Exhibit 10.7 

 

 

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CREDIT AGREEMENT AND GUARANTY

 

 

 

dated as of July 25, 2014

 

 

 

by and between

 

 

 

VARIATION BIOTECHNOLOGIES (US), INC.,

 

as the Borrower,

 

THE GUARANTORS PARTY HERETO,

 

and

 

PCOF 1, LLC,

 

as the Lender

 

 

 

 

 

 

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TABLE OF CONTENTS 

 

 

 

 

Page

 

 

 

 

Article I

DEFINITIONS AND ACCOUNTING TERMS  

 1

 

Section 1.1 

Defined Terms

 1

 

Section 1.2 

Use of Defined Terms

18

 

Section 1.3 

Cross-References 

 18

 

Section 1.4 

Accounting and Financial Determinations 

 18

Article II

COMMITMENT and BORROWING procedures

 18

 

Section 2.1

Commitment

 18

 

Section 2.2

Borrowing Procedures

 18

 

Section 2.3 

Funding

 19

 

Section 2.4

Reduction of the Commitment Amounts

 19

Article III

REPAYMENTS, PREPAYMENTS, INTEREST AND FEES 

 19

 

Section 3.1

Repayments and Prepayments; Application

 19

 

Section 3.2

Repayments and Prepayments

 19

 

Section 3.3

Application

 20

 

Section 3.4 

Interest Rate

 20

 

Section 3.5

Default Rate

 20

 

Section 3.6 

Payment Dates

21

 

Section 3.7

Exit Fee 

 21

 

Section 3.8

Other Fees

 21

Article IV

LIBO RATE AND OTHER PROVISIONS

 21

 

Section 4.1

Increased Costs, Etc

 21

 

Section 4.2

Increased Capital Costs

 22

 

Section 4.3 

Taxes

 22

 

Section 4.4

Payments, Computations; Proceeds of Collateral, Etc

 23

 

Section 4.5

Setoff

 24

 

Section 4.6

LIBOR Rate Not Determinable

 24

Article V

CONDITIONS TO LOAN

 24

 

Section 5.1

Initial Loan

 24

  Section 5.2 Delayed Draw Loan  28 Article VI REPRESENTATIONS AND WARRANTIES 29

  

 
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TABLE OF CONTENTS

 

      Page           Section 6.1  Organization, Etc 29   Section 6.2   Due
Authorization, Non-Contravention, Etc 30   Section 6.3   Government Approval,
Regulation, Etc 30   Section 6.4 Validity, Etc 30   Section 6.5 Financial
Information 30   Section 6.6  No Material Adverse Change 31   Section 6.7
Litigation, Labor Matters and Environmental Matters     30Section
6.8     Subsidiaries 31   Section 6.8 Subsidiaries 31   Section 6.9 Ownership of
Properties 31   Section 6.10  Taxes 31   Section 6.11 Pension Plans, Etc  32  
Section 6.12 Accuracy of Information 32   Section 6.13 Regulations U and X 32  
Section 6.14 Solvency 32   Section 6.15 Intellectual Property 32   Section 6.16
Material Agreements 33   Section 6.17  Permits 34   Section 6.18  Regulatory
Matters 34   Section 6.19 Transactions with Affiliates 36   Section 6.20
Investment Company Act  36   Section 6.21  OFAC 36   Section 6.22
Anti-Corruption 36   Section 6.23 Deposit and Disbursement Accounts 36   Section
6.24  Registration Rights 37   Section 6.25 Royalty and Other Payments 37
Article VII AFFIRMATIVE COVENANTS 37   Section 7.1 Financial Information,
Reports, Notices, Etc  37   Section 7.2  Maintenance of Existence; Compliance
with Contracts, Laws, Etc  39   Section 7.3 Maintenance of Properties  39  
Section 7.4  Insurance 39

  

 
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TABLE OF CONTENTS

 

      Page           Section 7.5 Books and Records 40   Section 7.6 
Environmental Law Covenant  40   Section 7.7 Use of Proceeds 40   Section 7.8 
Future Guarantors, Security, Etc   41   Section 7.9   Obtaining of Permits,
Etc    41   Section 7.10 Product Licenses 41   Section 7.11  Maintenance of
Regulatory Authorizations, Contracts, Intellectual Property, Etc 41   Section
7.12  Inbound Licenses 42   Section 7.13 Cash Management 42   Section 7.14
Modification of Organic Documents 43   Section 7.15 Inconsistent Agreements  43
  Section 7.16   Restriction of Amendments to Certain Documents 43   Section
7.17 PIC   43   Section 7.18  Required Milestones  43   Section 7.19 Minimum
Liquidity 43 Article VIII NEGATIVE COVENANTS 43   Section 8.1 Business
Activities 44   Section 8.2 Indebtedness 44   Section 8.3 Liens 44   Section 8.4
[INTENTIONALLY OMITTED]  45   Section 8.5 Investments 45   Section 8.6
Restricted Payments, Etc 46   Section 8.7 [INTENTIONALLY OMITTED] 46   Section
8.8 Consolidation, Merger; Permitted Acquisitions, Etc  46   Section 8.9
Permitted Dispositions 46   Section 8.10 Modification of Certain Agreements 46  
Section 8.11  Transactions with Affiliates 47   Section 8.12 Restrictive
Agreements, Etc  47   Section 8.13 Sale and Leaseback  47   Section 8.14 
Product Sales   47

 

 
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TABLE OF CONTENTS

 

      Page           Section 8.15  Outbound Licenses 47   Section 8.16 Change in
Name, Location, Executive Office, or Executive Management; Change in Fiscal Year
47 Article IX EVENTS OF DEFAULT  48   Section 9.1 Listing of Events of Default
48   Section 9.2 Action if Bankruptcy 51   Section 9.3 Action if Other Event of
Default  51 Article X GUARANTY 51   Section 10.1  Guaranty 51   Section 10.2 
Waivers 52   Section 10.3 Benefit of Guaranty 52   Section 10.4 Subordination of
Subrogation, Etc 52   Section 10.5  Election of Remedies 52   Section 10.6 
Limitation 53   Section 10.7  Liability Cumulative 53 Article XI  MISCELLANEOUS
PROVISIONS 53   Section 11.1  Waivers, Amendments, Etc  53   Section 11.2   
Notices; Time  53   Section 11.3   Payment of Costs and Expenses 54   Section
11.4  Indemnification 54   Section 11.5 Survival  55   Section 11.6 
Severability 55   Section 11.7 Headings 55   Section 11.8  Execution in
Counterparts, Effectiveness, Etc 55   Section 11.9  Governing Law; Entire
Agreement 55   Section 11.10 Successors and Assigns  56   Section 11.11  Other
Transactions 56   Section 11.12 Forum Selection and Consent to Jurisdiction 56  
Section 11.13 Waiver of Jury Trial  57

  

 
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TABLE OF CONTENTS

 

SCHEDULES:           Schedule 5.1.19  VBI Convertible Notes   Schedule 6.7(a)
Litigation   Schedule 6.8  Existing Subsidiaries   Schedule 6.11 Pension Plans  
Schedule 6.15(a)    Intellectual Property   Schedule 6.16  Material Agreements  
Schedule 6.19   Transactions with Affiliates   Schedule 6.23  Deposit and
Disbursement Accounts   Schedule 6.24 Registration Rights   Schedule 6.25
Royalty Payments   Schedule 8.2(b)  Existing Indebtedness   Schedule 8.3(b) 
Existing Liens   Schedule 8.5(a) Investments   Schedule 10.02 Notice Information
 

 

EXHIBITS:

 

 

 

Exhibit A-1

-

Form of Initial Term Note

 

Exhibit A-2

-

Form of Delayed Draw Note

 

Exhibit B

-

Form of Loan Request

 

Exhibit C

-

Form of Compliance Certificate

 

Exhibit D 

-

Form of Pledge and Security Agreement

 

Exhibit E

-

Form of Closing Date Warrant

 

Exhibit F

-

Form of Delayed Draw Warrant

 

Exhibit G

-

Intercompany Subordinated Note Provisions

 

    

 
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CREDIT AGREEMENT AND GUARANTY

 

THIS CREDIT AGREEMENT AND GUARANTY dated as of July 25, 2014 (as amended,
supplemented or otherwise modified from time to time, this “Agreement”), is by
and between VARIATION BIOTECHNOLOGIES (US), INC., a Delaware corporation (the
“Borrower”), each Guarantor (as defined below) party hereto and PCOF 1, LLC
(together with its Affiliates, successors, transferees and assignees, the
“Lender”).

 

W I T N E S S E T H:

 

WHEREAS, the Borrower has requested that the Lender provide a senior term loan
facility to the Borrower in an aggregate principal amount of $6,000,000 (with up
to $3,000,000 available on the Closing Date and up to $3,000,000 available on
the Delayed Draw Date, in each case subject to the terms and conditions set
forth herein); and

 

WHEREAS, the Lender is willing, on the terms and subject to the conditions
hereinafter set forth, to extend the Commitment and make the Loans to the
Borrower.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

Article I
DEFINITIONS AND ACCOUNTING TERMS

 

Section 1.1 Defined Terms. The following terms (whether or not underscored) when
used in this Agreement, including its preamble and recitals, shall, except where
the context otherwise requires, have the following meanings (such meanings to be
equally applicable to the singular and plural forms thereof):

 

“Affiliate” of any Person means any other Person which, directly or indirectly,
controls, is controlled by or is under common control with such Person.
“Control” (and its correlatives) by any Person means the power of such Person,
directly or indirectly, (i) to vote 10% or more of the Capital Securities (on a
fully diluted basis) of another Person which Capital Securities have ordinary
voting power for the election of directors, managing members or general partners
(as applicable), or (ii) to direct or cause the direction of the management and
policies of such other Person (whether by contract or otherwise).

 

“Agreement” is defined in the preamble.

 

“Applicable Margin” means 11.00%, as such percentage may be increased pursuant
to Section 3.5.

 

“Authorized Officer” means, relative to each Loan Party, those of its officers,
general partners or managing members (as applicable) whose signatures and
incumbency shall have been certified to the Lender pursuant to Section 5.1.1.

 

“Benefit Plan” means any employee benefit plan, as defined in section 3(3) of
ERISA, that either (i) is a Multiemployer Plan, (ii) is subject to section 412
of the Code, section 302 of ERISA or Title IV of ERISA or (iii) provides welfare
benefits to terminated employees, other than to the extent required by section
4980B(f) of the Code and the corresponding provisions of ERISA or similar state
law.

 

 
 

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“BLA” means (i) (x) a biologics license application (as defined in the FD&C Act)
to introduce, or deliver for introduction, a biologic product, including
vaccines into commerce in the U.S., or any successor application or procedure
and (y) any similar application or functional equivalent relating to biologics
licensing applicable to or required by any country, jurisdiction or Governmental
Authority other than the U.S. and (ii) all supplements and amendments that may
be filed with respect to the foregoing.

 

“Borrower” is defined in the preamble.

 

“Business Day” means any day which is neither a Saturday nor Sunday nor a legal
holiday on which banks are authorized or required to be closed in New York,
New York.

 

“Capital Securities” means, with respect to any Person, all shares of, interests
or participations in, or other equivalents in respect of (in each case however
designated, whether voting or non-voting), such Person’s capital stock, whether
now outstanding or issued after the Closing Date.

 

“Capitalized Lease Liabilities” means, with respect to any Person, all monetary
obligations of such Person and its Subsidiaries under any leasing or similar
arrangement which have been (or, in accordance with GAAP, should be) classified
as capitalized leases, and for purposes of each Loan Document the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP, and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a premium or
a penalty.

 

“Cash Equivalent Investment” means, at any time:

 

(a) any direct obligation of (or unconditionally guaranteed by) the United
States or a state thereof (or any agency or political subdivision thereof, to
the extent such obligations are supported by the full faith and credit of the
United States or a state thereof) maturing not more than one year after such
time;

 

(b) commercial paper maturing not more than 270 days from the date of issue,
which is issued by a corporation (other than an Affiliate of the Borrower or any
of its Subsidiaries) organized under the laws of any state of the United States
or of the District of Columbia and rated A-1 or higher by S&P or P-1 or higher
by Moody’s; or

 

(c) any certificate of deposit, time deposit or bankers acceptance, maturing not
more than one year after its date of issuance, which is issued by any bank
organized under the laws of the United States (or any state thereof) and which
has (x) a credit rating of A2 or higher from Moody’s or A or higher from S&P and
(y) a combined capital and surplus greater than $1,000,000,000.

 

“Casualty Event” means the damage, destruction or condemnation, as the case may
be, of property of any Person or any of its Subsidiaries.

 

 
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“Change in Control” means and shall be deemed to have occurred if (i) any
“person” or “group” (within the meaning of Rule 13d-5 of the Securities Exchange
Act of 1934 as in effect on the date hereof) (other than the Permitted
Investors) shall own, directly or indirectly, beneficially or of record,
determined on a fully diluted basis, more than 37.5% of the Voting Securities of
Holdco, (ii) a majority of the seats (other than vacant seats) on the board of
directors (or equivalent) of Holdco shall at any time be occupied by persons who
were neither (x) nominated by the board of directors of Holdco nor (y) appointed
by directors so nominated, (iii) Holdco shall cease to own directly,
beneficially and of record, 100% of the issued and outstanding Capital
Securities of the Borrower or (iv) Holdco shall cease to own directly or
indirectly, beneficially and of record, 100% of the issued and outstanding
Capital Securities of each of its other Subsidiaries.

 

“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (i) the adoption or taking effect of any law, rule, regulation
or treaty, (ii) any change in any law, rule, regulation or treaty or in the
administration, interpretation, implementation or application thereof by any
Governmental Authority or (iii) the making or issuance of any request, rule,
guideline or directive (whether or not having the force of law) by any
Governmental Authority; provided that, notwithstanding anything herein to the
contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and
all requests, rules, guidelines or directives thereunder or issued in connection
therewith and (y) all requests, rules, guidelines or directives promulgated by
the Bank for International Settlements, the Basel Committee on Banking
Supervision (or any successor or similar authority) or the United States or
foreign regulatory authorities, in each case pursuant to Basel III, shall in
each case be deemed to be a “Change in Law”, regardless of the date enacted,
adopted or issued.

 

“Closing Date” means the date of the making of the Initial Loan hereunder.

 

“Closing Date Certificate” is defined in Section 5.1.2.

 

“Closing Date Warrant” means the warrant dated as of the date hereof, executed
and delivered by the Lender and an Authorized Officer of Holdco, substantially
in the form of Exhibit E hereto, as amended, supplemented, amended and restated
or otherwise modified from time to time.

 

“Code” means the Internal Revenue Code of 1986, and the regulations thereunder,
in each case as amended, reformed or otherwise modified from time to time.

 

“Commitment” means the Lender’s obligation (if any) to make Loans hereunder.

 

“Commitment Amount” means the Initial Commitment Amount plus the Delayed Draw
Commitment Amount.

 

“Compliance Certificate” means a certificate duly completed and executed by an
Authorized Officer of the Borrower and Holdco, substantially in the form of
Exhibit C hereto, together with such changes thereto as the Lender may from time
to time request for the purpose of monitoring the Borrower’s compliance with the
financial covenants contained herein.

 

 
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“Contingent Liability” means any agreement, undertaking or arrangement by which
any Person guarantees, endorses or otherwise becomes or is contingently liable
upon (by direct or indirect agreement, contingent or otherwise, to provide funds
for payment, to supply funds to, or otherwise to invest in, a debtor, or
otherwise to assure a creditor against loss) the Indebtedness of any other
Person (other than by endorsements of instruments in the course of collection),
or guarantees the payment of dividends or other distributions upon the Capital
Securities of any other Person. The amount of any Person’s obligation under any
Contingent Liability shall (subject to any limitation set forth therein) be
deemed to be the outstanding principal amount of the debt, obligation or other
liability guaranteed thereby; provided that, in the event there is not an
outstanding principal amount or other similar readily discernable outstanding,
 actual or liquidated amount with respect to such debt, obligation or other
liability guaranteed thereby, then, as of any time of determination,  the amount
of the Contingent Liability in respect thereof shall be the amount that, in
light of then existing facts and circumstances, is reasonably expected to become
an actual or matured liability.

 

“Control” is defined within the definition of “Affiliate”.

 

“Controlled Account” is defined in Section 7.13(a).

 

“Copyrights” means all copyrights, whether statutory or common law, and all
exclusive and nonexclusive licenses from third parties or rights to use
copyrights owned by such third parties, along with any and all (i) renewals,
revisions, extensions, derivative works, enhancements, modifications, updates
and new releases thereof, (ii) income, royalties, damages, claims and payments
now and hereafter due and/or payable with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iii) rights to sue for past, present and future infringements thereof,
and (iv) foreign copyrights and any other rights corresponding thereto
throughout the world.

 

“Copyright Security Agreement” means any Copyright Security Agreement executed
and delivered by a Grantor substantially in the form of Exhibit C to the Pledge
and Security Agreement, as amended, supplemented, amended and restated or
otherwise modified from time to time.

 

“Default” means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.

 

“Delayed Draw Date” means the date of the making of the Delayed Draw Loan
hereunder, which shall be no sooner than the date on which each of the
conditions precedent set forth in Section 5.2 shall have been satisfied.

 

“Delayed Draw Certificate” is defined in Section 5.2.1.

 

“Delayed Draw Commitment Amount” means $3,000,000.

 

“Delayed Draw Loan” is defined in Section 2.1(b).

 

“Delayed Draw Note” means a promissory note of the Borrower payable to the
Lender, in the form of Exhibit A-2 hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Borrower to the Lender resulting from the
outstanding amount of the Delayed Draw Loans, and also means all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof.

 

 
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“Delayed Draw Warrant” means the warrant dated as of the Delayed Draw Date,
executed and delivered by the Lender and an Authorized Officer of Holdco,
substantially in the form of Exhibit F hereto, as amended, supplemented, amended
and restated or otherwise modified from time to time.

 

“Designated Jurisdiction” means any country or territory to the extent that such
country or territory is the subject of any Sanction.

 

“Disposition” (or similar words, such as “Dispose”) means any sale, transfer,
lease, contribution or other conveyance (including by way of merger) of, or the
granting of options, warrants or other rights to, any Loan Party’s assets
(including accounts receivable and Capital Securities of Subsidiaries) to any
other Person (other than to Holdco or one of its wholly-owned Subsidiaries) in a
single transaction or series of transactions.

 

“DOH” means the Department of Health (Canada) and any successor entity.

 

“Dollars” and the sign “$” mean lawful money of the United States.

 

“Early Prepayment Fee” means (i) with respect to any prepayment of any Loan
during the period from the Closing Date up to (and including) the first
anniversary of the Closing Date, an amount equal to 5.00% of the principal
amount of the Loans being prepaid and (ii) with respect to any prepayment of any
Loan during the period from the day following the first anniversary of the
Closing Date up to (and including) the second anniversary of the Closing Date,
an amount equal to 2.00% of the principal amount of the Loans being prepaid.

 

“Environmental Laws” means all federal, state, local or international laws,
statutes, rules, regulations, codes, directives, treaties, requirements,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, natural resources, Hazardous Material or
health and safety matters.

 

“Environmental Liability” means any liability, loss, claim, suit, action,
investigation, proceeding, damage, commitment or obligation, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of or affecting any Loan Party
directly or indirectly arising from, in connection with or based upon (i) any
Environmental Law or Environmental Permit, (ii) the generation, use, handling,
transportation, storage, treatment, recycling, presence, disposal, Release or
threatened Release of, or exposure to, any Hazardous Materials or (iii) any
contract, agreement, penalty, order, decree, settlement, injunction or other
arrangement (including operation of law) pursuant to which liability is assumed,
entered into, inherited or imposed with respect to any of the foregoing.

 

“Environmental Permit” is defined in Section 6.7(c).

 

 
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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute thereto of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to Sections of ERISA also refer to any successor Sections thereto.

 

“ERISA Affiliate” means any person that for purposes of Title I and Title IV of
ERISA and Section 412 of the Code would be deemed to be a single employer with
the Borrower, pursuant to Section 414(b), (c), (m) or (o) of the Code or Section
4001 of ERISA.

 

“ERISA Event” means (a) any reportable event, as defined in Section 4043 of
ERISA, with respect to a Pension Plan, as to which PBGC has not by regulation
waived the requirement of Section 4043(a) of ERISA that it be notified of such
event, (b) the filing of a notice of intent to terminate any Pension Plan, if
such termination would require material additional contributions in order to be
considered a standard termination within the meaning of Section 4041(b) of
ERISA, the filing under Section 4041(c) of ERISA of a notice of intent to
terminate any Pension Plan or the termination of any Pension Plan under Section
4041(c) of ERISA, (c) the institution of proceedings under Section 4042 of ERISA
by the PBGC for the termination of, or the appointment of a trustee to
administer, any Pension Plan, (d) any failure by any Pension Plan to satisfy the
minimum funding requirements of Sections 412 and 430 of the Code or Section 302
of ERISA applicable to such Pension Plan, whether or not waived, (e) the failure
to make a required contribution to any Pension Plan that would result in the
imposition of an encumbrance on any Loan Party or any ERISA Affiliate under
Section 412 or 430 of the Code or at any time prior to date hereof, a filing
under Section 412 of the Code or Section 302 of ERISA of any request for a
minimum funding variance with respect to any Pension Plan or Multiemployer Plan,
(f) an engagement in a non-exempt prohibited transaction within the meaning of
Section 4975 of the Code or Section 406 of ERISA with respect to which a Loan
Party would incur liability which would reasonably be expected to have a
Material Adverse Effect, (g) the complete or partial withdrawal of any Loan
Party or any material ERISA Affiliate from a Multiemployer Plan, (h) any Loan
Party or an ERISA Affiliate incurring any material liability under Title IV of
ERISA with respect to any Pension Plan (other than premiums due and not
delinquent under Section 4007 of ERISA) and (i) a determination that any Pension
Plan is, or is expected to be, in “at risk” status (as defined in Section
303(i)(4) of ERISA or Section 430(i)(4) of the Code).

 

“Event of Default” is defined in Section 9.1.

 

“Event of Loss” means, with respect to any asset of any Loan Party, any of the
following: (i) any loss, destruction or damage of such asset, (ii) any pending
or threatened institution of any proceedings for the condemnation or seizure of
such asset or of any right of eminent domain, or (iii) any actual condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such asset, or confiscation of such asset or requisition of the use of such
asset.

 

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

 

“Excluded Collateral” is defined in the Pledge and Security Agreement.

 

 
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“Excluded Subsidiary” means any of PIC, VBI Acquisition, Paulson Investment I
LLC, an Oregon limited liability company, Paulson Capital Properties LLC, an
Oregon limited liability company, and PCP I LLC, an Oregon limited liability
company.

 

“Existing Investors” means Perceptive Life Sciences Master Fund Ltd.; Titan-Perc
Ltd.; 5AM Ventures II, L.P.; 5AM Co-Investors II, L.P.; ARCH Venture Fund VI,
L.P.; and Clarus Lifesciences I, L.P.

 

“Expense Deposit” means an amount equal to $30,000 deposited by the Borrower
with the Lender to be applied to the expenses of the Lender pursuant to Section
11.3.

 

“FDA” means the U.S. Food and Drug Administration and any successor entity.

 

“FD&C Act” means the U.S. Food, Drug and Cosmetic Act of 1938 (or any successor
thereto), as amended from time to time, and the rules and regulations
promulgated thereunder.

 

“Fiscal Quarter” means a quarter ending on the last day of March, June,
September or December.

 

“Fiscal Year” means any period of twelve consecutive calendar months ending on
December 31; references to a Fiscal Year with a number corresponding to any
calendar year (e.g., the “2013 Fiscal Year”) refer to the Fiscal Year ending on
December 31 of such calendar year.

 

“F.R.S. Board” means the Board of Governors of the Federal Reserve System or any
successor thereto.

 

“GAAP” is defined in Section 1.4.

 

“Governmental Authority” means any national, supranational, federal, state,
county, provincial, local, municipal or other government or political
subdivision thereof (including any Regulatory Authority), whether domestic or
foreign, and any agency, authority, commission, ministry, instrumentality,
regulatory body, court, tribunal, arbitrator, central bank or other Person
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to any such government.

 

“Grantor” means, collectively, Holdco and each of its Subsidiaries.

 

“Guarantors” means, collectively, Holdco and each of its Subsidiaries (other
than the Excluded Subsidiaries).

 

“Hazardous Material” means any material, substance, chemical, mixture or waste
which is capable of damaging or causing harm to any living organism, the
environment or natural resources, including all explosive, special, hazardous,
polluting, toxic, industrial, dangerous, biohazardous, medical, infectious or
radioactive substances, materials or wastes, noise, odor, electricity or heat,
and including petroleum or petroleum products, byproducts or distillates,
asbestos or asbestos-containing materials, urea formaldehyde, polychlorinated
biphenyls, radon gas, ozone-depleting substances, greenhouse gases, and all
other substances or wastes of any nature regulated pursuant to any Environmental
Law or as to which any Governmental Authority requires investigation, reporting
or remedial action.

 

 
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“Hedging Obligations” means, with respect to any Person, all liabilities of such
Person under currency exchange agreements, interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, and all other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates or currency exchange rates.

 

“herein”, “hereof”, “hereto”, “hereunder” and similar terms contained in any
Loan Document refer to such Loan Document as a whole and not to any particular
Section, paragraph or provision of such Loan Document.

 

“Holdco” means VBI Vaccines Inc., a Delaware corporation.

 

“Impermissible Qualification” means any qualification or exception to the
opinion or certification of any independent public accountant as to any
financial statement of Holdco and its Subsidiaries (i) which is of a “going
concern” or similar nature, (ii) which relates to the limited scope of
examination of matters relevant to such financial statement or (iii) which
relates to the treatment or classification of any item in such financial
statement and which, as a condition to its removal, would require an adjustment
to such item the effect of which would be to cause the Borrower to be in
Default.

 

“including” and “include” means including without limiting the generality of any
description preceding such term, and, for purposes of each Loan Document, the
parties hereto agree that the rule of ejusdem generis shall not be applicable to
limit a general statement, which is followed by or referable to an enumeration
of specific matters, to matters similar to the matters specifically mentioned.

 

“IND” means (i) (x) an investigational new drug application (as defined in the
FD&C Act) that is required to be filed with the FDA before beginning clinical
testing in human subjects, or any successor application or procedure and (y) any
similar application or functional equivalent relating to any investigational new
drug application applicable to or required by any country, jurisdiction or
Governmental Authority other than the U.S. and (ii) all supplements and
amendments that may be filed with respect to the foregoing.

 

“Indebtedness” of any Person means:

 

(a) all obligations of such Person for borrowed money or advances and all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments;

 

(b) all obligations, contingent or otherwise, relative to the face amount of all
letters of credit, whether or not drawn, and banker’s acceptances issued for the
account of such Person;

 

(c) all Capitalized Lease Liabilities of such Person;

 

(d) net Hedging Obligations of such Person and all obligations of such Person
arising under Synthetic Leases, excluding amounts due under Synthetic Leases
that may be terminated by the lessee on no more than 180 days prior notice and
without penalty or further obligation in respect of the period following any
notice of termination period required thereunder;

 

 
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(e) all obligations issued, undertaken or assumed as the deferred purchase price
of property or services, including earnouts, purchase price adjustments and
seller notes in connection with acquisitions permitted hereunder (to the extent
due and payable and included as a liability on the balance sheet in accordance
with GAAP) (other than trade payables entered into in the ordinary course of
business);

 

(f) whether or not so included as liabilities in accordance with GAAP, all
obligations of such Person to pay the deferred purchase price of property or
services (excluding trade accounts payable in the ordinary course of business
which are not overdue for a period of more than 90 days or, if overdue for more
than 90 days, as to which a dispute exists and adequate reserves in conformity
with GAAP have been established on the books of such Person), and indebtedness
secured by (or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) a Lien on property owned or being
acquired by such Person (including indebtedness arising under conditional sales
or other title retention agreements), whether or not such indebtedness shall
have been assumed by such Person or is limited in recourse; and

 

(g) all Contingent Liabilities of such Person in respect of any of the
foregoing.

 

The Indebtedness of any Person shall include the Indebtedness of any other
Person (including any partnership in which such Person is a general partner) to
the extent such Person is liable therefor as a result of such Person’s ownership
interest in or other relationship with such Person, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.

 

“Indemnified Liabilities” is defined in Section 11.4.

 

“Indemnified Parties” is defined in Section 11.4.

 

“Infringement” and “Infringes” mean the misappropriation of know-how, trade
secrets and/or confidential information.

 

“Initial Commitment Amount” means $3,000,000.

 

“Initial Loan” is defined in Section 2.1(a).

 

“Initial Term Note” means a promissory note of the Borrower payable to the
Lender, in the form of Exhibit A-1 hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Borrower to the Lender resulting from the
outstanding amount of the Initial Loans, and also means all other promissory
notes accepted from time to time in substitution therefor or renewal thereof.

 

 
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“Intellectual Property” means all (i) Patents, (ii) Trademarks, (iii) Copyrights
and other works of authorship (registered or unregistered), and all
applications, registrations and renewals therefor, (iv) Product Authorizations,
(v) Product Agreements, (vi) computer software, databases, data and
documentation, (vii) trade secrets and confidential business information,
whether patentable or unpatentable and whether or not reduced to practice,
know-how, inventions, manufacturing processes and techniques, research and
development information, data and other information included in or supporting
Product Authorizations, (viii) financial, marketing and business data, pricing
and cost information, business, finance and marketing plans, customer and
prospective customer lists and information, and supplier and prospective
supplier lists and information, (ix) other intellectual property or similar
proprietary rights, (x) copies and tangible embodiments of any of the foregoing
(in whatever form or medium) and (xi) any and all improvements to any of the
foregoing.

 

“Intercompany Subordinated Note” means a promissory note executed and delivered
by the Borrower or another Loan Party that includes subordination provisions
substantially as set forth in Exhibit G hereto and is otherwise satisfactory in
form and substance to the Lender.

 

“Intercompany Subordinated Debt” means Indebtedness of any Loan Party owing to
any other Loan Party; provided that (i) such Indebtedness is unsecured and
evidenced by an Intercompany Subordinated Note, (ii) such Intercompany
Subordinated Note is pledged to the Lender pursuant to the Pledge and Security
Agreement on a first-priority basis and (iii) such Indebtedness will not mature
or otherwise become due and payable earlier than 90 days following the Maturity
Date.

 

“Interest Period” means, (i) initially, for any Loan made hereunder, the period
beginning on (and including) the date on which such Loan is made hereunder
pursuant to Section 2.2 and ending on (and including) the last day of the
calendar month in which such Loan was made, and (ii) thereafter, the period
beginning on (and including) the first day of each succeeding calendar month and
ending on the earlier of (and including) (x) the last day of such calendar month
and (y) the Maturity Date.

 

“Investment” means, relative to any Person, (i) any loan, advance or extension
of credit made by such Person to any other Person, including the purchase by
such Person of any bonds, notes, debentures or other debt securities of any
other Person, (ii) Contingent Liabilities in favor of any other Person and (iii)
any Capital Securities held by such Person in any other Person. The amount of
any Investment shall be the original principal or capital amount thereof less
all returns of principal or equity thereon and shall, if made by the transfer or
exchange of property other than cash, be deemed to have been made in an original
principal or capital amount equal to the fair market value of such property at
the time of such Investment.

 

“Lender” is defined in the preamble.

 

“Lender’s Designee” is defined in Section 5.1.20.

 

“LIBO Rate” means, with respect to any applicable Interest Period hereunder, the
one-month London Interbank Offered Rate for deposits in Dollars at approximately
11:00 a.m. (London, England time), as determined by the Lender from the
appropriate Bloomberg or Telerate page selected by the Lender (or any successor
thereto or similar source reasonably determined by the Lender from time to
time), which shall be that one-month London Interbank Offered Rate for deposits
in Dollars in effect two Business Days prior to the first Business Day of such
Interest Period rounded up to the nearest 1/16 of 1%, with such rate to be reset
effective as of the first Business Day of each succeeding Interest Period. If
the Initial Loan or the Delayed Draw Loan is advanced other than on the first
Business Day of a Fiscal Quarter, the initial LIBO Rate for such Loan shall be
that one-month London Interbank Offered Rate for deposits in Dollars in effect
two Business Days prior to the date of the Initial Loan or the Delayed Draw
Loan, as the case may be, which rate shall be in effect until (and including)
the last Business Day of the first Interest Period relative to such Loan. The
Lender’s internal records of applicable interest rates shall be determinative in
the absence of manifest error. Notwithstanding the foregoing, in no event shall
the LIBO Rate for any Loan at any time be greater than 5.00%.

 

 
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“Lien” means any security interest, mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or otherwise), charge against
or interest in property, or other priority or preferential arrangement of any
kind or nature whatsoever, to secure payment of a debt or performance of an
obligation.

 

“Loan” means, as the context may require, the Initial Loan, the Delayed Draw
Loan or both.

 

“Loan Documents” means, collectively, this Agreement, the Notes, the Pledge and
Security Agreement, the Copyright Security Agreement, the Patent Security
Agreement, the Trademark Security Agreement, each other agreement pursuant to
which the Lender is granted a Lien to secure the Obligations, the Proposal
Letter, the Closing Date Warrant, the Delayed Draw Warrant, and each other
agreement, certificate, document or instrument delivered in connection with any
Loan Document, whether or not specifically mentioned herein or therein.

 

“Loan Parties” means, collectively, the Borrower, Holdco and each other
Guarantor.

 

“Loan Request” means a Loan request and certificate duly executed by an
Authorized Officer of the Borrower substantially in the form of Exhibit B
hereto.

 

“Material Adverse Effect” means a material adverse effect on (i) the business,
condition (financial or otherwise), operations, performance, properties or
prospects of Holdco and its Subsidiaries, taken as a whole, (ii) the rights and
remedies of the Lender under any Loan Document or (iii) the ability of Holdco
and its Subsidiaries to perform their respective Obligations under any Loan
Document.

 

“Material Agreements” means (i) each contract or agreement to which any Loan
Party is a party involving aggregate payments of more than $100,000, whether
such payments are being made by such Loan Party to a non-Affiliated Person, or
by a non-Affiliated Person to such Loan Party; and (ii) all other contracts or
agreements, individually or in the aggregate, material to the business,
operations, assets, prospects, conditions (financial or otherwise), performance
or liabilities of the Loan Parties.

 

“Maturity Date” means July 25, 2017; provided that if the Delayed Draw Loan is
made pursuant hereto, the Maturity Date shall be July 25, 2018.

 

 
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“Merger Agreement” means the Agreement and Plan of Merger dated as of May 8,
2014, between the Borrower, Holdco and VBI Acquisition.

 

“Merger Transaction” means the acquisition of the Borrower by Holdco pursuant to
the Merger Agreement.

 

“Milestone Clinical Trial” means a Phase I clinical trial for a CMV (VLP)
vaccine candidate.

 

“MMA” has the meaning ascribed to such term in the definition of “FDA
Requirements”.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Multiemployer Plan” means a “multiemployer plan” (as defined in Section
4001(a)(3) of

ERISA) that is subject to Title IV of ERISA contributed to for any employees of
a Loan Party or any ERISA Affiliate.

 

“NDA” means (i) (x) a new drug application (as defined in the FD&C Act) and (y)
any similar application or functional equivalent relating to any new drug
application applicable to or required by any country, jurisdiction or
Governmental Authority other than the U.S. and (ii) all supplements and
amendments that may be filed with respect to the foregoing.

 

“Net Cash Proceeds” means when used in respect of (i) any Disposition, (ii) any
issuance of any debt or equity securities, or (iii) the receipt of any proceeds
in connection with any Event of Loss suffered, in each case by any Loan Party,
the gross proceeds in cash or cash equivalents received by such Person
(including such proceeds subsequently received in respect of noncash
consideration initially received and amounts initially placed in escrow that
subsequently become available) from such Disposition, issuance or Event of Loss,
less all direct costs and expenses incurred or to be incurred, and all federal,
state, local and foreign Taxes assessed or to be assessed (if any), in
connection therewith.

 

“Non-Excluded Taxes” means any Taxes other than net income and franchise Taxes
imposed on the Lender or its properties by any Governmental Authority under the
laws of which the Lender is organized or in which it maintains its applicable
lending office.

 

“Note” means the Initial Term Note or the Delayed Draw Note, as the case may be.

 

“Obligations” means all obligations (monetary or otherwise, whether absolute or
contingent, matured or unmatured) of each Loan Party arising under or in
connection with a Loan Document and the principal of and premium, if any, and
interest (including interest accruing during the pendency of any proceeding of
the type described in Section 9.1.8, whether or not allowed in such proceeding)
on the Loans.

 

“Organic Document” means, relative to each Loan Party, its certificate of
incorporation, by-laws, certificate of partnership, partnership agreement,
certificate of formation, limited liability agreement, operating agreement and
all shareholder agreements, voting trusts and similar arrangements applicable to
each Loan Party’s Capital Securities.

 

 
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“Other Taxes” means any and all stamp, documentary or similar Taxes, or any
other excise or property Taxes or similar levies that arise on account of any
payment made or required to be made under any Loan Document or from the
execution, delivery, registration, recording or enforcement of any Loan
Document.

 

“Other Administrative Proceeding” means any administrative proceeding relating
to a dispute involving a patent office or other relevant intellectual property
registry which relates to validity, opposition, revocation, ownership or
enforceability or the relevant Intellectual Property.

 

“Patent” means any patent, patent application and invention disclosure,
including any divisions, continuations, continuations in-part, provisionals,
continued prosecution applications, substitutions, reissues, reexaminations,
renewals, extensions, restorations, supplemental protection certificates and
other additions in connection therewith, whether in or related to the United
States or any foreign country or other jurisdiction.

 

“Patent Security Agreement” means any Patent Security Agreement executed and
delivered by a Grantor in substantially the form of Exhibit A to the Pledge and
Security Agreement, as amended, supplemented, amended and restated or otherwise
modified from time to time.

 

“PBGC” means the Pension Benefit Guaranty Corporation, or any entity succeeding
to all or any of its functions under ERISA.

 

“PDMA” means the Prescription Drug Marketing Act.

 

“Pension Plan” means a “pension plan”, as such term is defined in Section 3(2)
of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer
Plan), to which a Loan Party or any ERISA Affiliate sponsors, contributes to, or
provides benefits under, or has any obligation to contribute or provide benefits
under, and to which such Loan Party or ERISA Affiliate may have liability,
including any liability by reason of having been a substantial employer under
Section 4063 of ERISA at any time during the preceding five years, or by reason
of being deemed to be a contributing sponsor under Section 4069 of ERISA.

 

“Permits” means all permits, licenses, registrations, certificates, orders,
approvals, authorizations, consents, waivers, franchises, variances and similar
rights issued by or obtained from any Governmental Authority or any other
Person, including, without limitation, those relating to Environmental Laws.

 

“Permitted Investor” means any Existing Investor or any of its Affiliates as to
which (i) such Existing Investor (or the Person that administers or manages such
Existing Investor) acts as the sole managing member, general partner or
equivalent of such Affiliate, and (ii) such Existing Investor (or other Person)
has the power to direct or cause the direction of the management and policies of
such Affiliate (whether by way of voting equity, contract or otherwise).

 

“Person” means any natural person, corporation, limited liability company,
partnership, joint venture, association, trust or unincorporated organization,
Governmental Authority or any other legal entity, whether acting in an
individual, fiduciary or other capacity.

 

 
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“PIC” means Paulson Investment Company, Inc.

 

“Pledge and Security Agreement” means the Pledge and Security Agreement executed
and delivered by each Grantor, substantially in the form of Exhibit D hereto, as
amended, supplemented, amended and restated or otherwise modified from time to
time.

 

“PPSA” means the Personal Property Security Act as in effect from time to time
in the Province of Ontario; provided that, if, with respect to any financing
statement or by reason of any provisions of law, the perfection or the effect of
perfection or non-perfection of the security interests granted to the Lender
pursuant to the applicable Loan Document is governed by the Personal Property
Security Act as in effect in a jurisdiction of Canada other than the Province of
Ontario, then “PPSA” means the Personal Property Security Act as in effect from
time to time in such other jurisdiction for purposes of the provisions of each
Loan Document and any financing statement relating to such perfection or effect
of perfection or non-perfection.

 

“Product” means any current or future product developed, manufactured, licensed,
marketed, sold or otherwise commercialized by any Loan Party, including any such
product in development or which may be developed.

 

“Product Agreement” means each agreement, license, document, instrument,
interest (equity or otherwise) or the like under which one or more Persons
grants or receives any right, title or interest with respect to any Product
Development and Commercialization Activities in respect of one or more Products
specified therein, or receives or is granted the right to exclude any third
parties from engaging in any Product Development and Commercialization
Activities with respect thereto, including each contract or agreement with
suppliers, manufacturers, distributors, clinical research organizations,
wholesalers, pharmacies or with any other Person related to any such entity.

 

“Product Authorizations” means any and all approvals (including applicable
supplements, amendments, pre and post approvals, drug master files, governmental
price and reimbursement approvals and approvals of applications for regulatory
exclusivity), licenses, registrations or authorizations of any Governmental
Authority necessary for the manufacture, development, distribution, use,
storage, import, export, transport, promotion, marketing, sale or other
commercialization of a Product in any country or jurisdiction, including without
limitation INDs, NDAs and BLAs or similar applications.

 

“Product Development and Commercialization Activities” means, with respect to
any Product, any combination of research, development, manufacture, importation,
use, sale, storage, design, labeling, marketing, promotion, supply,
distribution, testing, packaging, purchasing or other commercialization
activities, receipt of payment in respect of any of the foregoing, or like
activities the purpose of which is to commercially exploit such Product.

 

“Prohibited Payment” means any bribe, rebate, payoff, influence payment,
kickback or other payment or gift of money or anything of value (including meals
or entertainment) to any officer, employee or ceremonial office holder of any
government or instrumentality thereof, political party or supra-national
organization (such as the United Nations), any political candidate, any royal
family member or any other person who is connected or associated personally with
any of the foregoing that is prohibited under any applicable law or regulation
or otherwise for the purpose of influencing any act or decision of such payee in
his official capacity, inducing such payee to do or omit to do any act in
violation of his lawful duty, securing any improper advantage or inducing such
payee to use his influence with a government or instrumentality thereof to
affect or influence any act or decision of such government or instrumentality.

 

 
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“Proposal Letter” means, collectively, the proposal letter, dated as of March
18, 2014, between the Lender and the Borrower regarding the transactions
contemplated hereby and the outline of proposed terms and conditions attached
thereto.

 

“Regulatory Authority” means any Governmental Authority that is concerned with
or has regulatory oversight with respect to the use, control, safety, efficacy,
reliability, manufacturing, marketing, distribution, sale or other Product
Development and Commercialization Activities relating to any Product of a Loan
Party, including the FDA, the DOH and all equivalent of such agencies in other
jurisdictions, and includes Standard Bodies.

 

“Regulatory Authorizations” means, with respect to the Products, all approvals,
clearances, authorizations, orders, exemptions, registrations, certifications,
licenses and Permits granted by any Regulatory Authorities, including all NDAs
and Product Authorizations held by the Loan Parties or any of their respective
licensors, as applicable, or that are pending before the FDA or equivalent
non-United States Governmental Entity with respect to the Products.

 

“Release” means any releasing, disposing, discharging, injecting, spilling,
leaking, leaching, pumping, pouring, dumping, depositing, emitting, escaping,
emptying, seeping, dispersal, migrating or placing, including movement through,
into or upon the environment or any natural or man-made structure.

 

“Required Milestone” means any event or occurrence described in Section 7.18.

 

“Restricted Payment” means (i) the declaration or payment of any dividend (other
than dividends payable solely in Capital Securities of a Loan Party) on, or the
making of any payment or distribution on account of, or setting apart assets for
a sinking or other analogous fund for the purchase, redemption, defeasance,
retirement or other acquisition of, any class of Capital Securities of a Loan
Party or any warrants, options or other right or obligation to purchase or
acquire any such Capital Securities, whether now or hereafter outstanding, (ii)
the making of any other distribution in respect of such Capital Securities, in
each case either directly or indirectly, whether in cash, property or
obligations of a Loan Party or otherwise, or (iii) any payments to officers,
directors or employees of a Loan Party, other than ordinary course wages or
similar compensation or ordinary course reimbursements of customary business
expenses incurred on behalf of such Loan Party or its operations.

 

“S&P” means Standard & Poor’s Rating Services, a division of The McGraw-Hill
Companies, Inc.

 

“Sanction” means any international economic sanction administered or enforced by
the United States Government (including, without limitation, OFAC), the United
Nations Security Council, the European Union or its Member States, Her Majesty’s
Treasury or other relevant sanctions authority.

 

 
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“SEC” means the Securities and Exchange Commission.

 

“Solvent” means, with respect to the Borrower and its Subsidiaries on a
particular date, that on such date (i) the fair value of the property of the
Borrower and its Subsidiaries on a consolidated basis is greater than the total
amount of liabilities, including Contingent Liabilities, of the Borrower and its
Subsidiaries on a consolidated basis, (ii) the present fair saleable value of
the assets of the Borrower and its Subsidiaries on a consolidated basis is not
less than the amount that will be required to pay the probable liability of the
Borrower and its Subsidiaries on a consolidated basis on its debts as they
become absolute and matured, (iii) the Borrower does not intend to, and does not
believe that it or its Subsidiaries will, incur debts or liabilities beyond the
ability of the Borrower and its Subsidiaries to pay as such debts and
liabilities mature, (iv) the Borrower and its Subsidiaries on a consolidated
basis are not engaged in business or a transaction, and the Borrower and its
Subsidiaries on a consolidated basis are not about to engage in a business or a
transaction, for which the property of the Borrower and its Subsidiaries on a
consolidated basis would constitute an unreasonably small capital and (v) the
Borrower and its Subsidiaries have not executed this Agreement or any other Loan
Document or made any transfer or incurred any obligations hereunder, with actual
intent to hinder, delay or defraud either present or future creditors. The
amount of Contingent Liabilities at any time shall be computed as the amount
that, in light of all the facts and circumstances existing at such time, can
reasonably be expected to become an actual or matured liability.

 

“Subordinated Debt” means any unsecured Indebtedness that (i) is of the type
described in clause (a) of the definition of “Indebtedness”, and (ii) is
permitted pursuant to Section 8.2(f).

 

“Subsidiary” means, with respect to any Person, any other Person of which more
than 50% of the outstanding Voting Securities of such other Person (irrespective
of whether at the time Capital Securities of any other class or classes of such
other Person shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned or controlled by such
Person, by such Person and one or more other Subsidiaries of such Person, or by
one or more other Subsidiaries of such Person. Unless the context otherwise
specifically requires, the term “Subsidiary” shall be a reference to a
Subsidiary of Holdco.

 

“Synthetic Lease” means, as applied to any Person, any lease (including leases
that may be terminated by the lessee at any time) of any property (whether real,
personal or mixed) (i) that is not a capital lease in accordance with GAAP and
(ii) in respect of which the lessee retains or obtains ownership of the property
so leased for federal income tax purposes, other than any such lease under which
that Person is the lessor.

 

“Taxes” means all income, stamp or other taxes, duties, levies, imposts,
charges, assessments, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority,
and all interest, penalties or similar liabilities with respect thereto.

 

 
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“Termination Date” means the date on which all Obligations (other than (i) any
obligations contained in or arising out of the Closing Date Warrant or the
Delayed Draw Warrant, and (ii) inchoate indemnification obligations) have been
paid in full in cash and the Commitment shall have terminated.

 

“Trademark” means any trademark, service mark, trade name, logo, symbol, trade
dress, domain name, corporate name and other indicator of source or origin, and
all applications and registrations therefor, together with all of the goodwill
associated with the therewith.

 

“Trademark Security Agreement” means any Trademark Security Agreement executed
and delivered by a Grantor substantially in the form of Exhibit B to the Pledge
and Security Agreement, as amended, supplemented, amended and restated or
otherwise modified from time to time.

 

“UCC” means the Uniform Commercial Code as in effect from time to time in the
State of New York; provided that, if, with respect to any financing statement or
by reason of any provisions of law, the perfection or the effect of perfection
or non-perfection of the security interests granted to the Lender pursuant to
the applicable Loan Document is governed by the Uniform Commercial Code as in
effect in a jurisdiction of the United States other than New York, then “UCC”
means the Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions of each Loan Document and any
financing statement relating to such perfection or effect of perfection or
non-perfection.

 

“United States” or “U.S.” means the United States of America, its fifty states
and the District of Columbia.

 

“VBI Acquisition” means VBI Acquisition Corp., a Delaware corporation.

 

“VBI Convertible Notes” means, collectively, the convertible promissory notes
listed on Schedule 5.1.19 hereto.

 

“Voting Securities” means, with respect to any Person, Capital Securities of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.

 

“Welfare Plan” means a “welfare plan”, as such term is defined in Section 3(1)
of ERISA.

 

“wholly owned Subsidiary” means any direct or indirect Subsidiaries of Holdco,
all of the outstanding Capital Securities of which (other than any director’s
qualifying shares or investments by foreign nationals mandated by applicable
laws) is owned directly or indirectly by Holdco.

 

 
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Section 1.2 Use of Defined Terms. Unless otherwise defined or the context
otherwise requires, terms for which meanings are provided in this Agreement
shall have such meanings when used in each other Loan Document and the schedules
attached hereto.

 

Section 1.3 Cross-References. Unless otherwise specified, references in a Loan
Document to any Article or Section are references to such Article or Section of
such Loan Document, and references in any Article, Section or definition to any
clause are references to such clause of such Article, Section or definition.

 

Section 1.4 Accounting and Financial Determinations. Unless otherwise specified,
all accounting terms used in each Loan Document shall be interpreted, and all
accounting determinations and computations thereunder (including under Section
7.19 and any definitions used in such calculations) shall be made, in accordance
with those generally accepted accounting principles (“GAAP”) applied in the
preparation of the financial statements referred to in Sections 5.1.4(a). Unless
otherwise expressly provided, all financial covenants and defined financial
terms shall be computed on a consolidated basis for Holdco and its Subsidiaries,
in each case without duplication.

 

Article II
COMMITMENT and BORROWING procedures

 

Section 2.1 Commitment.

 

(a) On the terms and subject to the conditions of this Agreement, the Lender
agrees to make a term loan (the “Initial Loan”) to the Borrower on the Closing
Date in an amount not to exceed the Initial Commitment Amount.

 

(b) On the terms and subject to the conditions of this Agreement, the Lender
agrees to make a term loan (the “Delayed Draw Loan”) to the Borrower on the
Delayed Draw Date in an amount equal to or greater than $1,000,000, not to
exceed the Delayed Draw Commitment Amount.

 

(c) No amounts paid or prepaid with respect to any Loan may be reborrowed.

 

Section 2.2 Borrowing Procedures. In each case subject to the terms and
conditions hereof:

 

(a) The Borrower may irrevocably request that the Initial Loan be made by
delivering to the Lender a Loan Request on or before 10:00 a.m. on a Business
Day at least three (3) (but not greater than five (5)) Business Days prior to
the Closing Date; provided, however, that the Borrower and the Lender shall have
mutually agreed upon the date of the Closing Date at least three (3) Business
Days prior thereto, provided further that if no such agreement is reached then
the Initial Loan will be funded within ten (10) days of delivery of the Loan
Request.

 

 
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(b) The Borrower may irrevocably request that the Delayed Draw Loan be made by
delivering to the Lender a Loan Request on or before 10:00 a.m. on a Business
Day at least 15 (but not greater than 20) Business Days prior to the proposed
Delayed Draw Date; provided, however, that the Borrower and the Lender shall
have mutually agreed upon the Delayed Draw Date at least three Business Days
prior thereto, provided further that if no such agreement is reached then the
Delayed Draw Loan will be funded within ten (10) days of delivery of the Loan
Request.

 

Section 2.3 Funding. After receipt of the applicable Loan Request for the
Initial Loan, the Lender shall, on the Closing Date and subject to the terms and
conditions hereof, make the requested proceeds of the Initial Loan available to
the Borrower by wire transfer to the account the Borrower shall have specified
in its Loan Request. After receipt of the Loan Request for the Delayed Draw
Loan, the Lender shall, on the Delayed Draw Date and subject to the terms and
conditions hereof, make the requested proceeds of the Delayed Draw Loan
available to the Borrower by wire transfer to the account the Borrower shall
have specified in its Loan Request.

 

Section 2.4 Reduction of the Commitment Amounts. The Initial Commitment Amount
shall automatically and permanently be reduced to zero immediately after the
making of the Initial Loan on the Closing Date. The Delayed Draw Commitment
Amount shall automatically and permanently be reduced to zero immediately after
the making of the Delayed Draw Loan on the Delayed Draw Date.

 

Article III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES

 

Section 3.1 Repayments and Prepayments; Application. The Borrower agrees that
the Loans, and any fees or interest accrued or accruing thereon, shall be repaid
and prepaid solely in Dollars pursuant to the terms of this Article III.

 

Section 3.2 Repayments and Prepayments. The Borrower shall repay in full the
entire unpaid principal amount of the Loans on the Maturity Date. Prior thereto,
payments and prepayments of the Loans shall be made as set forth below.

 

(a) From the Closing Date through the first anniversary thereof, no scheduled
repayment of the aggregate outstanding principal amount of the Loans shall be
required. Thereafter, on the last Business Day of each calendar month, the
Borrower shall make a scheduled principal payment of $75,000 on the Initial Loan
and, to the extent funded, $75,000 on the Delayed Draw Loan, with the remaining
unpaid balance of the Loans payable in cash on the Maturity Date.

 

(b) The Borrower may, upon five (5) Business Days prior written notice to the
Lender, prepay the outstanding amount of the Loans in whole or in part.

 

(c) Upon the issuance, sale or other incurrence of any debt securities or other
Indebtedness (other than Subordinated Debt or Intercompany Subordinated Debt, in
either case solely to the extent expressly permitted hereunder) by any Loan
Party, the Borrower shall, within three Business Days of such Person’s receipt
of the proceeds thereof, prepay the outstanding principal amount of the Loans in
an amount equal to 100% of the Net Cash Proceeds therefrom. The provisions of
this clause shall not be deemed to be implied consent to any such issuance, sale
or incurrence otherwise prohibited by the terms and conditions of this
Agreement.

 

 
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(d) Upon a Disposition by any Loan Party (other than a Disposition permitted
pursuant to Section 8.9), the Borrower shall within three Business Days of such
Person’s receipt of the proceeds thereof, prepay the outstanding principal
amount of the Loans in an amount equal to 100% of the Net Cash Proceeds
therefrom. The provisions of this clause shall not be deemed to be implied
consent to any Disposition otherwise prohibited by the terms and conditions of
this Agreement.

 

(e) If any Event of Loss shall occur with respect to any Loan Party, the
Borrower shall prepay the outstanding principal amount of the Loans in an amount
equal to 100% the Net Cash Proceeds therefrom, if any.

 

(f) Immediately upon any acceleration of the Maturity Date of the Loans pursuant
to Section 9.2 or Section 9.3, the Borrower shall repay in full the Loans,
unless, pursuant to Section 9.3, only a portion of the Loans are so accelerated
(in which case the portion so accelerated shall be so repaid).

 

(g) If any Loan hereunder is prepaid for any reason on or prior to the date that
is two (2) years after the Closing Date, (excluding, however, payments made
pursuant to clause (a) of this Section 3.2), the Borrower shall pay the Early
Prepayment Fee to the Lender at the time of such prepayment, together with all
other fees payable hereunder (if any), including pursuant to Sections 3.7 and
3.8.

 

Section 3.3 Application. Amounts repaid or prepaid in respect of the Loans shall
be applied as set forth in this Section 3.3.

 

(a) Subject to clause (b), each prepayment or repayment of the Loans shall be
applied to the principal amount of the Loans then outstanding.

 

(b) Each prepayment of the Loans made pursuant to clauses (b), (c), (d) or (e)
of Section 3.2 shall be applied in reverse order of the scheduled repayments set
forth in clause (a) of Section 3.2.

 

Section 3.4 Interest Rate. During any applicable Interest Period, the Loans
shall accrue interest during such Interest Period at a rate per annum equal to
the sum of (i) the Applicable Margin plus (ii) the higher of (x) the LIBO Rate
for such Interest Period and (y) 1.00%. The interest rate shall be recalculated
and, if necessary, adjusted for each Interest Period, in each case pursuant to
the terms hereof.

 

Section 3.5 Default Rate. At all times commencing upon the date any Event of
Default occurs, and continuing until such Event of Default is no longer
continuing, the Applicable Margin shall be increased by 4.00% per annum.

 

 
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Section 3.6 Payment Dates. Interest accrued on any Loan shall be payable in
cash, without duplication:

 

(a) on the Maturity Date therefor;

 

(b) on the date of any payment or prepayment, in whole or in part, of principal
outstanding on such Loan on the principal amount so paid or prepaid;

 

(c) the last day of each Interest Period for such Loan; provided that if such
day is not a Business Day, then such payment shall be made on the next
succeeding Business Day; and

 

(d) on that portion of such Loan that is accelerated pursuant to Section 9.2 or
Section 9.3, immediately upon such acceleration.

 

Interest accrued on any Loan or other monetary Obligations after the date such
amount is due and payable (whether on the Maturity Date, upon acceleration or
otherwise) shall be payable upon demand.

 

Section 3.7 Exit Fee. On the day when all Loans outstanding hereunder are paid
in full, whether by voluntary or involuntary prepayment, scheduled amortization,
acceleration, on the Maturity Date or otherwise, the Borrower will pay an exit
fee equal to two percent (2%) multiplied by the sum of (i) the original
principal amount of the Initial Loan and (ii) the original principal amount of
the Delayed Draw Loan (if made); provided, however, that in the event that (x)
the commitment for the Delayed Draw Loan has been permanently terminated and (y)
all outstanding Loans have been repaid in full in cash prior to the first
anniversary of the Closing Date, such exit fee shall not be payable.

 

Section 3.8 Other Fees and Expenses. The Borrower shall pay to the Lender all
fees and expenses of the Lender as required hereby and by each other Loan
Document.

 

Article IV
LIBO RATE AND OTHER PROVISIONS

 

Section 4.1 Increased Costs, Etc. If any Change in Law shall (i) impose, modify
or deem applicable any reserve, special deposit, compulsory loan, insurance
charge or similar requirement against assets of, deposits with or for the
account of, or credit extended by, the Lender or any Person controlling the
Lender (except any reserve requirement reflected in the LIBO Rate) or (ii)
impose on the Lender or the London interbank market any other condition, cost or
expense (other than Taxes) affecting this Agreement or Loans made by the Lender,
and the result of any of the foregoing shall be to increase the cost to the
Lender of making, converting to, continuing or maintaining any Loan or of
maintaining its obligation to make any such Loan (whether of principal, interest
or any other amount) then, upon written notice from the Lender, the Borrower
shall within 30 days following receipt of such notice pay directly to the Lender
such additional amount or amounts sufficient to compensate the Lender for such
additional costs incurred or reduction suffered. A certificate of the Lender
setting forth the amount or amounts necessary to compensate the Lender or a
Person controlling the Lender, as the case may be, as specified in this Section
4.1 and delivered to the Borrower, shall be conclusive absent manifest error.
Failure or delay on the part of the Lender to demand compensation pursuant to
this Section 4.1 shall not constitute a waiver of the Lender’s right to demand
such compensation; provided that the Borrower shall not be required to
compensate the Lender pursuant to this Section 4.1 for any increased costs
incurred or reductions suffered more than nine months prior to the date that the
Lender notifies the Borrower of the Change in Law giving rise to such increased
costs or reductions, and of the Lender’s intention to claim compensation
therefor (except that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the nine-month period referred to above shall
be extended to include the period of retroactive effect thereof).

 

 
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Section 4.2 Increased Capital Costs. If any Change in Law affects or would
affect the amount of capital required or expected to be maintained by the Lender
or any Person controlling the Lender, and the Lender determines (in good faith
but in its sole and absolute discretion) that the rate of return on its or such
controlling Person’s capital as a consequence of the Commitment or any Loan made
by it hereunder is reduced to a level below that which the Lender or such
controlling Person could have achieved but for the occurrence of any such
circumstance, then upon notice from time to time by the Lender to the Borrower,
the Borrower shall within five days following receipt of such notice pay
directly to the Lender additional amounts sufficient to compensate the Lender or
such controlling Person for such reduction in rate of return. A statement of the
Lender as to any such additional amount or amounts shall, in the absence of
manifest error, be conclusive and binding on the Borrower. In determining such
amount, the Lender may use any method of averaging and attribution that it (in
its sole and absolute discretion) shall deem applicable.

 

Section 4.3 Taxes. The Borrower covenants and agrees as follows with respect to
Taxes.

 

(a) Any and all payments by the Borrower under each Loan Document shall be made
without setoff, counterclaim or other defense, and free and clear of, and
without deduction or withholding for or on account of, any Taxes. In the event
that any Taxes are imposed and required to be deducted or withheld from any
payment required to be made by any Loan Party to or on behalf of the Lender
under any Loan Document, then:

 

(i) if such Taxes are Non-Excluded Taxes, the amount of such payment shall be
increased as may be necessary so that such payment is made, after withholding or
deduction for or on account of such Taxes, in an amount that is not less than
the amount provided for in such Loan Document; and

 

(ii) such Loan Party shall withhold the full amount of such Taxes from such
payment (as increased pursuant to clause (a)(i) and shall pay such amount to the
Governmental Authority imposing such Taxes in accordance with applicable law.

 

(b) In addition, the Borrower shall pay all Other Taxes imposed to the relevant
Governmental Authority imposing such Other Taxes in accordance with applicable
law.

 

 
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(c) As promptly as practicable after the payment of any Taxes or Other Taxes,
and in any event within 45 days of any such payment being due, the Borrower
shall furnish to the Lender a copy of an official receipt (or a certified copy
thereof) evidencing the payment of such Taxes or Other Taxes.

 

(d) The Borrower shall indemnify the Lender for any Non-Excluded Taxes and Other
Taxes levied, imposed or assessed on (and whether or not paid directly by) the
Lender whether or not such Non-Excluded Taxes or Other Taxes are correctly or
legally asserted by the relevant Governmental Authority. Promptly upon having
knowledge that any such Non-Excluded Taxes or Other Taxes have been levied,
imposed or assessed, and promptly upon notice thereof by the Lender, the
Borrower shall pay such Non-Excluded Taxes or Other Taxes directly to the
relevant Governmental Authority (provided that, the Lender shall not be under
any obligation to provide any such notice to the Borrower). In addition, the
Borrower shall indemnify the Lender for any incremental Taxes that may become
payable by the Lender as a result of any failure of the Borrower to pay any
Taxes when due to the appropriate Governmental Authority or to deliver to the
Lender, pursuant to clause (c), documentation evidencing the payment of Taxes or
Other Taxes. With respect to indemnification for Non-Excluded Taxes and Other
Taxes actually paid by the Lender or the indemnification provided in the
immediately preceding sentence, such indemnification shall be made within 30
days after the date the Lender makes written demand therefor. The Borrower
acknowledges that any payment made to the Lender or to any Governmental
Authority in respect of the indemnification obligations of the Borrower provided
in this clause shall constitute a payment in respect of which the provisions of
clause (a) and this clause shall apply.

 

Section 4.4 Payments, Computations; Proceeds of Collateral, Etc.

 

(a) Unless otherwise expressly provided in a Loan Document, all payments by the
Borrower pursuant to each Loan Document shall be made without setoff, deduction
or counterclaim not later than 11:00 a.m. on the date due in same day or
immediately available funds to such account as the Lender shall specify from
time to time by notice to the Borrower. Funds received after that time shall be
deemed to have been received by the Lender on the next succeeding Business Day.
All interest and fees shall be computed on the basis of the actual number of
days (including the first day but excluding the last day) occurring during the
period for which such interest or fee is payable over a year comprised of
360 days. Payments due on other than a Business Day shall be made on the next
succeeding Business Day and such extension of time shall be included in
computing interest and fees in connection with that payment.

 

(b) All amounts received as a result of the exercise of remedies under the Loan
Documents (including from the proceeds of collateral securing the Obligations)
or under applicable law shall be applied upon receipt to the Obligations as
follows: (i) first, to the payment in full in cash of all interest (including
interest accruing after the commencement of a proceeding in bankruptcy,
insolvency or similar law, whether or not permitted as a claim under such law)
and fees owing under the Loan Documents, and all costs and expenses owing to the
Lender pursuant to the terms of the Loan Documents, until paid in full in cash,
(ii) second, after payment in full in cash of the amounts specified in
clause (b)(i), to the payment of the principal amount of the Loans then
outstanding, (iii) third, after payment in full in cash of the amounts specified
in clauses (b)(i) and (b)(ii), to the payment of all other Obligations owing to
the Lender, and (iv) fourth, after payment in full in cash of the amounts
specified in clauses (b)(i) through (b)(iii), and following the Termination
Date, to the Borrower or any other Person lawfully entitled to receive such
surplus.

 

 
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Section 4.5 Setoff. The Lender shall, upon the occurrence and during the
continuance of any Event of Default described in clauses (a) through (d) of
Section 9.1.8 or, upon the occurrence and during the continuance of any other
Event of Default declared by the Lender pursuant to Section 9.3, have the right
to appropriate and apply to the payment of the Obligations owing to it (whether
or not then due), and (as security for such Obligations) each Loan Party hereby
grants to the Lender a continuing security interest in, any and all balances,
credits, deposits, accounts or moneys of each Loan Party then or thereafter
maintained with the Lender. The Lender agrees promptly to notify the Borrower
after any such appropriation and application made by the Lender; provided that,
the failure to give such notice shall not affect the validity of such setoff and
application. The rights of the Lender under this Section are in addition to
other rights and remedies (including other rights of setoff under applicable law
or otherwise) which the Lender may have.

 

Section 4.6 LIBOR Rate Not Determinable. If prior to the commencement of any
Interest Period, adequate and reasonable means do not exist for ascertaining the
LIBO Rate for such Interest Period, then the Lender shall give notice thereof to
the Borrower as promptly as practicable. In the event of any such determination,
the Loans shall, until the Lender has advised the Borrower that the
circumstances giving rise to such notice no longer exist, bear interest at the
interest rate in effect for the immediately preceding Interest Period.

 

Article V
CONDITIONS TO LOAN

 

Section 5.1 Initial Loan. The obligation of the Lender to make the Initial Loan
shall be subject to the execution and delivery of this Agreement by the parties
hereto, the delivery of a Loan Request as requested pursuant to Section 2.2, and
the prior or concurrent satisfaction of each of the conditions precedent set
forth below in this Article.

 

Section 5.1.1 Secretary’s Certificate, Etc. The Lender shall have received from
each Loan Party and its respective Subsidiaries party to a Loan Document, (i) a
copy of a good standing certificate, dated a date reasonably close to the
Closing Date, for each such Person and (ii) a certificate, dated as of the
Closing Date, duly executed and delivered by such Person’s Secretary or
Assistant Secretary, managing member or general partner, as applicable, as to:

 

(a) resolutions of each such Person’s board of directors (or other managing
body, in the case of other than a corporation) then in full force and effect
authorizing the execution, delivery and performance of each Loan Document to be
executed by such Person and the transactions contemplated hereby and thereby;

 

 
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(b) the incumbency and signatures of those of its officers, managing member or
general partner, as applicable, authorized to act with respect to each Loan
Document to be executed by such Person; and

 

(c) the full force and validity of each Organic Document of such Person and
copies thereof;

 

upon which certificates the Lender may conclusively rely until it shall have
received a further certificate of the Secretary, Assistant Secretary, managing
member or general partner, as applicable, of any such Person cancelling or
amending the prior certificate of such Person.

 

Section 5.1.2 Closing Date Certificate. The Lender shall have received a
certificate, dated as of the Closing Date and in form and substance satisfactory
to the Lender (the “Closing Date Certificate”), duly executed and delivered by
an Authorized Officer of the Borrower and Holdco, in which certificate each of
the Borrower and Holdco shall agree and acknowledge, among other things, that
the statements made therein shall be deemed to be true and correct
representations and warranties of each of the Borrower and Holdco as of such
date, and, at the time such certificate is delivered, such statements shall in
fact be true and correct, and such statements shall include that (i) both
immediately before and after giving effect to the Initial Loan, (x) the
representations and warranties set forth in each Loan Document shall, in each
case, be true and correct and (y) no Default shall have then occurred and be
continuing, or would result from the Initial Loan being advanced on the Closing
Date and (ii) all of the conditions set forth in Section 5.1 have been
satisfied. All documents and agreements required to be appended to the Closing
Date Certificate, if any, shall be in form and substance satisfactory to the
Lender, shall have been executed and delivered by the requisite parties, and
shall be in full force and effect.

 

Section 5.1.3 Delivery of Notes. The Lender shall have received a Note for the
Initial Loan duly executed and delivered by an Authorized Officer of the
Borrower.

 

Section 5.1.4 Financial Information, Etc. The Lender shall have received:

 

(a) audited consolidated financial statements of Holdco and its Subsidiaries for
each of the Fiscal Year ended December 31, 2013; and

 

(b) unaudited consolidated balance sheets of Holdco and its Subsidiaries for
each Fiscal Quarter ended after December 31, 2013 and at least ten Business Days
prior to the Closing Date, together with the related consolidated statement of
operations, shareholder’s equity and cash flows for such Fiscal Quarter.

 

Section 5.1.5 Compliance Certificate. The Lender shall have received an initial
Compliance Certificate, prepared on a pro forma basis as of March 31, 2014,
consistent in form with the pro forma financial statements included in the
Definitive Proxy Statement on Schedule 14A of Holdco, and giving effect to the
Initial Loan, the Merger Transaction and the Private Placement (as defined in
the Merger Agreement), dated as of the Closing Date, duly executed (and with all
schedules thereto duly completed) and delivered by the chief financial or
accounting Authorized Officer of each of the Borrower and Holdco.

 

 
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Section 5.1.6 Solvency, Etc. The Lender shall have received, a solvency
certificate duly executed and delivered by the chief financial or accounting
Authorized Officer of the Borrower, dated as of the Closing Date, in form and
substance satisfactory to the Lender.

 

Section 5.1.7 Pledge and Security Agreement. The Lender shall have received
executed counterparts of the Pledge and Security Agreement, dated as of the date
hereof, duly executed and delivered by each Grantor, together with:

 

(a) certificates (in the case of Capital Securities that are securities (as
defined in the UCC)) evidencing all of the issued and outstanding capital
Securities owned by each Grantor, which certificates in each case shall be
accompanied by undated instruments of transfer duly executed in blank, or, if
any Capital Securities (in the case of Capital Securities that are
uncertificated securities (as defined in the UCC)), confirmation and evidence
satisfactory to the Lender that the security interest therein has been
transferred to and perfected by the Lender in accordance with Articles 8 and 9
of the UCC and all laws otherwise applicable to the perfection of the pledge of
such Capital Securities.

 

(b) financing statements suitable in form for naming each Grantor as a debtor
and the Lender as the secured party, or other similar instruments or documents
to be filed under the UCC and the PPSA of all jurisdictions as may be necessary
or, in the opinion of the Lender, desirable to perfect the security interests of
the Lender pursuant to the Pledge and Security Agreement;

 

(c) UCC Form UCC-3 termination statements and PPSA Form 2C discharge statements,
if any, necessary to release all Liens and other rights of any Person (i) in any
collateral described in the Pledge and Security Agreement previously granted by
any Person, and (ii) securing any of the Indebtedness identified in Schedule
8.2(b), together with such other UCC Form UCC-3 termination statements and PPSA
Form 2C discharge statements as the Lender may reasonably request from any
Grantor;

 

(d) evidence that all deposit accounts, lockboxes, disbursement accounts,
investment accounts or other similar accounts of each Grantor are Controlled
Accounts; and

 

(e) evidence that all such Controlled Accounts are subject to one or more
account control agreement, in favor of, and satisfactory in form and substance
to, the Lender.

 

Section 5.1.8 Intellectual Property Security Agreements. The Lender shall have
received a Patent Security Agreement, a Copyright Security Agreement and a
Trademark Security Agreement, as applicable, each dated as of the Closing Date,
duly executed and delivered by each Grantor that, pursuant to the Pledge and
Security Agreement, is required to provide such intellectual property security
agreements to the Lender.

 

Section 5.1.9 Closing Date Warrant. The Lender shall have received the Closing
Date Warrant, dated as of the Closing Date, duly executed, delivered and validly
issued by Holdco in favor of the Lender.

 

 
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Section 5.1.10 Insurance. The Lender shall have received, certified copies of
the insurance policies (or binders in respect thereof), from one or more
insurance companies satisfactory to the Lender, evidencing coverage required to
be maintained pursuant to each Loan Document. All such insurance policies
required pursuant to this Section shall (i) name the Lender as mortgagee (in the
case of property insurance) or loss payee or additional insured (in the case of
liability insurance), as applicable, and provide that no cancellation or
modification of the policies will be made without the prior written consent of
the Lender and (ii) be in addition to any requirements to maintain specific
types of insurance contained in the other Loan Documents.

 

Section 5.1.11 Material Agreements. The Lender shall be satisfied, in its sole
discretion, with the terms, conditions and other provisions of each Material
Agreement.

 

Section 5.1.12 Opinions of Counsel. The Lender shall have received opinions,
dated the Closing Date and addressed to the Lender, from

 

(a) Richardson & Patel, LLP, New York counsel to each Loan Party and its
respective Subsidiaries, in form and substance satisfactory to the Lender; and

 

(b) Borden Ladner Gervais LLP, Canadian counsel to each Loan Party, in form and
substance satisfactory to the Lender.

 

Section 5.1.13 Closing Fees, Expenses, Etc. The Lender shall have received for
its own account, all fees, costs and expenses due and payable pursuant to
Section 11.3 and the Proposal Letter.

 

Section 5.1.14 Equity Investment. The Lender shall have received evidence,
satisfactory to it, that Holdco has received an equity investment of no less
than $6,000,000 in cash from investors other than the Lender or any of its
Affiliates, all on terms and conditions satisfactory to the Lender. The Lender
shall have received documentation for such equity investment in form and
substance satisfactory to the Lender.

 

Section 5.1.15 Holdco Cash Contribution. Holdco shall have deposited at least
$5,250,000 of cash in one or more Controlled Accounts that is free and clear of
all Liens, other than Liens granted hereunder in favor of the Lender.

 

Section 5.1.16 Anti-Terrorism Laws. The Lender shall have received, as
applicable, all documentation and other information required by bank regulatory
authorities under applicable “know your customer” and anti-money laundering
rules and regulations, including the U.S.A. Patriot Act.

 

Section 5.1.17 Due Diligence. The Lender shall have received and be satisfied
with all due diligence (including without limitation legal, intellectual
property, commercial market forecasts clinical and regulatory assessments,
supply chain, securities, labor, tax, litigation, environmental, reimbursement
and regulatory authority matters) in its sole discretion.

 

Section 5.1.18 Material Adverse Change. No material adverse change shall have
occurred in the business, financial performance or condition, operations
(including the results thereof), assets, properties or prospects of Holdco and
its Subsidiaries, taken as a whole, since December 31, 2013 (after giving pro
forma effect to the Merger Transaction).

 

 
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Section 5.1.19 Merger Transaction, Etc. The Merger Transaction shall have been
consummated in accordance with the terms of the Merger Agreement (or the Lender
shall be satisfied with the arrangements in place for the consummation of the
Merger Transaction). The Lender shall be satisfied with the ownership and
capital structure of Holdco and its Subsidiaries (including in respect of debt
and equity capital and all terms and legal and economic rights related thereto),
after giving effect to the Merger Transaction. Without limiting the foregoing,
each of the VBI Convertible Notes shall have been converted into shares of
common stock of Holdco on terms satisfactory to the Lender. The Lender shall
have received all documentation relating to the Merger Transaction and the debt
and equity capital structure of Holdco and its Subsidiaries (including the
Merger Agreement) and such documentation shall be reasonably satisfactory to the
Lender.

 

Section 5.1.20 Board Representatives. The Lender shall designate one individual
who will be appointed to the board of directors (or equivalent) of each of
Holdco and the Borrower (the “Lender’s Designee”), such Lender’s Designee to be
reasonably acceptable to the Borrower.  For so long as such Lender’s Designee is
a member of the board of directors (or equivalent) of Holdco or the Borrower,
the Lender shall not take any action (or advise such Lender’s Designee to take
any action) that would cause the Lender’s Designee to be in violation of its
fiduciary duties as a director (or equivalent) under applicable Delaware law.

 

Section 5.1.21 Satisfactory Legal Form. All documents executed or submitted
pursuant hereto by or on behalf of each Loan Party or any of its respective
Subsidiaries shall be satisfactory in form and substance to the Lender and its
counsel, and the Lender and its counsel shall have received all information,
approvals, resolutions, opinions, documents or instruments as the Lender or its
counsel may reasonably request.

 

Section 5.2 Delayed Draw Loan. The obligation of the Lender to make the Delayed
Draw Loan shall be subject to the prior making of the Initial Loan, the delivery
of a Loan Request for such Delayed Draw Loan as required pursuant to Section
2.2, and the satisfaction of each of the conditions precedent set forth below in
this Section 5.2.

 

Section 5.2.1 Delayed Draw Certificate. The Lender shall have received a
certificate, dated as of the Delayed Draw Date and in form and substance
satisfactory to the Lender (the “Delayed Draw Certificate”), duly executed and
delivered by an Authorized Officer of each of the Borrower and Holdco, in which
certificate each of the Borrower and Holdco shall agree and acknowledge, among
other things, that the statements made therein shall be deemed to be true and
correct representations and warranties of each of the Borrower and Holdco as of
such date, and, at the time such certificate is delivered, such statements shall
in fact be true and correct, and such statements shall include that (i) both
immediately before and after giving effect to the Delayed Draw Loan (x) the
representations and warranties set forth in this Agreement and each other Loan
Document shall, in each case, be true and correct and (y) no Default shall have
then occurred and be continuing, or would result from the Delayed Draw Loan to
be advanced on the Delayed Draw Date, and (ii) all of the conditions set forth
in Section 5.2 have been satisfied. All documents and agreements required to be
appended to the Delayed Draw Certificate, if any, shall be in form and substance
reasonably satisfactory to the Lender, shall have been executed and delivered by
the requisite parties, and shall be in full force and effect.

 

 
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Section 5.2.2 Milestone Clinical Trial. The Borrower shall have commenced the
Milestone Clinical Trial.

 

Section 5.2.3 Delivery of Note. The Lender shall have received a Note for the
Delayed Draw Loan duly executed and delivered by an Authorized Officer of the
Borrower.

 

Section 5.2.4 Compliance Certificate. The Lender shall have received a
Compliance Certificate, prepared on a pro forma basis as if the Delayed Draw
Loan had been made as of the first day of the most recently ended Fiscal Quarter
for which a report pursuant to Section 7.1(b) has been delivered to the Lender,
duly executed (and with all schedules thereto duly completed) and delivered by
the chief financial or accounting Authorized Officer of each Loan Party.

 

Section 5.2.5 Closing Fee, Expenses, Etc. The Lender shall have received for its
own account, all fees, costs and expenses due and payable pursuant to Section
11.3 and the Proposal Letter.

 

Section 5.2.6 Delayed Draw Warrant. The Lender shall have received the Delayed
Draw Warrant, dated as of the Delayed Draw Date, duly executed, delivered and
validly issued by the Borrower in favor of the Lender.

 

Section 5.2.7 Disclosure Schedules. Immediately prior to the Delayed Draw Date,
the Borrower shall deliver to the Lender updates to Schedules 6.15(a), 6.16 and
6.23, each such updated Schedule to be complete and accurate as of the Delayed
Draw Date.

 

Section 5.2.8 Delayed Draw Date. The Loan Request for the Delayed Draw Loan
shall have been submitted to the Lender on or before the second anniversary of
the Closing Date.

 

Section 5.2.9 Satisfactory Legal Form. All documents executed or submitted
pursuant hereto by or on behalf of the Borrower or any Subsidiary shall be
reasonably satisfactory in form and substance to the Lender and its counsel, and
the Lender and its counsel shall have received all information, approvals,
resolutions, opinions, documents or instruments as the Lender or its counsel may
reasonably request.

 

Article VI
REPRESENTATIONS AND WARRANTIES

 

In order to induce the Lender to enter into this Agreement and to make the Loans
hereunder, each Loan Party jointly and severally represents and warrants to the
Lender as set forth in this Article.

 

Section 6.1 Organization, Etc. Each Loan Party is (i) validly organized and
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, (ii) to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect, is duly qualified
to do business and is in good standing as a foreign entity in each jurisdiction
where the nature of its business requires such qualification, and (iii) has full
power and authority and holds all requisite governmental licenses, permits and
other approvals to enter into and perform its Obligations under each Loan
Document to which it is a party, to own and hold under lease its property and to
conduct its business substantially as currently conducted by it.

 

 
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Section 6.2 Due Authorization, Non-Contravention, Etc. The execution, delivery
and performance by each Loan Party of each Loan Document executed or to be
executed by it are in each case within such Person’s powers, have been duly
authorized by all necessary action, and do not:

 

(a) contravene (i) any Loan Party’s Organic Documents, (ii) any court decree or
order binding on or affecting any Loan Party or (iii) any law or governmental
regulation binding on or affecting any Loan Party; or

 

(b) result in (i) or require the creation or imposition of, any Lien on any Loan
Party’s properties (except as permitted by this Agreement) or (ii) a default
under any material contractual restriction binding on or affecting any Loan
Party.

 

Section 6.3 Government Approval, Regulation, Etc. No authorization or approval
or other action by, and no notice to or filing with, any Governmental Authority
or other Person (other than those that have been, or on the Closing Date will
be, duly obtained or made and which are, or on the Closing Date will be, in full
force and effect) is required for the due execution, delivery or performance by
any Loan Party of any Loan Document to which it is a party. Each Loan Party and
its respective properties and businesses are in compliance in all material
respects with all laws, rules regulations, orders and court decrees applicable
to such Persons, properties or businesses, as the case may be.

 

Section 6.4 Validity, Etc. Each Loan Document to which any Loan Party is a party
constitutes the legal, valid and binding obligations of such Person enforceable
against such Person in accordance with its respective terms (except, in any
case, as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors’ rights generally
and by principles of equity).

 

Section 6.5 Financial Information. The consolidated financial statements of
Holdco and its Subsidiaries furnished to the Lender pursuant to Section 5.1.4
and Section 7.1(a) and (b) have been prepared in accordance with GAAP
consistently applied, and present fairly the consolidated financial condition of
the Persons covered thereby as at the dates thereof and the results of their
operations for the periods then ended.

 

 
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Section 6.6 No Material Adverse Change. Other than the Merger Transaction, there
has been no material adverse change in the business, financial performance or
condition, operations (including the results thereof), assets, properties or
prospects of Holdco and its Subsidiaries, taken as a whole, since December 31,
2013.

 

Section 6.7 Litigation, Labor Matters and Environmental Matters.

 

(a) Except as described on Schedule 6.7(a), there are no actions, suits or
proceedings by or before any arbitrator or Governmental Authority pending
against or, to the knowledge of the Borrower and Holdco, threatened against or
affecting, any Loan Party (i) as to which there is a reasonable likelihood of an
adverse determination and that, if adversely determined, would reasonably be
expected, individually or in the aggregate, to result in liabilities in excess
of $250,000 or (ii) that would reasonably be likely to adversely affect this
Agreement or the transaction contemplated hereby.

 

(b) There are no labor controversies pending against or, to the knowledge of the
Borrower and Holdco, threatened against or affecting any Loan Party (i) that
would reasonably be expected, individually or in the aggregate, to result in
liabilities in excess of $250,000 or (ii) that would reasonably be likely to
adversely affect this Agreement or the transaction contemplated hereby.

 

(c) No Loan Party (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any Permit under or in connection with any
Environmental Law (“Environmental Permit”), (ii) is or has been subject to any
Environmental Liability, (iii) has received notice of any Environmental
Liability or (iv) knows of any basis for any Environmental Liability.

 

Section 6.8 Subsidiaries. Holdco has no Subsidiaries, except those Subsidiaries
which are identified on Schedule 6.8, or which are permitted to have been
organized or acquired in accordance with Section 8.5 or Section 8.8.

 

Section 6.9 Ownership of Properties. Each Loan Party owns (i) in the case of
owned real property, good and marketable fee title to, and (ii) in the case of
owned personal property, good and valid title to, or, in the case of leased real
or personal property, valid and enforceable leasehold interests (as the case may
be) in, all of its material properties and assets, tangible and intangible, of
any nature whatsoever, free and clear in each case of all Liens or claims,
except for Liens permitted pursuant to Section 8.3.

 

Section 6.10 Taxes. Each Loan Party has filed all tax returns and reports
required by law to have been filed by it and has paid all Taxes thereby shown to
be due and owing, except any such Taxes which are being diligently contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books.

 

 
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Section 6.11 Pension Plans, Etc. During the twelve-consecutive-month period
prior to the Closing Date and prior to the date of any Loans hereunder, no
formal steps have been taken to terminate any Pension Plan, and no contribution
failure has occurred with respect to any Pension Plan sufficient to give rise to
a Lien on any Loan Party or any ERISA Affiliate under Section 303(k) of ERISA or
under Section 430(k) of the Code. No condition exists or event or transaction
has occurred with respect to any Pension Plan which would reasonably be expected
to result in the incurrence by any Loan Party or any ERISA Affiliate of any
material liability, fine or penalty. Except as disclosed in Schedule 6.11,
neither any Loan Party nor any ERISA Affiliate has any Contingent Liability with
respect to any post-retirement benefit under a Welfare Plan, other than
liability for continuation coverage described in Part 6 of Title I of ERISA or
similar state law. No Pension Plan is a Multiemployer Plan and no Loan Party has
any actual or Contingent Liability in respect of such plan.

 

Section 6.12 Accuracy of Information. None of the factual information heretofore
or contemporaneously furnished in writing to the Lender by or on behalf of any
Loan Party in connection with any Loan Document or any transaction contemplated
hereby contains any untrue statement of a material fact, or omits to state any
material fact necessary to make any information not misleading.

 

Section 6.13 Regulations U and X. No Loan Party is engaged in the business of
extending credit for the purpose of buying or carrying margin stock, and no
proceeds of any Loan will be used to purchase or carry margin stock or otherwise
for a purpose which violates, or would be inconsistent with, F.R.S. Board
Regulation U or Regulation X. Terms for which meanings are provided in F.R.S.
Board Regulation U or Regulation X or any regulations substituted therefor, as
from time to time in effect, are used in this Section with such meanings.

 

Section 6.14 Solvency. The Borrower, both before and after giving effect to each
Loan, is Solvent.

 

Section 6.15 Intellectual Property.

 

(a) Schedule 6.15(a) sets forth a complete and accurate list of all (i) Patents,
(ii) registered and material unregistered Trademarks (including domain names)
and any pending registrations for Trademarks and (iii) any other registered
Intellectual Property and (iv) any commercially significant unregistered
Intellectual Property, in each case owned or licensed by each Loan Party. For
each item of Intellectual Property listed on Schedule 6.15(a), the applicable
Loan Party has, where relevant, indicated (A) the countries in each case in
which such item is patented, (B) the application numbers, (C) the registration
or patent numbers, (D) with respect to the Patents, the earliest expected
expiration date of the issued Patents as of the Closing Date, (E) the owner of
such item of Intellectual Property and (F) with respect to Intellectual Property
owned by any third party, the agreement pursuant to which that Intellectual
Property is licensed to any Loan Party.

 

(b) With respect to all Intellectual Property of the Loan Parties listed on
Schedule 6.15(a):

 

 
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(i) such Loan Party owns or has a valid license to such Intellectual Property
free and clear of any and all Liens other than Liens permitted pursuant to
Section 8.3 and all such Intellectual Property are in full force and effect, and
have not expired, lapsed or been forfeited, cancelled or abandoned;

 

(ii) such Loan Party has taken commercially reasonable actions to maintain and
protect such Intellectual Property and there are no unpaid maintenance or
renewal fees payable by such Loan Party that are currently overdue for any of
such registered Intellectual Property;

 

(iii) there is no proceeding challenging the validity or enforceability of any
such Intellectual Property, no Loan Party is involved in any such proceeding
with any Person and none of the Intellectual Property is the subject of any
Other Administrative Proceeding;

 

(iv) to the knowledge of the Borrower and Holdco, (A) such Intellectual Property
is valid, enforceable and subsisting and (B) no event has occurred, and nothing
has been done or omitted to have been done, that would effect the validity or
enforceability of such Intellectual Property; and

 

(v) such Loan Party is the sole and exclusive owner of all right, title and
interest in and to, all such Intellectual Property that is owned by such Loan
Party.

 

(c) To the knowledge of the Borrower and Holdco, no third party is committing
any act of Infringement of any Intellectual Property listed on Schedule 6.15(a).

 

(d) With respect to each license agreement listed on Schedule 6.15(a), such
license agreement (i) is in full force and effect and is binding upon and
enforceable against each Loan Party party thereto and, to the knowledge of the
responsible officer of the Borrower and Holdco, all other parties party thereto
in accordance with its terms, (ii) has not been amended or otherwise modified
and (iii) has not suffered a default thereunder. No Loan Party has taken any
action that would permit any other Person party to any Material Agreement to
have, and to the knowledge of any responsible officer of the Borrower and
Holdco, no such Person otherwise has, any defenses, counterclaims or rights of
setoff thereunder.

 

(e) No Loan Party has received written notice from any third party alleging that
the conduct of its business (including the development, manufacture, use, sale
or other commercialization of any Product) Infringes any Intellectual Property
of that third party and, to the knowledge of the Borrower and Holdco, the
conduct of its business (including the development, manufacture, use, sale or
other commercialization of any Product) does not Infringe any Intellectual
Property of any third party.

 

Section 6.16 Material Agreements. Set forth on Schedule 6.16 is a complete and
accurate list as of the Closing Date or Delayed Draw Date, as applicable, of all
Material Agreements of each Loan Party, with an adequate description of the
parties, subject matter thereof and amendments and modifications thereto. Each
such Material Agreement (i) is in full force and effect and is binding upon and
enforceable against each Loan Party party thereto and, to the knowledge of any
responsible officer of the Borrower and Holdco, all other parties thereto in
accordance with its terms, (ii) has not been amended or otherwise modified and
(iii) has not suffered a default thereunder. No Loan Party has taken any action
that would permit any other Person party to any Material Agreement to have, and
to the knowledge of any responsible officer of the Borrower and Holdco, no such
Person otherwise has, any defenses, counterclaims or rights of setoff
thereunder.

 

 
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Section 6.17 Permits. Each Loan Party has all material Permits, including
Environmental Permits, necessary or required for the ownership, operation and
conduct of its business and the distribution of the Products. All such Permits
are validly held and there are no defaults thereunder.

 

Section 6.18 Regulatory Matters. With respect to each Product:

 

(a) (i) All regulatory filings required by any Regulatory Authority or in
respect of any Regulatory Authorization or Product Authorization with respect to
any Product or any Product Development and Commercialization Activities have
been made, and all such filings are complete and correct and have complied in
all material respects with all applicable laws and regulations, (ii) all
clinical and pre-clinical trials, if any, of investigational Products have been
and are being conducted by each Loan Party according to all applicable laws and
regulations along with appropriate monitoring of clinical investigator trial
sites for their compliance, and (iii) each Loan Party has disclosed to the
Lender all such regulatory filings and all material communications between
representatives of each Loan Party and any Regulatory Authority.

 

(b) The Borrower and each other Loan Party and the Borrower’s agents and the
agents of each other Loan Party are in compliance in all material respects with
all applicable statutes, rules and regulations (including all Regulatory
Authorizations and Product Authorizations) of all applicable Governmental
Authorities, including the FDA, the DOH and all other Regulatory Authorities,
with respect to each Product and all Product Development and Commercialization
Activities related thereto. The Borrower and each other Loan Party has and
maintains in full force and effect all the necessary and requisite Regulatory
Authorizations and Product Authorizations. The Borrower and each other Loan
Party is in compliance in all material respects with all applicable registration
and listing requirements set forth in the FD&C Act, 21 U.S.C. § 360, and all
similar applicable laws (whether U.S. or non-U.S.), including the Food and Drugs
Act (R.S.C., 1985, c.F-27) in Canada. Each Loan Party adheres in all material
respects to all applicable regulations of all Regulatory Authorities with
respect to the Products and all Product Development and Commercialization
Activities related thereto, including applicable provisions of the FDA’s Quality
System regulation as set forth in Title 21 of the Code of Federal Regulations.

 

 
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(c) Neither the Borrower nor any other Loan Party has received from any
Regulatory Authority any notice of adverse findings with respect to any Product
or any Product Development and Commercialization Activities related thereto,
including any FDA Form 483 inspectional observations, notices of violations,
Warning Letters, criminal proceeding notices under Section 305 of the FD&C Act,
or any other similar communication from any Regulatory Authority. There have
been no seizures conducted or, to the Borrower’s knowledge, threatened by any
Regulatory Authority with respect to any Product, and no recalls, market
withdrawals, field notifications, notifications of misbranding or adulteration
or safety alerts conducted, requested or, to the Borrower’s knowledge,
threatened by any Regulatory Authority with respect to any Product, and no
recalls, market withdrawals, field notifications, notifications of misbranding
or adulteration or safety alerts have been conducted, requested or, to the
Borrower’s knowledge, threatened by any Regulatory Authority relating to any
Products. Neither the Borrower nor any other Loan Party has received any written
notification that remains unresolved from the FDA, the DOH or any other
Regulatory Authority indicating any breach or violation of any applicable
Product Authorization or Regulatory Authorization, including that any of the
Products is misbranded or adulterated as defined in the FD&C Act or the rules
and regulations promulgated thereunder.

 

(d) Neither the Borrower nor any other Loan Party nor any officer, employee or
agent thereof, has made an untrue statement of a material fact or fraudulent
statements to the FDA, the DOH or any other Regulatory Authority, failed to
disclose a material fact required to be disclosed to the FDA, the DOH or any
other Regulatory Authority, or committed an act, made a statement, or failed to
make a statement that, at the time such disclosure was made (or was not made),
could reasonably be expected to provide a basis for the FDA, the DOH or any
other Regulatory Authority to invoke its policy respecting Fraud, Untrue
Statements of Material Facts, Bribery and Illegal Gratuities, set forth in 56
Fed. Reg. 46191 (September 10, 1991) or any similar policy.

 

(e) Neither the Borrower nor any other Loan Party has received any written
notice that the FDA, the DOH or any other applicable Regulatory Authority has
commenced or initiated, or, to the knowledge of the Borrower or any such Loan
Party, threatened to commence or initiate, any action to withdraw any Regulatory
Authorization or Product Authorization or requested the recall of any Products
or commenced or initiated or, to the knowledge of the Borrower or any such Loan
Party, threatened to commence or initiate, any action to enjoin any Product
Development and Commercialization Activities of the Borrower or any such Loan
Party.

 

(f) The clinical, preclinical, safety and other studies and tests conducted by
or on behalf of or sponsored by the Borrower and each other Loan Party, or in
respect of which any Products or Product candidates under development have
participated, were (and if still pending, are) being conducted in accordance
with standard medical and scientific research procedures and all applicable
Product Authorizations. The Borrower and each other Loan Party has operated
within, and currently is in compliance in all material respects with, all
applicable laws, Product Authorizations and Regulatory Authorizations, as well
as the rules and regulations of the FDA, the DOH and each other Regulatory
Authority, including but not limited to those rules and regulations governing
studies for which an investigational new drug application has been filed in
accordance with 21 C.F.R. Part 312 and all other rules and laws regarding
clinical studies. Neither the Borrower nor any other Loan Party has received any
notices or other correspondence from the FDA, the DOH or any other Regulatory
Authority requiring the termination or suspension of any clinical, preclinical,
safety or other studies or tests used to support regulatory clearance of, or any
Product Authorization or Regulatory Authorization for, any Product.

 

 
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Section 6.19 Transactions with Affiliates. Except as set forth on Schedule 6.19,
neither the Borrower nor any Subsidiary has entered into, renewed, extended or
been a part to, any transaction (including the purchase, sale, lease, transfer
or exchange of property or assets of any kind or the rendering of services of
any kind) with any Affiliate during the three-year period prior to the Closing
Date.

 

Section 6.20 Investment Company Act. No Loan Party is an “investment company” or
is “controlled” by an “investment company,” as such terms are defined in, or
subject to regulation under, the Investment Company Act of 1940, as amended.

 

Section 6.21 OFAC. No Loan Party or, to the knowledge of the Borrower and
Holdco, any Related Party nor any of their respective directors, officers, or
employees nor, to the knowledge of the Borrower and Holdco, any agents or other
persons acting on behalf of any of the foregoing (a) is currently the target of
any Sanctions, (b) is located, organized or residing in any Designated
Jurisdiction, (c) is or has been (within the previous five (5) years) engaged in
any transaction with, or for the benefit of, any Person who is now or was then
the target of Sanctions or who is located, organized or residing in any
Designated Jurisdiction or (d) is or has ever been in violation of or subject to
an investigation relating to Sanctions. No Loan, nor the proceeds from any Loan,
has been or will be used, directly or indirectly, to lend, contribute or provide
to, or has been or will be otherwise made available to fund, any activity or
business in any Designated Jurisdiction or to fund any activity or business of
any Person located, organized or residing in any Designated Jurisdiction or who
is the subject of any Sanctions, or in any other manner that will result in any
violation by any Person (including the Lender and its Affiliates) of Sanctions.

 

Section 6.22 Anti-Corruption. No Loan Party or, to the knowledge of the Borrower
and Holdco, any Related Party, nor any of their respective directors, officers,
or employees nor, to the knowledge of the Borrower and Holdco, any agents or
other persons acting on behalf of any of the foregoing, directly or indirectly,
has (a) violated or is in violation of any applicable anti-corruption law, (b)
made, offered to make, promised to make or authorized the payment or giving of,
directly or indirectly, any Prohibited Payment and (c) been subject to any
investigation by any Governmental Authority with regard to any actual or alleged
Prohibited Payment.

 

Section 6.23 Deposit and Disbursement Accounts. Schedule 6.23 contains a list as
of the Closing Date or the Delayed Draw Date, as applicable, of all banks and
other financial institutions at which each Loan Party maintains deposit
accounts, lockboxes, disbursement accounts, investment accounts or other similar
accounts, and such Schedule correctly identifies the name, address and telephone
number of each bank or financial institution, the name in which the account is
held, the type of account, and the complete account number therefor.

 

 
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Section 6.24 Registration Rights. Except as set forth on Schedule 6.24, no Loan
Party has granted or agreed to grant any registration rights, including
piggyback rights (other than in respect of the Closing Date Warrant and the
Delayed Draw Warrant), to any Person.

 

Section 6.25 Royalty and Other Payments. Except as set forth on Schedule 6.25,
no Loan Party is obligated to pay any royalty, milestone payment, deferred
payment or any other contingent payment in respect of any Product.

 

Article VII
AFFIRMATIVE COVENANTS

 

Each Loan Party jointly and severally covenants and agrees with the Lender that
until the Termination Date has occurred, each Loan Party will perform the
obligations set forth below.

 

Section 7.1 Financial Information, Reports, Notices, Etc. The Borrower will
furnish the Lender copies of the following financial statements, reports,
notices and information:

 

(a) as soon as available and in any event within 25 days after the end of each
calendar month, an unaudited consolidated balance sheet of Holdco and its
Subsidiaries as of the end of such month, and consolidated statements of income
and cash flow of Holdco and its Subsidiaries for such applicable period,
including (in each case), in comparative form, the figures for the corresponding
month in, and year to date portion of, the immediately preceding Fiscal Year,
certified as complete and correct by the chief financial or accounting
Authorized Officer of Holdco (subject to normal year-end audit adjustments);

 

(b) as soon as available and in any event within 45 days after the end of each
Fiscal Quarter, an unaudited consolidated balance sheet of Holdco and its
Subsidiaries as of the end of such Fiscal Quarter, and consolidated statements
of income and cash flow of Holdco and its Subsidiaries for such period,
including (in each case), in comparative form, the figures for the corresponding
Fiscal Quarter in, and year to date portion of, the immediately preceding Fiscal
Year, certified as complete and correct by the chief financial or accounting
Authorized Officer of Holdco (subject to normal year-end audit adjustments);

 

(c) commencing with the Fiscal Year ending December 31, 2014, as soon as
available and in any event within 90 days after the end of each Fiscal Year, a
copy of the consolidated balance sheet of Holdco and its Subsidiaries, and the
related consolidated statements of income and cash flow of Holdco and its
Subsidiaries for such Fiscal Year, setting forth in comparative form the figures
for the immediately preceding Fiscal Year, audited (without any Impermissible
Qualification) by independent public accountants acceptable to the Lender, which
shall include a calculation of the financial covenants set forth in Section 7.19
and stating that, in performing the examination necessary to deliver the audited
financial statements of Holdco, no knowledge was obtained of any Event of
Default;

 

 
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(d) concurrently with the delivery of the financial information pursuant to
clauses (a) and (b), a Compliance Certificate, executed by the chief financial
or accounting Authorized Officer of each of the Borrower and Holdco, (i) showing
compliance with the financial covenants set forth in Section 7.19 and stating
that no Default has occurred and is continuing (or, if a Default has occurred,
specifying the details of such Default and the action that Holdco or any of its
Subsidiaries has taken or proposes to take with respect thereto) and
(ii) stating that no Subsidiary has been formed or acquired since the delivery
of the last Compliance Certificate (or, if a Subsidiary has been formed or
acquired since the delivery of the last Compliance Certificate, a statement that
such Subsidiary has complied with Section 7.8);

 

(e) as soon as available upon approval of the board of directors of Holdco, but
in any event within 30 days after the end of each Fiscal Year, an annual budget,
a business plan and financial forecasts of Holdco and its Subsidiaries for the
then current Fiscal Year of Holdco, in form and substance as approved by the
board of directors of Holdco, which shall include at least a projection of
income and a projected cash flow statement for each Fiscal Quarter in such
Fiscal Year and a projected balance sheet as of the end of each Fiscal Quarter
in such Fiscal Year, in each case prepared in reasonable detail, with
appropriate presentation and discussion (in reasonable detail) of the principal
assumptions upon which such budgets and projections are based, which shall be
accompanied by the statement of an Authorized Officer of Holdco to the effect
that such budget and projections are based on reasonable and good faith
estimates and assumptions made by the management of Holdco for the respective
periods covered thereby;

 

(f) as soon as possible, but in any event within (i) three Business Days after
the Borrower or Holdco obtains knowledge of the occurrence of an Event of
Default described in Section 9.1.1 or (ii) five Business Days after the Borrower
or Holdco obtains knowledge of the occurrence of any other Event of Default, in
each case a statement of an Authorized Officer of the Borrower setting forth
details of such Event of Default and the action which the Borrower has taken and
proposes to take with respect thereto;

 

(g) as soon as possible and in any event within five Business Days after the
Borrower or Holdco obtains knowledge of (i) the occurrence of any material
adverse development with respect to any litigation, action, proceeding or labor
controversy described in Schedule 6.7(a) or (ii) the commencement of any
litigation, action, proceeding or labor controversy of the type and materiality
described in Section 6.7, notice thereof and, to the extent the Lender requests,
copies of all documentation relating thereto;

 

(h) as soon as possible and in any event within five Business Days after the
Borrower or Holdco obtains knowledge of any return, recovery, dispute or claim
related to any Product or inventory that involves more than $250,000, written
notice thereof from an Authorized Officer of the Borrower which notice shall
include any statement setting forth details of such return, recovery, dispute or
claim;

 

 
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(i) promptly upon becoming aware of (i) the institution of any steps by any
Person to terminate any Pension Plan, (ii) the failure of any Loan Party or any
ERISA Affiliate to make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a Lien on any Loan Party or any ERISA
Affiliate under Section 303(k) of ERISA or under Section 430(k) of the Code,
(iii) the taking of any action with respect to a Pension Plan which would
reasonably be expected to result in the requirement that any such Person furnish
a bond or other security to the PBGC or such Pension Plan, or (iv) the
occurrence of any event with respect to any Pension Plan which would reasonably
be expected to result in the incurrence by any Loan Party or any ERISA Affiliate
of any material liability, fine or penalty, notice thereof and copies of all
documentation relating thereto, written notice thereof from an Authorized
Officer of the Borrower, which notice shall include a statement setting forth
details of such events;

 

(j) promptly after the filing thereof, written notice (which may be in the form
of an email) of all reports, notices, prospectuses and registration statements
which Holdco or any of its Subsidiaries files with the SEC;

 

(k) promptly upon receipt thereof, copies of all formal “management letters” (or
equivalent) submitted to Holdco or any of its Subsidiaries by the independent
public accountants referred to in clause (b) in connection with each audit made
by such accountants; and

 

(l) such other financial and other information as the Lender may from time to
time reasonably request (including information and reports in such detail as the
Lender may request with respect to the terms of and information provided
pursuant to the Compliance Certificate).

 

Section 7.2 Maintenance of Existence; Compliance with Contracts, Laws, Etc. Each
Loan Party will (i) preserve and maintain its legal existence (except as
otherwise permitted by Section 8.8), (ii) perform in all material respects its
obligations under each Material Agreement to which it is a party, and (iii)
comply in all material respects with all applicable laws, rules, regulations and
orders, including (x) the FD&C Act and the PDMA and in connection with the
preparation and submission to the FDA of NDAs, and (y) the payment (before the
same become delinquent) of all Taxes imposed upon such Loan Party or upon its
property, except to the extent being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
have been set aside on the books of such Loan Party, as applicable.

 

Section 7.3 Maintenance of Properties. Each Loan Party will maintain, preserve,
protect and keep its and their respective properties in good repair, working
order and condition (ordinary wear and tear excepted), and make necessary
repairs, renewals and replacements so that the business carried on by such Loan
Party may be properly conducted at all times, unless such Loan Party determines
in good faith that the continued maintenance of such property is no longer
economically desirable, necessary or useful to the business of such Loan Party
or the Disposition of such property is otherwise permitted by Section 8.8 or
Section 8.9.

 

Section 7.4 Insurance. Each Loan Party will maintain:

 

 
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(a) insurance on its property with financially sound and reputable insurance
companies against loss and damage in at least the amounts (and with only those
deductibles) customarily maintained, and against such risks as are typically
insured against in the same general area, by Persons of comparable size engaged
in the same or similar business as such Loan Party; and

 

(b) all worker’s compensation, employer’s liability insurance or similar
insurance as may be required under the laws of any state or jurisdiction in
which it may be engaged in business.

 

Without limiting the foregoing, all insurance policies required pursuant to this
Section shall (i) name the Lender as mortgagee (in the case of property
insurance) or loss payee or additional insured (in the case of liability
insurance), as applicable, and provide that no cancellation or modification of
the policies will be made without the prior written consent of the Lender and
(ii) be in addition to any requirements to maintain specific types of insurance
contained in the other Loan Documents.

 

Section 7.5 Books and Records. Each Loan Party will keep books and records that
accurately reflect all of its business affairs and transactions and permit the
Lender or any of its respective representatives, at reasonable times and
intervals upon reasonable notice to the Borrower, to visit such Loan Party’s
offices, to discuss such Loan Party’s financial matters with its officers and
employees, and its independent public accountants (and such Loan Party hereby
authorizes such independent public accountant to discuss such Loan Party’s
financial matters with the Lender or its representatives whether or not any
representative of such Loan Party is present) and to examine (and photocopy
extracts from) any of its books and records. Each Loan Party shall pay any fees
of such independent public accountant incurred in connection with the Lender’s
exercise of its rights pursuant to this Section.

 

Section 7.6 Environmental Law Covenant. Each Loan Party will (i) use and operate
all of its and their businesses, facilities and properties in material
compliance with all Environmental Laws, and keep and maintain all Environmental
Permits and remain in compliance therewith, and (ii) promptly notify the Lender
of, and provide the Lender with copies of all material claims, complaints,
notices or inquiries relating to, any actual or alleged non-compliance with any
Environmental Laws or Environmental Permits or any actual or alleged
Environmental Liabilities. Each Loan Party will promptly resolve, remedy and
mitigate any such non-compliance or Environmental Liabilities, and shall keep
the Lender informed as to the progress of same.

 

Section 7.7 Use of Proceeds. Proceeds of the Loans shall be used for general
corporate purposes of Holdco and its Subsidiaries, including the payment of
fees, costs and expenses related to the transactions contemplated hereby.

 

 
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Section 7.8 Future Guarantors, Security, Etc. Each Loan Party will execute any
documents, UCC-1 financing statements, UCC-3 termination statements, PPSA-1C
financing statements, PPSA-2C discharge statements, agreements and instruments,
and take all further action that may be required under applicable law, or that
the Lender may reasonably request, in order to effectuate the transactions
contemplated by the Loan Documents and in order to grant, preserve, protect and
perfect the validity and first priority (subject to Liens permitted by Section
8.3) of the Liens created or intended to be created by the Loan Documents.
Holdco will promptly cause any Subsidiary acquired or organized after the date
hereof to execute a supplement (in form and substance reasonably satisfactory to
the Lender) to this Agreement and each other applicable Loan Document in favor
of the Lender. The Borrower will promptly notify the Lender of any subsequently
acquired real property of any Loan Party and will provide the Lender with a
description of such real property, the acquisition date thereof and the purchase
price therefor. In addition, from time to time, each Loan Party will, at its
cost and expense, promptly secure the Obligations by pledging or creating, or
causing to be pledged or created, perfected Liens with respect to such of its
assets and properties as the Lender shall designate, it being agreed that it is
the intent of the parties that the Obligations shall at all times be secured by,
among other things, substantially all the assets of Holdco and its Subsidiaries
(including personal property acquired subsequent to the Closing Date), except
for the Excluded Collateral. Such Liens will be created under the Loan Documents
in form and substance reasonably satisfactory to the Lender, and each Loan Party
shall deliver or cause to be delivered to the Lender all such instruments and
documents (including legal opinions and lien searches) as the Lender shall
reasonably request to evidence compliance with this Section 7.8.

 

Section 7.9 Obtaining of Permits, Etc. With respect to Products, each Loan Party
shall obtain, maintain and preserve, and take all necessary action to timely
renew all Permits and accreditations which are necessary in the proper conduct
of its business.

 

Section 7.10 Product Licenses. Each Loan Party shall (i) maintain each Permit,
including each Regulatory Authorization, from, or file any notice or
registration in, each jurisdiction in which such Loan Party is required to
obtain any Permit or Regulatory Authorization or to file any notice or
registration, in order to sell or distribute the Products and (ii) promptly
provide evidence of same to the Lender.

 

Section 7.11 Maintenance of Regulatory Authorizations, Contracts, Intellectual
Property, Etc. With respect to the Products, each Loan Party will (i) maintain
in full force and effect all Regulatory Authorizations (including the Product
Authorizations), contract rights, or other rights necessary for the operations
of its business, (ii) notify the Lender, promptly after learning thereof, of any
product recalls, safety alerts, corrections, withdrawals, marketing suspensions,
removals or the like conducted, to be undertaken or issued by any Loan Party or
its respective suppliers whether or not at the request, demand or order of any
Governmental Authority or otherwise with respect to any Product, or any basis
for undertaking or issuing any such action or item, (iii) maintain in full force
and effect, and pay all costs and expenses relating to, all Intellectual
Property owned or controlled by any Loan Party that is used in the operations of
the business of such Loan Party, or in connection with any Product Development
and Commercialization Activities, and all Material Agreements, (iv) notify the
Lender, promptly after learning thereof, of any Infringement or other violation
by any Person of its Intellectual Property that is used in the operations of the
business of such Loan Party, or in connection with any Product Development and
Commercialization Activities, and aggressively pursue any such Infringement or
other violation except in any specific circumstances where both (x) such Loan
Party is able to demonstrate that it is not commercially reasonable to do so and
(y) where not doing so does not materially adversely affect any Product, (v) use
commercially reasonable efforts to pursue and maintain in full force and effect
legal protection for all new Intellectual Property developed or controlled by
such Loan Party that is used in the operations of the business of such Loan
Party, or in connection with any Product Development and Commercialization
Activities, and (vi) notify the Lender, promptly after learning thereof, of (x)
any claim by any Person that the conduct of such Loan Party’s business
(including the development, manufacture, use, sale or other commercialization of
any Product) Infringes any Intellectual Property of such Loan Party and, if
requested by the Lender, use commercially reasonable efforts to resolve such
claim, or (y) any event, circumstance, act or omission that would cause any
representation or warranty contained in Section 6.18 to be incorrect in any
material respect if such representation or warranty was to be made at the time
such Loan Party learned of such event, circumstance, act or omission.

 

 
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Section 7.12 Inbound Licenses. Prior to any Loan Party entering into or becoming
bound by any inbound license or agreement requiring the Borrower to make
payments in excess of $1,000,000 in any twelve-month period during the term of
such license or agreement (other than over-the-counter software that is
commercially available to the public), the Borrower shall: (i) provide written
notice to the Lender of the material terms of such license or agreement with a
description of its anticipated and projected impact on such Loan Party’s
business or financial condition, (ii) obtain written consent of the Lender to
such inbound license or agreement, such consent not to be unreasonably withheld
and (iii) take such commercially reasonable actions as the Lender may reasonably
request to obtain the consent of, or waiver by, any Person whose consent or
waiver is necessary for the Lender to be granted and perfect a valid security
interest in such license or agreement and to fully exercise its rights under any
of the Loan Documents in the event of a disposition or liquidation of the
rights, assets or property that is the subject of such license or agreement.

 

Section 7.13 Cash Management. Each Loan Party will:

 

(a) maintain all deposit accounts, disbursement accounts, investment accounts
(and other similar accounts) and lockboxes with a bank or financial institution
that has executed and delivered to the Lender an account control agreement, in
form and substance reasonably acceptable to the Lender; each such deposit
account, disbursement account, investment account (or similar account) and
lockbox (each, a “Controlled Account”) shall be a cash collateral account, with
all cash, checks and other similar items of payment in such account securing
payment of the Obligations, and each Loan Party shall have granted a Lien to the
Lender over such Controlled Accounts;

 

(b) deposit promptly, and in any event no later than five Business Days after
the date of receipt thereof, all cash, checks, drafts or other similar items of
payment relating to or constituting payments made in respect of any and all
accounts and other rights and interests into Controlled Accounts; and

 

(c) at any time after the occurrence and during the continuance of an Event of
Default, at the request of the Lender, each Loan Party will cause all payments
constituting proceeds of accounts to be directed into lockbox accounts under
agreements in form and substance satisfactory to the Lender.

 

 
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Section 7.14 Modification of Organic Documents. No Loan Party will amend, modify
or otherwise change its Organic Documents without the Lender’s prior written
consent, which shall not be unreasonably withheld.

 

Section 7.15 Inconsistent Agreements. No Loan Party will enter into any
agreement containing any provision which would (i) be violated or breached by
such Person hereunder or by the performance by such Person of any of its
obligations hereunder or under any other Loan Document, (ii) prohibit any such
Person from granting to the Lender a Lien on any of its assets or (iii) create
or permit to exist or become effective any encumbrance or restriction on the
ability of any Loan Party to (x) pay dividends or make other distributions to
the Borrower, or pay any Indebtedness owed to the Borrower, (y) make loans or
advances to the Borrower or (z) transfer any of its assets or properties to the
Borrower.

 

Section 7.16 Restriction of Amendments to Certain Documents. No Loan Party will
amend or otherwise modify, or waive any rights under, any other document,
instrument or agreement if, in any case, such amendment, modification or waiver
could be materially adverse to the Lender’s Lien in any Collateral (as defined
in the Pledge and Security Agreement).

 

Section 7.17 PIC. Holdco’s percentage ownership of PIC’s Capital Securities
shall be diluted to approximately 0.01% as provided in the Merger Agreement.

 

Section 7.18 Required Milestones. Holdco and the Borrower covenant and agree
that (i) on or before September 30, 2014 the Borrower will have entered into a
licensing agreement with a global pharmaceuticals company with respect to the
Thermostable LPV technology, on terms satisfactory to the Lender, (ii) on or
before September 25, 2015 the Borrower will have commenced toxicology work with
respect to the CMV (VLP) Product, in the form of a first immunization of an
animal for GLP toxicology, and (iii) on or before April 25 2016 the Borrower
will have commenced Phase I clinical trials with respect to the CMV (VLP)
Product, in the form of a patient vaccination.

 

Section 7.19 Minimum Liquidity. The Loan Parties shall at all times maintain a
minimum aggregate balance of $1,000,000 of cash in one or more Controlled
Accounts that is free and clear of all Liens, other than Liens granted hereunder
in favor of the Lender.

 

Article VIII
NEGATIVE COVENANTS

 

Each Loan Party jointly and severally covenants and agrees with the Lender that
until the Termination Date has occurred, each Loan Party will perform or cause
to be performed the obligations set forth below.

 

 
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Section 8.1 Business Activities. No Loan Party will engage in any business
activity except those business activities engaged in on the date of this
Agreement and activities reasonably incidental thereto.

 

Section 8.2 Indebtedness. No Loan Party will create, incur, assume or permit to
exist any Indebtedness without the Lender’s prior written consent (which may be
withheld in the Lender’s sole discretion), other than:

 

(a) Indebtedness in respect of the Obligations;

 

(b) Indebtedness existing as of the Closing Date which is identified in Schedule

8.2(b), and refinancing of such Indebtedness in a principal amount not in excess
of that

which is outstanding on the Closing Date (as such amount has been reduced
following the Closing Date);

 

(c) unsecured Indebtedness in respect of performance, surety or appeal bonds
provided in the ordinary course of business in an aggregate amount at any time
outstanding not to exceed $250,000, but excluding (in each case) Indebtedness
incurred through the borrowing of money or Contingent Liabilities in respect
thereof;

 

(d) purchase money Indebtedness and Capitalized Lease Liabilities in an
aggregate amount at any time outstanding not to exceed $250,000;

 

(e) Intercompany Subordinated Debt that does not exceed an aggregate principal
amount of $1,500,000 at any time outstanding; and

 

(f) Subordinated Debt of any Loan Party owing to a non-Affiliate that (i) is
unsecured and subject to a written subordination agreement that is satisfactory
to the Lender (in form and substance) and (ii) does not exceed an aggregate
principal amount of $2,000,000 at any time outstanding;

 

provided that, no Indebtedness otherwise permitted by clauses (b), (d), (e) or
(f) shall be assumed, created or otherwise incurred if a Default has occurred
and is then continuing or would result therefrom.

 

Section 8.3 Liens. No Loan Party will create, incur, assume or permit to exist
any Lien upon any of its property (including Capital Securities of any Person),
revenues or assets, whether now owned or hereafter acquired, except:

 

(a) Liens securing payment of the Obligations;

 

(b) Liens existing as of the Closing Date and disclosed in Schedule 8.3(b)
securing Indebtedness described in clause (b) of Section 8.2, and refinancings
of such Indebtedness; provided that, no such Lien shall encumber any additional
property and the amount of Indebtedness secured by such Lien is not increased
from that existing on the Closing Date (as such Indebtedness may have been
permanently reduced subsequent to the Closing Date);

 

 
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(c) Liens in favor of carriers, warehousemen, mechanics, materialmen and
landlords granted in the ordinary course of business for amounts not overdue or
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on its
books;

 

(d) Liens incurred or deposits made in the ordinary course of business in
connection with worker’s compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, bids, leases or other similar obligations (other than for
borrowed money) entered into in the ordinary course of business or to secure
obligations on surety and appeal bonds or performance bonds;

 

(e) judgment Liens in existence for less than 45 days after the entry thereof or
with respect to which execution has been stayed or the payment of which is
covered in full (subject to a customary deductible) by insurance maintained with
responsible insurance companies and which do not otherwise result in an Event of
Default under Section 9.1.6;

 

(f) easements, rights-of-way, zoning restrictions, minor defects or
irregularities in title and other similar encumbrances not interfering in any
material respect with the value or use of the property to which such Lien is
attached;

 

(g) Liens for Taxes not at the time delinquent or thereafter payable without
penalty or being diligently contested in good faith by appropriate proceedings
and for which adequate reserves in accordance with GAAP shall have been set
aside on its books; and

 

(h) Liens securing purchase money Indebtedness and Capitalized Lease Liabilities
permitted under Section 8.2(d).

 

Section 8.4 [INTENTIONALLY OMITTED].

 

Section 8.5 Investments. No Loan Party will purchase, make, incur, assume or
permit to exist any Investment in any other Person, except:

 

(a) Investments existing on the Closing Date and identified in Schedule 8.5(a);

 

(b) Cash Equivalent Investments;

 

(c) Investments received in connection with the bankruptcy or reorganization of,
or settlement of delinquent accounts and disputes with, customers and suppliers,
in each case in the ordinary course of business;

 

(d) Investments consisting of any deferred portion of the sales price received
by any Loan Party in connection with any Disposition permitted under Section
8.9;

 

 
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(e) Investments constituting (i) accounts receivable arising, (ii) trade debt
granted, or (iii) deposits made in connection with the purchase price of goods
or services, in each case in the ordinary course of business; and

 

(f) Intercompany Subordinated Debt permitted under Section 8.2(e).

 

Section 8.6 Restricted Payments, Etc. No Loan Party will declare or make a
Restricted Payment, or make any deposit for any Restricted Payment, other than
(i) Restricted Payments made by Loan Parties to the Borrower or to other wholly
owned Subsidiaries of Holdco and (ii) distributions of assets of the liquidating
trust of Holdco described in Holdco’s Annual Report on Form 10-K for the year
ended December 31, 2013 filed with the SEC, as amended and as may be updated in
subsequent periodic reports of Holdco filed with the SEC.

 

Section 8.7 [INTENTIONALLY OMITTED]

 

Section 8.8 Consolidation, Merger; Permitted Acquisitions, Etc. No Loan Party
will liquidate or dissolve, consolidate with, or merge into or with, any other
Person, or purchase or otherwise acquire any other Person or all or
substantially all of the assets of any other Person (or any division thereof),
except that, so long as no Event of Default has occurred and is continuing (or
would occur), (i) any Subsidiary of Holdco (other than the Borrower) may
liquidate or dissolve voluntarily into, and may merge with and into, Holdco or
any wholly owned Subsidiary of Holdco, (ii) any Loan Party may from time to time
acquire another Person or all or substantially all of the assets of another
Person (or any division thereof); provided that (v) such acquisition is approved
by the boards of director of each of the Borrower and Holdco, (w) the newly
acquired (or continuing or surviving) Person shall comply with Section 7.8
hereof and shall be engaged in a line of business similar to the Borrower, (x)
the aggregate consideration paid for all acquisitions pursuant to this clause
(ii) shall not exceed $5,000,000, (y) the aggregate consideration paid in cash
for all such acquisitions pursuant to this clause (ii) shall not exceed
$1,500,000, and (z) Holdco and the Borrower shall, prior to consummating any
such acquisition, certify in writing to the Lender that, after giving effect to
such acquisition, it reasonably expects to comply with Sections 7.18 and 7.19
hereof.

 

Section 8.9 Permitted Dispositions. No Loan Party will dispose of any of its
assets (including accounts receivable and Capital Securities) to any Person in
one transaction or series of transactions unless such Disposition (i) is
inventory or obsolete, damaged, worn out or surplus property Disposed of in the
ordinary course of its business, (ii) has an aggregate fair market value that,
when taken together with all other Dispositions made pursuant to this clause
(ii), does not exceed $250,000, (iii) is required pursuant to Section 7.17 or
(iv) is an outbound license of Intellectual Property permitted by Section 8.15.

 

Section 8.10 Modification of Certain Agreements. No Loan Party will consent to
any amendment, supplement, waiver or other modification of, or enter into any
forbearance from exercising any rights with respect to the terms or provisions
contained in any Organic Documents of any Loan Party, if the result would have a
material adverse effect on the rights or remedies of the Lender.

 

 
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Section 8.11 Transactions with Affiliates. No Loan Party will enter into or
cause or permit to exist any arrangement, transaction or contract (including for
the purchase, lease or exchange of property or the rendering of services) with
any of its other Affiliates, other than Intercompany Subordinated Debt, unless
such arrangement, transaction or contract (i) is on fair and reasonable terms no
less favorable to such Loan Party than it could obtain in an arm’s-length
transaction with a Person that is not an Affiliate and (ii) is of the kind which
would be entered into by a prudent Person in the position of such Loan Party
with a Person that is not one of its Affiliates.

 

Section 8.12 Restrictive Agreements, Etc. No Loan Party will enter into any
agreement prohibiting (i) the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter acquired, (ii)
the ability of such Loan Party to amend or otherwise modify any Loan Document or
(iii) the ability of any Subsidiary to make any payments, directly or
indirectly, to the Borrower or Holdco, including by way of dividends, advances,
repayments of loans, reimbursements of management and other intercompany
charges, expenses and accruals or other returns on investments. The foregoing
prohibitions shall not apply to restrictions contained (x) in any Loan Document,
or (y) in the case of clause (i), any agreement governing any Indebtedness
permitted by clause (e) of Section 8.2 as to the assets financed with the
proceeds of such Indebtedness.

 

Section 8.13 Sale and Leaseback. No Loan Party will directly or indirectly enter
into any agreement or arrangement providing for the sale or transfer by it of
any property (now owned or hereafter acquired) to a Person and the subsequent
lease or rental of such property or other similar property from such Person.

 

Section 8.14 Product Sales. No Loan Party will sell or distribute Products or
cause any sale or distribution where such Loan Party is required to obtain any
Permit, or to file any notice or registration in any jurisdiction prior to any
such sale or distribution, in each case, until such Loan Party has obtained such
required Permit or filed such notice or registration.

 

Section 8.15 Outbound Licenses. So long as no Default has occurred and is
continuing, no Loan Party will enter into or become bound by any outbound
license of Intellectual Property unless such outbound license (i) is approved by
the board of directors of each of the Borrower and Holdco, (ii) is entered into
on an arm’s-length basis, on commercially reasonable terms and in the ordinary
course of business, (iii) does not otherwise constitute a Disposition prohibited
pursuant to Section 8.9, and (iv) does not impair the Lender from fully
exercising its rights under any of the Loan Documents in the event of a
disposition or liquidation of the rights, assets or property that is the subject
of such license or agreement.

 

Section 8.16 Change in Name, Location, Executive Office, or Executive
Management; Change in Fiscal Year. No Loan Party will (i) change its legal name
or any trade name used to identify it in the conduct of its business or
ownership of its properties (other than Holdco in connection with the Merger
Transaction), (ii) change its jurisdiction of organization or legal structure,
(iii) relocate its chief executive office, principal place of business or any
office in which it maintains books or records relating to its business
(including the establishment of any new office or facility), (iv) change its
federal taxpayer identification number or organizational number (or equivalent)
without 30 days prior written notice to the Lender, (v) replace its chief
financial officer without written notification to the Lender within 30 days
thereafter or (vi) change its Fiscal Year or any of its Fiscal Quarters.

 

 
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Article IX
EVENTS OF DEFAULT

 

Section 9.1 Listing of Events of Default. Each of the following events or
occurrences described in this Article shall constitute an “Event of Default”.

 

Section 9.1.1 Non-Payment of Obligations. The Borrower shall default in the
payment or prepayment when due of (i) any principal of or interest on any Loan,
or (ii) any fee described in Article III or any other monetary Obligation, and
in the case of clause (ii) such default shall continue unremedied for a period
of two (2) Business Days after such amount was due.

 

Section 9.1.2 Breach of Warranty. Any representation or warranty made or deemed
to be made by any Loan Party in any Loan Document (including any certificates
delivered pursuant to Article V) is or shall be incorrect when made or deemed to
have been made in any material respect.

 

Section 9.1.3 Non-Performance of Certain Covenants and Obligations. Any Loan
Party shall default in the due performance or observance of any of its
obligations under Sections 7.1(f), 7.13, 7.17, 7.18, 7.19 or Article VIII.

 

Section 9.1.4 Non-Performance of Other Covenants and Obligations. Any Loan Party
shall default in the due performance and observance of any other covenant,
obligation or agreement contained in any Loan Document executed by it, and such
default shall continue unremedied for a period of fifteen (15) days after the
earlier to occur of (a) notice thereof given to the Borrower by the Lender or
(b) the date on which the Borrower or Holdco has knowledge of such default;
provided that, if the Borrower shall default in the due performance and
observance of any covenant, obligation or agreement under Section 7.1(c) solely
resulting from the inclusion of an Impermissible Qualification, then such
fifteen (15) day cure period shall be extended to ninety (90) days; provided
further that, if the Borrower delivers to the Lender a detailed plan in form and
substance reasonably satisfactory to the Lender and approved by the board of
directors of the Borrower addressing such Impermissible Qualification in a
commercially reasonable manner, then such ninety (90) day cure period shall be
extended for up to an additional ninety (90) days (but in no event shall such
cure period exceed one hundred eighty (180) days in the aggregate).

 

Section 9.1.5 Default on Other Indebtedness. A default shall occur in the
payment of any amount when due (subject to any applicable grace period), whether
by acceleration or otherwise, of any principal or stated amount of, or interest
or fees on, any Indebtedness (other than Indebtedness permitted under Section
8.2) of any Loan Party having a principal or stated amount, individually or in
the aggregate, in excess of $250,000, or a default shall occur in the
performance or observance of any obligation or condition with respect to such
Indebtedness if the effect of such default is to accelerate the maturity of any
such Indebtedness or such default shall continue unremedied for any applicable
period of time sufficient to permit the holder or holders of such Indebtedness,
or any trustee or agent for such holders, to cause or declare such Indebtedness
to become due and payable or to require such Indebtedness to be prepaid,
redeemed, purchased or defeased, or require an offer to purchase or defease such
Indebtedness to be made, prior to its expressed maturity.

 

 
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Section 9.1.6 Judgments. Any judgment or order for the payment of money
individually or in the aggregate in excess of $250,000 (exclusive of (i) any
amounts fully covered by insurance (less any applicable deductible) and as to
which the insurer has acknowledged its responsibility to cover such judgment or
order and (ii) any amounts indemnified and covered pursuant to the
Indemnification Escrow/Reserve and Liquidating Trust Indemnification Agreement
(each as provided by and defined in the Merger Agreement)) shall be rendered
against any Loan Party and such judgment shall not have been vacated or
discharged or stayed or bonded pending appeal within 30 days after the entry
thereof or enforcement proceedings shall have been commenced by any creditor
upon such judgment or order.

 

Section 9.1.7 Change in Control. Any Change in Control shall occur.

 

Section 9.1.8 Bankruptcy, Insolvency, Etc. Any Loan Party shall:

 

(a) become insolvent or generally fail to pay, or admit in writing its inability
or unwillingness generally to pay, debts as they become due;

 

(b) apply for, consent to, or acquiesce in the appointment of a trustee,
receiver, sequestrator or other custodian for any substantial part of the
property of any thereof, or make a general assignment for the benefit of
creditors;

 

(c) in the absence of such application, consent or acquiescence in or permit or
suffer to exist the appointment of a trustee, receiver, sequestrator or other
custodian for a substantial part of the property of any thereof, and such
trustee, receiver, sequestrator or other custodian shall not be discharged
within 60 days; provided that, each Loan Party hereby expressly authorizes the
Lender to appear in any court conducting any relevant proceeding during such
60-day period to preserve, protect and defend its rights under the Loan
Documents;

 

(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law or any dissolution, winding up or liquidation
proceeding, in respect thereof, and, if any such case or proceeding is not
commenced by a Loan Party, such case or proceeding shall be consented to or
acquiesced in by a Loan Party, as the case may be, or shall result in the entry
of an order for relief or shall remain for 60 days undismissed; provided that,
each Loan Party hereby expressly authorizes the Lender to appear in any court
conducting any such case or proceeding during such 60-day period to preserve,
protect and defend its rights under the Loan Documents; or

 

 
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(e) take any action authorizing, or in furtherance of, any of the foregoing.

 

Section 9.1.9 Impairment of Security, Etc. Any Loan Document or any Lien granted
thereunder shall (except in accordance with its terms), in whole or in part,
terminate, cease to be effective or cease to be the legally valid, binding and
enforceable obligation of any Loan Party party thereto; any Loan Party shall,
directly or indirectly, contest in any manner such effectiveness, validity,
binding nature or enforceability; or, except as permitted under any Loan
Document, any Lien securing any Obligation shall, in whole or in part, cease to
be a perfected first priority Lien.

 

Section 9.1.10 Material Adverse Change. Any circumstance occurs that could
reasonably be expected to have a Material Adverse Effect.

 

Section 9.1.11 Key Person Event. If Jeff Baxter ceases to be employed full time
by both the Borrower and Holdco and actively working as Chief Executive Officer
of each such Person, unless within 30 days after such individual ceases to be
employed full time and actively working as President and Chief Executive Officer
of each such Person the Borrower or Holdco, as the case may be, hires a
replacement for such individual approved by the Lender in its sole discretion.

 

Section 9.1.12 Regulatory Matters. If any of the following occurs: (i) the FDA
or any other Governmental Authority initiates enforcement action against, or
issues a warning letter with respect to, any Loan Party, or any of their
Products or the manufacturing facilities therefor, that causes any Loan Party to
discontinue marketing or withdraw any of its material Products, or causes a
delay in the manufacture of any of its material Products, which discontinuance,
withdrawal or delay could reasonably be expected to last for more than 90 days,
(ii) a recall of any Product that has generated or is expected to generate at
least $1,000,000 in revenue for Holdco and its Subsidiaries over any consecutive
twelve (12) month period or (iii) any Loan Party enters into a settlement
agreement with the FDA or any other Governmental Authority that results in
aggregate liability as to any single or related series of transactions,
incidents or conditions, in excess of $250,000.

 

Section 9.1.13 Pension Plans. Any of the following events shall occur with
respect to any Pension Plan:

 

(a) the institution of any steps by any Loan Party, any ERISA Affiliate or any
other Person to terminate a Pension Plan if, as a result of such termination,
any Loan Party or any such ERISA Affiliate would be required to make a
contribution to such Pension Plan, or would reasonably expect to incur a
liability or obligation to such Pension Plan, in excess of $250,000;

 

(b) a contribution failure occurs with respect to any Pension Plan sufficient to
give rise to a Lien on the Borrower or any ERISA Affiliate under section 303(k)
of ERISA or under Section 430(k) of the Code; or

 

(c) any ERISA Event shall occur.

 

 
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Section 9.2 Action if Bankruptcy. If any Event of Default described in
clauses (a) through (d) of Section 9.1.8 with respect to any Loan Party shall
occur, the Commitments (if not theretofore terminated) shall automatically
terminate and the outstanding principal amount of the Loans and all other
Obligations shall automatically be and become immediately due and payable,
without notice or demand to any Person.

 

Section 9.3 Action if Other Event of Default. If any Event of Default (other
than any Event of Default described in clauses (a) through (d) of Section 9.1.8)
shall occur for any reason, whether voluntary or involuntary, and be continuing,
the Lender may, by notice to the Borrower declare all or any portion of the
outstanding principal amount of the Loans and other Obligations to be due and
payable and/or the Commitments (if not theretofore terminated) to be terminated,
whereupon the full unpaid amount of the Loans and other Obligations which shall
be so declared due and payable shall be and become immediately due and payable,
without further notice, demand or presentment, and the Commitments shall
terminate.

 

Article X
GUARANTY

 

Section 10.1 Guaranty. Each Guarantor hereby agrees that such Guarantor is
jointly and severally liable for, and hereby absolutely and unconditionally
guarantees to the Lender and its successors and assigns, the full and prompt
payment (whether at stated maturity, by acceleration or otherwise) and
performance of, all Obligations owed or hereafter owing to Lender by each Loan
Party. Each Guarantor agrees that its guaranty obligation hereunder is a
continuing guaranty of payment and performance and not of collection, and that
its obligations under this Article X shall be absolute and unconditional,
irrespective of, and unaffected by,

 

(a)     the genuineness, validity, regularity, enforceability or any future
amendment of, or change in, this Agreement, any other Loan Document or any other
agreement, document or instrument to which any Loan Party is or may become a
party;

 

(b)     the absence of any action to enforce this Agreement (including this
Article X) or any other Loan Document or the waiver or consent by the Lender
with respect to any of the provisions thereof;

 

(c)     the existence, value or condition of, or failure to perfect its Lien
against, any security for the Obligations or any action, or the absence of any
action, by the Lender in respect thereof (including the release of any such
security);

 

(d)     the insolvency of any Loan Party; or

 

(e)     any other action or circumstances which might otherwise constitute a
legal or equitable discharge or defense of a surety or guarantor,

 

 
51 

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it being agreed by each Guarantor that its obligations under this Article X
shall not be discharged until the Termination Date. Each Guarantor shall be
regarded, and shall be in the same position, as principal debtor with respect to
the Obligations guaranteed hereunder.

 

Section 10.2 Waivers. Each Guarantor expressly waives all rights it may have now
or in the future under any statute, or at common law, or at law or in equity, or
otherwise, to compel the Lender to marshal assets or to proceed in respect of
the Obligations guaranteed hereunder against the Borrower or any other
Guarantor, any other party or against any security for the payment and
performance of the Obligations before proceeding against, or as a condition to
proceeding against, such Guarantor. It is agreed among each Guarantor and the
Lender that the foregoing waivers are of the essence of the transaction
contemplated by this Agreement and the other Loan Documents and that, but for
the provisions of this Article X and such waivers, the Lender would decline to
enter into this Agreement.

 

Section 10.3 Benefit of Guaranty. Each Guarantor agrees that the provisions of
this Article X are for the benefit of the Lender and its successors,
transferees, endorsees and assigns, and nothing herein contained shall impair,
as between the Borrower, on the one hand, and the Lender, on the other hand, the
obligations of the Borrower and each Guarantor under the Loan Documents.

 

Section 10.4 Subordination of Subrogation, Etc. Notwithstanding anything to the
contrary in this Agreement or in any other Loan Document, each Guarantor hereby
expressly and irrevocably subordinates to the prior payment in full, in cash, of
the Obligations any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off and any and
all defenses available to a surety, guarantor or accommodation co-obligor until
all Commitments have expired or been terminated and the Obligations are
indefeasibly paid in full in cash. Each Guarantor acknowledges and agrees that
this subordination is intended to benefit the Lender and shall not limit or
otherwise affect such Guarantor’s liability hereunder or the enforceability of
this Article X, and that the Lender and its successors and assigns are intended
third party beneficiaries of the waivers and agreements set forth in this
Section 10.4.

 

Section 10.5 Election of Remedies. If the Lender may, under applicable law,
proceed to realize its benefits under any of the Loan Documents giving the
Lender a Lien upon any collateral, whether owned by any Grantor or by any other
Person, either by judicial foreclosure or by non-judicial sale or enforcement,
the Lender may, at its sole option, determine which of its remedies or rights it
may pursue without affecting any of its rights and remedies under this Article
X. If, in the exercise of any of its rights and remedies, the Lender shall
forfeit any of its rights or remedies, including its right to enter a deficiency
judgment against any Loan Party or any other Person, whether because of any
applicable laws pertaining to “election of remedies” or the like, each Guarantor
hereby consents to such action by the Lender and waives any claim based upon
such action, even if such action by the Lender shall result in a full or partial
loss of any rights of subrogation which each Guarantor might otherwise have had
but for such action by the Lender. Any election of remedies which results in the
denial or impairment of the right of the Lender to seek a deficiency judgment
against the any Loan Party shall not impair any Guarantor’s obligation to pay
the full amount of the Obligations. In the event the Lender shall bid at any
foreclosure or trustee’s sale or at any private sale permitted by law or the
Loan Documents, the Lender may bid all or less than the amount of the
Obligations and the amount of such bid need not be paid by the Lender but shall
be credited against the Obligations. The amount of the successful bid at any
such sale, whether the Lender or any other party is the successful bidder, shall
be conclusively deemed to be the fair market value of the collateral and the
difference between such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to be the amount of the Obligations guaranteed
under this Article X, notwithstanding that any present or future law or court
decision or ruling may have the effect of reducing the amount of any deficiency
claim to which the Lender might otherwise be entitled but for such bidding at
any such sale.

 

 
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Section 10.6 Limitation. Notwithstanding any provision herein contained to the
contrary, each Guarantor’s liability under this Article X shall be limited to an
amount not to exceed the amount which could be claimed by the Lender from such
Guarantor under this Article X without rendering such claim voidable or
avoidable under Section 548 of Chapter 11 of the United States Bankruptcy Code
or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law after taking into
account, among other things, such Guarantor’s right of contribution and
indemnification from each other Guarantor.

 

Section 10.7 Liability Cumulative. The liability of each Guarantor under this
Article X is in addition to and shall be cumulative with all liabilities of each
Loan Party to the Lender under this Agreement and the other Loan Documents to
which each Loan Party is a party or in respect of any Obligations or obligation
of such Loan Party, without any limitation as to amount, unless the instrument
or agreement evidencing or creating such other liability specifically provides
to the contrary.

 

Article XI
MISCELLANEOUS PROVISIONS

 

Section 11.1 Waivers, Amendments, Etc. The provisions of each Loan Document may
from time to time be amended, modified or waived, if such amendment,
modification or waiver is in writing and consented to by the Lender, Holdco and
the Borrower.

 

No failure or delay on the part of the Lender in exercising any power or right
under any Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on any Loan Party in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by the Lender under any
Loan Document shall, except as may be otherwise stated in such waiver or
approval, be applicable to subsequent transactions. No waiver or approval
hereunder shall require any similar or dissimilar waiver or approval thereafter
to be granted hereunder.

 

Section 11.2 Notices; Time. All notices and other communications provided under
any Loan Document shall be in writing or by facsimile and addressed, delivered
or transmitted, if to the Borrower or the Lender, to the applicable Person at
its address or facsimile number set forth on Schedule 11.02 hereto, or at such
other address or facsimile number as may be designated by such party in a notice
to the other parties. Any notice, if mailed and properly addressed with postage
prepaid or if properly addressed and sent by pre-paid courier service, shall be
deemed given when received; any notice, if transmitted by facsimile, shall be
deemed given when the confirmation of transmission thereof is received by the
transmitter. Unless otherwise indicated, all references to the time of a day in
a Loan Document shall refer to New York City time.

 

 
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Section 11.3 Payment of Costs and Expenses. The Borrower agrees to pay on demand
all reasonable expenses of the Lender (including the reasonable fees and
out-of-pocket expenses of Morrison & Foerster LLP, counsel to the Lender and of
local counsel, if any, who may be retained by or on behalf of the Lender) in
connection with:

 

(a) the negotiation, preparation, execution and delivery of each Loan Document,
including schedules and exhibits, and any amendments, waivers, consents,
supplements or other modifications to any Loan Document as may from time to time
hereafter be required, whether or not the transactions contemplated hereby are
consummated; and

 

(b) the filing or recording of any Loan Document (including any financing
statements) and all amendments, supplements, amendment and restatements and
other modifications to any thereof, searches made following the Closing Date in
jurisdictions where financing statements (or other documents evidencing Liens in
favor of the Lender) have been recorded and any and all other documents or
instruments of further assurance required to be filed or recorded by the terms
of any Loan Document; and

 

(c) the preparation and review of the form of any document or instrument
relevant to any Loan Document;

 

provided that the Expense Deposit (if any) shall be applied by the Lender from
time to time for purposes of satisfying the foregoing expenses of the Borrower.

 

The Borrower further agrees to pay, and to save the Lender harmless from all
liability for, any stamp or other taxes which may be payable in connection with
the execution or delivery of each Loan Document, the Loans or the issuance of
the Note. The Borrower also agrees to reimburse the Lender upon demand for all
reasonable out-of-pocket expenses (including reasonable attorneys’ fees and
legal expenses of counsel to the Lender) incurred by the Lender in connection
with (i) the negotiation of any restructuring or “work-out” with the Borrower,
whether or not consummated, of any Obligations and (ii) the enforcement of any
Obligations; provided that the Borrower shall not be liable for indemnification
of any expenses under this clause (ii) to the extent such expenses arise as a
result of the bad faith, gross negligence or willful misconduct of the Lender,
as finally determined by a court of competent jurisdiction in a non-appealable
decision.

 

Section 11.4 Indemnification. In consideration of the execution and delivery of
this Agreement by the Lender, the Borrower hereby indemnifies, agrees to defend,
exonerates and holds the Lender and each of its officers, directors, employees
and agents (collectively, the “Indemnified Parties”) free and harmless from and
against any and all actions, causes of action, suits, losses, costs,
liabilities, obligations and damages, and expenses incurred in connection
therewith (irrespective of whether any such Indemnified Party is a party to the
action for which indemnification hereunder is sought), including reasonable
attorneys’ and professionals’ fees and disbursements, whether incurred in
connection with actions between the parties hereto or the parties hereto and
third parties (collectively, the “Indemnified Liabilities”), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to (i) the entering into and performance of any Loan Document by any of
the Indemnified Parties (including any action brought by or on behalf of the
Borrower as the result of any determination by the Lender pursuant to Article V
not to fund any Loan; provided that, any such action is resolved in favor of
such Indemnified Party) or (ii) any Environmental Liability, any actual or
alleged breach of or non-compliance with Environmental Laws or Environmental
Permits, any Hazardous Materials, or any other decision, act, omission or matter
relating to the environment, natural resources, health, safety or welfare. If
and to the extent that the foregoing indemnification may be unenforceable for
any reason, the Borrower agrees to make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.

 

 
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Section 11.5 Survival. The obligations of the Borrower under Section 4.1,
Section 4.2, Section 4.3, Section 11.3 and Section 11.4, shall in each case
survive any assignment by the Lender and the occurrence of the Termination Date.
The representations and warranties made by each Loan Party in each Loan Document
shall survive the execution and delivery of such Loan Document until the
Termination Date.

 

Section 11.6 Severability. Any provision of any Loan Document which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.

 

Section 11.7 Headings. The various headings of each Loan Document are inserted
for convenience only and shall not affect the meaning or interpretation of such
Loan Document or any provisions thereof.

 

Section 11.8 Execution in Counterparts, Effectiveness, Etc. This Agreement may
be executed by the parties hereto in several counterparts, each of which shall
be an original and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when counterparts hereof
executed on behalf of the Borrower, each other Loan Party and the Lender, shall
have been received by the Lender. Delivery of an executed counterpart of a
signature page to this Agreement by email (e.g. “pdf” or “tiff”) or telecopy
shall be effective as delivery of a manually executed counterpart of this
Agreement.

 

Section 11.9 Governing Law; Entire Agreement. EACH LOAN DOCUMENT AND ANY CLAIMS,
CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR
OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT CONTEMPLATED HEREBY AND THEREBY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK). The Loan Documents constitute the
entire understanding among the parties hereto with respect to the subject matter
thereof and supersede any prior agreements, written or oral, with respect
thereto.

 

 
55

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Section 11.10 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided that, no Loan Party may assign or transfer its rights or
obligations hereunder without the prior written consent of the Lender.

 

Section 11.11 Other Transactions. Nothing contained herein shall preclude the
Lender, from engaging in any transaction, in addition to those contemplated by
the Loan Documents, with any Loan Party or any of their respective Affiliates in
which such Loan Party or such Affiliate is not restricted hereby from engaging
with any other Person.

 

Section 11.12 Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, ANY LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF THE LENDER OR THE LOAN PARTIES IN CONNECTION HEREWITH OR THEREWITH
MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE BOROUGH OF MANHATTAN IN THE
CITY OF NEW YORK IN THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED THAT, ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
LENDER’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR
OTHER PROPERTY MAY BE FOUND. EACH LOAN PARTY IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR
WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN Section
11.2. EACH LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT EACH LOAN PARTY HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH LOAN
PARTY HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS.

 

 
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Section 11.13 Waiver of Jury Trial. THE LENDER AND EACH LOAN PARTY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED
BY LAW ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, EACH LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF THE LENDER OR EACH LOAN PARTY IN CONNECTION THEREWITH.
EACH LOAN PARTY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE LENDER ENTERING INTO THE LOAN DOCUMENTS.

 

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

 

 

VARIATION BIOTECHNOLOGIES (US), INC.,

 

  as the Borrower  

 

 

 

 

               

 

By:

/s/ Jeff Baxter

 

 

 

Name: Jeff Baxter

 

 

 

Title: Chief Executive Officer

 

                          VBI VACCINES INC.,     as Guarantor                  
          By: /s/ Jeff Baxter       Name:       Title:                          
  VARIATION BIOTECHNOLOGIES, INC.,     as Guarantor                            
By: /s/ Jeff Baxter       Name: Jeff Baxter       Title: Chief Executive Officer
 

 

 
SIGNATURE PAGE TO CREDIT AGREEMENT AND GUARANTY 

--------------------------------------------------------------------------------

 

 

PCOF 1, LLC,

 

  as the Lender        

 

 

 

 

 

 

 

 

 

By:

/s/ Sandeep Dixit

 

 

 

Name: Sandeep Dixit

 

 

 

Title: Chief Credit Officer

 

                          By: /s/ Sam Chawla       Name: Sam Chawla       Title:
Portfolio Manager  

 

 
SIGNATURE PAGE TO CREDIT AGREEMENT AND GUARANTY 

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Disclosure Schedule to Credit Agreement and Guaranty

 

 

Variation Biotechnologies (US), Inc., a Delaware corporation (“Borrower” or
“Company”) and VBI Vaccines Inc., a Delaware corporation (“Holdco” or “Parent”)
do hereby disclose certain information as called for under, and as exceptions to
the representations and warranties contained in the Credit Agreement and
Guaranty, dated July 25, 2014, by and among the Borrower and Lender and the
Guarantors (as such terms are defined therein) (the “Agreement”). Schedule
numbers and references to sections herein correspond to relevant sections of the
Agreement. All capitalized terms not otherwise defined herein shall have the
meanings set forth in the Agreement or the Merger Agreement.

 

 
 

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SCHEDULE 5.1.19

 

VBI Convertible Notes

 

●     As at May 31, 2014, Borrower has issued USD $15.6 million of convertible
notes I - X to existing venture capital investors. The accrued interest as of
May 31, 2014 is estimated to be $4.2M as detailed in the following table:

 

 [a1.jpg]

 

●     See Attached Schedule 5.1.19 – Company Convertible Notes I – X for a
complete list of outstanding convertibles notes and accrued interest to be
converted in Company Series A Preferred and then converted into Company Common
Shares prior to Closing; all earn 10% interest per annum and mature September 8,
2014; and,

 

●     See Attached Schedule 5.1.19– Company Convertible Notes XI for a list of
convertibles notes issued on March 10, 2014; all earn 5% interest per annum and
mature September 8, 2014. The accrued interest as at July 15, 2014 is estimated
to be $52,602.74, as detailed in the following table:

 

Convertible Notes XI

Issued Date

 

10-Mar-14

                 

Annual Percentage Rate

  10%                      

Amount

   

Interest

(to 15-Jul-14)

   

Total Interest +

Notes

 

5AM Ventures II, LP

  $ 95,805.89     $ 3,359.77     $ 99,165.66  

5AM Co-Investors II, LP

    3,780.29       132.57       3,912.86  

Arch Venture Fund VI, LP

    137,221.65       4,812.16       142,033.81  

Clarus Lifesciences I, L.P.

    263,192.17       9,229.75       272,421.92  

Perceptive Advisors LLC

    437,500.00       15,342.47       452,842.47  

Titan-Perc Ltd.

    62,500.00       2,191.78       64,691.78  

Hudson Bay Master Fund Ltd

    250,000.00       8,767.12       258,767.12  

DKR Ventures

    250,000.00       8,767.12       258,767.12       $ 1,500,000.00     $
52,602.74     $ 1,552,602.74  

  

 
 

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●

On March 10, Borrower issued convertible notes to new and existing investors in
the aggregate principal amount and for total gross proceeds of $1,500,000 (the
“Bridge Notes”) which bear interest at 5% per annum, except upon and during the
continuation of an event of default the interest rate shall be 15% per annum.
 The maturity date of the Bridge Notes is September 8, 2014, which may be
extended by three months if Borrower fails to close the Merger, or a similar
transaction with an Applicable Entity (as defined below) prior to the maturity
date despite Borrower reasonable and good faith best efforts to do so and
through no fault of Borrower, in which case the maturity date shall be extended
by three months for a maturity date (as extended) of December 8, 2014. The
maturity date for all other issued and outstanding Notes was amended to be
September 8, 2014.

      If prior to the maturity date of the Bridge Notes (i) Borrower completes a
financing resulting in aggregate gross proceeds to Borrower of at least
$9,000,000.00 (excluding conversion of the Bridge Notes) (a “Qualified
Financing”), (ii) the Merger is consummated or (iii) Borrower enters into a
similar merger  with an alternative NASDAQ listed public company (a “NASDAQ
Pubco”) or a company whose common stock is listed in an over-the-counter market
maintained by the OTC Markets Group, Inc. (an “OTC Pubco” and together with the
PubCo and the NASDAQ Pubco, each an “Applicable Entity,” as applicable), then
the Bridge Notes shall be automatically converted into shares of Borrower or the
Applicable Entity at a 15% discount to the price per share issued as part of
such Qualified Financing or the PIPE.       If the Merger is not consummated
prior to the maturity date of the Bridge Notes or Borrower does not consummate a
merger with a NASDAQ Pubco or an OTC Pubco prior to the maturity date of the
Bridge Notes, in addition to full repayment of the Bridge Notes and any accrued
interest thereon, purchasers of the Bridge Notes shall be entitled to on a pro
rata basis based on the principal amount of their respective Bridge Notes, a
total amount of common stock of Borrower determined by dividing 15% of the total
outstanding principal and interest of the Bridge Notes as of the maturity date
by $1.455 per share (as adjusted for any forward or reverse stock splits), which
share price is equivalent to 75% of the price per share of Borrower’s Series A
Preferred Stock last issued by Borrower. The Bridge Notes are not subject to
optional conversion of the holders thereof.

  

 
 

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Variation Biotechnologies (US), Inc.

Schedule 5.1.19 - VBI Convertible Notes I-X

Summary of Outstanding Convertible Notes I to X

Page 1 / 2

As at Date

 

31-May-14

 

 

             

31-Dec-10

   

31-Dec-11

   

31-Dec-12

   

31-Dec-13

   

31-May-14

                       

Unpaid Principal

   

Interest

   

Interest

   

Interest

           

Interest

   

Total Interest

   

Total Interest + Notes

   

5AM Ventures II, LP

  $ 2,525,813.65     $ 10,233.49     $ 124,020.03     $ 218,410.87     $
285,800.44     $ 130,905.77     $ 769,370.60     $ 3,295,184.24    

5AM Co-Investors II, LP

  $ 99,663.20     $ 403.79     $ 4,893.56     $ 8,618.02     $ 11,277.07     $
5,165.26     $ 30,357.71     $ 130,020.92    

Arch Venture Fund VI, LP

  $ 5,348,130.61     $ 14,657.30     $ 177,632.42     $ 312,827.31     $
465,527.03     $ 261,406.84     $ 1,232,050.90     $ 6,580,181.52    

Clarus Lifesciences I, L.P.

  $ 7,583,325.33     $ 28,112.81     $ 340,700.34     $ 600,005.18     $
802,551.21     $ 387,002.45     $ 2,158,371.98     $ 9,741,697.32         $
15,556,932.79     $ 53,407.39     $ 647,246.35     $ 1,139,861.39     $
1,565,155.75     $ 784,480.32     $ 4,190,151.20     $ 19,747,083.99            
                   

Cumulative balance

    $ 18,962,603.68     $ 19,747,083.99                  

 

 

Detail by Convertible Debt Financing:

                              -                          

I

Issued Date

 

17-Nov-10

                                                           

Day Count Convention

 

ACTUAL/ACTUAL

                                                   

Annual Percentage Rate

  10%                                                                        

31-Dec-10

   

31-Dec-11

   

31-Dec-12

   

31-Dec-13

   

31-May-14

                       

Note

   

Interest

   

Interest

   

Interest

   

Interest

   

Interest

   

Total Interest

   

Total Interest + Notes

   

5AM Ventures II, LP

  $ 830,049.36     $ 10,233.49     $ 84,028.28     $ 92,431.11     $ 101,674.22
    $ 46,268.74     $ 334,635.84     $ 1,164,685.20    

5AM Co-Investors II, LP

  $ 32,751.96     $ 403.79     $ 3,315.58     $ 3,647.13     $ 4,011.85     $
1,825.66     $ 13,204.01     $ 45,955.97    

Arch Venture Fund VI, LP

  $ 1,188,869.91     $ 14,657.30     $ 120,352.72     $ 132,387.99     $
145,626.79     $ 66,270.16     $ 479,294.97     $ 1,668,164.88    

Clarus Lifesciences I, L.P.

  $ 2,280,261.56     $ 28,112.81     $ 230,837.44     $ 253,921.18     $
279,313.30     $ 127,106.68     $ 919,291.41     $ 3,199,552.97         $
4,331,932.79     $ 53,407.39     $ 438,534.02     $ 482,387.42     $ 530,626.16
    $ 241,471.25     $ 1,746,426.24     $ 6,078,359.03  

  

 
 

--------------------------------------------------------------------------------

 

 

II

Issued Date

 

3-Jun-11

                                                           

Day Count Convention

 

ACTUAL/ACTUAL

                                                   

Annual Percentage Rate

  10%                                                                          
     

31-Dec-11

   

31-Dec-12

   

31-Dec-13

   

31-May-14

                       

Note

           

Interest

   

Interest

   

Interest

   

Interest

   

Total Interest

   

Total Interest +

Notes

   

5AM Ventures II, LP

  $ 670,641.24             $ 38,952.31     $ 70,959.36     $ 78,055.29     $
35,520.50     $ 223,487.46     $ 894,128.70    

5AM Co-Investors II, LP

  $ 26,462.06             $ 1,536.97     $ 2,799.90     $ 3,079.89     $
1,401.56     $ 8,818.33     $ 35,280.39    

Arch Venture Fund VI, LP

  $ 960,551.53             $ 55,790.94     $ 101,634.25     $ 111,797.67     $
50,875.60     $ 320,098.46     $ 1,280,649.99    

Clarus Lifesciences I, L.P.

  $ 1,842,345.17             $ 107,007.45     $ 194,935.26     $ 214,428.79    
$ 97,579.79     $ 613,951.28     $ 2,456,296.45         $ 3,500,000.01          
  $ 203,287.67     $ 370,328.77     $ 407,361.64     $ 185,377.45     $
1,166,355.53     $ 4,666,355.54  

 

 

IIIa

Issued Date

 

14-Dec-11

                                                           

Day Count Convention

 

ACTUAL/ACTUAL

                                                   

Annual Percentage Rate

  10%                                                                          
     

31-Dec-11

   

31-Dec-12

   

31-Dec-13

   

31-May-14

                       

Note

           

Interest

   

Interest

   

Interest

   

Interest

   

Total Interest

   

Total Interest +

Notes

   

5AM Ventures II, LP

  $ 210,772.97             $ 1,039.43     $ 21,181.24     $ 23,299.36     $
10,602.81     $ 56,122.84     $ 266,895.80    

5AM Co-Investors II, LP

  $ 8,316.65             $ 41.01     $ 835.77     $ 919.34     $ 418.36     $
2,214.49     $ 10,531.14    

Arch Venture Fund VI, LP

  $ 301,887.61             $ 1,488.76     $ 30,337.64     $ 33,371.40     $
15,186.27     $ 80,384.07     $ 382,271.68    

Clarus Lifesciences I, L.P.

  $ 579,022.77             $ 2,855.45     $ 58,187.82     $ 64,006.60     $
29,127.39     $ 154,177.27     $ 733,200.04         $ 1,100,000.00     $ -     $
5,424.66     $ 110,542.47     $ 121,596.71     $ 55,334.83     $ 292,898.67    
$ 1,392,898.67  

  

 
 

--------------------------------------------------------------------------------

 

 

IIIb

Issued Date

 

9-Mar-12

                                                           

Day Count Convention

 

ACTUAL/ACTUAL

                                                   

Annual Percentage Rate

  10%                                                                          
             

31-Dec-12

   

31-Dec-13

   

31-May-14

                       

Note

                   

Interest

   

Interest

   

Interest

   

Total Interest

   

Total Interest +

Notes

   

5AM Ventures II, LP

  $ 210,772.97                     $ 17,208.31     $ 22,798.13     $ 10,374.71  
  $ 50,381.15     $ 261,154.12    

5AM Co-Investors II, LP

  $ 8,316.65                     $ 679.00     $ 899.57     $ 409.36     $
1,987.93     $ 10,304.59    

Arch Venture Fund VI, LP

  $ 301,887.61                     $ 24,647.26     $ 32,653.49     $ 14,859.57  
  $ 72,160.32     $ 374,047.93    

Clarus Lifesciences I, L.P.

  $ 579,022.77                     $ 47,273.64     $ 62,629.64     $ 28,500.78  
  $ 138,404.06     $ 717,426.83         $ 1,100,000.00     $ -     $ -     $
89,808.22     $ 118,980.82     $ 54,144.42     $ 262,933.46     $ 1,362,933.46  

 

 

IV

Issued Date

 

20-Jun-12

                                                           

Day Count Convention

 

ACTUAL/ACTUAL

                                                   

Annual Percentage Rate

  10%                                                                          
             

31-Dec-12

   

31-Dec-13

   

31-May-14

                       

Note

                   

Interest

   

Interest

   

Interest

   

Total Interest

   

Total Interest +

Notes

   

5AM Ventures II, LP

  $ 229,934.14                     $ 12,284.15     $ 24,221.83     $ 11,022.59  
  $ 47,528.57     $ 277,462.71    

5AM Co-Investors II, LP

  $ 9,072.71                     $ 484.71     $ 955.74     $ 434.93     $
1,875.38     $ 10,948.09    

Arch Venture Fund VI, LP

  $ 329,331.95                     $ 17,594.45     $ 34,692.64     $ 15,787.53  
  $ 68,074.61     $ 397,406.56    

Clarus Lifesciences I, L.P.

  $ 631,661.20                     $ 33,746.28     $ 66,540.75     $ 30,280.60  
  $ 130,567.63     $ 762,228.83         $ 1,200,000.00                     $
64,109.59     $ 126,410.96     $ 57,525.64     $ 248,046.19     $ 1,448,046.19  
                                                                               
                                 

Schedule 5.1.19 – VBI Convertible Notes I - X

                                                Page 2 / 2  

  

 
 

--------------------------------------------------------------------------------

 

  

V

Issued Date

 

24-Oct-12

                                                   

 

   

Day Count Convention

 

ACTUAL/ACTUAL

                                                   

Annual Percentage Rate

  10%                                                                          
             

31-Dec-12

   

31-Dec-13

   

31-May-14

                       

Note

                   

Interest

   

Interest

   

Interest

   

Total Interest

   

Total Interest +

Notes

   

5AM Ventures II, LP

  $ 229,934.14                     $ 4,346.70     $ 23,428.08     $ 10,661.38  
  $ 38,436.17     $ 268,370.30    

5AM Co-Investors II, LP

  $ 9,072.71                     $ 171.51     $ 924.42     $ 420.68     $
1,516.61     $ 10,589.32    

Arch Venture Fund VI, LP

  $ 329,331.95                     $ 6,225.73     $ 33,555.77     $ 15,270.17  
  $ 55,051.67     $ 384,383.62    

Clarus Lifesciences I, L.P.

  $ 631,661.20                     $ 11,940.99     $ 64,360.22     $ 29,288.31  
  $ 105,589.52     $ 737,250.72         $ 1,200,000.00                     $
22,684.93     $ 122,268.49     $ 55,640.54     $ 200,593.96     $ 1,400,593.96  

 

 

VI

Issued Date

 

22-Feb-13

                                                           

Day Count Convention

 

ACTUAL/ACTUAL

                                                   

Annual Percentage Rate

  10%                                                                          
                     

31-Dec-13

   

31-May-14

                       

Note

                           

Interest

   

Interest

   

Total Interest

   

Total Interest +

Notes

   

5AM Ventures II, LP

  $ 143,708.84                             $ 12,323.53     $ 6,455.04     $
18,778.56     $ 162,487.40    

5AM Co-Investors II, LP

  $ 5,670.45                             $ 486.26     $ 254.70     $ 740.96    
$ 6,411.41    

Arch Venture Fund VI, LP

  $ 337,428.54                             $ 28,935.65     $ 15,156.44     $
44,092.09     $ 381,520.63    

Clarus Lifesciences I, L.P.

  $ 263,192.17                             $ 22,569.63     $ 11,821.93     $
34,391.56     $ 297,583.73         $ 750,000.00                             $
64,315.07     $ 33,688.10     $ 98,003.17     $ 848,003.17  

  

 
 

--------------------------------------------------------------------------------

 

 

VII

Issued Date

 

10-Jun-13

                                                           

Day Count Convention

 

ACTUAL/ACTUAL

                                                   

Annual Percentage Rate

  10%                                                                          
                     

31-Dec-13

   

31-May-14

                       

Note

                           

Interest

   

Interest

   

Total Interest

   

Total Interest +

Notes

   

5AM Ventures II, LP

  $ -                             $ -     $ -     $ -     $ -    

5AM Co-Investors II, LP

  $ -                             $ -     $ -     $ -     $ -    

Arch Venture Fund VI, LP

  $ 500,225.84                             $ 28,094.88     $ 21,856.56     $
49,951.43     $ 550,177.27    

Clarus Lifesciences I, L.P.

  $ 249,774.16                             $ 14,028.41     $ 10,913.48     $
24,941.89     $ 274,716.05         $ 750,000.00                             $
42,123.29     $ 32,770.03     $ 74,893.32     $ 824,893.32  

 

 

VIII

Issued Date

 

26-Aug-13

                                                           

Day Count Convention

 

ACTUAL/ACTUAL

                                                   

Annual Percentage Rate

  10%                                                                          
                     

31-Dec-13

   

31-May-14

                       

Note

                           

Interest

   

Interest

   

Total Interest

   

Total Interest +

Notes

   

5AM Ventures II, LP

  $ -                             $ -     $ -     $ -     $ -    

5AM Co-Investors II, LP

  $ -                             $ -     $ -     $ -     $ -    

Arch Venture Fund VI, LP

  $ 118,403.92                             $ 4,152.25     $ 5,070.13     $
9,222.38     $ 127,626.30    

Clarus Lifesciences I, L.P.

  $ 131,596.08                             $ 4,614.88     $ 5,635.03     $
10,249.90     $ 141,845.98         $ 250,000.00                             $
8,767.12     $ 10,705.16     $ 19,472.28     $ 269,472.28  

 

 
 

--------------------------------------------------------------------------------

 

  

IX

Issued Date

 

30-Sep-13

                                                           

Day Count Convention

 

ACTUAL/ACTUAL

                                                   

Annual Percentage Rate

  10%                                                                          
                     

31-Dec-13

   

31-May-14

                       

Note

                           

Interest

   

Interest

   

Total Interest

   

Total Interest +

Notes

   

5AM Ventures II, LP

  $ -                             $ -     $ -     $ -     $ -    

5AM Co-Investors II, LP

  $ -                             $ -     $ -     $ -     $ -    

Arch Venture Fund VI, LP

  $ 355,211.75                             $ 9,050.60     $ 15,069.48     $
24,120.08     $ 379,331.83    

Clarus Lifesciences I, L.P.

  $ 394,788.25                             $ 10,058.99     $ 16,748.47     $
26,807.46     $ 421,595.71         $ 750,000.00                             $
19,109.59     $ 31,817.96     $ 50,927.55     $ 800,927.55  

 

 

X

Issued Date

 

11-Dec-13

                                                           

Day Count Convention

 

ACTUAL/ACTUAL

                                                   

Annual Percentage Rate

  10%                                                                          
                     

31-Dec-13

   

31-May-14

                       

Note

                           

Interest

   

Interest

   

Total Interest

   

Total Interest +

Notes

   

5AM Ventures II, LP

  $ -                             $ -     $ -     $ -     $ -    

5AM Co-Investors II, LP

  $ -                             $ -     $ -     $ -     $ -    

Arch Venture Fund VI, LP

  $ 625,000.00                             $ 3,595.89     $ 26,004.93     $
29,600.82     $ 654,600.82    

Clarus Lifesciences I, L.P.

  $ -                             $ -     $ -     $ -     $ -         $
625,000.00                             $ 3,595.89     $ 26,004.93     $
29,600.82     $ 654,600.82  

 

 
 

--------------------------------------------------------------------------------

 

  

Variation Biotechnologies (US), Inc.

Schedule 5.1.19 - VBI Convertible Notes XI

Summary of Outstanding Convertible Notes XI

 

As at Date

 

15-Jul-14

 

 

XI

Issued Date

 

10-Mar-14

                   

Day Count Convention

 

ACTUAL/ACTUAL

                   

Annual Percentage Rate

  10%                        

15-Jul-14

               

Note

   

Interest

   

Total Interest +

Notes

   

5AM Ventures II, LP

  $ 95,805.89     $ 3,359.77     $ 99,165.66    

5AM Co-Investors II, LP

  $ 3,780.29     $ 132.57     $ 3,912.86    

Arch Venture Fund VI, LP

  $ 137,221.65     $ 4,812.16     $ 142,033.81    

Clarus Lifesciences I, L.P.

  $ 263,192.17     $ 9,229.75     $ 272,421.92    

Perceptive Advisors LLC

  $ 436,250.00     $ 15,298.63     $ 451,548.63    

Titan-Perc Ltd.

  $ 63,750.00     $ 2,235.62     $ 65,985.62    

Hudson Bay Master Fund Ltd

  $ 250,000.00     $ 8,767.12     $ 258,767.12    

DKR Ventures, LLC

  $ 250,000.00     $ 8,767.12     $ 258,767.12         $ 1,500,000.00     $
52,602.74     $ 1,552,602.74  

 

 
 

--------------------------------------------------------------------------------

 

 

 

SCHEDULE 6.7(a)

 

Litigation, Labor Matters and Environmental Matters

 

None.

 

 
 

--------------------------------------------------------------------------------

 

  

SCHEDULE 6.8

 

Subsidiaries

 

●     Variation Biotechnologies (US), Inc., a Delaware corporation

 

●     Variation Biotechnologies Inc., a Canadian company (“Canadian Subsidiary”)
incorporated on August 24, 2001 under the Canada Business Corporations Act, is a
wholly-owned subsidiary of Borrower.

 

●     ePixis SA (“ePixis”), a French company, was a wholly-owned subsidiary of
Canadian Subsidiary. Effective March 1, 2014, ePixis was dissolved and all
remaining assets and liabilities were transferred to Borrower Cda.

 

●     Paulson Investment Company, Inc., an Oregon corporation (“PIC”), which
upon consummation of the Merger and post-recapitalization of PIC, Holdco will
own .1% of PIC.

 

●     Paulson Investment I LLC, an Oregon limited liability company wholly-owned
by Holdco. 

 

 
 

--------------------------------------------------------------------------------

 

  

SCHEDULE 6.11

 

Pension Plans

 

None.

 

 
 

--------------------------------------------------------------------------------

 

 

SCHEDULE 6.15(a)

 

Intellectual Property

 

(a)

All intellectual property listed on Schedules 6.15(a) and (b) is owned by
Canadian Subsidiary.

    i.   Please see attachment Schedule 6.15(a) for summary of Borrower Patents,
updated as of July 11, 2014.     ii.  Please see attachment Schedule 6.15(b) for
summary of Borrower Trademarks, updated as of May 27, 2014.     iii.  Domain
Names:

 

Domain Name

Name of
Registrant

Registration

Renewal

Date

Registrar Name and

Contact Information

www.variationbiotech.com

Egidio Nascimento

July 27, 2001

July 27, 2014

NAMESCOUT CORP / http://www.namescout.com

www.variationbiotechnologies.com

Egidio Nascimento

July 27, 2001

July 27, 2014

NAMESCOUT CORP / http://www.namescout.com

www.variationbiotech.ca

Egidio Nascimento

January 3, 2008

January 3, 2015

DomainsAtCost Corp.

http://www.domainsatcost.ca

www.Borrowervaccines.com

Egidio Nascimento

November 11, 2010

November 11, 2014

DomainsAtCost Corp.

http://www.domainsatcost.ca

www.Borrowervaccines.ca

Egidio Nascimento

November 11, 2010

November 11, 2014

DomainsAtCost Corp.

http://www.domainsatcost.ca

www.vbiv.com

Egidio Nascimento

June 5, 2004

June 5, 2015

Godaddy.com LLC / Godaddy.com

www.vbiv.ca

Egidio Nascimento

July 2, 2014

July 2, 2015

Go Daddy Domains Canada, Inc / Godaddy.com

 

Borrower maintains certain trade secrets, information and proprietary rights as
are necessary to the conduct of Borrower business.

 

(F)     Intellectual Property License Agreements

●     AMRIC Exclusive License Agreement for Variosite patent families (see
Schedule 6.15(a) – patent families VBI-001, VBI-002, VBI-003, VBI-004, VBI-008
and associated VariositeTM Trademarks)

●     NRC License Agreement for HEK 293 proprietary manufacturing cell line for
eVLPs

●     Epixis S.A. UPMC/INSERM License Agreements for eVLP base patents (see
Schedule 6.15(a) – patent families P1, P2 and P3)

 

 
 

--------------------------------------------------------------------------------

 

  

Schedule 6.15(a) VBI Patent Summary 

(July 11th, 2014)

Article I.VARIATION OWNED PEPTIDES PATENTS AND PATENT APPLICATIONS (Published)

Inventors: 

José Vidal Torres

Assignee: Variation Biotechnologies Inc.

Licensee: AMRIC/Lilly Creek Vaccines

Patent Family:

Immunogenic Formulations of Variable Peptidic Epitopes and Process for
Preparation Thereof

 

(Variosite Process Patent – Abstract - A process is disclosed for preparation of
a immunogenic peptide mixture in a single synthesis. The peptide mixture
collectively represents the in vivo variability seen in immunogenic epitopes
from a pathogen. The mixture is termed a hypervariable epitope construct (HEC).
Immunization with a HEC evokes broadly reactive immunity against divergent
strains of a pathogen upon which the HEC is based.)

Priority Date:

October 9, 1998.

VBI-001-1

(US 60/103,642)

Country

Number

Agent

Filing Date

Dd/mm/yr

Reference No.

Status or Patent No.

United States

12/636,204

Continuation of

 

11/425,610

Continuation of

 

10/072,084

CIP of

 

 

 

 

 

09/414,484

Choate

(0028)

 

BLG

(568B)

 

(568A)

11/12/09

 

 

21/06/06

 

 

08/02/02

 

 

 

 

 

 

08/10/99

VBI-001USCN2

 

VBI-001USCN

 

VBI-001USCIP

 

 

 

 

 

VBI-001US

●abandoned

●abandoned

 

 

●Issued; 7,118,874

Issue date 10/10/06; Earliest expected expiration date 08/02/22

●11.5 year Renewal due 10/04/18

●abandoned

PCT

PCT/CA02/00137

 

WO 03/066090

(publish 14/08/03)

BLG

08/02/02

VBI-001PC

●National Phase

●No priority claim to VBI-001-1

Canada

2,472,265

BLG

08/02/02

VBI-001CA

●Issued; 2,472,265

Issue date 05/02/13; Earliest expected expiration date 08/02/22

  

 
 

--------------------------------------------------------------------------------

 

 

Europe

02711695.3

BLG

08/02/02

VBI-001EP

●Issued; 1476182

Issue date 09/11/11; Earliest expected expiration date 08/02/22

●Validated in UK, France & Germany;

Japan

2003-565513

BLG

08/02/02

VBI-001JP

●Issued; 4391827

Issue date 16/10/09; Earliest expected expiration date 08/02/22

Australia

2002231510

BLG

08/02/02

VBI-001AU

●Issued;2002231510

Issue date 17/07/08; Earliest expected expiration date 08/02/22

China

02828706.1

BLG

08/02/02

VBI-001CN

●Issued; ZL02828706.1

Issue date 28/07/10; Earliest expected expiration date 08/02/22

India

1995/CHENP/2004

BLG

08/02/02

VBI-001IN

●Issued; 243388

Issue date 12/10/10; Earliest expected expiration date 08/02/22

Mexico

PA/A/2004/007646

BLG

08/02/02

VBI-001MX

●Issued; 263534

Issue date 07/01/09; Earliest expected expiration date 08/02/22

Eurasia

2004 00897

BLG

08/02/02

VBI-001EA

●Issued; 008143

Issue date 27/04/07; Earliest expected expiration date 08/02/22

Russia

2004 00897

BLG

08/02/02

VBI-001RU

●Issued; 008143 RU

Issue date 27/04/07; Earliest expected expiration date 08/02/22

ARIPO

AP/P/2004/003081

BLG

08/02/02

VBI-001AR

●Issued; AP 2393

Issue date 30/04/12; Earliest expected expiration date 08/02/22

South Africa

2004/5492

BLG

08/02/02

VBI-001ZA

●Issued; 2004/5492

Issue date 28/09/05; Earliest expected expiration date 08/02/22

Korea

 

BLG

08/02/02

VBI-001KP

●Abandoned

  

 
 

--------------------------------------------------------------------------------

 

 

Inventors:

José Vidal Torres, David Evander Anderson and Franciso J. Diaz-Mitoma

Assignee: Variation Biotechnologies Inc.

Licensee: AMRIC/Lilly Creek Vaccines

Patent Family:

HIV Vaccine Composition

 

(Abstract - An anti-HIV vaccine composition is disclosed. The vaccine comprises
an combination of immunogenic peptide mixtures, which mixtures may be prepared
in a single synthesis. The composition collectively represents the in vivo
variability seen in immunogenic epitopes from highly variable regions of HIV.
Immunization with the vaccine elicits broadly reactive immunity (CTL and T
helper cell responses) against the divergent strains of HIV upon which it is
based. The vaccine may be formulated to target regionally distinct variability
based on an HIV clade predominant in a geographical region.)

Priority Date:

March 1, 2005

VBI-002-1

(US 60/656,908)

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/CA06/000295

 

WO 06/092046

(publish 08/09/06)

BLG

(2767)

28/02/06

VBI-002PC

●National Phase

Canada

2,540,279

BLG

28/02/06

VBI-002CA

●Issued; 2,540,279

Issue date 20/10/09; Earliest expected expiration date 28/02/26

United States

11/817,640

BLG

28/02/06

VBI-002US

●Issued; 8,029,797

Issue date 04/10/11; Earliest expected expiration date 28/02/26

Europe

06705249.8

BLG

28/02/06

VBI-002EP

●Issued; 1861121

Issue date 11/04/12; Earliest expected expiration date 28/02/26

●Validated in UK, France & Germany

  

 
 

--------------------------------------------------------------------------------

 

 

Inventors:

José Vidal Torres

Assignee: Variation Biotechnologies Inc.

Licensee: AMRIC/Lilly Creek Vaccines

Patent Family:

Peptide-Based Influenza Vaccine Formulation

 

(Abstract - Peptide-based anti-influenza formulations against influenza A and B
are disclosed. The peptides are derived from influenza-based epitopes. The
formulations are based on peptide mixtures which may be formulated so that
variability is present at particular residues. The formulations can be used to
prepare vaccines for preventing influenza in human, avian, murine or equine
animals.)

Priority Date:

June 1, 2005

VBI-003-1

(US 60/686,041)

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/CA06/000891

 

WO 06/128294

(publish 07/12/06)

BLG

(2849)

01/06/06

VBI-003PC

●National Phase

Canada

2,610,667

BLG

01/06/06

VBI-003CA

●Abandoned

United States

11/921,436

BLG

01/06/06

VBI-003US

●Abandoned

Europe

06741591.9

BLG

01/06/06

VBI-003EP

●Abandoned

Japan

2008-513881

BLG

01/06/06

VBI-003JP

●Issued; 4939531

Issue date 02/03/12; Earliest expected expiration date 01/06/26

Mexico

MX/A/2007/015105

BLG

01/06/06

VBI-003MX

●Abandoned

India

9663/DELNP/2007

BLG

01/06/06

VBI-003IN

●Abandoned

Singapore

200718225-6

BLG

01/06/06

VBI-003SG

●Issued; 137978

Issue date 15/06/10; Earliest expected expiration date 01/06/26

China

200680023950.X

BLG

01/06/06

VBI-003CN

●Issued; ZL20068023950.X

Issue date 05/10/11; Earliest expected expiration date 01/06/26

Hong Kong

08105712.8

BLG

01/06/06

VBI-003HK

●Abandoned

Korea

2007-7029582

BLG

01/06/06

VBI-003KR

●Abandoned

  

 
 

--------------------------------------------------------------------------------

 

 

Inventors:

Andrei Ogrel

Assignee: Variation Biotechnologies Inc.

Licensee: AMRIC/Lilly Creek Vaccines

Patent Family:

Influenza Vaccine Formulation

 

(Abstract – Peptide-based anti-influenza formulations against influenza are
disclosed. The peptides derived from influenza-based epitopes. The formulations
are based on peptide mixtures which may be formulated so that variability is
present at particular residues. The formulations can be used to prepare vaccines
for preventing influenza, particularly avian influenza.)

Priority Date:

November 30, 2006

VBI-004-1

(US 60/868,008)

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/CA07/002164

 

WO 08/064488

(publish 05/06/08)

BLG

(3556)

30/11/07

VBI-004PC

●National Phase

United States

12/875,638

Divisional of

 

11/948,505

BLG/

Choate

03-09-10

 

 

30/11/07

VBI-004USDV

 

VBI-004US

●Abandoned

 

 

●Issued; 7,807,173

Issue date 05/10/10; Earliest expected expiration date 30/11/27

Canada

2, 670, 965

BLG

30/11/07

VBI-004CA

●Pending – 1st Office Action Response due 11/09/14

Europe

07855446.6

BLG

30/11/07

VBI-004EP

●Issued; 2097103

Issue date 03/10/12; Earliest expected expiration date 30/11/27

 

● Validated in UK, France, Germany & Switzerland

India

3777/CHENP/2009

BLG

30/11/07

VBI-004IN

●Pending –1st Office Action Response due 23/08/14

China

200780048923.2

BLG

30/11/07

VBI-004CN

●Issued;

ZL200780048923.2

Issue date 22/08/12; Earliest expected expiration date 30/11/27

Japan

2009-538564

BLG

30/11/07

VBI-004JP

●Issued; 5177451

Issue date 18/01/13; Earliest expected expiration date 30/11/27

  

 
 

--------------------------------------------------------------------------------

 

 

Inventors:

Franciso J. Diaz-Mitoma, Andrei Ogrel, José Vidal Torres and David Evander
Anderson

Assignee: Variation Biotechnologies Inc.

Licensee: AMRIC/Lilly Creek Vaccines

Patent Family:

Compositions and Methods for Treating Influenza

 

(Abstract – The present application provides compositions and methods useful for
treating influenza. As described herein, the compositions and methods are based
on the development of peptides and peptide combinations which exhibit
immunogenic properties against influenza. In some embodiments, the peptide
combinations induce a protective response against multiple strains of influenza,
e.g., seasonal strains of influenza or even the new pandemic influenza A (H1N1)
virus of swine origin.)

Priority Date:

June 19, 2008

VBI-005PC

(PCT/US08/067471)

 

Priority Date:

May 29, 2009

VBI-008-1

(US 61/182,614)

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US09/047911

 

WO 09/155489

(publish 23/12/09)

Choate

(0019)

 

19/06/09

VBI-008PC

●National Phase

Canada

2,735,724

Choate

(0055)

to BLG

28/02/11

VBI-008CA

●Pending –

Examination requested 19/06/14

United States

14/161,842

Continuation of

 

12/999,725

Choate

(0098)

to BLG

Choate

(0052)

23/01/14

 

 

17/12/10

VBI-008USCN

 

VBI-008US

●Pending

 

 

●Abandoned

Japan

2011-514829

Choate

(0060)

to BLG

17/02/11

VBI-008JP

●Pending – 1st Office Action Response filed 19/05/14

Australia

2009259964

Choate

(0053)

to BLG

17/01/11

VBI-008AU

●Pending – 1st Office Action Response due 15/01/15

China

80132130.8

Choate

(0056)

to BLG

17/02/11

VBI-008CN

●Pending – 1st & 2nd Office Action Responses filed

India

348/CHENP/2011

Choate

(0058)

to BLG

17/01/11

VBI-008IN

●Pending

Israel

210097

Choate

(0059)

to BLG

19/01/11

VBI-008IL

●Pending – 1st Office Action Response due 16/12/14

Korea

2011-7001217

Choate

(0062)

to BLG

17/01/11

VBI-008KR

●Pending –

Examination requested 19/06/14

  

 
 

--------------------------------------------------------------------------------

 

  

VARIATION OWNED HEPATITIS A PATENT APPLICATIONS (Published)

Inventors:

Franciso J. Diaz-Mitoma and Thanh Le

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Treating Hepatitis A

 

(Abstract – The present application provides compositions and methods useful for
treating hepatitis A. In particular, while hepatitis A vaccines are currently
limited to parenteral administration routes (i.e., intramuscular injection), we
have identified compositions that induce a protective response when administered
orally.)

Priority Date:

September 18, 2008

VBI-006-1

(US 60/098,177)

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US09/057492

 

WO 10/033812

(publish 25/03/10)

Choate

(0020)

18/09/09

VBI-006PC

●National Phase

United States

13/119,583

Choate

(0072)

18/09/09

VBI-006US

●Abandoned

Inventors:

Ali Aziz

Owner: Variation Biotechnologies Inc.

Patent Family:

Method and Kit for Detection of Hepatitis A Virus Neutralizing Antibodies

 

Priority Date:

April 15, 2009

VBI-007-1

(US 61/169,344)

Country 

Number

Agent

Filing Date

Reference No.

Status or Patent No.

Canada

2,700,078

BLG

(6043)

15/04/10

VBI-007CA

●Abandoned

United States

12/760,858

BLG

(6043)

15/04/10

VBI-007US

●Abandoned

  

 
 

--------------------------------------------------------------------------------

 

  

VARIATION OWNED FORMULATION PROCESS PATENT APPLICATIONS (Published)

Inventors:

David Evander Anderson and Andrei Ogrel

Owner: Variation Biotechnologies Inc.

Patent Family:

Methods for Preparing Liposomes and Formulation Produced Therefrom

 

Priority Date(s):

July 6, Oct. 30th, 2009

VBI-009-1/VBI-009-2

US 61/223,196 and US 61/256,912

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US10/041078

 

WO 11/005769

(publish 13/01/11)

Choate

(0041)

06/07/10

VBI-009PC

●National Phase

Canada

2,767,392

BLG

06/07/10

VBI-009CA

●Pending – Examination to be requested 06/07/15

United States

13/377,365

Choate

06/07/10

VBI-009US

●Pending – 1st Office Action Response due 06/09/14

Europe

10797727.4

BLG

06/07/10

VBI-009EP

●Pending – 

Response filed to Extended European Search Report

Japan

2012-519672

BLG

06/07/10

VBI-009JP

●Pending

China

201080039405.6

BLG

06/07/10

VBI-009CN

●Pending – 1st & 2nd

Office Action Response filed

Australia

2010270722

BLG

06/07/10

VBI-009AU

●Pending

Brazil

112012 0008269

BLG

06/07/10

VBI-009BR

●Pending

Israel

217375

BLG

06/07/10

VBI-009IL

●Pending – Response filed to Examination Notice

India

1069/DELNP/2012

BLG

06/07/10

VBI-009IN

●Pending

Mexico

MX/A/2012/000372

BLG

06/07/10

VBI-009MX

●Pending – 1st Office Action Response filed 24/06/14

Inventors:

David Evander Anderson, Francisco Diaz-Mitoma and Thanh Le

Owner: Variation Biotechnologies Inc.

Patent Family:

Methods for Preparing Liposomes and Formulation Produced Therefrom

Priority Date(s):

July 6, Oct. 30th, 2009

VBI-010-1/VBI-010-2

US 61/223,192 and

US 61/256, 909

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US10/041081

 

WO 11/005772

(publish 13/01/11)

Choate

(0043)

06/07/10

VBI-010PC

●National Phase

Canada

2,803,282

BLG

06/07/10

VBI-010CA

●Pending – 

Examination to be Requested 06/07/15

United States

13/377,371

Choate

06/07/10

VBI-010US

●Pending – 1st Office

Action Response filed 30/06/14

  

 
 

--------------------------------------------------------------------------------

 

  

VARIATION OWNED ORAL FORMULATION PATENT APPLICATIONS (Unpublished)

Inventors:

David Evander Anderson

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Treating Meningococcal and Pneumococcal Infections

Priority Date:

December 23, 2009

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

US

Provisional

61/289,603

Choate (0024)

23/12/09

VBI-011-1

●Not converted to PCT

Inventors:

David Evander Anderson, Marc J. Kirchmeier, Tanvir Ahmed and Catalina P. Soare

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Treating Enteric Diseases

 

*Priority claim withdrawn prior to publication

Priority Date:

December 23, 2009

VBI-012-1 US 61/289,615

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US10/061673

Choate (0045)

21/12/10

VBI-012PC

●PCT withdrawn prior to publication

Inventors:

David Evander Anderson, Francisco Diaz-Mitoma, Thanh Le and Andrei Ogrel

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Treating Influenza

 

*Priority claim withdrawn prior to publication

Priority Date:

December 23, 2009

VBI-013-1

US 61/289,580

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US10/61685

Choate (0047)

22/12/10

VBI-013PC

●PCT withdrawn prior to publication

Inventors:

David Evander Anderson

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Treating Measles, Mumps, and Rubella

Priority Date:

December 23, 2009

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

US

Provisional

61/289,586

Choate (0027)

23/12/09

VBI-014-1

●Not converted to PCT

  

 
 

--------------------------------------------------------------------------------

 

  

VARIATION OWNED THERMOSTABLE FORMULATION PATENT APPLICATIONS (published)

Inventors:

David Evander Anderson

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Treating Influenza

Priority Date:

December 23, 2009

VBI-015-1

61/289,556

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US10/62079

Choate (0049)

23/12/10

VBI-015PC

●PCT withdrawn prior to publication

Inventors:

David Evander Anderson, Jeff Baxter, Andrei Ogrel and Ron Boch

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Treating Influenza

Priority Date(s):

July 6, 2010 & Jan. 10, 2011

VBI-015-2/ VBI-015-4

US 61/361,898 and

US 61/431,218

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US11/43094

 

WO 12/006367

(publish 12/01/12)

Choate

(0073)

06/07/11

VBI-015PC1

●National Phase

Canada

2,840,079

BLG

06/07/11

VBI-015CA

●Pending –

Examination to be Requested 06/07/16

United States

13/808,155

Choate

06/07/11

VBI-015US

●Pending – 1st Office Action response filed

Europe

11804305.8

BLG

06/07/11

VBI-015EP

●Pending

Japan

2013-518810

BLG

06/07/11

VBI-015JP

●Pending –

Examination Requested 05/07/14

China

201180042971.7

BLG

06/07/11

VBI-015CN

●Pending

Australia

2011276223

BLG

06/07/11

VBI-015AU

●Pending – 1st Office Action Response due 14/01/15

Brazil

1120130003944

BLG

06/07/11

VBI-015BR

●Pending –

Examination Requested 05/07/14

Israel

224022

BLG

06/07/11

VBI-015IL

●Pending

India

1077/DELNP/2013

BLG

06/07/11

VBI-015IN

●Pending –

Examination Requested 05/07/14

Mexico

MX/A/2012/015232

BLG

06/07/11

VBI-015MX

●Pending

Inventors:

David Evander Anderson, Jeff Baxter, Andrei Ogrel and Ron Boch

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Treating Influenza

Priority Date(s):

July 6, 2010 & Jan. 10, 2011 

VBI-015-3/VBI-015-5

US 61/361,899 and

US 61/431,278

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US11/43095

 

WO 12/006368

(publish 12/01/12)

Choate

(0074)

06/07/11

VBI-015PC2

●Not converted at National Phase

  

 
 

--------------------------------------------------------------------------------

 

 

Inventors:

David Evander Anderson

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Treating Melanoma

Priority Date:

December 23, 2009

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

US

Provisional

61/289,560

Choate (0030)

23/12/09

VBI-016-1

●Not converted to PCT

Inventors:

David Evander Anderson

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Treating Hepatitis B

Priority Date:

December 23, 2009

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

US

Provisional

61/289,576

Choate (0031)

23/12/09

VBI-017-1

●Not converted to PCT

Inventors:

Francisco Diaz-Mitoma, David Evander Anderson and Ali Aziz

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Method for Immunogenic Peptide Vaccines

 

 

 

*Priority claim(s) withdrawn prior to publication

Priority Date(s):

Dec. 23, 2009 & Feb 5, 2010

VBI-018-1/VBI-018-2

US 61/289,588 and

US 61/301,784

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US11/061683

Choate (0051)

23/12/10

VBI-018PC

●PCT withdrawn prior to publication

Inventors:

David Evander Anderson

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Treating Hepatitis A

Priority Date:

March 25, 2009

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

US

Provisional

61/317,421

Choate (0035)

25/03/10

VBI-019-1

●Not converted to PCT

US

Provisional

61/317,418

Choate (0034)

25/03/10

VBI-020-1

●Not converted to PCT

  

 
 

--------------------------------------------------------------------------------

 

 

Inventors:

Maura Ellen Campbell

Owner: Variation Biotechnologies Inc.

Patent Family:

Synthetic Derivatives of MPL and Uses Thereof

Priority Date(s):

November 18, 2011

VBI-021-1/VBI-022-1

61/561,795 and 61/561,797

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US12/65466

PCT/IB12/002855

 

WO 13/072768

(publish 23/05/13)

Choate

(0087)

BLG

18/11/12

VBI-022PC

●Pending

●EP Application filed

●US Application filed

●Assignment filed

Inventors:

David Evander Anderson, Tanvir Ahmed, Jasminka Bozic and Marc Kirchmeier

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Treating Viral Infections

Priority Date:

January 13, 2011 VBI-023-1

61/432,567

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US12/21388

 

WO 12/097346

(Publish 19/07/12)

Choate

(0080)

13/01/12

VBI-023PC

●National Phase

Canada

NA

BLG

13/01/12

VBI-023CA

●Reinstate NPE late entry 13/07/14

United States

13/979,322

BLG

13/01/12

VBI-023US

●Pending – Preliminary Amendment filed

Europe

12734104.8

BLG

13/01/12

VBI-023EP

●Pending – Claim Amendments filed

China

201280008709.5

BLG

13/01/12

VBI-023CN

●Pending

Brazil

1120130179392

BLG

13/01/12

VBI-023BR

●Pending –

Examination to be Requested 12/01/15

India

7052/DELNP/2013

BLG

13/01/12

VBI-023IN

●Pending – 

Examination to be Requested 12/01/15

Mexico

MX/A/2013/008106

BLG

13/01/12

VBI-023MX

●Pending

  

 
 

--------------------------------------------------------------------------------

 

 

Inventors:

David Evander Anderson, Yvonne Perrie, Jit Wilkhu and Marc Kirchmeier

Owner: Variation Biotechnologies Inc.

Patent Family:

Methods for Preparing Vesicles and Formulations Produced Therefrom

Priority Date:

January 13, 2011

VBI-024-1

61/432,569

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US12/21389

 

WO 12/097347

(Publish 19/07/12)

Choate

(0081)

13/01/12

VBI-024PC

●National Phase

Canada

NA

BLG

13/01/12

VBI-024CA

●Reinstate NPE late entry 13/07/14

United States

13/979,317

BLG

13/01/12

VBI-024US

●Pending – Preliminary Amendment filed

Europe

12733900.0

BLG

13/01/12

VBI-024EP

●Pending – Claim Amendments filed

China

201280008692.3

BLG

13/01/12

VBI-024CN

●Pending

Australia

2012205315

BLG

13/01/12

VBI-024AU

●Pending – 

Examination to be Requested 12/01/17

Brazil

1120130180749

BLG

13/01/12

VBI-024BR

●Pending –

Examination to be Requested 12/01/15

India

7053/DELNP/2013

BLG

13/01/12

VBI-024IN

●Pending –

Examination to be Requested 12/01/15

Mexico

MX/A/2013/008104

BLG

13/01/12

VBI-024MX

●Pending

Inventors:

David Evander Anderson and Anne-Catherine Fluckiger

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Treatment of Cytomegalovirus

Priority Date(s):

Nov 11, 2011 and July 1, 2012

VBI-025-1/ VBI-025-2

61/558,800 and 61/654,157

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US12/64556

PCT/IB12/002854

 

WO 13/068847

(publish 16/05/13)

Choate

(0086)

BLG

09/11/12

VBI-025PC

●Pending – NPE (31 months) & late entries

●30 month NPE Applications filed 10/05/14

●Assignment filed

Inventors:

David Evander Anderson

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Treating Viral Infections

Priority Date:

January 12, 2012

VBI-026-1

61/585,971

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US13/21277

PCT/IB13/000453

 

WO 13/104995

(publish 18/07/13)

Choate

(0091)

BLG

12/01/13

VBI-026PC

●Pending – NPE (30 months) due 11/07/14

●Assignment filed

  

 
 

--------------------------------------------------------------------------------

 

 

Inventors:

Marc Kirchmeier

Owner: Variation Biotechnologies Inc.

Patent Family:

Methods and Compositions for Therapeutic Agents

Priority Date:

January 27, 2012

VBI-027-1

61/591,837

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US13/23079

PCT/IB13/000454

 

WO 13/111012

(publish 01/08/13)

Choate

(0092)

BLG

25/01/13

VBI-027PC

●Pending – NPE (30 months) due 26/07/14

●Assignment filed

Inventors:

David Evander Anderson, Jasminka Bozic and Barthelemy Ontsouka

Owner: Variation Biotechnologies Inc.

Patent Family:

Methods for Detection of Anti-Cytomegalovirus Neutralizing Antibodies

Priority Date:

January 27, 2012

VBI-028-1

61/616,204

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US13/34157

PCT/IB13/001021

 

WO 13/144722

(publish 03/10/13)

Choate

(0093)

BLG

27/03/13

VBI-028PC

●Pending –NPE (30 months) due 26/09/14

●Assignment filed

Inventors:

David Evander Anderson, and David Klatzmann

Owner: Variation Biotechnologies Inc.

Patent Family:

Compositions and Methods for Inducing a CTL Response

Priority Date(s):

February 25, 2013 and March 21, 2013

VBI-029-1/ VBI-029-2

61/769,140 and 61/803,940

Country

Number

Agent

Filing Date

Reference No.

Status or Patent No.

PCT

PCT/US14/18277

PCT/IB14/000815

Choate(0099)

BLG

25/02/14

VBI-029PC

●Pending

●Assignment to be filed

  

 
 

--------------------------------------------------------------------------------

 

  

Inventors: 

David Klatzmann and Jean-Loup Salzmann

Assignee:

Universite Pierre et Marie Curies (Paris VI)

Licensee: Variation Biotechnologies Inc.

Patent Family:

Defective Viral Vaccine Particles Obtained in Vivo or Ex Vivo

(Particules Virales Defectives Vaccinales Obtenues in Vivo ou ex Vivo)

Filed in French

 

(Abstract – The present invention relates to a vaccine consisting of defective
viral particles as are obtained in vivo or ex vivo, in individuals infected or
capable of being infected with a virus, after expression of the genes carried by
a vector or a combination of vectors and comprising at least the structural
genes necessary for the constitution of the viral particle.)

Priority Date:

April 5, 1996

(FR 96/04370)

Country

Number

Agent

Filing Date Dd/mm/yr

Reference No.

Status or Patent No.

PCT

PCT/FR97/00619

 

WO 97/38118

(published 16/10/97)

Becker

B0014

07/04/97

P1-PC

●National Phase

United States

09/166,147

Becker

07/04/97

P1-US

●Issued; 6,140,114

Issue date 31/10/00; Earliest expected expiration date 07/04/17

Europe

EP 97 400796.5

Becker

07/04/97

P1-EP

●Issued; EP0799893B2

Issue date 12/09/01; Earliest expected expiration date 07/04/17

●Validated in France, Germany, Great Britain,Spain & Italy

Canada

2,251,027

Becker

07/04/97

P1-CA

●Issued; 2,251,027

Issue date 10/11/09; Earliest expected expiration date 07/04/17

Japan

JP 1997-535922

Becker

07/04/97

P1-JP

●Abandoned

  

 
 

--------------------------------------------------------------------------------

 

 

Inventors:

David Klatzmann, Jean-Loup Salzmann, Bertrand Bellier, Charlotte Frisen and
Francoise-Loic Cosset

Assignee:

Universite Pierre et Marie Curies (Paris VI)

Licensee: Variation Biotechnologies Inc.

Patent Family:

Synthetic Viruses and Uses Thereof

 

(Abstract – The present invention relates to compositions and methods for
producing an immune response or reaction, as well as to vaccines, kits,
processes, cells and uses thereof. This invention more particularly relates to
compositions and methods of using a synthetic viral particle to produce, modify
or regulate an immune response in a subject. In a more preferred embodiment, the
invention is based, generally, on compositions using synthetic viral particles
as an adjuvant and/or vehicle to raise immune response against selected
antigen(s) or epitopes, in particular a cellular and/or a humoral immune
response.

Priority Date:

October 26, 2000

(EP 00 402978.1)

Country

Number

Agent

Filing Date

Dd/mm/yr

Reference No.

Status or Patent No.

PCT

PCT/EP01/12356

 

WO 02/34893

(published 02/05/02)

Becker

B0047

25/10/01

P2-PC

●National Phase

United States

14/163,315

Continuation of

 

10/415,242

 

Choate

 

Becker

 

24/01/14

 

25/10/01

 

P2-US2

 

P2-US1

 

●Pending

 

●Issued; 8,673,612

Issue date 18/03/14; Earliest expected expiration date 25/10/21

Europe

10 183343.2

Divisional of

 

 

01 988766.0

Becker

30/09/10

 

 

 

25/10/01

P2-EP2

 

 

 

P2-EP1

●Pending – 1st & 2nd Office Action responses filed

 

●Notice to Grant;

15/10/13; Earliest expected expiration date 25/10/21

 

 
 

--------------------------------------------------------------------------------

 

  

Inventors:

Birke Bartosch and Francois-Loic Cosset

Assignee: 

Institut National de la Sante et de la Recherche Medicale (INSERM) 

Licensee: Variation Biotechnologies Inc.

Patent Family:

Infectious Hepacivirus Pseudo-Particles Containing Functional E1, E2 Envelope
Proteins

Priority Date(s):

Sept 13, 2002 & March 3, 2003

(EP 02292254.6) &

(EP 03290505.1)

Country

Number

Agent

Filing Date

Dd/mm/yr

Reference No.

Status or Patent No.

PCT

PCT/IB03/003882

 

WO 04/024904

(published 25/03/04)

Lavoix

12/09/03

P3-PC

●National Phase

United States

10/527,422

Lavoix

12/09/03

P3-US

●Pending – Response filed to RCE

Europe

03 795150.6

Lavoix

12/09/03

P3-EP

●Issued;

EP 1 537 206 B1

Issue date 06/05/09; Earliest expected expiration date 12/09/23

●Validated in France, Germany, Spain, Greece, Italy, Great Britain and Turkey

Canada

2,498,770

Lavoix

12/09/03

P3-CA

●Pending – 3rd Office Action response filed

Japan

JP 2004-571924

Lavoix

12/09/03

P3-JP

●Issued; 4634152

Issue date 26/11/10; Earliest expected expiration date 12/09/23

  

 
 

--------------------------------------------------------------------------------

 

  

Schedule 6.15(b) VBI Trademark Summary

(May 27th, 2014)

 

Variation Owned Trademark Applications

Trademark Family:

Variosite™ 

Priority Date:

August 11, 2010

Country

Number

Agent

Filing Date/

Registration Date

(Dd/mm/yr)

Reference No.

Status

Canada

S.N. 1,491,977

BLG

11/08/2010

(Filing date)

TM 102449-1 CA

Pending

US

S.N. 76/440,352

BLG

11/02/2002 (Priority filing date)

 

09/08/2002

(Filing date)

TM 54051-2 US

Pending

Mexico

S.N. 1,027,921 (Class 5)

 

R.N. 1120583

BLG

19/08/2009

(Filing date)

 

11/09/2009

(Registration Date)

TM 100380C5-21

Registered

Mexico

S.N. 1,027,927 (Class 42)

 

R.N. 1120585

BLG

19/08/2009

(Filing date)

 

11/09/2009

(Registration Date)

TM 100380C42-21

Registered

EU

S.N. 2,823,367

 

R.N. 2,823,367

BLG

09/08/2002

(Filing date)

 

12/03/2004

(Registration Date)

TM 54051-81

Registered

Trademark Family:

Lipid Particle Vaccine™ 

Priority Date:

May 20, 2011

Country

Number

Agent

Filing Date

Dd/mm/yr

Reference No.

Status

Canada

S.N. 1,528,640

BLG

20/05/2011

TM 103841-1 CA

●Pending

Trademark Family:

LPV™

Priority Date:

May 20, 2011

Country

Number

Agent

Filing Date

Dd/mm/yr

Reference No.

Status

Canada

S.N. 1,528,635

BLG

20/05/2011

TM 103842-1 CA

●Pending

  

 
 

--------------------------------------------------------------------------------

 

  

SCHEDULE 6.16

 

Agreements, Actions

 

  Material Agreements of Borrower       See Attachment Schedule 6.16 for list of
agreements and contracts of the Borrower.    

●

Signed a contribution agreement for CAD $499,000 on July 18, 2013 with the
National Research Council under their Industrial Research Assistance program.

 

●

Amendments to the letter agreements with Middlebury Securities, LLC
(“Middlebury”) and Evolution Venture Partners (“Evolution”) :

 

o

Initial Term extended from September 30, 2013 to December 31, 2013.

 

o

For the balance of the Initial Term, being June 1, 2013 to December 31, 2013, an
additional US $50,000 payable upon the successful completion of a transaction
(instead of $15,000 per month).

 

o

Both agreements were terminated on May 30, 2014

 

o

Success fees payable and shares to be issued under these agreements are
summarized below:

 

Broker / Agent

Fees

Shares / Warrants

Middlebury

Success fees based on 6% of funds sourced which are expected to be:

●$300,000 being 6% of the $5,000,000 equity investment by Perceptive Advisors,
LLC or 6% of any lesser total amount invested by Perceptive in the Private
Placement; and

●Upon the initial drawdown of $3,000,000 in Venture Debt from Perceptive, 6% of
such initial drawdown ($180,000)

●600,000 common shares of Parent shall be issuable to Middlebury and 2,400,000
common shares of Parent to Evolution post-Merger and Private Placement (see
below)

Palladium

Success fees based on 7% of funds sourced which are expected to be:

●$35,000 being 7% of the $500,000 they sourced for the March 10, 2014
convertible notes financing (already paid); and,

●$367,500 being 7% of the $5,250,000 unencumbered cash and cash equivalents
owned by Parent at the time of the Merger (net of any unpaid payables or debt of
Parent at the time of the Merger)

●1,708,657 common shares of Parent, representing 1.27% of the total common
shares of Parent post-Merger and Private Placement

  

 
 

--------------------------------------------------------------------------------

 

 

Evolution

●A financial advisory and consulting fees and deferred retainers of $570,000

●2,400,000 shares shall be issuable to Evolution, upon the concurrent closings
of the Paulson Merger and the Paulson Private Placement, in each case subject to
the lock-up agreements described in Section 4(g) of the Middlebury Letter
Agreement Amendment #2

 

 

●

On December 12, 2013 Borrower a signed term sheet with Bezalel Partners, LLC
(“Bezalel”) for the “Proposed Acquisition of and Equity Investment in Variation
Biotechnologies (US), Inc.” Related to this term sheet, Borrower signed a
Nondisclosure and Noncircumvent Agreement with Bezalel on December 18, 2013. The
term sheet has been superseded but the Letter of Intent signed with Paulson
Capital Corp. as described below.

   

●

On March 7, 2014, Borrower signed an agreement with PALLADIUM CAPITAL ADVISORS,
LLC (“Palladium”) whereby Palladium agreed to act its non-exclusive agent to
arrange bridge financing prior to the Merger.

     

Borrower agreed to pay Palladium, upon the closing of the Bridge with Investors
introduced by Palladium 7% of the aggregate consideration raised in each Closing
from such Investors introduced by Palladium. In respect of the Bridge consisting
of the sale of senior secured convertible promissory notes of Borrower,
Palladium acknowledges that the only Investors introduced by Palladium are
Hudson Bay Capital and DKR Ventures, which combined are purchased $500,000 in
aggregate principle amount of such Bridge notes, therefore requiring Borrower to
pay Palladium a total of $35,000 at the Closing of the sale thereof.

      In addition, if a Merger with a Pubco introduced by Palladium to Borrower
during the Term is consummated during the one year term of the agreement, or if
Borrower enters into a definitive agreement with a Pubco introduced by Palladium
that subsequently results in a Merger, Borrower agreed to pay Palladium the
following compensation: (i) 7% of the unencumbered cash and cash equivalents
owned by Pubco at the time of the Merger (net of any unpaid payables or debt of
the Pubco at the time of the Merger), and (ii) the number of shares of common
stock of Pubco immediately after the Merger that represents 1.27% of the
surviving post-Merger entity on a fully diluted basis.    

●

On March 10, 2014, Borrower signed an agreement with Bezalel Partners, LLC
(“Bezalel”) whereby Bezalel agreed provide consulting services to the Surviving
Company after the Merger. Upon the consummation of the Merger, Bezalel shall
receive an award of 5,342,510 shares of Pubco’s common stock (subject to
proportionate adjustment for forward or reverse stock splits) (the “Awarded
Shares”). The Awarded Shares shall be one hundred percent (100%) vested on the
date of issuance and deemed to have been fully earned on such date. The Awarded
Shares, together with any related expense reimbursement are the sole
compensation payable to Bezalel with respect to its performance of the
consulting services.

 

  

 
 

--------------------------------------------------------------------------------

 

 

●

On May 8, 2014, Borrower signed an Agreement and Plan of Merger with Paulson
Capital (Delaware) Corp. a NASDAQ listed public company (“Holdco”) whereby the
Company merged with a subsidiary of Holdco (the “Merger”). On closing, the
shareholders of the Borrower will be issued 42,772,713 of Holdco common shares,
representing 71% of the PubCo voting shares immediately post-merger. The Merger
also contemplates closing an additional $11 million of private equity financing
(the “PIPE”) contemporaneously with the merger and a $6 million of venture debt
financing.

 

 

Material Agreements of Holdco

 

 

●

Subscription Agreement, dated as of January 29, 2014, by and among Parent and
the subscribers party thereto, relating to the sale of $250,000 in aggregate
amount of Parent Common Stock, at a price of $0.50 per share.

 

●

Agreements with Broadridge Corporate Issuer Solutions with respect to transfer
agent and warrant agent services.

 

●

Insurance arrangements as described on Schedule 4.18, which is incorporated by
reference herein.

 

●

Agreement with Donohoe Advisory Associates LLC, related to advice in connection
with NASDAQ matters.

 

●

Engagement letter with Grant Thornton, related to tax services.

 

●

Agreement with Holland & Knight LLP, related to legal representation.

 

●

Agreement with Nasdaq related to the listing of Parent shares.

 

●

Engagement letter with Peterson Sullivan, related to accounting services.

 

●

Agreement with Sichenzia Ross Friedman Ference LLP, relate to escrow services
and the payment of certain legal fees.

  

 
 

--------------------------------------------------------------------------------

 

 

Variation Biotechnologies (US), Inc.

 

Disclosure Schedule Section 6.16 – Agreements Summary

 

**1

 

 

 

 

 

--------------------------------------------------------------------------------

 

1 Information omitted pursuant to a Confidential Treatment Request filed with
the SEC on February 25, 2016. 
 

--------------------------------------------------------------------------------

 

 

SCHEDULE 6.19

 

Transactions with Affiliates 

 

   

VBI (US)

(Borrower)

 

VBI Cda

(Canadian Subsidiary)

 

ePixis SA

   

2013

2012

2011

 

2013

2012

2011

 

2013

2012

2011

                         

1) Intercompany transactions between VBI Subsidiary & Borrower

                       

Relationship: Intercompany management agreement between companies which covers
transfer pricing charges for services rendered (PDF document 4.25 available for
review)

                       

Fees charged – based on intercompany entries for services rendered (eliminated
on consolidation)

Yes

Yes

Yes

 

Yes

Yes

Yes

 

N/A

N/A

N/A

                         

2) Intercompany transactions between VBI Subsidiary & ePixis SA

                       

Relationship: Canadian Subsidiary is the parent company of ePixis SA (a French
company); prior to acquisition ePixis SA had a research collaboration MOU
agreement with Canadian Subsidiary

                       

a) R&D fees paid to ePixis SA (as per related MOU and amendments listed in
Schedule 16.6)

N/A

N/A

N/A

 

No

No

Yes

 

N/A

N/A

N/A

                           

b) Short-term loan(s)

N/A

N/A

N/A

 

Yes

Yes

No

 

N/A

N/A

N/A

 

- 1,500 Euro loan in 2013

                       

- 20,000 Euro loan in 2013

                       

Principal & interest now fully repaid

                       

c) Incurred ePixis SA related professional fees

N/A

N/A

N/A

 

Yes

Yes

Yes

 

N/A

N/A

N/A

                         

 

 
 

--------------------------------------------------------------------------------

 

 

 

SCHEDULE 6.23

 

Deposit and Disbursement Accounts

 

 

Name of bank or other financial

institution

Name of Account

Holder

Account

number

 

Type of Account

Silicon Valley Bank

3003 Tasman Drive, Santa Clara, CA 95054

888-782-4140

Variation Biotechnologies (US), Inc. (“Borrower’)

###

Main operating account for Borrower

Caisse Desjardins

655, boulevard Saint-René Ouest

Gatineau, Québec

J8T 8M4

819-568-5368

Variation Biotechnologies (US), Inc. (“Borrower’)

###

USD account for Borrower in Canada

Caisse Desjardins

655, boulevard Saint-René Ouest

Gatineau, Québec

J8T 8M4

819-568-5368

Variation Biotechnologies Inc. (“VBI Subsidiary”)

###

CAD and USD account for R&D operations in Canada

Capital Advisors Group

29 Crafts Street Newton, MA 02458

617-630-8100

Variation Biotechnologies (US), Inc. (“Borrower’)

###

Investment account

State Street

PO Box 710

South Windsor, CT

06074-0710

800-392-9244

Variation Biotechnologies (US), Inc. (“Borrower’)

###

Safekeeping investment account (custodian)

Silicon Valley Bank

3003 Tasman Drive, Santa Clara, CA 95054

888-782-4140

VBIV Vaccines Inc.

NEW bank account to be opened concurrent with Merger

USD Operating account

  

 
 

--------------------------------------------------------------------------------

 

  

SCHEDULE 6.24

 

Registration Rights

 

Capitalized terms not defined herein shall be as defined in the Merger
Agreement.

 

(a)     The Merger Agreement provides demand registration rights to the
Pre-Merger Company Sharesholders holding at least twenty-five percent (25%) of
shares of Parent Common Stock held by all Pre-Merger Company Shareholders
immediately after the Merger, including any shares of Parent Common Stock issued
in the Merger, issued in the Private Placement and/or issuable upon exercise or
conversion of any options, warrants or convertible securities held by such
Pre-Merger Company Shareholders immediately after the Merger or issued in the
Private Placement (the “Required Registration Holders”), Parent shall, as soon
as practicable and in any event within thirty (30) days after Parent’s receipt
of the Registration Request, file with the SEC, and thereafter use its
commercially reasonable efforts to have declared effective as soon as
practicable and in any event within ninety (90) days after the initial filing
thereof with the SEC, a registration statement on Form S-3 (or if Parent is not
eligible to use Form S-3, any other form that Parent is eligible to use) (a “S-3
Registration Statement”) under the Securities Act covering the resale by all
Pre-Merger Company Shareholders (collectively, the “Registration Holders”) of
such shares of Parent Common Stock (the “Registrable Shares”). In its
discretion, Parent will be permitted to register any other shares for resale by
other eligible selling stockholders using the S-3 Registration Statement and
other shares on its own behalf on the S-3 Registration Statement. Parent shall
use commercially reasonable efforts to keep the S-3 Registration Statement
continuously effective and usable for the resale of the Registrable Shares
covered thereby for a period commencing on the date on which the SEC declares
the S-3 Registration Statement effective or it otherwise becomes automatically
effective and ending on the earlier of (i) the date upon which all of the
Registrable Shares first become eligible for resale under the Securities Act
without restriction or (ii) the first date upon which all of the Registrable
Shares covered by the S-3 Registration Statement have been sold pursuant to such
S-3 Registration Statement or otherwise. The Registration Holders agree to
cooperate with and provide such assistance to Parent, as Parent may reasonably
request, in connection with any registration and sale of the Registrable Shares,
including without limitation, accurately completing and executing selling
shareholder questionnaires prior to the filing of any S-3 Registration
Statement. 

 

(b)     The agreements entered into by Parent in connection with the
transactions contemplated by the October 2013 Proxy Statement contain certain
provisions with respect to the voting rights of the shares of Parent Capital
Stock, the registration of shares of Parent Capital Stock, participation rights
with respect to Parent Capital Stock, and anti-dilution rights with respect to
Parent Capital Stock. Those agreements, which are attached as exhibits to
Parent's Form 8/K filed with the SEC on August 30, 2013, include (A) the
Subscription Agreement, (B) the Class A Warrant, (C) the Class B Warrants, and
(D) the Interest Preservation Letter Agreement. 

 

(c)     DKR and Hudson Bay were granted certain registration rights pursuant to
the Hudson Bay Financing Documents (as defined in the Merger Agreement).      

 

 
 

--------------------------------------------------------------------------------

 

 

SCHEDULE 6.25

 

Royalty and Other Payments    

 

1.    Inbound Intellectual Property Contracts that include royalties or other
payments:        

●

NRC License Agreement for HEK 293 proprietary manufacturing cell line for eVLPs

          Borrower acquired a non-exclusive license to the National Research
Council’s (“NRC”) 293SF-3F6 cell line for use in vaccine manufacturing.   Under
the terms of the agreement, NRC is entitled to, and Borrower is obligated to pay
milestone payments on successful advancement of a product using the cell line in
clinical development.  The milestone payments total up to $155,000, excluding a
commercial annual fee of $10,000 once a product is approved.

 

 

●

Epixis S.A. UPMC/INSERM License Agreements for eVLP base patents (see Schedule
6.15(a) – patent families P1, P2 and P3)

  

  On July 18, 2011, VBI entered into a Sale and Purchase Agreement where it is
obligated to make the following milestone payments:    

●

EUR 101,720 upon successful technology transfer to a contract manufacturing
organization;

 

●

EUR 500,000 to EUR 1,000,000 upon first approval by the United States Food and
Drug Administration;

 

●

EUR 750,000 to EUR 1,500,000 upon reaching Cumulative Net Sales of EUR
25,000,000, in the case of a sublicense the payments, are reduced by 50%;

 

●

EUR 1,000,000 to EUR 2,000,000 upon reaching Cumulative Net Sales of EUR
50,000,000 , in the case of a sublicense, the payments are reduced by 50%; and

 

●

in the case of a sublicense only, EUR 500,000 to EUR 1,000,000 upon reaching
Cumulative Net Sales of EUR 75,000,000 and EUR 100,000,000

  

The events obliging VBI to make these payments have not yet occurred and the
probability of them occurring is not determinable; consequently, no amounts are
accrued in respect of these contingencies.

 

2.     The Consulting Agreement with Dr. David Klatzman dated January 17, 2013
includes the following provisions in Appendix II to the agreement:

 

“EQUITY

 

Upon execution of this Agreement, subject to VBI Board Approval, the Consultant
shall be entitled to a grant of $100K in equity of VBI as determined by the
price of the Series B financing. For greater clarity, the shares will be issued
coincident with the Series B financing.

 

RISK ADJUSTED PERFORMANCE BONUSES

 

To provide incentive to the Consultant for the successful development of the HCV
vaccine, the Company will provide incentive based pay for each of the following
events (the “Milestones”):

 

 

●

For each new eVLP vaccine patent filed (in which Consultant is an inventor AND
which does not include other inventors/rights other than those already secured
owned by VBI)

 

●

FDA or EMEA approval to begin clinical testing of an eVLP based HCV vaccine

 

●

Start of Ph II of an eVLP based HCV vaccine

  

 
 

--------------------------------------------------------------------------------

 

 

 

●

Start of Ph III of an eVLP based HCV vaccine

 

●

Approval of an eVLP based HCV vaccine product

 

●

Cumulative sales of $100M for an eVLP based HCV vaccine product

 

Event/Compensation

Each

New

Patent

 

FDA/EMEA

IND/CTA

Approval

Start of

Ph II

Start

of Ph

III

Approval

of HCV

Vaccine

Cumulative

Sales of

$100M

Compensation Due

on Milestone

$10K

$40K

$50K

$75K

$125K

$125K

Implied Present

Value

$8.9K

$35.7K

$12.6K

$3.7K

$5.7K

$5.7K

 

 

The above chart describes the Compensation Due on Milestone to the Consultant on
successful achievement of each event. Note that Implied Present Values are also
included as they provide an estimate of the current value of the compensation
once risk and time-value of money are considered. These values were calculated
using industry standard risk-adjustment of potential future revenues in relation
to the time and development risk involved in developing a potential HCV
vaccine.”

 

With respect to the equity commitment noted above, management is exploring
possible alternative equity grants that are mutually acceptable and will be
submitted to the post-merger board of directors for approval.

 

3.     The Consulting Agreement Dr. Charlotte Fribert dated January 28, 2013
includes the following provisions:

 

“EQUITY

Upon execution of this Agreement, subject to VBI Board Approval, the Consultant
shall be entitled to a grant of $100K in equity of VBI as determined by the
price of the Series B financing.

 

PERFORMANCE BONUSES

To provide incentive to the Consultant for the successful development of the HCV
vaccine, the Company will provide incentive based pay for each of the following:

 

●

$10K for each new eVLP vaccine patent filed (in which Consultant is an inventor
AND which does not include other inventors/rights other than those already
secured owned by VBI)

●

$40K on FDA or EMEA approval to begin clinical testing of an eVLP based HCV
vaccine

●

$50K on start of Ph II of an eVLP based HCV vaccine

●

$75K on start of Ph III of an eVLP based HCV vaccine

●

$125K on approval of an eVLP based HCV vaccine product

●

$125K on cumulative sales of $100M for an eVLP based HCV vaccine product”

 

With respect to the equity commitment noted above, management is exploring
possible alternative equity grants that are mutually acceptable and will be
submitted to the post-merger board of directors for approval.

 

 
 

--------------------------------------------------------------------------------

 

  

SCHEDULE 8.2(b)

 

Existing Indebtedness

 

None, other than convertible notes and trade payables.

 

See Schedule 5.1.19 – VBI Convertible Notes.

 

 
 

--------------------------------------------------------------------------------

 

  

SCHEDULE 8.3(b)

 

Existing Liens

 

●

As part of the Credit Facility and Guaranty Agreement, the lender will be
placing a lien on VBI Subsidiary’s intellectual property.

 

 
 

--------------------------------------------------------------------------------

 

  

SCHEDULE 8.5(a)

 

Investments

 

 

None, other than investment in respective subsidiaries of Holdco and Borrower.

 

 
 

--------------------------------------------------------------------------------

 

  

SCHEDULE 11.02

 

Notice Information

 

If to VBI Vaccines Inc. or Variation Biotechnologies (US), Inc.:

 

222 Third Street, Suite 2241
Cambridge, MA 02142
Attn: Jeff Baxter

eFacsimile: 888-391-2579

Email: jbaxter@vbivaccines.com

 

With a copy to:

 

Richardson & Patel LLP
1100 Glendon Avenue, Suite 850
Los Angeles, California 90024

Attn: Kevin Friedmann, Esq.

Facsimile: 310-208-1154

Email: kfriedmann@richardsonpatel.com

 

If to Perceptive Advisors LLC:

 

499 Park Avenue, 25th Floor

New York, New York 10022

Attention: Sandeep Dixit

E-mail: sandeep@perceptivelife.com

Fax: 646-205-5301

 

 
 

--------------------------------------------------------------------------------

 

  

EXHIBIT A-1

 

FORM OF INITIAL TERM NOTE

 

 

$3,000,000  

July 25, 2014,

                                              

FOR VALUE RECEIVED, VARIATION BIOTECHNOLOGIES (US), INC., a Delaware corporation
(the “Borrower”), promises to pay to PCOF 1, LLC (together with any of its
successors, transferees and assignees, the “Lender”) on the Maturity Date (as
such date may be accelerated pursuant to the Credit Agreement, defined below)
the principal sum of $THREE MILLION DOLLARS ($3,000,000) or, if less, the
aggregate unpaid principal amount of the Initial Loan shown on the schedule
attached hereto (and any continuation thereof) made by the Lender pursuant to
the Credit Agreement and Guaranty, dated as of July 25, 2014] (as amended or
otherwise modified from time to time, the “Credit Agreement”), by and among the
Borrower, each Guarantor party thereto and the Lender. Unless otherwise defined,
capitalized terms used herein have the meanings provided in the Credit
Agreement.

 

The Borrower also promises to pay interest on the unpaid principal amount hereof
from time to time outstanding from the date hereof until maturity (whether by
acceleration or otherwise) and, after maturity upon demand, until paid in full,
at the rates per annum and on the dates specified in the Credit Agreement, as
well as any other amounts that may be due to the Lender upon maturity (whether
by acceleration or otherwise) under or in respect of this Initial Term Note.

 

Payments of both principal and interest are to be made in Dollars in same day or
immediately available funds to the account designated by the Lender pursuant to
the Credit Agreement.

 

The Borrower hereby irrevocably authorizes the Lender to make (or cause to be
made) appropriate notations on the grid attached to this Initial Term Note (or
on any continuation of such grid), which notations, if made, shall evidence,
inter alia the date of, the outstanding principal amount of, and the interest
rate and Interest Period applicable to the Initial Loan evidenced hereby. Such
notations shall, to the extent not inconsistent with notations made by the
Lender in the Register, be conclusive and binding on the Borrower absent
manifest error; provided, that the failure of the Lender to make any such
notations shall not limit or otherwise affect any Obligations of the Borrower or
any Guarantors.

 

This Initial Term Note is one of the Notes referred to in, and evidences
Indebtedness incurred under, the Credit Agreement, to which reference is made
for a description of the security for this Initial Term Note and for a statement
of the terms and conditions on which the Borrower is permitted and required to
make prepayments and repayments of the unpaid principal amount of the
Indebtedness evidenced by this Initial Term Note and on which such Indebtedness
may be declared to be immediately due and payable. Any prepaid principal of this
Initial Term Note may not be reborrowed.

 

All parties hereto, whether as makers, endorsers or otherwise, severally waive
presentment for payment, demand, protest and notice of dishonor.

 

 
 

--------------------------------------------------------------------------------

 

  

THIS INITIAL TERM NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

 

 

VARIATION BIOTECHNOLOGIES (US), INC.

 

By:

   

Name:

Title:

 

 
A-2

--------------------------------------------------------------------------------

 

 

INITIAL LOAN AND PRINCIPAL PAYMENTS

 

Date

Amount of Initial

Loan Made

Interest Period

Amount of

Principal

Repaid

Unpaid Principal

Balance

Total

Notation Made

By

LIBO Rate

LIBO Rate

LIBO Rate

                                                                               
                                             

 

 
 

--------------------------------------------------------------------------------

 

 

EXHIBIT A-2

 

FORM OF DELAYED DRAW NOTE

 

 

$[_______] 

[DATE]

     

FOR VALUE RECEIVED, VARIATION BIOTECHNOLOGIES (US), INC., a Delaware corporation
(the “Borrower”), promises to pay to PCOF 1, LLC (together with any of its
successors, transferees and assignees, the “Lender”) on the Maturity Date (as
such date may be accelerated pursuant to the Credit Agreement, defined below)
the principal sum of [_______] [($_______)] or, if less, the aggregate unpaid
principal amount of the Delayed Draw Loan shown on the schedule attached hereto
(and any continuation thereof) made by the Lender pursuant to the Credit
Agreement and Guaranty, dated as of July 25, 2014 (as amended or otherwise
modified from time to time, the “Credit Agreement”), by and among the Borrower,
each Guarantor party thereto and the Lender. Unless otherwise defined,
capitalized terms used herein have the meanings provided in the Credit
Agreement.

 

The Borrower also promises to pay interest on the unpaid principal amount hereof
from time to time outstanding from the date hereof until maturity (whether by
acceleration or otherwise) and, after maturity upon demand, until paid in full,
at the rates per annum and on the dates specified in the Credit Agreement, as
well as any other amounts that may be due to the Lender upon maturity (whether
by acceleration or otherwise) under or in respect of this Delayed Draw Note.

 

Payments of both principal and interest are to be made in Dollars in same day or
immediately available funds to the account designated by the Lender pursuant to
the Credit Agreement.

 

The Borrower hereby irrevocably authorizes the Lender to make (or cause to be
made) appropriate notations on the grid attached to this Delayed Draw Note (or
on any continuation of such grid), which notations, if made, shall evidence,
inter alia the date of, the outstanding principal amount of, and the interest
rate and Interest Period applicable to the Delayed Draw Loan evidenced hereby.
Such notations shall, to the extent not inconsistent with notations made by the
Lender in the Register, be conclusive and binding on the Borrower absent
manifest error; provided, that the failure of the Lender to make any such
notations shall not limit or otherwise affect any Obligations of the Borrower or
any Guarantors.

 

This Delayed Draw Note is one of the Notes referred to in, and evidences
Indebtedness incurred under, the Credit Agreement, to which reference is made
for a description of the security for this Delayed Draw Note and for a statement
of the terms and conditions on which the Borrower is permitted and required to
make prepayments and repayments of the unpaid principal amount of the
Indebtedness evidenced by this Delayed Draw Note and on which such Indebtedness
may be declared to be immediately due and payable. Any prepaid principal of this
Delayed Draw Note may not be reborrowed.

 

All parties hereto, whether as makers, endorsers or otherwise, severally waive
presentment for payment, demand, protest and notice of dishonor.

 

 
 

--------------------------------------------------------------------------------

 

 

 

THIS DELAYED DRAW NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

 

 

VARIATION BIOTECHNOLOGIES (US), INC.

 

By:

   

Name:

Title:

 

 
A-2

--------------------------------------------------------------------------------

 

 

DELAYED DRAW LOAN AND PRINCIPAL PAYMENTS

 

Date

Amount of

Delayed Draw

Loan Made

Interest Period

Amount of

Principal Repaid

Unpaid Principal

Balance

Total

Notation

Made By

LIBO Rate

LIBO Rate

LIBO Rate

                                                                               
                                             

  

 
 

--------------------------------------------------------------------------------

 

  

EXHIBIT B

 

FORM OF LOAN REQUEST

 

  Date: [•]    

To:

PCOF 1, LLC, as Lender under the Credit Agreement (as defined below).

   

Re:

Credit Agreement and Guaranty, dated as of July 25, 2014 (as amended or
otherwise modified from time to time, the “Credit Agreement”) by and among
VARIATION BIOTECHNOLOGIES (US), INC., a Delaware corporation, each Guarantor
party thereto and PCOF 1, LLC. Capitalized terms used herein and not otherwise
defined shall have the meanings provided in the Credit Agreement.

  

Ladies and Gentlemen:

 

The undersigned hereby requests a borrowing of (select one):

 

☐ the Initial Loan

☐ the Delayed Draw Loan

   

 

1.

Date of borrowing: [●] (a Business Day)

 

 

2.

Principal Amount: $[●]

 

With respect to any borrowing requested hereby, the undersigned Borrower hereby
represents and warrants that (i) such request complies with the requirements of
Sections 2.1 and 2.2 of the Credit Agreement, as applicable, (ii) all
representations and warranties set forth in each Loan Document are true and
correct and (iii) no Default or Event of Default shall exist, or would result
from such proposed Loan.

 

VARIATION BIOTECHNOLOGIES (US), INC., a Delaware corporation

 

 

By:

 

Name:

Title:

 

 

 
[Signature Page to Loan Request] 

--------------------------------------------------------------------------------

 

  

EXHIBIT C

 

FORM OF COMPLIANCE CERTIFICATE
VARIATION BIOTECHNOLOGIES (US), INC.

COMPUTATION DATE: _______ __, 201_

 

This Compliance Certificate (this “Compliance Certificate”) is delivered
pursuant to [Section 5.1.5] [Section 5.2.5] [clause (c) of Section 7.1] of the
Credit Agreement and Guaranty, dated as of July 25, 2014 (as amended or
otherwise modified from time to time, the “Credit Agreement”), by and among
VARIATION BIOTECHNOLOGIES (US), INC., a Delaware corporation (the “Borrower”),
each Guarantor party thereto and PCOF 1, LLC (together with its Affiliates,
successors, transferees and assignees, the “Lender”). Unless otherwise defined
herein or the context otherwise requires, terms used herein have the meanings
provided in the Credit Agreement.

 

The undersigned are duly authorized to execute and deliver this Compliance
Certificate on behalf of each of the Borrower and Holdco. By executing this
Compliance Certificate the Borrower and Holdco hereby certify to the Lender on
behalf of the Loan Parties as follows:

 

(a)     The financial statements delivered pursuant to Section 5.1.4 or, if
later, pursuant to clause (a) or (b) of Section 7.1 of the Credit Agreement have
been prepared in accordance with GAAP consistently applied, and fairly present
the financial condition of the Loan Parties as of the dates thereof and the
related results of their operations for the periods then ended (subject to the
absence of footnotes and to normal year-end adjustments in the case of unaudited
financial statements).

 

(b)     All other information presented in connection with this Compliance
Certificate (including the Attachments hereto) is correct and complete in all
material respects.

 

(c)     Borrower has maintained at all times a minimum balance of $1,000,000 of
cash in one or more Controlled Accounts that is free and clear of all Liens,
other than Liens granted hereunder in favor of the Lender. As a result, the
minimum liquidity requirement pursuant to Section 7.19 of the Credit Agreement
[has been][has not been] satisfied.     

 

(d)     No Default or Event of Default has occurred and is continuing[, except
as set forth on Attachment 4 hereto, which includes a description of the nature
and period of existence of such Default or Event of Default and what action the
Borrower has taken, is taking and proposes to take with respect thereto.]

 

(e)     Except as set forth on Attachment 5 hereto, subsequent to the date of
the most recent Compliance Certificate submitted by the undersigned pursuant to
clause (c) of Section 7.1 of the Credit Agreement no Subsidiary has been formed
or acquired or, if a Subsidiary has been formed or acquired since the delivery
of the last Compliance Certificate, such Subsidiary has, to the extent required,
complied with Section 7.8 of the Credit Agreement).

 

IN WITNESS WHEREOF, each undersigned has caused this Compliance Certificate to
be executed and delivered, and the certification and warranties contained herein
to be made, by its chief financial or accounting Authorized Officer as of the
date first above written.

 

 
 

--------------------------------------------------------------------------------

 

  

VARIATION BIOTECHNOLOGIES (US), INC.

 

 

By:

 

Name:

Title:

 

 

 

[HOLDCO]

 

 

By:

 

Name:

Title:

 

 
C-2

--------------------------------------------------------------------------------

 

 

EXHIBIT D

 

FORM OF PLEDGE AND SECURITY AGREEMENT

 

This PLEDGE AND SECURITY AGREEMENT, dated as of July 25, 2014 (as amended or
otherwise modified from time to time, this “Security Agreement”), is made by and
among Variation Biotechnologies (US), Inc., a Delaware corporation (the
“Borrower”) and the Guarantors party to the Credit Agreement (defined below);
(the Borrower, the Guarantors and any Subsidiary that becomes a party to this
Security Agreement are herein referred to as the “Grantors”) (terms used in the
preamble and the recitals have the definitions set forth in or incorporated by
reference in Article I), in favor of PCOF 1, LLC (together with its successors,
transferees or assignees, the “Secured Party”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to a Credit Agreement and Guaranty, dated as of July 25, 2014,
(as amended or otherwise modified from time to time, the “Credit Agreement”), by
and among the Borrower, each Guarantor party thereto and the Secured Party, the
Secured Party has extended Commitments to make Loans to the Borrower; and

 

WHEREAS, as a condition precedent to the making of Loans under the Credit
Agreement, the Grantors are required to execute and deliver this Security
Agreement;

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, each Grantor agrees, for the benefit of the
Secured Party, as follows:

 

ARTICLE I
DEFINITIONS

 

Certain Terms. The following terms (whether or not underscored) when used in
this Security Agreement, including its preamble and recitals, shall have the
following meanings (such definitions to be equally applicable to the singular
and plural forms thereof):

 

“Borrower” is defined in the preamble.

 

“Collateral” is defined in Section 2.1.

 

“Collateral Account” is defined in clause (b) of Section 4.3.

 

“Computer Hardware and Software Collateral” means:

 

all computer and other electronic data processing hardware, integrated computer
systems, central processing units, memory units, display terminals, printers,
features, computer elements, card readers, tape drives, hard and soft disk
drives, cables, electrical supply hardware, generators, power equalizers,
accessories and all peripheral devices and other related computer hardware,
including all operating system software, utilities and application programs in
whatsoever form;

 

 
 

--------------------------------------------------------------------------------

 

  

all software programs (including both source code, object code and all related
applications and data files), designed for use on the computers and electronic
data processing hardware described in clause (a) above;

 

all firmware associated therewith;

 

all documentation (including flow charts, logic diagrams, manuals, guides,
specifications, training materials, charts and pseudo codes) with respect to
such hardware, software and firmware described in the preceding clauses (a)
through (c);and

 

all rights with respect to all of the foregoing, including copyrights, licenses,
options, warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal rights and
indemnifications and any substitutions, replacements, improvements, error
corrections, updates, additions or model conversions of any of the foregoing.

 

“Control Agreement” means an authenticated record in form and substance
reasonably satisfactory to the Secured Party, that provides for the Secured
Party to have “control” (as defined in the UCC) over the Controlled Accounts.

 

“Copyright Collateral” means all copyrights of any Grantor, whether statutory or
common law, registered or unregistered and whether published or unpublished, now
or hereafter in force throughout the world including all of such Grantor’s
right, title and interest in and to all copyrights registered in the United
States Copyright Office or anywhere else in the world and also including the
copyrights referred to in Item A of Schedule V, and registrations and recordings
thereof and all applications for registration thereof, all copyright licenses,
including each copyright license referred to in Item B of Schedule V, the right
to sue for past, present and future infringements of any of the foregoing, all
rights corresponding thereto, all extensions and renewals of any thereof and all
Proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and Proceeds of suit.

 

“Credit Agreement” is defined in the first recital.

 

“Distributions” means all dividends or other distributions paid on Capital
Securities, including in connection with (or in connection with the exercise of)
stock splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Capital Securities.

 

“Excluded Collateral” is defined in Section 2.1.

 

“Filing Statements” is defined in clause (b) of Section 3.7.

 

“General Intangibles” means all “general intangibles” and all “payment
intangibles”, each as defined in the UCC.

 

“Grantor” is defined in the preamble.

 

“Guarantor” means, collectively, Holdco and each of its Subsidiaries (other than
the Borrower).

 

 
E-2

--------------------------------------------------------------------------------

 

  

“Intellectual Property Collateral” means, collectively, the Computer Hardware
and Software Collateral, the Copyright Collateral, the Patent Collateral, the
Trademark Collateral and the Trade Secrets Collateral.

 

“Patent Collateral” means:

 

(a)     Inventions, invention disclosures and discoveries, whether patentable or
not, all letters patent and applications for letters patent throughout the
world, including provisional, design and utility patents each patent and patent
application referred to in Item A of Schedule III;

 

(b)     all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
clause (a);

 

all patent licenses, and other agreements providing any Grantor with the right
to use any items of the type referred to in clauses (a) and (b) above, including
each patent license referred to in Item B of Schedule III; and

 

all Proceeds of, and rights associated with, the foregoing (including licenses,
royalties and Proceeds of infringement suits), the right to sue third parties
for past, present or future infringements of any patent or patent application,
and for breach or enforcement of any patent license.

 

“Permitted Liens” means all Liens permitted by Section 8.3 of the Credit
Agreement.

 

“PIC” has the meaning defined in the Credit Agreement.

 

“Secured Party” is defined in the preamble.

 

“Securities Act” is defined in clause (a) of Section 6.2.

 

“Security Agreement” is defined in the preamble.

 

“Termination Date” has the meaning defined in the Credit Agreement.

 

“Trademark Collateral” means:

 

(a)     (i)     all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos and other source or business
identifiers, and all goodwill of the business associated therewith, now existing
or hereafter adopted or acquired including those referred to in Item A of
Schedule IV, whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any office or agency of the United States of America, or any State thereof or
any other country or political subdivision thereof or otherwise, and all
common-law rights relating to the foregoing, and (ii) the right to obtain all
reissues, extensions or renewals of the foregoing (collectively referred to as
the “Trademark”);

 

 
E-3

--------------------------------------------------------------------------------

 

  

(c)     all Trademark licenses for the grant by or to any Grantor of any right
to use any trademark, including each trademark license referred to in Item B of
Schedule IV; and

 

all of the goodwill of the business connected with the use of, and symbolized by
the items described in, clause (a) above, and to the extent applicable
clause (b) above;

 

the right to sue third parties for past, present and future infringements of any
Trademark Collateral described in clause (a) above and, to the extent
applicable, clause (b) above; and

 

all Proceeds of, and rights associated with, the foregoing, including any claim
by any Grantor against third parties for past, present or future infringement or
dilution of any Trademark, Trademark registration or Trademark license, or for
any injury to the goodwill associated with the use of any such Trademark or for
breach or enforcement of any Trademark license and all rights corresponding
thereto throughout the world.

 

“Trade Secrets Collateral” means all common law and statutory trade secrets and
all other confidential, proprietary or useful information and all know-how (all
of the foregoing being collectively called a “Trade Secret”), whether or not
such Trade Secret has been reduced to a writing or other tangible form,
including all Documents and things embodying, incorporating or referring in any
way to such Trade Secret, all Trade Secret licenses, including each Trade Secret
license referred to in Schedule VI, and including the right to sue for and to
enjoin and to collect damages for the actual or threatened misappropriation of
any Trade Secret and for the breach or enforcement of any such Trade Secret
license.

 

Credit Agreement Definitions. Unless otherwise defined herein or the context
otherwise requires, terms used in this Security Agreement, including its
preamble and recitals, have the meanings provided in the Credit Agreement,
including, without limitation, Section 1.4 thereof.

 

UCC and PPSA Definitions. When used herein the terms “Account”, “Certificate of
Title”, “Certificated Securities”, “Chattel Paper”, “Commercial Tort Claim”,
“Commodity Account”, “Commodity Contract”, “Deposit Account”, “Document”,
“Electronic Chattel Paper”, “Equipment”, “Goods”, “Instrument”, “Inventory”,
“Investment Property”, “Letter-of-Credit Rights”, “Payment Intangibles”,
“Proceeds”, “Promissory Notes”, “Securities Account”, “Security Entitlement”,
“Supporting Obligations” and “Uncertificated Securities” have the meaning
provided in Article 8 or Article 9, as applicable, of the UCC or their
corresponding meaning or definition in Section 1(1) of the PPSA. “Letters of
Credit” has the meaning provided in Section 5-102 of the UCC.

 

SECURITY INTEREST

 

Grant of Security Interest. Each Grantor hereby grants to the Secured Party, a
continuing security interest in all of such Grantor’s right, title, and interest
in and to the following property, whether now or hereafter existing, owned or
acquired by such Grantor, and wherever located, (collectively, the
“Collateral”):

 

Accounts;

 

Chattel Paper;

 

 
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Commercial Tort Claims listed on Item I of Schedule II (as such schedule may be
amended or supplemented from time to time);

 

Deposit Accounts;

 

Documents;

 

General Intangibles;

 

Goods;

 

Instruments;

 

Intellectual Property Collateral;

 

Investment Property;

 

Letter-of-Credit Rights and Letters of Credit;

 

Supporting Obligations;

 

all books, records, writings, databases, information and other property relating
to, used or useful in connection with, evidencing, embodying, incorporating or
referring to, any of the foregoing in this Section;

 

all Proceeds of the foregoing and, to the extent not otherwise included, (A) all
payments under insurance (whether or not the Secured Party is the loss payee
thereof) and (B) all tort claims; and

 

all other property and rights of every kind and description and interests
therein.

 

Notwithstanding the foregoing, the term “Collateral” shall not include the
following (collectively the “Excluded Collateral”):

 

any Grantor’s real property interests (including fee real estate, leasehold
interests and fixtures);

 

any General Intangibles or other rights arising under any contracts,
instruments, licenses or other documents as to which the grant of a security
interest would (A) constitute a violation of a valid and enforceable restriction
in favor of a third party on such grant, unless and until any required consents
shall have been obtained, (B) give any other party to such contract, instrument,
license or other document the right to terminate its obligations thereunder or
accelerate any of relevant Grantor’s obligations thereunder, or (C) result in a
breach or violation of, or constitute a default under, the agreement or
instrument governing such Collateral;

 

any asset, the granting of a security interest in which would be void or illegal
under any applicable governmental law, rule or regulation, or pursuant thereto
would result in, or permit the termination of, such asset;

 

 
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any asset subject to a Permitted Lien (other than Liens in favor of the Secured
Party) to the extent that the grant of other Liens on such asset (A) would
result in a breach or violation of, or constitute a default under, the agreement
or instrument governing such Permitted Lien, (B) would result in the loss of use
of such asset or (C) would permit the holder of such Permitted Lien to terminate
the relevant Grantor’s use of such asset or accelerate any of such Grantor’s
obligations thereunder;

 

vehicles and other goods subject to a Certificate of Title; and

 

all of PIC’s assets and any Capital Securities of PIC held by Holdco.

 

Security for Obligations. This Security Agreement and the Collateral in which
the Secured Party is granted a security interest hereunder by the Grantors
secures the payment and performance by the Grantors of all of the Obligations
under the Credit Agreement and each other Loan Document including, without
limitation, the payment of all principal of and premium, if any, and interest
(including interest accruing during the pendency of any proceeding of the type
described in Section 9.1.8 of the Credit Agreement) on the Loans.

 

Grantors Remain Liable. Anything herein to the contrary notwithstanding:

 

the Grantors will remain liable under their respective contracts and agreements
included in the Collateral to the extent set forth therein, and will perform all
of their respective duties and obligations under such contracts and agreements
to the same extent as if this Security Agreement had not been executed;

 

the exercise by the Secured Party of any of its rights hereunder will not
release any Grantor from any of its duties or obligations under any such
contracts or agreements included in the Collateral; and

 

the Secured Party will have no obligation or liability under any contracts or
agreements included in the Collateral by reason of this Security Agreement, nor
will it be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.

 

Distributions on Pledged Shares. In the event that any Distribution with respect
to any Capital Securities pledged hereunder is permitted to be paid (in
accordance with Section 8.6 of the Credit Agreement), such Distribution or
payment may be paid directly to the relevant Grantor. If any Distribution is
made in contravention of Section 8.6 of the Credit Agreement, the relevant
Grantor shall hold the same segregated and in trust for the Secured Party until
paid to the Secured Party in accordance with Section 4.1.5.

 

Security Interest Absolute, etc. This Security Agreement shall in all respects
be a continuing, absolute, unconditional and irrevocable grant of security
interest, and shall remain in full force and effect until the Termination Date.
All rights of the Secured Party and the security interests granted to the
Secured Party hereunder, and all obligations of the each Grantor hereunder,
shall, in each case, be absolute, unconditional and irrevocable irrespective of:

 

any lack of validity, legality or enforceability of any Loan Document;

 

 
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the failure of the Secured Party (i) to assert any claim or demand or to enforce
any fight or remedy against any Obligor or any other Person (including any
Grantor) under the provisions of any Loan Document or otherwise, or (ii) to
exercise any right or remedy against any other guarantor (including any Grantor)
of, or collateral securing, any Obligations;

 

any change in the time, manner or place of payment of, or in any other term of,
all or any part of the Obligations, or any other extension, compromise or
renewal of any Obligations;

 

any reduction, limitation, impairment or termination of any Obligations for any
reason, including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to (and each Grantor hereby waives any
right to or claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality, non-genuineness,
irregularity, compromise, unenforceability of, or any other event or occurrence
affecting, any Obligations or otherwise;

 

any amendment to, rescission, waiver, or other modification of, or any consent
to or departure from, any of the terms of any Loan Document;

 

any addition, exchange or release of any Collateral or of any Person that is (or
will become) a Grantor (including each Grantor hereunder) of the Obligations, or
any surrender or non-perfection of any collateral, or any amendment to or waiver
or release or addition to, or consent to or departure from, any other guarantee
held by the Secured Party securing any of the Obligations; or

 

any other circumstance which might otherwise constitute a defense available to,
or a legal or equitable discharge of, any Obligor, any surety or any guarantor.

 

REPRESENTATIONS AND WARRANTIES

 

In order to induce the Secured Party to enter into the Credit Agreement and make
Loans thereunder, the Grantors represent and warrant to the Secured Party as set
forth below.

 

As to Capital Securities of the Subsidiaries, Investment Property.

 

With respect to any direct Subsidiary of each Grantor that is

 

a corporation, business trust, joint stock company or similar Person, all
Capital Securities issued by such Subsidiary are duly authorized and validly
issued, fully paid and non-assessable, and represented by a certificate; and

 

a partnership or limited liability company, no Capital Securities issued by such
Subsidiary (A) are dealt in or traded on securities exchanges or in securities
markets, (B) expressly provide that such Capital Securities is a security
governed by Article 8 of the UCC or (C) are held in a Securities Account,
except, with respect to this clause (a)(ii), Capital Securities (x) for which
the Secured Party is the registered owner or (y) with respect to which the
issuer has agreed in an authenticated record with such Grantor and the Secured
Party to comply with any instructions of the Secured Party without the consent
of such Grantor.

 

 
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Each Grantor has delivered all Certificated Securities constituting Collateral
held by such Grantor on the Closing Date to the Secured Party, together with
duly executed undated blank stock powers, or other equivalent instruments of
transfer acceptable to the Secured Party.

 

With respect to Uncertificated Securities constituting Collateral owned by any
Grantor, such Grantor has caused the issuer thereof either to (i) register the
Secured Party as the registered owner of such security or (ii) agree in an
authenticated record with such Grantor and the Secured Party that such issuer
will comply with instructions with respect to such security originated by the
Secured Party without further consent of such Grantor.

 

The percentage of the issued and outstanding Capital Securities of each
Subsidiary pledged by each Grantor hereunder is as set forth on Schedule I.

 

All deposit accounts, lockboxes, disbursement accounts, investment accounts or
other similar accounts of each Grantor are Controlled Accounts.

 

Grantor Name, Location, etc.

 

The jurisdictions in which the Grantors are located for purposes of
Sections 9-301 and 9-307 of the UCC or its PPSA equivalent, as applicable, are
set forth in Item A of Schedule II.

 

Each location in which a secured party would have filed a UCC or PPSA financing
statement in the five years prior to the date hereof to perfect a security
interest in Equipment, Inventory and General Intangibles owned by a Grantor is
set forth in Item B of Schedule II.

 

No Grantor has any trade names other than those set forth in Item C of Schedule
II hereto.

 

During the four months preceding the date hereof, no Grantor has been known by
any legal name different from the one set forth on the signature page hereto and
no Grantor has been the subject of any merger or other corporate reorganization,
except as set forth in Item D of Schedule II hereto.

 

Each Grantor’s federal taxpayer identification number is (and, during the four
months preceding the date hereof, such Grantor has not had a federal taxpayer
identification number different from that) set forth in Item E of Schedule II
hereto.

 

No Grantor is a party to any federal, state or local government contract except
as set forth in Item F of Schedule II hereto.

 

No Grantor maintains any Deposit Accounts, Securities Accounts or Commodity
Accounts with any Person, in each case, except as set forth on Item G of
Schedule II.

 

No Grantor is the beneficiary of any Letters of Credit, except as set forth on
Item H of Schedule II.

 

No Grantor has Commercial Tort Claims except as set forth on Item I of Schedule
II.

 

 
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The name set forth on the signature page attached hereto is the true and correct
legal name (as defined in the UCC or PPSA, as applicable) of each Grantor.

 

Each Grantor has obtained a legal, valid and enforceable consent of each issuer
of any Letter of Credit pledged by such Grantor to the assignment of the
Proceeds of such Letter of Credit to the Secured Party and such Grantor has not
consented to, and is not otherwise aware of, any Person (other than the Secured
Party pursuant hereto) having control (within the meaning of Section 9-104 of
the UCC) over, or any other interest in any of such Grantor’s rights in respect
thereof.

 

Ownership, No Liens, etc. Except as disclosed on Schedules III through V, each
Grantor owns its Collateral free and clear of any Lien, except for any security
interest (i) created by the Loan Documents, (ii) in the case of Collateral other
than the Capital Securities of each Subsidiary pledged hereunder, that is a
Permitted Lien, or (iii) which will be released simultaneously with the making
of the Initial Loan under the Credit Agreement. No effective UCC or PPSA
financing statement or other filing similar in effect covering all or any part
of the Collateral is on file in any recording office, except those filed in
favor of the Secured Party relating to this Security Agreement, Permitted Liens
or as to which a duly authorized termination statement relating to such UCC or
PPSA financing statement or other instrument has been delivered to the Secured
Party on the Closing Date.

 

Possession of Inventory, Control; etc.

 

Except as otherwise permitted in the Credit Agreement, each Grantor has, and
agrees that it will maintain, exclusive possession of its Documents,
Instruments, Promissory Notes, Goods, Equipment and Inventory, other than (i)
Equipment and Inventory in transit in the ordinary course of business, (ii)
Equipment and Inventory that is in the possession or control of a warehouseman,
bailee agent or other Person (other than a Person controlled by or under common
control with such Grantor) that has been notified of the security interest
created in favor of the Secured Party pursuant to this Security Agreement, and
has authenticated a record acknowledging that it holds possession of such
Collateral for the Secured Party’s benefit and waives any Lien held by it
against such Collateral, and (iii) Instruments or Promissory Notes that have
been delivered to the Secured Party pursuant to Section 3.5. In the case of
Equipment or Inventory described in clause (ii) above, no lessor or warehouseman
of any premises or warehouse upon or in which such Equipment or Inventory is
located has (i) issued any warehouse receipt or other receipt in the nature of a
warehouse receipt in respect of any such Equipment or Inventory, (ii) issued any
Document for any such Equipment or Inventory, (iii) received notification of the
Secured Party’s interest (other than the security interest granted hereunder) in
any such Equipment or Inventory or (iv) any Lien on any such Equipment or
Inventory.

 

Each Grantor is the sole entitlement holder of its Accounts and no other Person
(other than the Secured Party pursuant to this Security Agreement or any other
Person with respect to Permitted Liens) has control or possession of, or any
other interest in, any of its Accounts or any other securities or property
credited thereto.

 

Negotiable Documents, Instruments and Chattel Paper. Each Grantor has delivered
to the Secured Party possession of all originals of all Documents, Instruments,
Promissory Notes, and tangible Chattel Paper owned or held by such Grantor on
the Closing Date.

 

 
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Intellectual Property Collateral. Except as disclosed on Schedules III through V
and except for standard off-the-shelf software used by any Grantor, with respect
to any Intellectual Property Collateral:

 

each Grantor has made all necessary filings and recordations to protect its
interest in such Intellectual Property Collateral, including recordations of all
of its interests in the Patent Collateral and Trademark Collateral in the United
States Patent and Trademark Office and in corresponding offices throughout the
world, and its claims to the Copyright Collateral in the United States Copyright
Office and in corresponding offices throughout the world;

 

no Grantor has made a previous assignment, sale, transferor agreement
constituting a present or future assignment, sale or transfer of any
Intellectual Property for purposes of granting a security interest or as
Collateral that has not been terminated or released;

 

each Grantor has executed and delivered to the Secured Party, Intellectual
Property Collateral security agreements for all Copyrights, Patents and
Trademarks owned by such Grantor, including all Copyrights, Patents and
Trademarks on Schedule III through V (as such schedules may be amended or
supplemented from time to time); and

 

the consummation of the transactions contemplated by the Credit Agreement and
this Security Agreement will not result in the termination or material
impairment of any of the Intellectual Property Collateral.

 

Validity, etc.

 

This Security Agreement creates a valid security interest in the Collateral
securing the payment of the Obligations.

 

Each Grantor has filed or caused to be filed all UCC-1 or PPSA-1C financing
statements, as applicable, in the filing office for such Grantor’s jurisdiction
of organization listed in Item A of Schedule II (collectively, the “Filing
Statements”) (or has authenticated and delivered to the Secured Party the Filing
Statements suitable for filing in such offices) and has taken all other actions
requested by the Secured Party necessary for the Secured Party to obtain control
of the Collateral as provided in Sections 9-104, 9-105, 9-106 and 9-107 of the
UCC or its PPSA equivalent, as applicable.

 

Upon the filing of the Filing Statements with the appropriate agencies therefor,
the security interests created under this Security Agreement shall constitute a
perfected security interest in the Collateral described on such Filing
Statements in favor of the Secured Party to the extent that a security interest
therein may be perfected by filing pursuant to the relevant UCC or PPSA, as
applicable, prior to all other Liens, except for Permitted Liens (in which case
such security interest shall be second in priority of right only to the
Permitted Liens until the obligations secured by such Permitted Liens have been
satisfied).

 

Authorization, Approval, etc. Except as have been obtained or made and are in
full force and effect, no authorization, approval or other action by, and no
notice to or filing with, any Governmental Authority or any other third party is
required either:

 

 
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for the grant by any Grantor of the security interest granted hereby or for the
execution, delivery and performance of this Security Agreement by any Grantor;

 

for the perfection or maintenance of the security interests hereunder including
the first priority (subject to Permitted Liens) nature of such security interest
(except with respect to the Filing Statements or, with respect to Intellectual
Property Collateral, the recordation of any agreements with the U.S. Patent and
Trademark Office or the U.S. Copyright Office or the Canadian Intellectual
Property Office) or the exercise by the Secured Party of its rights and remedies
hereunder; or

 

for the exercise by the Secured Party of the voting or other rights provided for
in this Security Agreement, or, except (i) with respect to any securities issued
by a Subsidiary of a Grantor, as may be required in connection with a
disposition of such securities by laws affecting the offering and sale of
securities generally, the remedies in respect of the Collateral pursuant to this
Security Agreement and (ii) any “change of control” or similar filings required
by state licensing agencies.

 

COVENANTS

 

Each Grantor covenants and agrees that, until the Termination Date, such Grantor
will perform, comply with and be bound by the obligations set forth below.

 

As to Investment Property, etc. Capital Securities of Subsidiaries. No Grantor
will allow any of its Subsidiaries:

 

that is a corporation, business trust, joint stock company or similar Person, to
issue Uncertificated Securities;

 

that is a partnership or limited liability company, to (i) issue Capital
Securities that are to be dealt in or traded on securities exchanges or in
securities markets, expressly provide in its Organic Documents that its Capital
Securities are securities governed by Article 8 of the UCC or its PPSA
equivalent, or (ii) place such Subsidiary’s Capital Securities in a Securities
Account; and

 

to issue Capital Securities in addition to or in substitution for the Capital
Securities pledged hereunder, except to such Grantor (and such Capital
Securities are immediately pledged and delivered to the Secured Party pursuant
to the terms of this Security Agreement).

 

SECTION 1.1.2     Investment Property (other than Certificated Securities).

 

With respect to any Deposit Accounts, Securities Accounts, Commodity Accounts,
Commodity Contracts or Security Entitlements constituting Investment Property
owned or held by any Grantor, such Grantor will, upon the Secured Party’s
request, cause the intermediary maintaining such Investment Property to execute
a Control Agreement relating to such Investment Property pursuant to which such
intermediary agrees to comply with the Secured Party’s instructions with respect
to such Investment Property without further consent by such Grantor.

 

 
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With respect to any Uncertificated Securities (other than Uncertificated
Securities credited to a Securities Account) constituting Investment Property
owned or held by any Grantor, such Grantor will cause the issuer of such
securities to either (i) register the Secured Party as the registered owner
thereof on the books and records of the issuer or (ii) execute a Control
Agreement relating to such Investment Property pursuant to which the issuer
agrees to comply with the Secured Party’s instructions with respect to such
Uncertificated Securities without further consent by such Grantor.

 

Certificated Securities (Stock Powers). Each Grantor agrees that all
Certificated Securities delivered to the Secured Party by such Grantor pursuant
to this Security Agreement, will be accompanied by duly executed undated blank
stock powers, or other equivalent instruments of transfer reasonably acceptable
to the Secured Party.

 

Continuous Pledge. Each Grantor will (except as otherwise permitted under the
Credit Agreement or this Security Agreement) deliver to the Secured Party and at
all times keep pledged to the Secured Party pursuant hereto, on a
first-priority, perfected basis all of its Investment Property, all Dividends
and Distributions with respect thereto, all of its Payment Intangibles to the
extent they are evidenced by a Document, Instrument, Promissory Note or Chattel
Paper, and all interest and principal with respect to such Payment Intangibles,
and all Proceeds and rights from time to time received by or distributable to
such Grantor in respect of any of the foregoing Collateral. Each Grantor agrees
that it will, promptly following receipt thereof, deliver to the Secured Party
possession of all originals of negotiable Documents, Instruments, Promissory
Notes and Chattel Paper that it acquires following the Closing Date.

 

Voting Rights; Dividends, etc. Each Grantor agrees:

 

promptly upon receipt of notice of the occurrence and continuance of an Event of
Default from the Secured Party and without any request therefor by the Secured
Party, so long as such Event of Default shall continue, to deliver (properly
endorsed where required hereby or requested by the Secured Party) to the Secured
Party all Dividends and Distributions with respect to Investment Property, all
interest, principal, other cash payments on Payment Intangibles, and all
Proceeds of the Collateral, in each case thereafter received by such Grantor,
all of which shall be held by the Secured Party as additional Collateral; and

 

with respect to Collateral consisting of general partner interests or limited
liability company interests, to promptly modify its Organic Documents to admit
the Secured Party as a general partner or member, as applicable, immediately
upon the occurrence and continuance of an Event of Default and so long as the
Secured Party has notified such Grantor of the Secured Party’s intention to
exercise its voting power under this clause,

 

that the Secured Party may exercise (to the exclusion of such Grantor) the
voting power and all other incidental rights of ownership with respect to any
Investment Property constituting Collateral and such Grantor hereby grants the
Secured Party an irrevocable proxy, exercisable under such circumstances, to
vote such Investment Property; and

 

to promptly deliver to the Secured Party such additional proxies and other
documents as may be necessary to allow the Secured Party to exercise such voting
power.

 

 
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All dividends, Distributions, interest, principal, cash payments, Payment
Intangibles and Proceeds that may at any time and from time to time be held by
any Grantor, but which such Grantor is then obligated to deliver to the Secured
Party, shall, until delivery to the Secured Party, be held by such Grantor
separate and apart from its other property in trust for the Secured Party. The
Secured Party agrees that unless an Event of Default shall have occurred and be
continuing and the Secured Party shall have given the notice referred to in
clause (b), the Grantors will have the exclusive voting power with respect to
any of their Investment Property constituting Collateral and the Secured Party
will, upon the written request of a Grantor, promptly deliver such proxies and
other documents, if any, as shall be reasonably requested by such Grantor which
are necessary to allow such Grantor to exercise that voting power; provided that
no vote shall be cast, or consent, waiver, or ratification given, or action
taken by any Grantor that would impair any such Collateral or be inconsistent
with or violate any provision of any Loan Document.

 

Change of Name, etc. No Grantor will change its name or place of incorporation
or organization or federal taxpayer identification number except upon 30 days’
prior written notice to the Secured Party.

 

As to Accounts.

 

The Grantors shall have the right to collect all Accounts so long as no Event of
Default shall have occurred and be continuing.

 

Upon (i) the occurrence and continuance of an Event of Default and (ii) the
delivery of notice by the Secured Party to a Grantor, all Proceeds of Collateral
received by such Grantor shall be delivered in kind to the Secured Party for
deposit in a Deposit Account of such Grantor maintained with the Secured Party
or with any depositary institution that has entered into a Control Agreement in
favor of the Secured Party (together with any other Accounts pursuant to which
any portion of the Collateral is deposited with the Secured Party, the
“Collateral Accounts”), and such Grantor shall not commingle any such Proceeds,
and shall hold separate and apart from all other property, all such Proceeds in
express trust for the benefit of the Secured Party until delivery thereof is
made to the Secured Party.

 

Following the delivery of notice pursuant to clause (b)(ii) and during the
continuance of an Event of Default, the Secured Party shall have the right to
apply any amount in the Collateral Account to the payment of any Obligations
which are due and payable.

 

With respect to each of the Collateral Accounts, it is hereby confirmed and
agreed that (i) deposits in such Collateral Account are subject to a security
interest as contemplated hereby, (ii) such Collateral Account shall be under the
control of the Secured Party and (iii) the Secured Party shall have the sole
right of withdrawal over such Collateral Account.

 

As to Grantors’ Use of Collateral.

 

Subject to clause (b), each Grantor (i) may in the ordinary course of its
business, at its own expense, sell, lease or furnish under the contracts of
service any of the Inventory normally held by such Grantor for such purpose, and
use and consume, in the ordinary course of its business, any raw materials, work
in process or materials normally held by such Grantor for such purpose, (ii)
will, at its own expense, endeavor to collect, as and when due and in accordance
with its customary practices, all amounts due with respect to any of the
Collateral, including the taking of such action with respect to such collection
as the Secured Party may request following the occurrence of an Event of Default
or, in the absence of such request, as such Grantor may deem advisable, and
(iii) may grant, in the ordinary course of business, to any party obligated on
any of the Collateral, any rebate, refund or allowance to which such party may
be lawfully entitled, and may accept, in connection therewith, the return of
Goods, the sale or lease of which shall have given rise to such Collateral.

 

 
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At any time following the occurrence and during the continuance of an Event of
Default, whether before or after the maturity of any of the Obligations, the
Secured Party may (i) revoke any or all of the rights of any Grantor set forth
in clause (a), (ii) notify any parties obligated on any of the Collateral to
make payment to the Secured Party of any amounts due or to become due thereunder
and (iii) enforce collection of any of the Collateral by suit or otherwise and
surrender, release, or exchange all or any part thereof, or compromise or extend
or renew for any period (whether or not longer than the original period) any
indebtedness thereunder or evidenced thereby.

 

Upon request of the Secured Party following the occurrence and during the
continuance of an Event of Default, each Grantor will, at its own expense,
notify any parties obligated on any of its Collateral to make payment to the
Secured Party of any amounts due or to become due thereunder.

 

At any time following the occurrence and during the continuation of an Event of
Default, the Secured Party may endorse, in the name of any Grantor, any item,
howsoever received by the Secured Party, representing any payment on or other
Proceeds of any of the Collateral.

 

As to Intellectual Property Collateral. Each Grantor covenants and agrees to
comply with the following provisions as such provisions relate to any
Intellectual Property Collateral material to the operations or business of such
Grantor:

 

the Grantor shall use commercially reasonable efforts to pursue and maintain, at
its own expense, legal protection for all Intellectual Property owned or
controlled by the Borrower or any of the Subsidiaries, including (i) initiating
proceedings before the United States Patent and Trademark Office, the United
States Copyright Office or similar offices or agencies in other countries or
political subdivisions thereof, and filing applications for renewal, affidavits
of use, affidavits of in contestability and opposition, interference and
cancellation proceedings and the paying fees and taxes and (ii) not doing or
failing to perform acts whereby such Intellectual Property may lapse or become
abandoned or dedicated to the public, invalid or unenforceable;

 

the Grantor shall promptly notify the Secured Party if it knows, or has reason
to know, that any application or registration relating to any material item of
the Intellectual Property Collateral may become abandoned or dedicated to the
public or placed in the public domain or invalid or unenforceable, or of any
adverse determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any foreign counterpart
thereof or any court) regarding such Grantor’s ownership of any of the
Intellectual Property Collateral, its right to register the same or to keep and
maintain and enforce the same;

 

 
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in no event will the Grantor or any of its agents, employees, designees or
licensees file an application for the registration of any Intellectual Property
Collateral with the United States Patent and Trademark Office, the United States
Copyright Office or any similar office or agency in any other country or any
political subdivision thereof, unless it promptly informs the Secured Party, and
upon request of the Secured Party (subject to the terms of the Credit
Agreement), executes and delivers all agreements, instruments and documents as
the Secured Party may request to evidence the Secured Party’s security interest
in such Intellectual Property Collateral; and

 

Within 30 days from the end of each Fiscal Quarter the Grantor will execute and
deliver to the Secured Party (as applicable) a Patent Security Agreement,
Trademark Security Agreement and/or Copyright Security Agreement, as the case
may be, in the forms of Exhibit A, Exhibit B and Exhibit C hereto in connection
with its obtaining an interest in any such Intellectual Property, and shall
execute and deliver to the Secured Party any other document reasonably required
to acknowledge or register or perfect the Secured Party’s interest in any part
of such item of Intellectual Property Collateral unless such Grantor shall
determine in good faith (with the consent of the Secured Party) that any
Intellectual Property Collateral is of negligible economic value to such
Grantor.

 

As to Letter-of-Credit Rights.

 

Each Grantor, by granting a security interest in its Letter-of-Credit Rights to
the Secured Party, intends to (and hereby does) collaterally assign to the
Secured Party its rights (including its contingent rights) to the Proceeds of
all Letter-of-Credit Rights of which it is or hereafter becomes a beneficiary or
assignee. Each Grantor will promptly use commercially reasonable efforts to
cause the issuer of each Letter of Credit and each nominated person (if any)
with respect thereto to consent to such assignment of the Proceeds thereof in a
consent agreement in form and substance reasonably satisfactory to the Secured
Party and deliver written evidence of such consent to the Secured Party.

 

Upon the occurrence of an Event of Default, each Grantor will, promptly upon
request by the Secured Party, (i) notify (and such Grantor hereby authorizes the
Secured Party to notify) the issuer and each nominated person with respect to
each of the Letters of Credit that the Proceeds thereof have been assigned to
the Secured Party hereunder and any payments due or to become due in respect
thereof are to be made directly to the Secured Party and (ii) arrange for the
Secured Party to become the transferee beneficiary Letter of Credit.

 

As to Commercial Tort Claims. Each Grantor covenants and agrees that, until the
payment in full of the Obligations and termination of all Commitments, with
respect to any Commercial Tort Claim hereafter arising asserting damages in
excess of $100,000 (individually or in the aggregate for all such claims), it
shall deliver to the Secured Party a supplement in form and substance
satisfactory to the Secured Party, together with all supplements to schedules
thereto identifying such new Commercial Tort Claims.

 

 
E-15

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Electronic Chattel Paper and Transferable Records. If any Grantor at any time
holds or acquires an interest in any electronic chattel paper or any
“transferable record,” as that term is defined in Section 201 of the U.S.
Federal Electronic Signatures in Global and National Commerce Act, or in
Section 16 of the U.S. Uniform Electronic Transactions Act as in effect in any
relevant jurisdiction, with a value in excess of $1,000,000, such Grantor shall
promptly notify the Secured Party thereof and, at the request of the Secured
Party, shall take such action as the Secured Party may request to vest in the
Secured Party control under Section 9-105 of the U.C.C. of such electronic
chattel paper or control under Section 201 of the Federal Electronic Signatures
in Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of
such transferable record. The Secured Party agrees with each Grantor that the
Secured Party will arrange, pursuant to procedures satisfactory to the Secured
Party and so long as such procedures will not result in the Secured Party’s loss
of control, for such Grantor to make alterations to the electronic chattel paper
or transferable record permitted under Section 9-105 of the U.C.C. or, as the
case may be, Section 201 of the U.S. Federal Electronic Signatures in Global and
National Commerce Act or Section 16 of the U.S. Uniform Electronic Transactions
Act for a party in control to allow without loss of control, unless an Event of
Default has occurred and is continuing or would occur after taking into account
any action by such Grantor with respect to such electronic chattel paper or
transferable record.

 

Further Assurances, etc. Each Grantor agrees that, from time to time at its own
expense, it will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or that the
Secured Party may request, in order to perfect, preserve and protect any
security interest granted or purported to be granted hereby or to enable the
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of the foregoing,
each Grantor will:

 

from time to time upon the request of the Secured Party, promptly deliver to the
Secured Party such stock powers, instruments and similar documents, reasonably
satisfactory in form and substance to the Secured Party, with respect to such
Collateral as the Secured Party may request and will, from time to time upon the
request of the Secured Party, after the occurrence and during the continuance of
any Event of Default, promptly transfer any securities constituting Collateral
into the name of any nominee designated by the Secured Party; if any Collateral
shall be evidenced by an Instrument, negotiable Document, Promissory Note or
tangible Chattel Paper, deliver and pledge to the Secured Party hereunder such
Instrument, negotiable Document, Promissory Note or tangible Chattel Paper duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Secured Party;

 

file (and hereby authorize the Secured Party to file) such Filing Statements or
continuation statements, or amendments thereto, and such other instruments or
notices (including any assignment of claim form under or pursuant to the federal
assignment of claims statute, 31 U.S.C. § 3726, any successor or amended version
thereof or any regulation promulgated under or pursuant to any version thereof),
as may be necessary or that the Secured Party may request in order to perfect
and preserve the security interests and other rights granted or purported to be
granted to the Secured Party hereby;

 

deliver to the Secured Party and at all times keep pledged to the Secured Party
pursuant hereto, on a first-priority, perfected basis, at the request of the
Secured Party, all Investment Property constituting Collateral, all Dividends
and Distributions with respect thereto, and all interest and principal with
respect to Promissory Notes, and all Proceeds and rights from time to time
received by or distributable to such Grantor in respect of any of the foregoing
Collateral;

 

 
E-16 

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not take or omit to take any action the taking or the omission of which would
result in any material impairment or alteration of any obligation of the maker
of any Payment Intangible or other Instrument constituting Collateral, except as
provided in Section 4.4;

 

not create any tangible Chattel Paper without placing a legend on such tangible
Chattel Paper reasonably acceptable to the Secured Party indicating that the
Secured Party has a security interest in such Chattel Paper;

 

furnish to the Secured Party, from time to time at the Secured Party’s request,
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Secured Party may
request, all in reasonable detail; and

 

do all things reasonably requested by the Secured Party in accordance with this
Security Agreement in order to enable the Secured Party to have and maintain
control over the Collateral consisting of Investment Property, Deposit Accounts,
Letter-of-Credit-Rights and Electronic Chattel Paper.

 

With respect to the foregoing and the grant of the security interest hereunder,
each Grantor hereby authorizes the Secured Party to file one or more financing
or continuation or financing change statements, and amendments thereto, relative
to all or any part of the Collateral. Each Grantor agrees that a carbon,
photographic or other reproduction of this Security Agreement or any UCC or PPSA
financing statement covering the Collateral or any part thereof shall be
sufficient as a UCC or PPSA financing statement where permitted by law. Each
Grantor hereby authorizes the Secured Party to file financing statements
describing as the collateral covered thereby “all of the debtor’s personal
property or assets” or words to that effect, notwithstanding that such wording
may be broader in scope than the Collateral described in this Security
Agreement.

 

Deposit Accounts. Following the occurrence and during the continuance of an
Event of Default, at the request of the Secured Party, each Grantor will
maintain all of its Deposit Accounts only with the Secured Party or with any
depositary institution that has entered into a Control Agreement in favor of the
Secured Party.

 

Inbound Licenses. Each Grantor will, promptly after entering into or becoming
bound by any inbound license or similar agreement relating to the sale,
distribution, licensing or other commercialization of any Product or any
Intellectual Property covering any Product (other than over-the-counter software
that is commercially available to the public), take such commercially reasonable
actions as the Secured Party may reasonably request to obtain the consent of, or
waiver by, any Person whose consent or waiver is necessary for the Secured Party
to be granted and perfect a valid security interest in such license or similar
agreement and to fully exercise its rights under any of the Loan Documents in
the event of a disposition or liquidation of the rights, assets or property that
is the subject of such license or similar agreement.

 

 
E-17

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THE SECURED PARTY

 

Secured Party Appointed Attorney-in-Fact. Each Grantor hereby irrevocably
appoints the Secured Party its attorney-in-fact, with full authority in the
place and stead of such Grantor and in the name of such Grantor or otherwise,
from time to time in the Secured Party’s discretion, following the occurrence
and during the continuance of an Event of Default, to take any action and to
execute any instrument which the Secured Party may deem necessary or advisable
to accomplish the purposes of this Security Agreement, including:

 

to ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral;

 

to receive, endorse, and collect any drafts or other Instruments, Documents and
Chattel Paper, in connection with clause (a) above;

 

to file any claims or take any action or institute any proceedings which the
Secured Party may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of the Secured Party with respect
to any of the Collateral;

 

dispose of all or any part of any Collateral as provided in Section 6.1(a)(iv)
below; and

 

to perform the affirmative obligations of such Grantor hereunder.

 

Each Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.

 

Secured Party May Perform. If any Grantor fails to perform any agreement
contained herein, the Secured Party may itself perform, or cause performance of,
such agreement, and the expenses of the Secured Party incurred in connection
therewith shall be payable by the Borrower pursuant to Section 10.3 of the
Credit Agreement.

 

Secured Party Has No Duty. The powers conferred on the Secured Party hereunder
are solely to protect its interest in the Collateral and shall not impose any
duty on it to exercise any such powers. Except for reasonable care of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Secured Party shall have no duty as to any Collateral or
responsibility for

 

ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Investment Property,
whether or not the Secured Party has or is deemed to have knowledge of such
matters, or

 

taking any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral.

 

Reasonable Care. The Secured Party is required to exercise reasonable care in
the custody and preservation of any of the Collateral in its possession;
provided that the Secured Party shall be deemed to have exercised reasonable
care in the custody and preservation of any of the Collateral, if it takes such
action for that purpose as any Grantor reasonably requests in writing at times
other than upon the occurrence and during the continuance of any Event of
Default, but failure of the Secured Party to comply with any such request at any
time shall not in itself be deemed a failure to exercise reasonable care.

 

 
E-18

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REMEDIES

 

Certain Remedies. If any Event of Default shall have occurred and be continuing:

 

The Secured Party may exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a Secured Party on default under the UCC or PPSA, as
applicable (whether or not the UCC or the PPSA applies to the affected
Collateral) and also may

 

take possession of any Collateral not already in its possession without demand
and without legal process;

 

require any Grantor to, and each Grantor hereby agrees that it will, at its
expense and upon request of the Secured Party forthwith, assemble all or part of
the Collateral as directed by the Secured Party and make it available to the
Secured Party at a place to be designated by the Secured Party that is
reasonably convenient to both parties,

 

enter onto the property where any Collateral is located and take possession
thereof without demand and without legal process;

 

without notice except as specified below, lease, license, sell or otherwise
dispose of the Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Secured Party’s offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as the Secured Party
may deem commercially reasonable. Each Grantor agrees that, to the extent notice
of sale shall be required by law, at least ten days’ prior notice to such
Grantor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The Secured
Party shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Secured Party may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned.

 

All cash Proceeds received by the Secured Party in respect of any sale of,
collection from, or other realization upon, all or any part of the Collateral
shall be applied by the Secured Party against, all or any part of the
Obligations as set forth in Section 4.4 of the Credit Agreement.

 

The Secured Party may:

 

transfer all or any part of the Collateral into the name of the Secured Party or
its nominee, with or without disclosing that such Collateral is subject to the
Lien hereunder,

 

 
E-19

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notify the parties obligated on any of the Collateral to make payment to the
Secured Party of any amount due or to become due thereunder,

 

withdraw, or cause or direct the withdrawal, of all funds with respect to the
Collateral Account;

 

enforce collection of any of the Collateral by suit or otherwise, and surrender,
release or exchange all or any part thereof, or compromise or extend or renew
for any period (whether or not longer than the original period) any obligations
of any nature of any party with respect thereto,

 

endorse any checks, drafts, or other writings in any Grantor’s name to allow
collection of the Collateral,

 

take control of any Proceeds of the Collateral, and

 

execute (in the name, place and stead of any Grantor) endorsements, assignments,
stock powers and other instruments of conveyance or transfer with respect to all
or any of the Collateral.

 

Securities Laws. If the Secured Party shall determine to exercise its right to
sell all or any of the Collateral that are Capital Securities pursuant to
Section 6.1, each Grantor agrees that, upon request of the Secured Party, such
Grantor will, at its own expense:

 

execute and deliver, and cause (or, with respect to any issuer which is not a
Subsidiary of such Grantor, use commercially reasonable efforts to cause) each
issuer of the Collateral contemplated to be sold and the directors and officers
thereof to execute and deliver, all such instruments and documents, and do or
cause to be done all such other acts and things, as may be necessary or, in the
opinion of the Secured Party, advisable to register such Collateral under the
provisions of the Securities Act of 1933, as from time to time amended (the
“Securities Act”), and cause the registration statement relating thereto to
become effective and to remain effective for such period as prospectuses are
required by law to be furnished, and to make all amendments and supplements
thereto and to the related prospectus which, in the opinion of the Secured
Party, are necessary or advisable, all in conformity with the requirements of
the Securities Act and the rules and regulations of the SEC applicable thereto;

 

use commercially reasonable efforts to exempt the Collateral under the state
securities or “Blue Sky” laws and to obtain all necessary governmental approvals
for the sale of the Collateral, as requested by the Secured Party;

 

cause (or, with respect to any issuer that is not a Subsidiary of such Grantor,
use commercially reasonable efforts to cause) each such issuer to make available
to its security holders, as soon as practicable, an earnings statement that will
satisfy the provisions of Section 11(a) of the Securities Act; and

 

do or cause to be done all such other acts and things as may be necessary to
make such sale of the Collateral or any part thereof valid and binding and in
compliance with applicable law.

 

 
E-20

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Compliance with Restrictions. Each Grantor agrees that in any sale of any of the
Collateral whenever an Event of Default shall have occurred and be continuing,
the Secured Party is hereby authorized to comply with any limitation or
restriction in connection with such sale as it may be advised by counsel is
necessary in order to avoid any violation of applicable law (including
compliance with such procedures as may restrict the number of prospective
bidders and purchasers, require that such prospective bidders and purchasers
have certain qualifications, and restrict such prospective bidders and
purchasers to Persons who will represent and agree that they are purchasing for
their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any Governmental Authority or official, and each
Grantor further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Secured Party be liable nor accountable to any Grantor for any
discount allowed by the reason of the fact that such Collateral is sold in
compliance with any such limitation or restriction.

 

Protection of Collateral. The Secured Party may from time to time, at its
option, perform any act which any Grantor fails to perform after being requested
in writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Secured Party may from time to time take any other action which the Secured
Party deems necessary for the maintenance, preservation or protection of any of
the Collateral or of its security interest therein.

 

MISCELLANEOUS PROVISIONS

 

Loan Document. This Security Agreement is a Loan Document executed pursuant to
the Credit Agreement and shall (unless otherwise expressly indicated herein) be
construed, administered and applied in accordance with the terms and provisions
thereof, including Article X thereof.

 

Binding on Successors, Transferees and Assigns; Assignment. This Security
Agreement shall remain in full force and effect until the Termination Date has
occurred, shall be binding upon each Grantor and its successors, transferees and
assigns and shall inure to the benefit of and be enforceable by the Secured
Party and its successors, transferees and assigns; provided that no Grantor may
(unless otherwise permitted under the terms of the Credit Agreement or this
Security Agreement) assign any of its obligations hereunder without the prior
written consent of the Secured Party.

 

Amendments, etc. No amendment to or waiver of any provision of this Security
Agreement, nor consent to any departure by any Grantor from its obligations
under this Security Agreement, shall in any event be effective unless the same
shall be in writing and signed by the Secured Party and the Grantors and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.

 

Notices. All notices and other communications provided for hereunder shall be in
writing or by facsimile and addressed, delivered or transmitted to the
appropriate party at the address or facsimile number of such party specified in
the Credit Agreement or at such other address or facsimile number as may be
designated by such party in a notice to the other party. Any notice or other
communication, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any such notice or other communication, if transmitted by
facsimile, shall be deemed given when transmitted and electronically confirmed.

 

 
E-21 

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Release of Liens. Upon (a) the Disposition of Collateral in accordance with the
Credit Agreement or (b) the occurrence of the Termination Date, the security
interests granted herein shall automatically terminate with respect to (i) such
Collateral (in the case of clause (a)) or (ii) all Collateral (in the case of
clause (b)). Upon any such Disposition or termination, the Secured Party will,
at the Grantors’ sole expense, deliver to the relevant Grantor, without any
representations, warranties or recourse of any kind whatsoever, all Collateral
held by the Secured Party hereunder, and execute and deliver to such Grantor
such documents as such Grantor shall reasonably request to evidence such
termination.

 

Additional Grantor. Upon the execution and delivery by any other Person of a
supplement in the form of Annex I hereto, such Person shall become a “Grantor”
hereunder with the same force and effect as if it were originally a party to
this Security Agreement and named as a “Grantor” hereunder. The execution and
delivery of such supplement shall not require the consent of any Grantor
hereunder, and the rights and obligations of each Grantor hereunder shall remain
in full force and effect notwithstanding the addition of any new Grantor as a
party to this Security Agreement.

 

No Waiver; Remedies. In addition to, and not in limitation of Section 2.5, no
failure on the part of the Secured Party to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

 

Headings. The various headings of this Security Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Security Agreement or any provisions thereof.

 

Severability. Any provision of this Security Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such provision and such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Security
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.

 

Governing Law, Entire Agreement, etc. THIS SECURITY AGREEMENT SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT THE
PERFECTION, EFFECT OF PERFECTION OR NON-PERFECTION, AND PRIORITY OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK. This Security Agreement and the other Loan Documents constitute the
entire understanding among the parties hereto with respect to the subject matter
hereof and thereof and supersede any prior agreements, written or oral, with
respect thereto.

 

Counterparts. This Security Agreement may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original and all of
which shall constitute together but one and the same agreement. Delivery of an
executed counterpart of a signature page to this Security Agreement by facsimile
shall be effective as delivery of a manually executed counterpart of this
Security Agreement.

 

 
E-22 

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IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be duly executed and delivered by its Authorized Officer as of the
date first above written.

 

 

VARIATION BIOTECHNOLOGIES (US), INC.

 

By:

       

Name:

 

Title:

 

 

 

VBI VACCINES INC.

 

By:

   

Name:

 

Title:

 

 

 

VARIATION BIOTECHNOLOGIES INC.

 

By:

   

Name:

 

Title:

 

 

PCOF 1, LLC

By:

   

Name:

 

Title:

 

 

By:

   

Name:

 

Title:

 

 
Signature Page to Pledge and Security Agreement 

--------------------------------------------------------------------------------

 

 

SCHEDULE I
to Security Agreement

 

Name of Grantor:

Variation

Biotechnologies

(US), Inc.

   

Common Stock

             

Issuer (corporate)

Cert. #

# of

Shares

Authorized Shares

Outstanding

Shares

% of Shares

Pledged

                                                                               
   

 

 

 

Limited Liability Company Interests

Issuer (limited liability

company

% of Limited Liability

Company Interests Pledged

Type of Limited Liability

Company Interests Pledged

                       

 

 

 

Partnership Interests

Issuer (partnership)

% of Partnership

Interests Owned

% of Partnership

Interests Pledged

N/A

   

  

 
 

--------------------------------------------------------------------------------

 

 

 

SCHEDULE II
to Security Agreement

 

Item A Location of Grantor.

 

Name of Grantor:

Location for purposes of

UCC or PPSA:

 

 

     

Item B Filing locations last five years.

 

Name of Grantor:

Filing locations last five

years

         

Item C Trade names.

 

Name of Grantor:

Trade Names:

 

 

 

     

Item D Merger or other corporate reorganization.

 

Name of Grantor:

Merger or other corporate

reorganization:

         

Item E Taxpayer ID numbers.

 

Name of Grantor:

Taxpayer ID numbers:

 

         

Item F Government Contracts.

 

Name of Grantor:

Description of Contract:

 

       

  

 
28

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Item G Deposit Accounts and Securities Accounts.

 

Name of Grantor:

Description of Deposit

Accounts and Securities

Accounts:

 

                         

Item H Letter of Credit Rights.

 

Name of Grantor:

Description of Deposit

Accounts and Securities

Accounts:

 

         

Item I Commercial Tort Claims.

 

Name of Grantor:

Description of Commercial

Tort Claims:

 

       

 

 
29

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SCHEDULE III
to Security Agreement

 

Item A Patents

 

Issued Patents

 

Pending Patent Applications

 

Item B Patent Licenses

 

 
30

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SCHEDULE IV
to Security Agreement

 

Item A Trademarks

 

Registered Trademarks

 

 

Country

 

Trademark

Registration No.

Registration Date

               

 

 

Pending Trademark Applications

 

 

Country

 

Trademark

Application No.

Filing Date

               

 

 

Domain Names

 

Item B Trademark Licenses

 

 
31

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SCHEDULE V
to Security Agreement

 

Item A Copyrights/Mask Works

 

Issued Copyrights/Mask Works

 

Pending Copyrights/Mask Works Registration Applications

 

Item B Copyrights/Mask Work Licenses

 

 
32

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SCHEDULE VI
to Security Agreement

 

Trade Secret or Know-How Licenses

 

 
33

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EXHIBIT A
to Security Agreement

 

PATENT SECURITY AGREEMENT

 

This PATENT SECURITY AGREEMENT, dated as of_______, 201_ (this Agreement”), is
made by [NAME OF GRANTOR], a _______ corporation (the “Grantor”), in favor of
PCOF 1, LLC (together with its successors, transferees or assignees, the
“Secured Party”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to a Credit Agreement and Guaranty, dated as of July 25, 2014
(as amended or otherwise modified from time to time, the “Credit Agreement”), by
and among the Borrower, each Guarantor party thereto and the Secured Party, the
Secured Party has extended Commitments to make Loans to the Borrower;

 

WHEREAS, in connection with the Credit Agreement, the Grantor has executed and
delivered a Pledge and Security Agreement, dated as of July 25, 2014 (as amended
or otherwise modified from time to time, the “Security Agreement”);

 

WHEREAS, pursuant to the Credit Agreement and pursuant to clause (d) of
Section 4.5 of the Security Agreement, the Grantor is required to execute and
deliver this Agreement and to grant to the Secured Party a continuing security
interest in all of the Patent Collateral (as defined below) to secure all
Obligations; and

 

WHEREAS, the Grantor has duly authorized the execution, delivery and performance
of this Agreement; and

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Grantor agrees, for the benefit of the
Secured Party, as follows:

 

SECTION 1. Definitions. Unless otherwise defined herein or the context otherwise
requires, terms used in this Agreement, including its preamble and recitals,
have the meanings provided in the Security Agreement.

 

SECTION 2. Grant of Security Interest. The Grantor hereby assigns, pledges,
hypothecates, charges, mortgages, delivers, and transfers to the Secured Party,
and hereby grants to the Secured Party, a continuing security interest in all of
the following property, whether now or hereafter existing or acquired by the
Grantor (the “Patent Collateral”):

 

(a)     all of its letters patent and applications for letters patent throughout
the world, including each patent and patent application referred to in Item A of
Schedule I;

 

(b)     all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
clause (a);

 

(c)     all of its patent licenses, and other agreements providing the Grantor
with the right to use any items of the type referred to in clauses (a) and (b)
above, including each patent license referred to in Item B of Schedule I; and

 

 
A-1

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(d)     all Proceeds of, and rights associated with, the foregoing (including
license royalties and Proceeds of infringement suits), the right to sue third
parties for past, present or future infringements of any patent or patent
application, and for breach or enforcement of any patent license.

 

SECTION 3. Security Agreement. This Agreement has been executed and delivered by
the Grantor for the purpose of registering the security interest of the Secured
Party in the Patent Collateral with the United States Patent and Trademark
Office and corresponding offices in other countries of the world. The security
interest granted hereby has been granted as a supplement to, and not in
limitation of, the security interest granted to the Secured Party under the
Security Agreement. The Security Agreement (and all rights and remedies of the
Secured Party thereunder) shall remain in full force and effect in accordance
with its terms.

 

SECTION 4. Release of Liens. Upon (i) the Disposition of Patent Collateral in
accordance with the Credit Agreement or (ii) the occurrence of the Termination
Date, the security interests granted herein shall automatically terminate with
respect to (A) such Patent Collateral (in the case of clause (i)) or (B) all
Patent Collateral (in the case of clause (ii)). Upon any such Disposition or
termination, the Secured Party will, at the Grantor’s sole expense, deliver to
the Grantor, without any representations, warranties or recourse of any kind
whatsoever, all Patent Collateral held by the Secured Party hereunder, and
execute and deliver to the Grantor such Documents as the Grantor shall
reasonably request to evidence such termination.

 

SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge and
affirm that the rights and remedies of the Secured Party with respect to the
security interest in the Patent Collateral granted hereby are more fully set
forth in the Security Agreement, the terms and provisions of which (including
the remedies provided for therein) are incorporated by reference herein as if
fully set forth herein.

 

SECTION 6. Loan Document. This Agreement is a Loan Document executed pursuant to
the Credit Agreement and shall (unless otherwise expressly indicated herein) be
construed, administered and applied in accordance with the terms and provisions
thereof, including Article X thereof.

 

SECTION 7. Counterparts. This Agreement may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original and all of
which shall constitute together but one and the same agreement.

 

*     *     *     *     *

 

 
A-2

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IN WITNESS WHEREOF, each of the parties here to has caused this Agreement to be
duly executed and delivered by its Authorized Officer as of the date first above
written.

 

[NAME OF GRANTOR]

   

By:

   

Name:

 

Title:

   

PCOF 1, LLC

 

By:

   

Name:

 

Title:

 

 
A-3

--------------------------------------------------------------------------------

 

 

SCHEDULE I
to Patent Security Agreement

 

Item A Patents

 

Issued Patents

 

     

Country

Patent No.

Issue Date

Inventor(s)

Title

                                       

Pending Patent Applications

 

Country

Serial No.

Filing Date

Inventor(s)

Title

                             

Item B Patent Licenses

 

Country or

Territory

Licensor

Licensee

Effective Date

Expiration

Date

Subject Matter

                       

  

 
A-4

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EXHIBIT B
to Security Agreement

 

TRADEMARK SECURITY AGREEMENT

 

This TRADEMARK SECURITY AGREEMENT, dated as of _______, 201_ (this “Agreement”),
is made by [GRANTOR], a _______ corporation (the “Grantor”), in favor of PCOF 1,
LLC (together with its successors, transferees or assignees, the “Secured
Party”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to a Credit Agreement and Guaranty, dated as of July 25, 2014
(as amended or otherwise modified from time to time, the “Credit Agreement”), by
and among the Borrower, each Guarantor party thereto and the Secured Party, the
Secured Party has extended Commitments to make Loans to the Borrower;

 

WHEREAS, in connection with the Credit Agreement, the Grantor has executed and
delivered a Pledge and Security Agreement, dated as of July 25, 2014 (as amended
or otherwise modified from time to time, the “Security Agreement”);

 

WHEREAS, pursuant to the Credit Agreement and pursuant to clause (d) of
Section 4.5 of the Security Agreement, the Grantor is required to execute and
deliver this Agreement and to grant to the Secured Party a continuing security
interest in all of the Trademark Collateral (as defined below) to secure all
Obligations; and

 

WHEREAS, the Grantor has duly authorized the execution, delivery and performance
of this Agreement; and

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Grantor agrees, for the benefit of the
Secured Party, as follows:

 

SECTION 1. Definitions. Unless otherwise defined herein or the context otherwise
requires, terms used in this Agreement, including its preamble and recitals,
have the meanings provided in the Security Agreement.

 

SECTION 2. Grant of Security Interest. The Grantor hereby assigns, pledges,
hypothecates, charges, mortgages, delivers, and transfers to the Secured Party,
and hereby grants to the Secured Party, a continuing security interest in all of
the following property, whether now or hereafter existing or acquired by the
Grantor (the “Trademark Collateral”):

 

(a)     (i) all of its trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos and other source or business
identifiers of the Grantor, and all goodwill of the business associated
therewith, now existing or hereafter adopted or acquired including those
referred to in Item A of Schedule I, whether currently in use or not, all
registrations and recordings thereof and all applications in connection
therewith, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any office or agency of the United
States of America or any State thereof or any other country or political
subdivision thereof or otherwise, and all common-law rights relating to the
foregoing, and (ii) the right to obtain all reissues, extensions or renewals of
the foregoing (collectively referred to as the “Trademark”);

 

 
B-1

--------------------------------------------------------------------------------

 

  

(b)     all Trademark licenses for the grant by or to the Grantor of any right
to use any Trademark, including each Trademark license referred to in Item B of
Schedule I;

 

(c)     all of the goodwill of the business connected with the use of, and
symbolized by the items described in, clause (a), and to the extent applicable
clause (b);

 

(d)     the right to sue third parties for past, present and future
infringements of any Trademark Collateral described in clause (a) and, to the
extent applicable, clause (b); and

 

(e)     all Proceeds of, and rights associated with, the foregoing, including
any claim by the Grantor against third parties for past, present or future
infringement or dilution of any Trademark, Trademark registration or Trademark
license, or for any injury to the goodwill associated with the use of any such
Trademark or for breach or enforcement of any Trademark license and all rights
corresponding thereto throughout the world.

 

SECTION 3. Security Agreement. This Agreement has been executed and delivered by
the Grantor for the purpose of registering the security interest of the Secured
Party in the Trademark Collateral with the United States Patent and Trademark
Office and corresponding offices in other countries of the world. The security
interest granted hereby has been granted as a supplement to, and not in
limitation of, the security interest granted to the Secured Party under the
Security Agreement. The Security Agreement (and all rights and remedies of the
Secured Party thereunder) shall remain in full force and effect in accordance
with its terms.

 

SECTION 4. Release of Liens. Upon (i) the Disposition of Trademark Collateral in
accordance with the Credit Agreement or (ii) the occurrence of the Termination
Date, the security interests granted herein shall automatically terminate with
respect to (A) such Trademark Collateral (in the case of clause (i)) or (B) all
Trademark Collateral (in the case of clause (ii)). Upon any such Disposition or
termination, the Secured Party will, at the Grantor’s sole expense, deliver to
the Grantor, without any representations, warranties or recourse of any kind
whatsoever, all Trademark Collateral held by the Secured Party hereunder, and
execute and deliver to the Grantor such Documents as the Grantor shall
reasonably request to evidence such termination.

 

SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge and
affirm that the rights and remedies of the Secured Party with respect to the
security interest in the Trademark Collateral granted hereby are more fully set
forth in the Security Agreement, the terms and provisions of which (including
the remedies provided for therein) are incorporated by reference herein as if
fully set forth herein.

 

SECTION 6. Loan Document. This Agreement is a Loan Document executed pursuant to
the Credit Agreement and shall (unless otherwise expressly indicated herein) be
construed, administered and applied in accordance with the terms and provisions
thereof, including Article X thereof.

 

SECTION 7. Counterparts. This Agreement may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original and all of
which shall constitute together but one and the same agreement.

 

*     *     *     *     *

 

 
B-2

--------------------------------------------------------------------------------

 

  

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
duly executed and delivered by Authorized Officer as of the date first above
written.

 

[NAME OF GRANTOR]

   

By:

   

Name:

 

Title:

   

PCOF 1, LLC

   

By:

   

Name:

 

Title:

  

 
B-3

--------------------------------------------------------------------------------

 

  

SCHEDULE I
to Trademark Security Agreement

 

Item A Trademarks

 

Registered Trademarks

 

Country

Trademark

Registration No.

Registration Date

                       

Pending Trademark Applications

 

Country

Trademark

Serial No.

Filing Date

                       

Item B Trademark Licenses

 

Country or

Territory

Trademark

Licensor

Licensee

Effective Date

Expiration

Date

                                   

  

 
B-4

--------------------------------------------------------------------------------

 

  

EXHIBIT C
to Security Agreement

 

COPYRIGHT SECURITY AGREEMENT

 

This COPYRIGHT SECURITY AGREEMENT, dated as of _______, 201_ (this “Agreement”),
is made by [GRANTOR], a _______ corporation (the “Grantor”), in favor of PCOF 1,
LLC (together with its successors, transferees or assignees, the “Secured
Party”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to a Credit Agreement and Guaranty, dated as of July 25, 2014
(as amended or otherwise modified from time to time, the “Credit Agreement”), by
and among the Borrower, each Guarantor party thereto and the Secured Party, the
Secured Party has extended Commitments to make Loans to the Borrower;

 

WHEREAS, in connection with the Credit Agreement, the Grantor has executed and
delivered a Pledge and Security Agreement, dated as of July 25, 2014 (as amended
or otherwise modified from time to time, the “Security Agreement”);

 

WHEREAS, pursuant to the Credit Agreement and pursuant to clause (d) of
Section 4.5 of the Security Agreement, the Grantor is required to execute and
deliver this Agreement and to grant to the Secured Party a continuing security
interest in all of the Copyright Collateral (as defined below) to secure all
Obligations; and

 

WHEREAS, the Grantor has duly authorized the execution, delivery and performance
of this Agreement; and

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Grantor agrees, for the benefit of the
Secured Party, as follows:

 

SECTION 1. Definitions. Unless otherwise defined herein or the context otherwise
requires, terms used in this Agreement, including its preamble and recitals,
have the meanings provided in the Security Agreement.

 

SECTION 2. Grant of Security Interest. The Grantor hereby assigns, pledges,
hypothecates, charges, mortgages, delivers, and transfers to the Secured Party,
and hereby grants to the Secured Party, a continuing security interest in all of
the following (the “Copyright Collateral”), whether now or hereafter existing or
acquired by the Grantor: all copyrights owned by the Grantor, whether statutory
or common law, registered or unregistered and whether published or unpublished,
now or hereafter in force throughout the world including all of the Grantor’s
right, title and interest in and to all copyrights registered in the United
States Copyright Office or anywhere else in the world and also including the
copyrights referred to in Item A of Schedule I, and registrations and recordings
thereof and all applications for registration thereof, all copyright licenses,
including each copyright license referred to in Item B of Schedule I, the right
to sue for past, present and future infringements of any of the foregoing, all
rights corresponding thereto, all extensions and renewals of any thereof and all
Proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and Proceeds of suit.

 

 
 

--------------------------------------------------------------------------------

 

  

SECTION 3. Security Agreement. This Agreement has been executed and delivered by
the Grantor for the purpose of registering the security interest of the Secured
Party in the Copyright Collateral with the United States Copyright Office and
corresponding offices in other countries of the world. The security interest
granted hereby has been granted as a supplement to, and not in limitation of,
the security interest granted to the Secured Party under the Security Agreement.
The Security Agreement (and all rights and remedies of the Secured Party
thereunder) shall remain in full force and effect in accordance with its terms.

 

SECTION 4. Release of Liens. Upon (i) the Disposition of Copyright Collateral in
accordance with the Credit Agreement or (ii) the occurrence of the Termination
Date, the security interests granted herein shall automatically terminate with
respect to (A) such Copyright Collateral (in the case of clause (i)) or (B) all
Copyright Collateral (in the case of clause (ii)). Upon any such Disposition or
termination, the Secured Party will, at the Grantor’s sole expense, deliver to
the Grantor, without any representations, warranties or recourse of any kind
whatsoever, all Copyright Collateral held by the Secured Party hereunder, and
execute and deliver to the Grantor such Documents as the Grantor shall
reasonably request to evidence such termination.

 

SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge and
affirm that the rights and remedies of the Secured Party with respect to the
security interest in the Copyright Collateral granted hereby are more fully set
forth in the Security Agreement, the terms and provisions of which (including
the remedies provided for therein) are incorporated by reference herein as if
fully set forth herein.

 

SECTION 6. Loan Document. This Agreement is a Loan Document executed pursuant to
the Credit Agreement and shall (unless otherwise expressly indicated herein) be
construed, administered and applied in accordance with the terms and provisions
thereof, including Article X thereof.

 

SECTION 7. Counterparts. This Agreement may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original and all of
which shall constitute together but one and the same agreement.

 

*     *     *     *     *

 

 
C-2

--------------------------------------------------------------------------------

 

  

IN WITNESS WHEREOF, each of the parties here to has caused this Agreement to be
duly executed and delivered by its Authorized Officer as of the date first above
written.

 

[NAME OF GRANTOR]

   

By:

   

Name:

 

Title:

   

PCOF 1, LLC

   

By:

   

Name:

 

Title:

 

 
C-3

--------------------------------------------------------------------------------

 

 

SCHEDULE I
to Copyright Security Agreement

 

Item A Copyrights/Mask Works

 

Registered Copyrights/Mask Works

 

Country

Registration No.

Registration Date

Author(s)

Title

                             

Copyright/Mask Work Pending Registration Applications

 

Country

Serial No.

Filing Date

Author(s)

Title

                             

Item B Copyright/Mask Work Licenses

 

Country or

Territory

Licensor

Licensee

Effective Date

Expiration Date

                             

  

 
C-4

--------------------------------------------------------------------------------

 

  

ANNEX I
to Security Agreement

 

SUPPLEMENT TO

PLEDGE AND SECURITY AGREEMENT

 

This SUPPLEMENT, dated as of _______, 201_ (this “Supplement”), is to the Pledge
and Security Agreement, dated as of July 25, 2014 (as amended or otherwise
modified from time to time, the “Security Agreement”), among the Grantors (such
term, and other terms used in this Supplement, to have the meanings set forth in
Article I of the Security Agreement) from time to time party thereto, in favor
of the Secured Party (together with its successors, transferees or assignees,
the “Secured Party”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to a Credit Agreement and Guaranty, dated as of July 25, 2014
(as amended or otherwise modified from time to time, the “Credit Agreement”), by
and among the Borrower, each Guarantor party thereto and the Secured Party, the
Secured Party has extended Commitments to make Loans to the Borrower; and

 

WHEREAS, pursuant to the provisions of Section 7.6 of the Security Agreement,
each of the undersigned is becoming a Grantor under the Security Agreement; and

 

WHEREAS, each of the undersigned desires to become a “Grantor” under the
Security Agreement in order to induce the Secured Party to continue to extend
Loans under the Credit Agreement;

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, each of the undersigned agrees, for the benefit
of the Secured Party, as follows.

 

SECTION 1. Party to Security Agreement, etc. In accordance with the terms of the
Security Agreement, by its signature below each of the undersigned hereby
irrevocably agrees to become a Grantor under the Security Agreement with the
same force and effect as if it were an original signatory thereto and each of
the undersigned hereby (i) agrees to be bound by and comply with all of the
terms and provisions of the Security Agreement applicable to it as a Grantor and
(ii) represents and warrants that the representations and warranties made by it
as a Grantor thereunder are true and correct as of the date hereof, unless
stated to relate solely to an earlier date, in which case such representations
and warranties shall be true and correct as of such earlier date. In furtherance
of the foregoing, each reference to a “Grantor” and/or “Grantors” in the
Security Agreement shall be deemed to include each of the undersigned.

 

SECTION 2. Representations. Each of the undersigned Grantor hereby represents
and warrants that this Supplement has been duly authorized, executed and
delivered by it and that this Supplement and the Security Agreement constitute
the legal, valid and binding obligation of each of the undersigned, enforceable
against it in accordance with its terms.

 

SECTION 3. Full Force of Security Agreement. Except as expressly supplemented
hereby, the Security Agreement shall remain in full force and effect in
accordance with its terms.

 

 
Annex I-1 

--------------------------------------------------------------------------------

 

  

SECTION 4. Severability. Wherever possible each provision of this Supplement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Supplement shall be prohibited by
or invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Supplement or the Security
Agreement.

 

SECTION 5. Governing Law, Entire Agreement, etc. THIS SUPPLEMENT SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK). This Supplement and the other Loan
Documents constitute the entire understanding among the parties hereto with
respect to the subject matter thereof and supersede any prior agreements,
written or oral, with respect thereto.

 

SECTION 6. Counterparts. This Supplement may be executed by the parties hereto
in several counterparts, each of which shall be deemed to be an original and all
of which shall constitute together but one and the same agreement.

 

*     *     *     *     *

 

 
Annex I-2

--------------------------------------------------------------------------------

 

  

IN WITNESS WHEREOF, each of the parties here to has caused this Agreement to be
duly executed and delivered by its Authorized Officer as of the date first above
written.

 

 

[NAME OF ADDITIONAL SUBSIDIARY]

         

By:

     

Name:

   

Title:

         

[NAME OF ADDITIONAL SUBSIDIARY]

         

By:

     

Name:

   

Title:

 

ACCEPTED AND AGREED

   

PCOF 1, LLC

   

By:

     

Name:

   

Title:

 

  

 
Annex I-3

--------------------------------------------------------------------------------

 

 

EXHIBIT E

 

FORM OF CLOSING DATE WARRANT AGREEMENT

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS
(I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND
IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT
AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW.

 

Warrant Certificate No.: 1

 

Original Issue Date: July 25, 2014

 

FOR VALUE RECEIVED, VBI VACCINES INC., a Delaware corporation (the "Company"),
hereby certifies that PCOF 1, LLC or its permitted transferees and assigns (the
"Holder") is entitled to purchase from the Company up to 699,281 duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
(defined below) at a per share purchase price of $2.145 (subject to adjustment
as provided herein, the "Exercise Price"), all subject to the terms, conditions
and adjustments set forth below in this Warrant (defined below). Certain
capitalized terms used herein are defined in Section 0 hereof.

 

Definitions. As used in this Warrant, the following terms have the following
meanings:

 

“Acknowledgement” has the meaning set forth in Section 3(e).

 

"Aggregate Exercise Price" means, with respect to any exercise of this Warrant,
an amount equal to the product of (i) the number of Warrant Shares in respect of
which this Warrant is then being exercised pursuant to Section 0 hereof,
multiplied by (ii) the Exercise Price in effect as of the Exercise Date.

 

“Assignment” has the meaning set forth in Section 7.

 

"Board" means the board of directors of the Company.

 

"Business Day" means any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed in New York,
New York.

 

 
1 

--------------------------------------------------------------------------------

 

  

“Cashless Method” means, as the context may require, one or both of the Exercise
Price payment methods described in clauses (ii) and (iii) of Section 3(b).

 

"Commission" means the Securities and Exchange Commission or any other federal
agency administering the Securities Act and the Exchange Act at the time.

 

"Common Stock" means the common stock, par value $0.0001 per share, of the
Company, and any capital stock into which such Common Stock shall have been
converted, exchanged or reclassified following the date hereof.

 

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

 

"Convertible Securities" means any securities, whether debt, equity or other
securities (directly or indirectly) convertible into or exchangeable for Common
Stock, but excluding Options.

 

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

 

“Credit Agreement” means the Credit Agreement and Guaranty dated as of the date
hereof among Variation Biotechnologies (US), Inc., as borrower, PCOF 1, LLC, as
lender, the Company, as guarantor and the other guarantors party thereto.

 

"Demand Registration" has the meaning set forth in Section 6(a)(ii).

 

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

 

"Exercise Date" means, for any given exercise of this Warrant, the date on which
the conditions to such exercise as set forth in Section 0 shall have been
satisfied at or prior to 5:00 p.m., New York time, on a Business Day, including,
without limitation, the receipt by the Company of the Subscription Agreement,
the Warrant and the Aggregate Exercise Price.

 

"Exercise Period" has the meaning set forth in Section 0.

 

"Exercise Price" has the meaning set forth in the preamble.

 

"Fair Market Value" means, as of any particular date: (i) the volume weighted
average of the closing sales prices of the Common Stock for such day on all
domestic securities exchanges on which the Common Stock may at the time be
listed; (ii) if there have been no sales of the Common Stock on any such
exchange on any such day, the average of the highest bid and lowest asked prices
for the Common Stock on all such exchanges at the end of such day; (iii) if on
any such day the Common Stock is not listed on a domestic securities exchange,
the closing sales price of the Common Stock as quoted on Nasdaq, the OTC
Bulletin Board, the “pink sheets” or similar quotation system or association for
such day; or (iv) if there have been no sales of the Common Stock on Nasdaq, the
OTC Bulletin Board, the “pink sheets” or similar quotation system or association
on such day, the average of the highest bid and lowest asked prices for the
Common Stock quoted on Nasdaq, the OTC Bulletin Board, the “pink sheets” or
similar quotation system or association at the end of such day; in each case,
averaged over twenty (20) consecutive Business Days ending on the Business Day
immediately prior to the day as of which "Fair Market Value" is being
determined; provided, that if the Common Stock is listed on any domestic
securities exchange, the term "Business Day" as used in this sentence means
Business Days on which such exchange is open for trading. If at any time the
Common Stock is not listed on any domestic securities exchange or quoted on
Nasdaq, the OTC Bulletin Board, the “pink sheets” or similar quotation system or
association, the "Fair Market Value" of the Common Stock shall be the fair
market value per share as determined jointly by the Board and the Holder.

 

 
2

--------------------------------------------------------------------------------

 

  

"Holder" has the meaning set forth in the preamble.

 

"Indemnified Liabilities" has the meaning set forth in Section 18(b).

 

"Indemnitees" has the meaning set forth in Section 18(b).

 

“Inspectors” has the meaning set forth in Section 6(c)(viii).

 

“Long-Form Registration” has the meaning set forth in Section 6(a)(i).

 

“Merger Agreement Demand” means any demand for registration under the Securities
Act of Registrable Securities pursuant to Section 6.14 of the Merger Agreement
(as defined in the Credit Agreement).

 

"Nasdaq" means The Nasdaq Stock Market, Inc.

 

"Options" means any warrants or other rights or options to subscribe for or
purchase Common Stock or Convertible Securities.

 

"Original Issue Date" means the date hereof.

 

"OTC Bulletin Board" means the National Association of Securities Dealers, Inc.
OTC Bulletin Board.

 

"Person" means any individual, sole proprietorship, partnership, limited
liability company, corporation, joint venture, trust, incorporated organization
or government or department or agency thereof.

 

“Piggyback Registration” has the meaning set forth in Section 6(b)(i).

 

"Prospectus" means the prospectus or prospectuses included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus or prospectuses.

 

 
3

--------------------------------------------------------------------------------

 

  

“Records” has the meaning set forth in Section 6(c)(viii).

 

"Registrable Securities" means (x) any shares of Common Stock held by any Person
or issuable upon conversion, exercise or exchange of any securities owned by any
Person at any time (including Warrant Shares exercisable upon exercise of this
Warrant), and (y) any shares of Common Stock issued or issuable with respect to
any shares described in subsection (x) above by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization (it being understood that for purposes of
this Warrant, a Person shall be deemed to be a holder of Registrable Securities
whenever such Person has the right to then acquire or obtain from the Company
any Registrable Securities, whether or not such acquisition has actually been
effected). As to any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (i) a Registration Statement covering
such securities has been declared effective by the Commission and such
securities have been disposed of pursuant to such effective Registration
Statement, (ii) such securities are sold under circumstances in which all of the
applicable conditions of Rule 144 (or any similar provisions then in force)
under the Securities Act are met, (iii) such securities are otherwise
transferred and such securities may be resold without subsequent registration
under the Securities Act, or (iv) such securities shall have ceased to be
outstanding.

 

"Registration Statement" means any registration statement of the Company which
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all materials incorporated by reference in such Registration Statement.

 

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

 

“Short-Form Registration” has the meaning set forth in Section 6(a)(ii).

 

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

 

"Subscription Agreement" has the meaning set forth in Section 3(a)(i).

 

"Warrant" means this Warrant and all warrants issued upon division or
combination of, or in substitution for, this Warrant.

 

"Warrant Shares" means the shares of Common Stock or other capital stock of the
Company purchasable upon exercise of this Warrant in accordance with its terms.

 

2.     Term of Warrant. Subject to the terms and conditions hereof, at any time
or from time to time after the date hereof up to and including 5:00 p.m., New
York time, on the fifth (5th) anniversary of the Original Issue Date or, if such
day is not a Business Day, on the next preceding Business Day (the "Exercise
Period"), the Holder of this Warrant may exercise this Warrant for all or any
part of the Warrant Shares purchasable hereunder (subject to adjustment as
provided herein).

 

 
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3.   Exercise of Warrant.        

(a)

Exercise Procedure. This Warrant may be exercised from time to time on any
Business Day during the Exercise Period, for all or any part of the unexercised
Warrant Shares, upon:

        (i) surrender of this Warrant to the Company at its then principal
executive offices (or an indemnification undertaking with respect to this
Warrant in the case of its loss, theft or destruction), together with a
Subscription Agreement in the form attached hereto as Exhibit A (each, a
"Subscription Agreement"), duly completed (including specifying the number of
Warrant Shares to be purchased) and executed; and         (ii) payment to the
Company of the Aggregate Exercise Price in accordance with Section Section
1.01(a)(ii).         (b) Payment of the Aggregate Exercise Price. Payment of the
Aggregate Exercise Price shall be made, at the option of the Holder as expressed
in the Subscription Agreement, by the following methods:         (i) by delivery
to the Company of a certified or official bank check payable to the order of the
Company or by wire transfer of immediately available funds to an account
designated in writing by the Company, in the amount of such Aggregate Exercise
Price;         (ii) by instructing the Company to withhold a number of Warrant
Shares then issuable upon exercise of this Warrant with an aggregate Fair Market
Value as of the Exercise Date equal to such Aggregate Exercise Price;        
(iii) by surrendering to the Company (x) Warrant Shares previously acquired by
the Holder with an aggregate Fair Market Value as of the Exercise Date equal to
such Aggregate Exercise Price and/or (y) other securities or debt obligations of
the Company (including loans outstanding under the Credit Agreement) having a
value as of the Exercise Date equal to the Aggregate Exercise Price (which value
in the case of debt securities or obligations shall be the principal amount
thereof plus accrued and unpaid interest, in the case of preferred stock shall
be the liquidation value thereof plus accumulated and unpaid dividends and in
the case of shares of Common Stock shall be the Fair Market Value thereof); or  
      (iv) any combination of the foregoing;

 

 
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provided; however; that the Holder may only use the Cashless Method to pay the
Exercise Price for up to (but not in excess of) 279,706 Warrant Shares (subject
to proportionate adjustment for any stock split, dividend, distribution,
subdivision, recapitalization or combination).

 

In the event of any withholding of Warrant Shares or surrender of other equity
securities pursuant to clause (ii), (iii) or (iv) above where the number of
shares whose value is equal to the Aggregate Exercise Price is not a whole
number, the number of shares withheld by or surrendered to the Company shall be
rounded up to the nearest whole share and the Company shall make a cash payment
to the Holder (by delivery of a certified or official bank check or by wire
transfer of immediately available funds) based on the incremental fraction of a
share being so withheld by or surrendered to the Company in an amount equal to
the product of (x) such incremental fraction of a share being so withheld or
surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value
per Warrant Share as of the Exercise Date, and, in all other cases, the value
thereof as of the Exercise Date determined in accordance with clause (iii)(y)
above.

 

(c)     Delivery of Stock Certificates. Upon receipt by the Company of the
Subscription Agreement, surrender of this Warrant and payment of the Aggregate
Exercise Price (in accordance with Section Section 1.01(a) hereof), the Company
shall, as promptly as practicable, and in any event within three (3) Business
Days thereafter, execute (or cause to be executed) and deliver (or cause to be
delivered) to the Holder a certificate or certificates representing the Warrant
Shares issuable upon such exercise, together with cash in lieu of any fraction
of a share, as provided in Section Section 1.01(c) hereof. The stock certificate
or certificates so delivered shall be, to the extent possible, in such
denomination or denominations as the exercising Holder shall reasonably request
in the Subscription Agreement and shall be registered in the name of the Holder
or, subject to compliance with Section 0 below, such other Person's name as
shall be designated in the Subscription Agreement. This Warrant shall be deemed
to have been exercised and such certificate or certificates of Warrant Shares
shall be deemed to have been issued, and the Holder or any other Person so
designated to be named therein shall be deemed to have become a holder of record
of such Warrant Shares for all purposes, as of the Exercise Date.

 

(d)     Fractional Shares. The Company shall not be required to issue a
fractional Warrant Share upon exercise of any Warrant. As to any fraction of a
Warrant Share that the Holder would otherwise be entitled to purchase upon such
exercise, the Company shall pay to such Holder an amount in cash (by delivery of
a certified or official bank check or by wire transfer of immediately available
funds) equal to the product of (i) such fraction multiplied by (ii) the Fair
Market Value of one Warrant Share on the Exercise Date.

 

(e)     Acknowledgement; Partial Exercise. Unless the purchase rights
represented by this Warrant shall have expired or shall have been fully
exercised, the Company shall, at the time of delivery of the certificate or
certificates representing the Warrant Shares being issued in accordance with
Section Section 1.01(c) hereof, deliver to the Holder within a reasonable time
an acknowledgement in substantially the form attached hereto as Exhibit B (each,
an “Acknowledgement”) indicating the number of Warrant Shares which remain
issuable upon exercise of this Warrant, if any.

 

 
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(f)     Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With
respect to the exercise of this Warrant, the Company hereby represents,
covenants and agrees:

 

(i)     This Warrant is, and any Warrant issued in substitution for or
replacement of this Warrant shall be, upon issuance, duly authorized and validly
issued.

 

(ii)     All Warrant Shares issuable upon the exercise of this Warrant pursuant
to the terms hereof shall be, upon issuance, and the Company shall take all such
actions as may be necessary or appropriate in order that such Warrant Shares
are, validly issued, fully paid and non-assessable, issued without violation of
any preemptive or similar rights of any stockholder of the Company and free and
clear of all taxes, liens and charges.

 

(iii)     The Company shall take all such actions as may be necessary to ensure
that all such Warrant Shares are issued without violation by the Company of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock or other securities
constituting Warrant Shares may be listed at the time of such exercise (except
for official notice of issuance which shall be immediately delivered by the
Company upon each such issuance).

 

(iv)     Without in any way limiting Section 6 hereof, the Company shall use its
best efforts to cause the Warrant Shares, immediately upon such exercise, to be
listed on any domestic securities exchange upon which shares of Common Stock or
other securities constituting Warrant Shares are listed at the time of such
exercise.

 

(v)     The Company shall pay all expenses in connection with, and all taxes and
other governmental charges that may be imposed with respect to, the issuance or
delivery of Warrant Shares upon exercise of this Warrant; provided, that the
Company shall not be required to pay any tax or governmental charge that may be
imposed with respect to any applicable withholding or the issuance or delivery
of the Warrant Shares to any Person other than the Holder, and no such issuance
or delivery shall be made unless and until the Person requesting such issuance
has paid to the Company the amount of any such tax, or has established to the
satisfaction of the Company that such tax has been paid.

 

(g)     Conditional Exercise. Notwithstanding any other provision hereof, if an
exercise of any portion of this Warrant is to be made in connection with a
public offering or a sale of the Company (pursuant to a merger, sale of stock,
or otherwise), such exercise may at the election of the Holder be conditioned
upon the consummation of such transaction, in which case such exercise shall not
be deemed to be effective until immediately prior to the consummation of such
transaction.

 

 
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(h)     Reservation of Shares. During the Exercise Period, the Company shall at
all times reserve and keep available out of its authorized but unissued Common
Stock or other securities constituting Warrant Shares, solely for the purpose of
issuance upon the exercise of this Warrant, the maximum number of Warrant Shares
issuable upon the exercise of this Warrant, and the par value per Warrant Share
shall at all times be less than or equal to the applicable Exercise Price. The
Company shall not increase the par value of any Warrant Shares receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and shall
take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.

 

(i)     No “Bad Actor” Disqualification. The Company has exercised reasonable
care, in accordance with Commission rules and guidance, to determine whether any
Covered Person (as defined below) is subject to any of the “bad actor”
disqualifications described in Rule 506(d)(1)(i) through (viii) under the
Securities Act (“Disqualification Events”). To the Company’s knowledge, no
Covered Person is subject to a Disqualification Event. The Company has complied,
to the extent applicable, with all disclosure obligations under Rule 506(e)
under the Securities Act. “Covered Persons” are those persons specified in
Rule 506(d)(1) under the Securities Act, including the Company, any predecessor
or affiliate of the Company, any director, executive officer, other officer
participating in the offering, general partner or managing member of the
Company, any beneficial owner of 20% or more of the Company’s outstanding voting
equity securities, calculated on the basis of voting power, any promoter (as
defined in Rule 405 under the Securities Act) connected with the Company in any
capacity at the time of the exercise of this Warrant, and any person that has
been or will be paid (directly or indirectly) remuneration for solicitation of
purchasers in connection with the sale of any securities of the Company (a
“Solicitor”), any general partner or managing member of any Solicitor, and any
director, executive officer or other officer participating in the offering of
any Solicitor or general partner or managing member of any such Solicitor.

 

4.            Adjustment to Exercise Price and Number of Warrant Shares. The
Exercise Price and the number of Warrant Shares issuable upon exercise of this
Warrant shall be subject to adjustment from time to time as provided in this
Section 0.

 

(a)     Dividends and Distributions of Non-Company Securities. If, at any time
or from time to time after the Original Issue Date, the Company makes or
declares, or fixes a record date for the determination of holders of Common
Stock entitled to receive, a dividend or any other distribution payable in
securities of the Company (other than a dividend or distribution of shares of
Common Stock or Options or Convertible Securities in each case in respect of
Common Stock), cash or other property, then, and in each such event, provision
shall be made so that the Holder shall receive upon exercise of the Warrant, in
addition to the number of Warrant Shares receivable thereupon, the kind and
amount of securities of the Company, cash or other property which the Holder
would have been entitled to receive had the Warrant been exercised in full into
Warrant Shares on the date of such event and had the Holder thereafter, during
the period from the date of such event to and including the Exercise Date,
retained such securities, cash or other property receivable by them as aforesaid
during such period, giving application to all adjustments called for during such
period under this Section 0 with respect to the rights of the Holder; provided,
that no such provision shall be made if the Holder receives, simultaneously with
the distribution to the holders of Common Stock, a dividend or other
distribution of such securities, cash or other property in an amount equal to
the amount of such securities, cash or other property as the Holder would have
received if the Warrant had been exercised in full into Warrant Shares on the
date of such event.

 

 
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(b)     Adjustment to Exercise Price and Warrant Shares Upon Dividend,
Subdivision or Combination of Common Stock. If the Company shall, at any time or
from time to time after the Original Issue Date, (i) pay a dividend or make any
other distribution upon the Common Stock or any other capital stock of the
Company payable in shares of Common Stock or in Options or Convertible
Securities (in each case in respect of Common Stock), or (ii) subdivide (by any
stock split, recapitalization or otherwise) its outstanding shares of Common
Stock into a greater number of shares, the Exercise Price in effect immediately
prior to any such dividend, distribution or subdivision shall be proportionately
reduced and the number of Warrant Shares issuable upon exercise of this Warrant
shall be proportionately increased. If the Company at any time combines (by
combination, reverse stock split or otherwise) its outstanding shares of Common
Stock into a smaller number of shares, the Exercise Price in effect immediately
prior to such combination shall be proportionately increased and the number of
Warrant Shares issuable upon exercise of this Warrant shall be proportionately
decreased. Any adjustment under this Section 4(b) shall become effective at the
close of business on the date the dividend, subdivision or combination becomes
effective.

 

(c)     Adjustment to Exercise Price and Warrant Shares Upon Reorganization,
Reclassification, Consolidation or Merger. In the event of any (i) capital
reorganization of the Company, (ii) reclassification of the stock of the Company
(other than a change in par value or from par value to no par value or from no
par value to par value or as a result of a stock dividend or subdivision,
split-up or combination of shares), (iii) consolidation or merger of the Company
with or into another Person, (iv) sale of all or substantially all of the
Company's assets to another Person, (v) Change of Control (as defined in the
Credit Agreement) or (vi) other similar transaction, in each case which entitles
the holders of Common Stock to receive (either directly or upon subsequent
liquidation) cash, stock, securities or assets with respect to or in exchange
for Common Stock, each Warrant shall, immediately after such reorganization,
reclassification, consolidation, merger, sale, Change of Control or similar
transaction, remain outstanding and shall thereafter, in lieu of or in addition
to (as the case may be) the number of Warrant Shares then exercisable under this
Warrant, be exercisable for the amount of cash or the kind and number of shares
of stock or other securities or assets of the Company or of the successor Person
resulting from such transaction to which the Holder would have been entitled
upon such reorganization, reclassification, consolidation, merger, sale, Change
of Control or similar transaction if the Holder had exercised this Warrant in
full immediately prior to the time of such reorganization, reclassification,
consolidation, merger, sale, Change of Control or similar transaction and
acquired the applicable number of Warrant Shares then issuable hereunder as a
result of such exercise (without taking into account any limitations or
restrictions on the exercisability of this Warrant); and, in such case,
appropriate adjustment (in form and substance satisfactory to the Holder) shall
be made with respect to the Holder's rights under this Warrant to insure that
the provisions of this Section 0 hereof shall thereafter be applicable, as
nearly as possible, to this Warrant in relation to any cash, shares of stock,
securities or assets thereafter acquirable upon exercise of this Warrant
(including, in the case of any consolidation, merger, sale, Change of Control or
similar transaction in which the successor or purchasing Person is other than
the Company, an immediate adjustment in the Exercise Price to the value per
share for the Common Stock reflected by the terms of such consolidation, merger,
sale, Change of Control or similar transaction, and a corresponding immediate
adjustment to the number of Warrant Shares acquirable upon exercise of this
Warrant without regard to any limitations or restrictions on exercise, if the
value so reflected is less than the Exercise Price in effect immediately prior
to such consolidation, merger, sale, Change of Control or similar transaction).
The provisions of this Section 4(c) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, Changes of
Control or similar transactions. The Company shall not effect any such
reorganization, reclassification, consolidation, merger, sale, Change of Control
or similar transaction unless, prior to the consummation thereof, the successor
Person (if other than the Company) resulting from such reorganization,
reclassification, consolidation, merger, sale, Change of Control or similar
transaction, shall assume, by written instrument substantially similar in form
and substance to this Warrant and satisfactory to the Holder, the obligation to
deliver to the Holder such shares of stock, securities or assets which, in
accordance with the foregoing provisions, such Holder shall be entitled to
receive upon exercise of this Warrant. Notwithstanding anything to the contrary
contained herein, with respect to any corporate event or other transaction
contemplated by the provisions of this Section 4(c), the Holder shall have the
right to elect prior to the consummation of such event or transaction, to give
effect to the exercise rights contained in Section 0 instead of giving effect to
the provisions contained in this Section 4(c) with respect to this Warrant.

 

 
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(d)     Certain Events. If any event of the type contemplated by the provisions
of this Section 0 but not expressly provided for by such provisions occurs, then
the Board shall make an appropriate adjustment in the Exercise Price and the
number of Warrant Shares issuable upon exercise of this Warrant so as to protect
the rights of the Holder in a manner consistent with the provisions of this
Section 0; provided, that no such adjustment pursuant to this Section 4(d) shall
increase the Exercise Price or decrease the number of Warrant Shares issuable as
otherwise determined pursuant to this Section 0.

 

(e)     Certificate as to Adjustment.

 

(i)     As promptly as reasonably practicable following any adjustment of the
Exercise Price, but in any event not later than three (3) Business Days
thereafter, the Company shall furnish to the Holder a certificate of an
executive officer setting forth in reasonable detail such adjustment and the
facts upon which it is based and certifying the calculation thereof.

 

 
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(ii)     As promptly as reasonably practicable following the receipt by the
Company of a written request by the Holder, but in any event not later than
three (3) Business Days thereafter, the Company shall furnish to the Holder a
certificate of an executive officer certifying the Exercise Price then in effect
and the number of Warrant Shares or the amount, if any, of other shares of
stock, securities or assets then issuable upon exercise of the Warrant.  

 

  (f) Notices. In the event:        

(i)

that the Company shall take a record of the holders of its Common Stock (or
other capital stock or securities at the time issuable upon exercise of the
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, to vote at a meeting (or by written consent), to receive
any right to subscribe for or purchase any shares of capital stock of any class
or any other securities, or to receive any other security; or

        (ii) of any capital reorganization of the Company, any reclassification
of the Common Stock of the Company, any consolidation or merger of the Company
with or into another Person, or sale of all or substantially all of the
Company's assets to another Person; or         (iii) of the voluntary or
involuntary dissolution, liquidation or winding-up of the Company;

  

then, and in each such case, the Company shall send or cause to be sent to the
Holder at least ten (10) Business days prior to the applicable record date or
the applicable expected effective date, as the case may be, for the event, a
written notice specifying, as the case may be, (A) the record date for such
dividend, distribution, meeting or consent or other right or action, and a
description of such dividend, distribution or other right or action to be taken
at such meeting or by written consent, or (B) the effective date on which such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up is proposed to take place, and the date, if any is to
be fixed, as of which the books of the Company shall close or a record shall be
taken with respect to which the holders of record of Common Stock (or such other
capital stock or securities at the time issuable upon exercise of the Warrant)
shall be entitled to exchange their shares of Common Stock (or such other
capital stock or securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, and the amount per share and character of such
exchange applicable to the Warrant and the Warrant Shares.

 

5.     Purchase Rights. In addition to (and not in limitation or in lieu of) any
adjustments pursuant to Section 0 above, if at any time the Company grants,
issues or sells any shares of Common Stock, Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to the
record holders of Common Stock (the "Purchase Rights"), then the Holder shall be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder would have acquired if the Holder had
held the number of Warrant Shares acquirable upon complete exercise of this
Warrant immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.

 

 
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6.   Registration Rights.        

(a)

Demand Registration.

 

(i)     At any time after the one hundred eightieth (180) day following the
Original Issue Date, the Holder may request registration under the Securities
Act of all or any portion of the Warrant Shares on Form S-1 or any successor
form thereto (each a "Long-Form Registration"). Each request for a Long-Form
Registration shall specify the approximate number of Warrant Shares required to
be registered. Upon receipt of such request, the Company shall promptly (but in
no event later than five days following receipt thereof) deliver notice of such
request to all other holders of Registrable Securities having “piggy back”
rights or equivalent, if any, who shall then have ten days from the date such
notice is given to notify the Company in writing of their desire to be included
in such registration. The Company shall cause a Registration Statement on Form
S-1 (or any successor form) to be filed within 30 days after the date on which
the initial request is given and shall use its best efforts to cause such
Registration Statement to be declared effective by the Commission as soon as
practicable thereafter. The Company shall not be required to effect a Long-Form
Registration more than five times by the Holder; provided, that a Registration
Statement shall not count as a Long-Form Registration requested under this
Section Section 1.01(a)(i) unless and until it has become effective and the
Holder is able to register and sell at least 35% of the Warrant Shares requested
to be included in such registration.

 

(ii)     The Company shall use its best efforts to qualify and remain qualified
to register securities under the Securities Act pursuant to a Registration
Statement on Form S-3 or any successor form thereto. At such time as the Company
shall have qualified for the use of a Registration Statement on Form S-3, the
Holder shall have the right to request an unlimited number of registrations of
Warrant Shares on Form S-3 or any similar short-form registration (each a
"Short-Form Registration" and, together with each Long-Form Registration, a
"Demand Registration"). Each request for a Short-Form Registration shall specify
the approximate number of Warrant Shares requested to be registered. Upon
receipt of any such request, the Company shall promptly (but in no event later
than five days following receipt thereof) deliver notice of such request to all
other holders of Registrable Securities having “piggy back” rights or
equivalent, if any, who shall then have ten days from the date such notice is
given to notify the Company in writing of their desire to be included in such
registration. The Company shall cause a Registration Statement on Form S-3 (or
any successor form) to be filed within 30 days after the date on which the
initial request is given and shall use its best efforts to cause such
Registration Statement to be declared effective by the Commission as soon as
practicable thereafter.

 

 
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(iii)     The Company shall not be obligated to effect any Long-Form
Registration within 90 days after the effective date of a previous Long-Form
Registration or a previous Piggyback Registration in which the Holder was
permitted to register, and actually sold, at least 35% of the shares of
Registrable Securities requested to be included therein. The Company may
postpone for up to 60 days the filing or effectiveness of a Registration
Statement for a Demand Registration if the Company's Board determines in its
reasonable good faith judgment that such Demand Registration would (i)
materially interfere with a significant acquisition, corporate organization or
other similar transaction involving the Company; (ii) require premature
disclosure of material information that the Company has a bona fide business
purpose for preserving as confidential; or (iii) render the Company unable to
comply with requirements under the Securities Act or Exchange Act. The Company
may delay a Demand Registration hereunder only two times in any period of twelve
consecutive months.

 

(iv)     If the Holder elects to distribute Warrant Shares covered by its
request in an underwritten offering, it shall so advise the Company as a part of
its request made pursuant to Section Section 1.01(a)(i)(i) or Section 6(a)(ii).
The Holder shall select the investment banking firm or firms to act as the
managing underwriter or underwriters in connection with such offering.

 

(v)     The Company shall not include in any Demand Registration any securities
which are not Registrable Securities without the prior written consent of the
Holder, which consent shall not be unreasonably withheld or delayed. If a Demand
Registration involves an underwritten offering and the managing underwriter of
the requested Demand Registration advises the Company in writing that in its
opinion the number of shares of Common Stock proposed to be included in the
Demand Registration, including all Registrable Securities and all other shares
of Common Stock proposed to be included in such underwritten offering, exceeds
the number of shares of Common Stock which can be sold in such underwritten
offering and/or the number of shares of Common Stock proposed to be included in
such registration would adversely affect the price per share of the Registrable
Securities proposed to be sold in such underwritten offering, the Company shall
include in such Demand Registration (A) first, all of the Warrant Shares
requested to be included in such registration by the Holder, and (B) second, any
other Registrable Securities the Company may permit to be included in such
registration, allocated pro rata among the respective holders thereof on the
basis of the number of Registrable Securities owned by each such holder.

 

 

(b)

Piggyback Registration.

 

(i)     Whenever the Company proposes to register any shares of its Common Stock
under the Securities Act (other than a registration effected solely to implement
an employee benefit plan or a transaction to which Rule 145 of the Securities
Act is applicable, or a Registration Statement on Form S-4, S-8 or any successor
form thereto or another form not available for registering the Registrable
Securities for sale to the public), whether for its own account or for the
account of one or more stockholders of the Company and the form of Registration
Statement to be used may be used for any registration of Warrant Shares (a
"Piggyback Registration"), the Company shall give prompt written notice (in any
event no later than twenty (20) days prior to the filing of such Registration
Statement) to the Holder of its intention to effect such a registration and,
subject to Section 6(b)(ii) and Section 6(b)(iii), shall include in such
registration all Warrant Shares with respect to which the Company has received
written requests for inclusion from the Holder within ten days after the
Company's notice has been given to the Holder.

 

 
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(ii)     If a Piggyback Registration is initiated as a primary underwritten
offering on behalf of the Company and the managing underwriter advises the
Company and the Holder (if the Holder has elected to include Warrant Shares in
such Piggyback Registration) in writing that in its opinion the number of shares
of Common Stock proposed to be included in such registration, including all
Registrable Securities and all other shares of Common Stock proposed to be
included in such underwritten offering, exceeds the number of shares of Common
Stock which can be sold in such offering and/or that the number of shares of
Common Stock proposed to be included in any such registration would adversely
affect the price per share of the Common Stock to be sold in such offering, the
Company shall include in such registration (A) first, the number of shares of
Common Stock that the Company proposes to sell; (B) second, the number of shares
of Common Stock requested to be included therein by the Holder; and (C) third,
the number of shares of Common Stock requested to be included therein by holders
of Common Stock (other than Warrant Shares held by the Holder); provided, that
in any event the Holder shall be entitled to register at least 35% of the
securities to be included in any such registration.

 

(iii)     If a Piggyback Registration is initiated as an underwritten offering
on behalf of one or more holders of Common Stock other than Warrant Shares, and
the managing underwriter advises the Company in writing that in its opinion the
number of shares of Common Stock proposed to be included in such registration,
including all Warrant Shares and all other shares of Common Stock proposed to be
included in such underwritten offering, exceeds the number of shares of Common
Stock which can be sold in such offering and/or that the number of shares of
Common Stock proposed to be included in any such registration would adversely
affect the price per share of the Common Stock to be sold in such offering, the
Company shall, subject to the proviso below, include in such registration (i)
first, the number of shares of Common Stock requested to be included therein by
the Holder (on a fully diluted, as converted basis); and (ii) second, the number
of shares of Common Stock requested to be included therein by other holders of
Common Stock, allocated among such holders in such manner as they may agree;
provided that, in the event of a registration resulting from a Merger Agreement
Demand, the Company shall include in such registration, on a pro rata basis, (x)
those shares of Common Stock (other than Warrant Shares) of the holders thereof
requesting such Merger Agreement Demand, and (y) those Warrant Shares requested
to be included in such registration by the Holder.

 

(iv)     If any Piggyback Registration is initiated as a primary underwritten
offering on behalf of the Company, the Company shall select the investment
banking firm or firms to act as the managing underwriter or underwriters in
connection with such offering.

 

 
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(c)     Registration Procedures. If and whenever the Holder requests that any
Warrant Shares be registered pursuant to the provisions of this Warrant, the
Company shall use its best efforts to effect the registration and the sale of
such Warrant Shares in accordance with the intended method of disposition
thereof, and pursuant thereto the Company shall as soon as practicable:

 

(i)     subject to Section 6(a)(i) and Section 6(a)(ii), prepare and file with
the Commission a Registration Statement with respect to such Warrant Shares and
use its best efforts to cause such Registration Statement to become effective;

 

(ii)     prepare and file with the Commission such amendments, post-effective
amendments and supplements to such Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for a period of not less than thirty (30) days, or if
earlier, until all of such Warrant Shares have been disposed of and to comply
with the provisions of the Securities Act with respect to the disposition of
such Warrant Shares in accordance with the intended methods of disposition set
forth in such Registration Statement;

 

(iii)     at least fifteen (15) Business Days before filing such Registration
Statement, Prospectus or amendments or supplements thereto, furnish to counsel
of the Holder copies of such documents proposed to be filed, which documents
shall be subject to the review, comment and approval of such counsel;

 

(iv)     notify the Holder, promptly after the Company receives notice thereof,
of the time when such Registration Statement has been declared effective or a
supplement to any Prospectus forming a part of such Registration Statement has
been filed;

 

(v)     furnish to the Holder such number of copies of the Prospectus included
in such Registration Statement (including each preliminary Prospectus) and any
supplement thereto (in each case including all exhibits and documents
incorporated by reference therein) and such other documents as the Holder may
request in order to facilitate the disposition of the Warrant Shares;

 

(vi)     use its best efforts to register or qualify such Warrant Shares under
such other securities or "blue sky" laws of such jurisdictions as any selling
holder requests and do any and all other acts and things which may be necessary
or advisable to enable the Holder to consummate the disposition; provided, that
the Company shall not be required to qualify generally to do business, subject
itself to general taxation or consent to general service of process in any
jurisdiction where it would not otherwise be required to do so but for this
Section 6(c)(vi);

 

(vii)     notify the Holder, at any time when a Prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the Prospectus included in such Registration Statement
contains an untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading, and, at the request of any such
holder, the Company shall prepare a supplement or amendment to such Prospectus
so that, as thereafter delivered to the purchasers of such Warrant Shares, such
Prospectus shall not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;

 

 
15

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(viii)     make available for inspection by the Holder, any underwriter
participating in any disposition pursuant to such Registration Statement and any
attorney, accountant or other agent retained by the Holder or any such
underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records"), and cause the Company's officers, directors and employees to supply
all information requested by any such Inspector in connection with such
Registration Statement;

 

(ix)     use its best efforts to cause such Warrant Shares to be listed on each
securities exchange on which the Common Stock is then listed or, if the Common
Stock is not then listed, on a national securities exchange selected by the
Holder;

 

(x)     in connection with an underwritten offering, enter into such customary
agreements (including underwriting and lock-up agreements in customary form) and
take all such other customary actions as the Holder or the managing underwriter
of such offering request in order to expedite or facilitate the disposition of
such Warrant Shares (including, without limitation, making appropriate officers
of the Company available to participate in "road show" and other customary
marketing activities (including one-on-one meetings with prospective purchasers
of the Warrant Shares);

 

(xi)     otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission and make available to its stockholders an earnings
statement (in a form that satisfies the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder) no later than thirty (30) days after the
end of the 12-month period beginning with the first day of the Company's first
full fiscal quarter after the effective date of such Registration Statement,
which earnings statement shall cover said 12-month period, and which requirement
will be deemed to be satisfied if the Company timely files complete and accurate
information on Forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise
complies with Rule 158 under the Securities Act;

 

(xii)     furnish to the Holder and each underwriter, if any, with (i) a legal
opinion of the Company's outside counsel, dated the effective date of such
Registration Statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), in form and substance as is customarily given in opinions of the
Company's counsel to underwriters in underwritten public offerings; and (ii) a
"comfort" letter signed by the Company's independent certified public
accountants in form and substance as is customarily given in accountants'
letters to underwriters in underwritten public offerings;

 

 
16

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(xiii)     without limiting Section 6(c)(vi) above, use its best efforts to
cause such Warrant Shares to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Holder to consummate the
disposition of such Warrant Shares in accordance with their intended method of
distribution thereof;

 

(xiv)     notify the Holder promptly of any request by the Commission for the
amending or supplementing of such Registration Statement or Prospectus or for
additional information;

 

(xv)     advise the Holder, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such Registration Statement or the initiation or
threatening of any proceeding for such purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal at the
earliest possible moment if such stop order should be issued; and

 

(xvi)     otherwise use its best efforts to take all other steps necessary to
effect the registration of such Warrant Shares contemplated hereby.

 

7.     Transfer of Warrant. Subject to the transfer conditions referred to in
the legend endorsed hereon, this Warrant and all rights hereunder are freely
transferable, in whole or in part, by the Holder without charge to the Holder,
upon delivery to the Company of a written request for assignment in the form
attached hereto as Exhibit C (each, an “Assignment”) by the Holder and surrender
of this Warrant to the Company at its then principal executive offices, together
with funds sufficient to pay any transfer taxes described in Section 3(f)(v) in
connection with the making of such transfer. If requested by the Company, the
Holder will also provide an opinion of counsel satisfactory to the Company to
the effect that the transfer or assignment is in compliance with (or is exempt
from) applicable federal and state securities laws. Upon such compliance,
surrender and delivery and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant, if
any, not so assigned and this Warrant shall promptly be cancelled.

 

8.     Holder Not Deemed a Stockholder; Limitations on Liability. Except as
otherwise specifically provided herein (including Section 4(a)), prior to the
issuance to the Holder of the Warrant Shares to which the Holder is then
entitled to receive upon the due exercise of this Warrant, the Holder shall not
be entitled to vote or receive dividends or be deemed the holder of shares of
capital stock of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the Holder, as such, any of the rights
of a stockholder of the Company or any right to vote, give or withhold consent
to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise. In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on the Holder to purchase any securities (upon exercise
of this Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 0, the Company shall provide the Holder with copies
of the same notices and other information given to the stockholders of the
Company generally, contemporaneously with the giving thereof to the
stockholders.

 

 
17

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9.     Replacement on Loss; Division and Combination.

 

(a)     Replacement of Warrant on Loss. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it
being understood that a written indemnification agreement or affidavit of loss
of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon
surrender of such Warrant for cancellation to the Company, the Company at its
own expense shall execute and deliver to the Holder, in lieu hereof, a new
Warrant of like tenor and exercisable for an equivalent number of Warrant Shares
as the Warrant so lost, stolen, mutilated or destroyed; provided, that, in the
case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.

 

(b)     Division and Combination of Warrant. Subject to compliance with the
applicable provisions of this Warrant as to any transfer or other assignment
which may be involved in such division or combination, this Warrant may be
divided or, following any such division of this Warrant, subsequently combined
with other Warrants, upon the surrender of this Warrant or Warrants to the
Company at its then principal executive offices, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the respective Holders or their agents or attorneys. Subject to
compliance with the applicable provisions of this Warrant as to any transfer or
assignment which may be involved in such division or combination, the Company
shall at its own expense execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants so surrendered in accordance with such
notice. Such new Warrant or Warrants shall be of like tenor to the surrendered
Warrant or Warrants and shall be exercisable in the aggregate for an equivalent
number of Warrant Shares as the Warrant or Warrants so surrendered in accordance
with such notice.

 

10.     No Impairment. The Company shall not, by amendment of its Certificate of
Incorporation or Bylaws, or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or circumvent or seek to avoid or circumvent the
observance or performance of any of the terms to be observed or performed by it
hereunder, but shall at all times in good faith assist in the carrying out of
all the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the Holder in order to protect the exercise rights of
the Holder against dilution or other impairment, consistent with the tenor and
purpose of this Warrant.

 

 
18
 

  

11.     Compliance with the Securities Act. The Holder, by acceptance of this
Warrant, agrees to comply in all respects with the provisions of this Section 0
and the restrictive legend requirements set forth on the face of this Warrant
and further agrees that such Holder shall not offer, sell or otherwise dispose
of this Warrant or any Warrant Shares to be issued upon exercise hereof except
under circumstances that will not result in a violation of the Securities Act.
This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless
registered under the Securities Act) shall be stamped or imprinted with a legend
in substantially the following form:

 

"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS
(I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND
IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT
AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW."

 

12.     Representations of the Holder. In connection with the issuance of this
Warrant, the Holder specifically represents, as of the date hereof, to the
Company by acceptance of this Warrant as follows:

 

(a)     The Holder is an "accredited investor" as defined in Rule 501 of
Regulation D promulgated under the Securities Act. The Holder is acquiring this
Warrant and the Warrant Shares to be issued upon exercise hereof for investment
for its own account and not with a current view towards, or for resale in
connection with, the public sale or distribution of this Warrant or the Warrant
Shares, except pursuant to sales registered or exempted under the Securities
Act.

 

(b)     The Holder understands and acknowledges that this Warrant and the
Warrant Shares to be issued upon exercise hereof are "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that, under such
laws and applicable regulations, such securities may be resold without
registration under the Securities Act only in certain limited circumstances. In
addition, the Holder represents that it is familiar with Rule 144 under the
Securities Act, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.

 

(c)     The Holder acknowledges that it can bear the economic and financial risk
of its investment for an indefinite period, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Warrant and the Warrant Shares. The
Holder has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Warrant and
the business, properties, prospects and financial condition of the Company.

 

 
19

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13.     Warrant Register. The Company shall keep and properly maintain at its
principal executive offices books for the registration of the Warrant and any
transfers thereof. The Company may deem and treat the Person in whose name the
Warrant is registered on such register as the Holder thereof for all purposes,
and the Company shall not be affected by any notice to the contrary, except any
assignment, division, combination or other transfer of the Warrant effected in
accordance with the provisions of this Warrant.

 

14.     Notices. All notices and other communications provided hereunder shall
be in writing or by facsimile and addressed, delivered or transmitted, if to the
Company or the Holder, to the applicable party at its address or facsimile
number set forth on the signature pages hereto, or at such other address or
facsimile number as may be designated by such party in a notice to the other
party. Any notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any notice, if transmitted by facsimile, shall be deemed given
when the confirmation of transmission thereof is received by the transmitter.
Unless otherwise indicated, all references to the time of a day shall refer to
New York City time.

 

15.     Cumulative Remedies. Except to the extent expressly provided in Section
0 to the contrary, the rights and remedies provided in this Warrant are
cumulative and are not exclusive of, and are in addition to and not in
substitution for, any other rights or remedies available at law, in equity or
otherwise.

 

16.     Equitable Relief. Each of the Company and the Holder acknowledges that a
breach or threatened breach by such party of any of its obligations under this
Warrant would give rise to irreparable harm to the other party hereto for which
monetary damages would not be an adequate remedy and hereby agrees that in the
event of a breach or a threatened breach by such party of any such obligations,
the other party hereto shall, in addition to any and all other rights and
remedies that may be available to it in respect of such breach, be entitled to
equitable relief, including a restraining order, an injunction, specific
performance and any other relief that may be available from a court of competent
jurisdiction.

 

17.     Finder’s Fee. Each party represents to the other party that it is not
and will not be obligated for any finder’s fee or commission in connection with
the transactions contemplated by this Warrant. The Holder agrees to indemnify
and to hold harmless the Company from any liability for any commission or
compensation in the nature of a finder’s fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Holder or
any of its officers, employees or representatives is responsible. The Company
agrees to indemnify and hold harmless the Holder from any liability for any
commission or compensation in the nature of a finder’s fee (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company or any of its officers, employees or representatives is responsible.

 

 
20

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18.     Expenses; Indemnification.

 

The Company will reimburse the reasonable fees and expenses of the Holder,
including reasonable legal fees and expenses, with respect to the negotiation,
execution and delivery of this Warrant as provided in Section 11.3 of the Credit
Agreement.

 

In further consideration of the Holder’s acquiring the Warrant hereunder and in
addition to all of the Company’s other obligations hereunder, the Company will
defend, protect, indemnify and hold harmless the Holder and each other holder of
the Warrant and all of their shareholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated hereby) (collectively,
the “Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Indemnitee is
a party to the action for which indemnification hereunder is sought), and
including attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (i)
any misrepresentation or breach of any representation or warranty made by the
Company in this Warrant or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any breach of any covenant, agreement or
obligation of the Company contained in this Warrant or any other certificate,
instrument or document contemplated hereby or thereby, or (iii) any cause of
action, suit or claim brought or made against such Indemnitee by a third party
(including for these purposes a derivative action brought on behalf of the
Company) and arising out of or resulting from (A) the execution, delivery,
performance or enforcement of this Warrant or any other certificate, instrument
or document contemplated hereby or thereby, or (B) the status of the Holder or
holder of the Warrant as an investor in the Company pursuant to the transactions
contemplated hereby. To the extent that the foregoing undertaking by the Company
may be unenforceable for any reason, the Company will make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.

 

19.     Entire Agreement. This Warrant constitutes the sole and entire agreement
of the parties to this Warrant with respect to the subject matter contained
herein, and supersedes all prior and contemporaneous understandings and
agreements, both written and oral, with respect to such subject matter.

 

20.     Successor and Assigns. This Warrant and the rights evidenced hereby
shall be binding upon and shall inure to the benefit of the parties hereto and
the successors of the Company and the successors and permitted assigns of the
Holder. Such successors and/or permitted assigns of the Holder shall be deemed
to be a Holder for all purposes hereunder.

 

21.     No Third-Party Beneficiaries. This Warrant is for the sole benefit of
the Company and the Holder and their respective successors and, in the case of
the Holder, permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other Person any legal or equitable right,
benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

 

 
21

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22.     Headings. The headings in this Warrant are for reference only and shall
not affect the interpretation of this Warrant.

 

23.     Amendment and Modification; Waiver. Except as otherwise provided herein,
this Warrant may only be amended, modified or supplemented by an agreement in
writing signed by each party hereto. No waiver by the Company or the Holder of
any of the provisions hereof shall be effective unless explicitly set forth in
writing and signed by the party so waiving. No waiver by any party shall operate
or be construed as a waiver in respect of any failure, breach or default not
expressly identified by such written waiver, whether of a similar or different
character, and whether occurring before or after that waiver. No failure to
exercise, or delay in exercising, any rights, remedy, power or privilege arising
from this Warrant shall operate or be construed as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.

 

24     Severability. If any term or provision of this Warrant is invalid,
illegal or unenforceable in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other term or provision of this Warrant or
invalidate or render unenforceable such term or provision in any other
jurisdiction.

 

25.     Governing Law. This Warrant shall be governed by and construed in
accordance with the internal laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of laws of any
jurisdiction other than those of the State of New York.

 

26.     Submission to Jurisdiction. Any legal suit, action or proceeding arising
out of or based upon this Warrant or the transactions contemplated hereby may be
instituted in the federal courts of the United States of America or the courts
of the State of New York, in either case sitting in the Borough of Manhattan,
and each party irrevocably submits to the exclusive jurisdiction of such courts
in any such suit, action or proceeding. Service of process, summons, notice or
other document by certified or registered mail to such party's address set forth
herein shall be effective service of process for any suit, action or other
proceeding brought in any such court. The parties irrevocably and
unconditionally waive any objection to the laying of venue of any suit, action
or any proceeding in such courts and irrevocably waive and agree not to plead or
claim in any such court that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.

 

27.     Waiver of Jury Trial. Each party acknowledges and agrees that any
controversy which may arise under this Warrant is likely to involve complicated
and difficult issues and, therefore, each such party irrevocably and
unconditionally waives any right it may have to a trial by jury in respect of
any legal action arising out of or relating to this Warrant or the transactions
contemplated hereby.

 

 
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28.     Counterparts. This Warrant may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall be deemed to
be one and the same agreement. A signed copy of this Warrant delivered by
facsimile, e-mail or other means of electronic transmission shall be deemed to
have the same legal effect as delivery of an original signed copy of this
Warrant.

 

29.     No Strict Construction. This Warrant shall be construed without regard
to any presumption or rule requiring construction or interpretation against the
party drafting an instrument or causing any instrument to be drafted.

 

 

 

[SIGNATURE PAGE FOLLOWS]

 

 
23

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IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original
Issue Date.

 

 

VBI VACCINES INC.

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

Accepted and agreed,

 

PCOF 1, LLC

 

By: _____________________

Name:

Title:

 

 

  

 
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EXHIBIT A

 

FORM OF SUBSCRIPTION AGREEMENT

 

(To be signed only upon exercise of Warrant)

 

To:__________________________

 

 

The undersigned, as holder of a right to purchase shares of Common Stock of VBI
VACCINES INC., a Delaware corporation (the “Company”), pursuant to that certain
Warrant of VBI VACCINES INC. (the “Warrant”), dated as of July 25, 2014, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, __________________________ (_________) shares
of Common Stock of the Company and herewith makes payment of
_________________________________ Dollars ($__________) therefor by the
following method:

 

(Check all that apply):

 

_______ (check if applicable)

The undersigned hereby elects to make payment of the Aggregate Exercise Price of
______________ Dollars ($___________) in cash for _____________ (_________)
shares of Common Stock using the method described in Section 3(b)(i).

 

_______ (check if applicable)

The undersigned hereby elects to make payment of the Aggregate Exercise Price of
______________ Dollars ($___________) for _____________ (_________) shares of
Common Stock using the method described in Section 3(b)(ii) of the Warrant.

 

_______ (check if applicable)

The undersigned hereby elects to make payment of the Aggregate Exercise Price of
______________ Dollars ($___________) for _____________ (_________) shares of
Common Stock using the method described in Section 3(b)(iii) of the Warrant.

 

Requested Denomination of

Common Stock:

__________________ shares

 

Registered Holder:

__________________

 

In order to induce the issuance of such securities the undersigned makes to the
Company, as of the date hereof, the representations and warranties set forth in
Section 12 of the Warrant. Unless otherwise defined herein, capitalized terms
have the meanings provided in the Warrant.

 

 
 

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DATED: ________________

 

 

  PCOF 1, LLC  

 

 

 

 

       

 

 

 

 

 

By:

 

 

 

 

 

 

  Name:            

 

Title:

 

 

  

 
 

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EXHIBIT B

 

FORM OF ACKNOWLEDGMENT

 

To: PCOF 1, LLC

 

The undersigned hereby acknowledges that as of the date hereof,
__________________ (___________) shares of Common Stock remain subject to the
right of purchase in favor of PCOF 1, LLC pursuant to that certain Warrant of
VBI VACCINES INC. in favor of PCOF 1, LLC, dated as of July 25, 2014.

 

DATED: ________________

 

 

  VBI VACCINES INC.  

 

 

 

 

       

 

 

 

 

 

By:

 

 

 

 

 

 

 

Name:

 

 

          Title:    

 

 
 

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EXHIBIT C

 

FORM OF ASSIGNMENT

 

FOR VALUE RECEIVED, the undersigned Holder of record of this Warrant of VBI
VACCINES INC. (the “Company”), which is dated ___________, hereby sells, assigns
and transfers unto the Assignee named below all of the rights, including,
without limitation, the Purchase Rights (as such term is defined in this
Warrant) of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:

 

Name of Transferee/Assignee 

Address  

No. of Shares

                           

 

and does hereby irrevocably constitute and appoint the Secretary of VBI VACCINES
INC. to make such transfer on the books of VBI VACCINES INC., maintained for the
purpose, with full power of substitution in the premises.

 

Attached hereto, if and to the extent requested by the Company, is an opinion of
counsel that the assignment is in compliance with or is exempt from, applicable
federal and state securities laws. As provided in the Warrant, including but not
limited to Section 7 of the Warrant, the Company may, in its sole discretion,
decide whether such opinion is satisfactory, and Assignee and Holder agree to
any reasonable delay in transfer caused by such evaluation.

 

The Assignee acknowledges and agrees that this Warrant and the shares of Common
Stock to be issued upon exercise hereof or conversion thereof are being acquired
for investment and that the Assignee will not offer, sell or otherwise dispose
of this Warrant or any shares of stock to be issued upon exercise hereof or
conversion thereof except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the “Act”), or any
applicable state securities laws.

 

Accordingly, the following restrictive legend is made applicable to this
assignment (and to this Warrant and securities covered by this Warrant as
assigned hereby to Assignee):

 

This Assignment and this Warrant and the securities underlying this Warrant as
assigned hereby, have not been registered under the Act, and may not be offered,
sold or otherwise transferred, assigned, pledged or hypothecated in the absence
of such registration or an exemption therefrom under such Act, any applicable
state securities laws and the rules and regulations thereunder.

 

 
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Dated: __________________________ HOLDER:    

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

        Dated: __________________________ ASSIGNEE:               By:      
Name:        Title:    

 

 
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EXHIBIT F

 

FORM OF DELAYED DRAW WARRANT

 

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS
(I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND
IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT
AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW.

 

Warrant Certificate No.: [___]

 

Original Issue Date: [__________ __], 201[_]

 

FOR VALUE RECEIVED, VBI VACCINES INC., a Delaware corporation (the "Company"),
hereby certifies that PCOF 1, LLC or its permitted transferees and assigns (the
"Holder") is entitled to purchase from the Company up to [_________]2 duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
(defined below) at a per share purchase price of $[______]3 (subject to
adjustment as provided herein, the "Exercise Price"), all subject to the terms,
conditions and adjustments set forth below in this Warrant (defined below).
Certain capitalized terms used herein are defined in Section 0 hereof.

 

1.              Definitions. As used in this Warrant, the following terms have
the following meanings:

 

“Acknowledgement” has the meaning set forth in Section 3(e).

 

"Aggregate Exercise Price" means, with respect to any exercise of this Warrant,
an amount equal to the product of (i) the number of Warrant Shares in respect of
which this Warrant is then being exercised pursuant to Section 0 hereof,
multiplied by (ii) the Exercise Price in effect as of the Exercise Date.

 

“Assignment” has the meaning set forth in Section 7.

 

"Board" means the board of directors of the Company.

 

 

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2 NTD: To be determined based on the amount of the Delayed Draw Loan. If the
Delayed Draw Loan is $3 million, then insert 699,281 shares.

3 NTD: Insert the 10-day volume weighted average stock price prior to the date
of the Milestone Draw.

 

 
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"Business Day" means any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed in New York,
New York.

 

“Cashless Method” means, as the context may require, one or both of the Exercise
Price payment methods described in clauses (ii) and (iii) of Section 3(b).

 

"Commission" means the Securities and Exchange Commission or any other federal
agency administering the Securities Act and the Exchange Act at the time.

 

"Common Stock" means the common stock, par value $0.0001 per share, of the
Company, and any capital stock into which such Common Stock shall have been
converted, exchanged or reclassified following the date hereof.

 

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

 

"Convertible Securities" means any securities, whether debt, equity or other
securities (directly or indirectly) convertible into or exchangeable for Common
Stock, but excluding Options.

 

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

 

“Credit Agreement” means the Credit Agreement and Guaranty dated as of July 25,
2014 among Variation Biotechnologies (US), Inc., as borrower, PCOF 1, LLC, as
lender, the Company, as guarantor and the other guarantors party thereto.

 

"Demand Registration" has the meaning set forth in Section 6(a)(ii).

 

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

 

"Exercise Date" means, for any given exercise of this Warrant, the date on which
the conditions to such exercise as set forth in Section 0 shall have been
satisfied at or prior to 5:00 p.m., New York time, on a Business Day, including,
without limitation, the receipt by the Company of the Subscription Agreement,
the Warrant and the Aggregate Exercise Price.

 

"Exercise Period" has the meaning set forth in Section 0.

 

"Exercise Price" has the meaning set forth in the preamble.

 

"Fair Market Value" means, as of any particular date: (i) the volume weighted
average of the closing sales prices of the Common Stock for such day on all
domestic securities exchanges on which the Common Stock may at the time be
listed; (ii) if there have been no sales of the Common Stock on any such
exchange on any such day, the average of the highest bid and lowest asked prices
for the Common Stock on all such exchanges at the end of such day; (iii) if on
any such day the Common Stock is not listed on a domestic securities exchange,
the closing sales price of the Common Stock as quoted on Nasdaq, the OTC
Bulletin Board, the “pink sheets” or similar quotation system or association for
such day; or (iv) if there have been no sales of the Common Stock on Nasdaq, the
OTC Bulletin Board, the “pink sheets” or similar quotation system or association
on such day, the average of the highest bid and lowest asked prices for the
Common Stock quoted on Nasdaq, the OTC Bulletin Board, the “pink sheets” or
similar quotation system or association at the end of such day; in each case,
averaged over twenty (20) consecutive Business Days ending on the Business Day
immediately prior to the day as of which "Fair Market Value" is being
determined; provided, that if the Common Stock is listed on any domestic
securities exchange, the term "Business Day" as used in this sentence means
Business Days on which such exchange is open for trading. If at any time the
Common Stock is not listed on any domestic securities exchange or quoted on
Nasdaq, the OTC Bulletin Board, the “pink sheets” or similar quotation system or
association, the "Fair Market Value" of the Common Stock shall be the fair
market value per share as determined jointly by the Board and the Holder.

 

 
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"Holder" has the meaning set forth in the preamble.

 

"Indemnified Liabilities" has the meaning set forth in Section 18(b).

 

"Indemnitees" has the meaning set forth in Section 18(b).

 

“Inspectors” has the meaning set forth in Section 6(c)(viii).

 

“Long-Form Registration” has the meaning set forth in Section 6(a)(i).

 

“Merger Agreement Demand” means any demand for registration under the Securities
Act of Registrable Securities pursuant to Section 6.14 of the Merger Agreement
(as defined in the Credit Agreement).

 

"Nasdaq" means The Nasdaq Stock Market, Inc.

 

"Options" means any warrants or other rights or options to subscribe for or
purchase Common Stock or Convertible Securities.

 

"Original Issue Date" means the date hereof.

 

"OTC Bulletin Board" means the National Association of Securities Dealers, Inc.
OTC Bulletin Board.

 

"Person" means any individual, sole proprietorship, partnership, limited
liability company, corporation, joint venture, trust, incorporated organization
or government or department or agency thereof.

 

“Piggyback Registration” has the meaning set forth in Section 6(b)(i).

 

"Prospectus" means the prospectus or prospectuses included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus or prospectuses.

 

 
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“Records” has the meaning set forth in Section 6(c)(viii).

 

"Registrable Securities" means (x) any shares of Common Stock held by any Person
or issuable upon conversion, exercise or exchange of any securities owned by any
Person at any time (including Warrant Shares exercisable upon exercise of this
Warrant), and (y) any shares of Common Stock issued or issuable with respect to
any shares described in subsection (x) above by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization (it being understood that for purposes of
this Warrant, a Person shall be deemed to be a holder of Registrable Securities
whenever such Person has the right to then acquire or obtain from the Company
any Registrable Securities, whether or not such acquisition has actually been
effected). As to any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (i) a Registration Statement covering
such securities has been declared effective by the Commission and such
securities have been disposed of pursuant to such effective Registration
Statement, (ii) such securities are sold under circumstances in which all of the
applicable conditions of Rule 144 (or any similar provisions then in force)
under the Securities Act are met, (iii) such securities are otherwise
transferred and such securities may be resold without subsequent registration
under the Securities Act, or (iv) such securities shall have ceased to be
outstanding.

 

"Registration Statement" means any registration statement of the Company which
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all materials incorporated by reference in such Registration Statement.

 

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

 

“Short-Form Registration” has the meaning set forth in Section 6(a)(ii).

 

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

 

"Subscription Agreement" has the meaning set forth in Section 3(a)(i).

 

"Warrant" means this Warrant and all warrants issued upon division or
combination of, or in substitution for, this Warrant.

 

"Warrant Shares" means the shares of Common Stock or other capital stock of the
Company purchasable upon exercise of this Warrant in accordance with its terms.

 

 
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2.     Term of Warrant. Subject to the terms and conditions hereof, at any time
or from time to time after the date hereof up to and including 5:00 p.m., New
York time, on the fifth (5th) anniversary of the Original Issue Date or, if such
day is not a Business Day, on the next preceding Business Day (the "Exercise
Period"), the Holder of this Warrant may exercise this Warrant for all or any
part of the Warrant Shares purchasable hereunder (subject to adjustment as
provided herein).

 

3.     Exercise of Warrant.

 

(a)     Exercise Procedure. This Warrant may be exercised from time to time on
any Business Day during the Exercise Period, for all or any part of the
unexercised Warrant Shares, upon:

 

(i)     surrender of this Warrant to the Company at its then principal executive
offices (or an indemnification undertaking with respect to this Warrant in the
case of its loss, theft or destruction), together with a Subscription Agreement
in the form attached hereto as Exhibit A (each, a "Subscription Agreement"),
duly completed (including specifying the number of Warrant Shares to be
purchased) and executed; and

 

(ii)     payment to the Company of the Aggregate Exercise Price in accordance
with Section Section 1.01(a)(ii).

 

(b)     Payment of the Aggregate Exercise Price. Payment of the Aggregate
Exercise Price shall be made, at the option of the Holder as expressed in the
Subscription Agreement, by the following methods:

 

(i)     by delivery to the Company of a certified or official bank check payable
to the order of the Company or by wire transfer of immediately available funds
to an account designated in writing by the Company, in the amount of such
Aggregate Exercise Price;

 

(ii)     by instructing the Company to withhold a number of Warrant Shares then
issuable upon exercise of this Warrant with an aggregate Fair Market Value as of
the Exercise Date equal to such Aggregate Exercise Price;

 

(iii)     by surrendering to the Company (x) Warrant Shares previously acquired
by the Holder with an aggregate Fair Market Value as of the Exercise Date equal
to such Aggregate Exercise Price and/or (y) other securities or debt obligations
of the Company (including loans outstanding under the Credit Agreement) having a
value as of the Exercise Date equal to the Aggregate Exercise Price (which value
in the case of debt securities or obligations shall be the principal amount
thereof plus accrued and unpaid interest, in the case of preferred stock shall
be the liquidation value thereof plus accumulated and unpaid dividends and in
the case of shares of Common Stock shall be the Fair Market Value thereof); or

 

(iv)     any combination of the foregoing;

 

 
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provided; however; that the Holder may only use the Cashless Method to pay the
Exercise Price for up to (but not in excess of) [_________] Warrant Shares
(subject to proportionate adjustment for any stock split, dividend,
distribution, subdivision, recapitalization or combination).

 

In the event of any withholding of Warrant Shares or surrender of other equity
securities pursuant to clause (ii), (iii) or (iv) above where the number of
shares whose value is equal to the Aggregate Exercise Price is not a whole
number, the number of shares withheld by or surrendered to the Company shall be
rounded up to the nearest whole share and the Company shall make a cash payment
to the Holder (by delivery of a certified or official bank check or by wire
transfer of immediately available funds) based on the incremental fraction of a
share being so withheld by or surrendered to the Company in an amount equal to
the product of (x) such incremental fraction of a share being so withheld or
surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value
per Warrant Share as of the Exercise Date, and, in all other cases, the value
thereof as of the Exercise Date determined in accordance with clause (iii)(y)
above.

 

(c)     Delivery of Stock Certificates. Upon receipt by the Company of the
Subscription Agreement, surrender of this Warrant and payment of the Aggregate
Exercise Price (in accordance with Section Section 1.01(a) hereof), the Company
shall, as promptly as practicable, and in any event within three (3) Business
Days thereafter, execute (or cause to be executed) and deliver (or cause to be
delivered) to the Holder a certificate or certificates representing the Warrant
Shares issuable upon such exercise, together with cash in lieu of any fraction
of a share, as provided in Section Section 1.01(c) hereof. The stock certificate
or certificates so delivered shall be, to the extent possible, in such
denomination or denominations as the exercising Holder shall reasonably request
in the Subscription Agreement and shall be registered in the name of the Holder
or, subject to compliance with Section 0 below, such other Person's name as
shall be designated in the Subscription Agreement. This Warrant shall be deemed
to have been exercised and such certificate or certificates of Warrant Shares
shall be deemed to have been issued, and the Holder or any other Person so
designated to be named therein shall be deemed to have become a holder of record
of such Warrant Shares for all purposes, as of the Exercise Date.

 

(d)     Fractional Shares. The Company shall not be required to issue a
fractional Warrant Share upon exercise of any Warrant. As to any fraction of a
Warrant Share that the Holder would otherwise be entitled to purchase upon such
exercise, the Company shall pay to such Holder an amount in cash (by delivery of
a certified or official bank check or by wire transfer of immediately available
funds) equal to the product of (i) such fraction multiplied by (ii) the Fair
Market Value of one Warrant Share on the Exercise Date.

 

(e)     Acknowledgement; Partial Exercise. Unless the purchase rights
represented by this Warrant shall have expired or shall have been fully
exercised, the Company shall, at the time of delivery of the certificate or
certificates representing the Warrant Shares being issued in accordance with
Section Section 1.01(c) hereof, deliver to the Holder within a reasonable time
an acknowledgement in substantially the form attached hereto as Exhibit B (each,
an “Acknowledgement”) indicating the number of Warrant Shares which remain
issuable upon exercise of this Warrant, if any.

 

 
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(f)     Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With
respect to the exercise of this Warrant, the Company hereby represents,
covenants and agrees:

 

(i)     This Warrant is, and any Warrant issued in substitution for or
replacement of this Warrant shall be, upon issuance, duly authorized and validly
issued.

 

(ii)     All Warrant Shares issuable upon the exercise of this Warrant pursuant
to the terms hereof shall be, upon issuance, and the Company shall take all such
actions as may be necessary or appropriate in order that such Warrant Shares
are, validly issued, fully paid and non-assessable, issued without violation of
any preemptive or similar rights of any stockholder of the Company and free and
clear of all taxes, liens and charges.

 

(iii)     The Company shall take all such actions as may be necessary to ensure
that all such Warrant Shares are issued without violation by the Company of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock or other securities
constituting Warrant Shares may be listed at the time of such exercise (except
for official notice of issuance which shall be immediately delivered by the
Company upon each such issuance).

 

(iv)     Without in any way limiting Section 6 hereof, the Company shall use its
best efforts to cause the Warrant Shares, immediately upon such exercise, to be
listed on any domestic securities exchange upon which shares of Common Stock or
other securities constituting Warrant Shares are listed at the time of such
exercise.

 

(v)     The Company shall pay all expenses in connection with, and all taxes and
other governmental charges that may be imposed with respect to, the issuance or
delivery of Warrant Shares upon exercise of this Warrant; provided, that the
Company shall not be required to pay any tax or governmental charge that may be
imposed with respect to any applicable withholding or the issuance or delivery
of the Warrant Shares to any Person other than the Holder, and no such issuance
or delivery shall be made unless and until the Person requesting such issuance
has paid to the Company the amount of any such tax, or has established to the
satisfaction of the Company that such tax has been paid.

 

(g)     Conditional Exercise. Notwithstanding any other provision hereof, if an
exercise of any portion of this Warrant is to be made in connection with a
public offering or a sale of the Company (pursuant to a merger, sale of stock,
or otherwise), such exercise may at the election of the Holder be conditioned
upon the consummation of such transaction, in which case such exercise shall not
be deemed to be effective until immediately prior to the consummation of such
transaction.

 

 
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(h)     Reservation of Shares. During the Exercise Period, the Company shall at
all times reserve and keep available out of its authorized but unissued Common
Stock or other securities constituting Warrant Shares, solely for the purpose of
issuance upon the exercise of this Warrant, the maximum number of Warrant Shares
issuable upon the exercise of this Warrant, and the par value per Warrant Share
shall at all times be less than or equal to the applicable Exercise Price. The
Company shall not increase the par value of any Warrant Shares receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and shall
take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.

 

(i)     No “Bad Actor” Disqualification. The Company has exercised reasonable
care, in accordance with Commission rules and guidance, to determine whether any
Covered Person (as defined below) is subject to any of the “bad actor”
disqualifications described in Rule 506(d)(1)(i) through (viii) under the
Securities Act (“Disqualification Events”). To the Company’s knowledge, no
Covered Person is subject to a Disqualification Event. The Company has complied,
to the extent applicable, with all disclosure obligations under Rule 506(e)
under the Securities Act. “Covered Persons” are those persons specified in
Rule 506(d)(1) under the Securities Act, including the Company, any predecessor
or affiliate of the Company, any director, executive officer, other officer
participating in the offering, general partner or managing member of the
Company, any beneficial owner of 20% or more of the Company’s outstanding voting
equity securities, calculated on the basis of voting power, any promoter (as
defined in Rule 405 under the Securities Act) connected with the Company in any
capacity at the time of the exercise of this Warrant, and any person that has
been or will be paid (directly or indirectly) remuneration for solicitation of
purchasers in connection with the sale of any securities of the Company (a
“Solicitor”), any general partner or managing member of any Solicitor, and any
director, executive officer or other officer participating in the offering of
any Solicitor or general partner or managing member of any such Solicitor.

 

4.     Adjustment to Exercise Price and Number of Warrant Shares. The Exercise
Price and the number of Warrant Shares issuable upon exercise of this Warrant
shall be subject to adjustment from time to time as provided in this Section 0.

 

(a)     Dividends and Distributions of Non-Company Securities. If, at any time
or from time to time after the Original Issue Date, the Company makes or
declares, or fixes a record date for the determination of holders of Common
Stock entitled to receive, a dividend or any other distribution payable in
securities of the Company (other than a dividend or distribution of shares of
Common Stock or Options or Convertible Securities in each case in respect of
Common Stock), cash or other property, then, and in each such event, provision
shall be made so that the Holder shall receive upon exercise of the Warrant, in
addition to the number of Warrant Shares receivable thereupon, the kind and
amount of securities of the Company, cash or other property which the Holder
would have been entitled to receive had the Warrant been exercised in full into
Warrant Shares on the date of such event and had the Holder thereafter, during
the period from the date of such event to and including the Exercise Date,
retained such securities, cash or other property receivable by them as aforesaid
during such period, giving application to all adjustments called for during such
period under this Section 0 with respect to the rights of the Holder; provided,
that no such provision shall be made if the Holder receives, simultaneously with
the distribution to the holders of Common Stock, a dividend or other
distribution of such securities, cash or other property in an amount equal to
the amount of such securities, cash or other property as the Holder would have
received if the Warrant had been exercised in full into Warrant Shares on the
date of such event.

 

 
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(b)     Adjustment to Exercise Price and Warrant Shares Upon Dividend,
Subdivision or Combination of Common Stock. If the Company shall, at any time or
from time to time after the Original Issue Date, (i) pay a dividend or make any
other distribution upon the Common Stock or any other capital stock of the
Company payable in shares of Common Stock or in Options or Convertible
Securities (in each case in respect of Common Stock), or (ii) subdivide (by any
stock split, recapitalization or otherwise) its outstanding shares of Common
Stock into a greater number of shares, the Exercise Price in effect immediately
prior to any such dividend, distribution or subdivision shall be proportionately
reduced and the number of Warrant Shares issuable upon exercise of this Warrant
shall be proportionately increased. If the Company at any time combines (by
combination, reverse stock split or otherwise) its outstanding shares of Common
Stock into a smaller number of shares, the Exercise Price in effect immediately
prior to such combination shall be proportionately increased and the number of
Warrant Shares issuable upon exercise of this Warrant shall be proportionately
decreased. Any adjustment under this Section 4(b) shall become effective at the
close of business on the date the dividend, subdivision or combination becomes
effective.

 

(c)     Adjustment to Exercise Price and Warrant Shares Upon Reorganization,
Reclassification, Consolidation or Merger. In the event of any (i) capital
reorganization of the Company, (ii) reclassification of the stock of the Company
(other than a change in par value or from par value to no par value or from no
par value to par value or as a result of a stock dividend or subdivision,
split-up or combination of shares), (iii) consolidation or merger of the Company
with or into another Person, (iv) sale of all or substantially all of the
Company's assets to another Person, (v) Change of Control (as defined in the
Credit Agreement) or (vi) other similar transaction, in each case which entitles
the holders of Common Stock to receive (either directly or upon subsequent
liquidation) cash, stock, securities or assets with respect to or in exchange
for Common Stock, each Warrant shall, immediately after such reorganization,
reclassification, consolidation, merger, sale, Change of Control or similar
transaction, remain outstanding and shall thereafter, in lieu of or in addition
to (as the case may be) the number of Warrant Shares then exercisable under this
Warrant, be exercisable for the amount of cash or the kind and number of shares
of stock or other securities or assets of the Company or of the successor Person
resulting from such transaction to which the Holder would have been entitled
upon such reorganization, reclassification, consolidation, merger, sale, Change
of Control or similar transaction if the Holder had exercised this Warrant in
full immediately prior to the time of such reorganization, reclassification,
consolidation, merger, sale, Change of Control or similar transaction and
acquired the applicable number of Warrant Shares then issuable hereunder as a
result of such exercise (without taking into account any limitations or
restrictions on the exercisability of this Warrant); and, in such case,
appropriate adjustment (in form and substance satisfactory to the Holder) shall
be made with respect to the Holder's rights under this Warrant to insure that
the provisions of this Section 0 hereof shall thereafter be applicable, as
nearly as possible, to this Warrant in relation to any cash, shares of stock,
securities or assets thereafter acquirable upon exercise of this Warrant
(including, in the case of any consolidation, merger, sale, Change of Control or
similar transaction in which the successor or purchasing Person is other than
the Company, an immediate adjustment in the Exercise Price to the value per
share for the Common Stock reflected by the terms of such consolidation, merger,
sale, Change of Control or similar transaction, and a corresponding immediate
adjustment to the number of Warrant Shares acquirable upon exercise of this
Warrant without regard to any limitations or restrictions on exercise, if the
value so reflected is less than the Exercise Price in effect immediately prior
to such consolidation, merger, sale, Change of Control or similar transaction).
The provisions of this Section 4(c) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, Changes of
Control or similar transactions. The Company shall not effect any such
reorganization, reclassification, consolidation, merger, sale, Change of Control
or similar transaction unless, prior to the consummation thereof, the successor
Person (if other than the Company) resulting from such reorganization,
reclassification, consolidation, merger, sale, Change of Control or similar
transaction, shall assume, by written instrument substantially similar in form
and substance to this Warrant and satisfactory to the Holder, the obligation to
deliver to the Holder such shares of stock, securities or assets which, in
accordance with the foregoing provisions, such Holder shall be entitled to
receive upon exercise of this Warrant. Notwithstanding anything to the contrary
contained herein, with respect to any corporate event or other transaction
contemplated by the provisions of this Section 4(c), the Holder shall have the
right to elect prior to the consummation of such event or transaction, to give
effect to the exercise rights contained in Section 0 instead of giving effect to
the provisions contained in this Section 4(c) with respect to this Warrant.

 

 
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(d)     Certain Events. If any event of the type contemplated by the provisions
of this Section 0 but not expressly provided for by such provisions occurs, then
the Board shall make an appropriate adjustment in the Exercise Price and the
number of Warrant Shares issuable upon exercise of this Warrant so as to protect
the rights of the Holder in a manner consistent with the provisions of this
Section 0; provided, that no such adjustment pursuant to this Section 4(d) shall
increase the Exercise Price or decrease the number of Warrant Shares issuable as
otherwise determined pursuant to this Section 0.

 

(e)     Certificate as to Adjustment.

 

(i)     As promptly as reasonably practicable following any adjustment of the
Exercise Price, but in any event not later than three (3) Business Days
thereafter, the Company shall furnish to the Holder a certificate of an
executive officer setting forth in reasonable detail such adjustment and the
facts upon which it is based and certifying the calculation thereof.

 

 
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(ii)     As promptly as reasonably practicable following the receipt by the
Company of a written request by the Holder, but in any event not later than
three (3) Business Days thereafter, the Company shall furnish to the Holder a
certificate of an executive officer certifying the Exercise Price then in effect
and the number of Warrant Shares or the amount, if any, of other shares of
stock, securities or assets then issuable upon exercise of the Warrant.

 

(f)     Notices. In the event:

 

(i)     that the Company shall take a record of the holders of its Common Stock
(or other capital stock or securities at the time issuable upon exercise of the
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, to vote at a meeting (or by written consent), to receive
any right to subscribe for or purchase any shares of capital stock of any class
or any other securities, or to receive any other security; or

 

(ii)     of any capital reorganization of the Company, any reclassification of
the Common Stock of the Company, any consolidation or merger of the Company with
or into another Person, or sale of all or substantially all of the Company's
assets to another Person; or

 

(iii)     of the voluntary or involuntary dissolution, liquidation or winding-up
of the Company;

 

then, and in each such case, the Company shall send or cause to be sent to the
Holder at least ten (10) Business days prior to the applicable record date or
the applicable expected effective date, as the case may be, for the event, a
written notice specifying, as the case may be, (A) the record date for such
dividend, distribution, meeting or consent or other right or action, and a
description of such dividend, distribution or other right or action to be taken
at such meeting or by written consent, or (B) the effective date on which such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up is proposed to take place, and the date, if any is to
be fixed, as of which the books of the Company shall close or a record shall be
taken with respect to which the holders of record of Common Stock (or such other
capital stock or securities at the time issuable upon exercise of the Warrant)
shall be entitled to exchange their shares of Common Stock (or such other
capital stock or securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, and the amount per share and character of such
exchange applicable to the Warrant and the Warrant Shares.

 

5.     Purchase Rights. In addition to (and not in limitation or in lieu of) any
adjustments pursuant to Section 0 above, if at any time the Company grants,
issues or sells any shares of Common Stock, Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to the
record holders of Common Stock (the "Purchase Rights"), then the Holder shall be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder would have acquired if the Holder had
held the number of Warrant Shares acquirable upon complete exercise of this
Warrant immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.

 

 
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6.     Registration Rights.

 

(a)     Demand Registration.

 

(i)     At any time after the one hundred eightieth (180) day following the
Original Issue Date, the Holder may request registration under the Securities
Act of all or any portion of the Warrant Shares on Form S-1 or any successor
form thereto (each a "Long-Form Registration"). Each request for a Long-Form
Registration shall specify the approximate number of Warrant Shares required to
be registered. Upon receipt of such request, the Company shall promptly (but in
no event later than five days following receipt thereof) deliver notice of such
request to all other holders of Registrable Securities having “piggy back”
rights or equivalent, if any, who shall then have ten days from the date such
notice is given to notify the Company in writing of their desire to be included
in such registration. The Company shall cause a Registration Statement on Form
S-1 (or any successor form) to be filed within 30 days after the date on which
the initial request is given and shall use its best efforts to cause such
Registration Statement to be declared effective by the Commission as soon as
practicable thereafter. The Company shall not be required to effect a Long-Form
Registration more than five times by the Holder; provided, that a Registration
Statement shall not count as a Long-Form Registration requested under this
Section Section 1.01(a)(i) unless and until it has become effective and the
Holder is able to register and sell at least 35% of the Warrant Shares requested
to be included in such registration.

 

(ii)     The Company shall use its best efforts to qualify and remain qualified
to register securities under the Securities Act pursuant to a Registration
Statement on Form S-3 or any successor form thereto. At such time as the Company
shall have qualified for the use of a Registration Statement on Form S-3, the
Holder shall have the right to request an unlimited number of registrations of
Warrant Shares on Form S-3 or any similar short-form registration (each a
"Short-Form Registration" and, together with each Long-Form Registration, a
"Demand Registration"). Each request for a Short-Form Registration shall specify
the approximate number of Warrant Shares requested to be registered. Upon
receipt of any such request, the Company shall promptly (but in no event later
than five days following receipt thereof) deliver notice of such request to all
other holders of Registrable Securities having “piggy back” rights or
equivalent, if any, who shall then have ten days from the date such notice is
given to notify the Company in writing of their desire to be included in such
registration. The Company shall cause a Registration Statement on Form S-3 (or
any successor form) to be filed within 30 days after the date on which the
initial request is given and shall use its best efforts to cause such
Registration Statement to be declared effective by the Commission as soon as
practicable thereafter.

 

(iii)     The Company shall not be obligated to effect any Long-Form
Registration within 90 days after the effective date of a previous Long-Form
Registration or a previous Piggyback Registration in which the Holder was
permitted to register, and actually sold, at least 35% of the shares of
Registrable Securities requested to be included therein. The Company may
postpone for up to 60 days the filing or effectiveness of a Registration
Statement for a Demand Registration if the Company's Board determines in its
reasonable good faith judgment that such Demand Registration would (i)
materially interfere with a significant acquisition, corporate organization or
other similar transaction involving the Company; (ii) require premature
disclosure of material information that the Company has a bona fide business
purpose for preserving as confidential; or (iii) render the Company unable to
comply with requirements under the Securities Act or Exchange Act. The Company
may delay a Demand Registration hereunder only two times in any period of twelve
consecutive months.

 

 
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(iv)     If the Holder elects to distribute Warrant Shares covered by its
request in an underwritten offering, it shall so advise the Company as a part of
its request made pursuant to Section Section 1.01(a)(i) or Section 6(a)(ii). The
Holder shall select the investment banking firm or firms to act as the managing
underwriter or underwriters in connection with such offering.

 

(v)     The Company shall not include in any Demand Registration any securities
which are not Registrable Securities without the prior written consent of the
Holder, which consent shall not be unreasonably withheld or delayed. If a Demand
Registration involves an underwritten offering and the managing underwriter of
the requested Demand Registration advises the Company in writing that in its
opinion the number of shares of Common Stock proposed to be included in the
Demand Registration, including all Registrable Securities and all other shares
of Common Stock proposed to be included in such underwritten offering, exceeds
the number of shares of Common Stock which can be sold in such underwritten
offering and/or the number of shares of Common Stock proposed to be included in
such registration would adversely affect the price per share of the Registrable
Securities proposed to be sold in such underwritten offering, the Company shall
include in such Demand Registration (A) first, all of the Warrant Shares
requested to be included in such registration by the Holder, and (B) second, any
other Registrable Securities the Company may permit to be included in such
registration, allocated pro rata among the respective holders thereof on the
basis of the number of Registrable Securities owned by each such holder.

 

(b)     Piggyback Registration.

 

(i)     Whenever the Company proposes to register any shares of its Common Stock
under the Securities Act (other than a registration effected solely to implement
an employee benefit plan or a transaction to which Rule 145 of the Securities
Act is applicable, or a Registration Statement on Form S-4, S-8 or any successor
form thereto or another form not available for registering the Registrable
Securities for sale to the public), whether for its own account or for the
account of one or more stockholders of the Company and the form of Registration
Statement to be used may be used for any registration of Warrant Shares (a
"Piggyback Registration"), the Company shall give prompt written notice (in any
event no later than twenty (20) days prior to the filing of such Registration
Statement) to the Holder of its intention to effect such a registration and,
subject to Section 6(b)(ii) and Section 6(b)(iii), shall include in such
registration all Warrant Shares with respect to which the Company has received
written requests for inclusion from the Holder within ten days after the
Company's notice has been given to the Holder.

 

 
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(ii)     If a Piggyback Registration is initiated as a primary underwritten
offering on behalf of the Company and the managing underwriter advises the
Company and the Holder (if the Holder has elected to include Warrant Shares in
such Piggyback Registration) in writing that in its opinion the number of shares
of Common Stock proposed to be included in such registration, including all
Registrable Securities and all other shares of Common Stock proposed to be
included in such underwritten offering, exceeds the number of shares of Common
Stock which can be sold in such offering and/or that the number of shares of
Common Stock proposed to be included in any such registration would adversely
affect the price per share of the Common Stock to be sold in such offering, the
Company shall include in such registration (A) first, the number of shares of
Common Stock that the Company proposes to sell; (B) second, the number of shares
of Common Stock requested to be included therein by the Holder; and (C) third,
the number of shares of Common Stock requested to be included therein by holders
of Common Stock (other than Warrant Shares held by the Holder); provided, that
in any event the Holder shall be entitled to register at least 35% of the
securities to be included in any such registration.

 

(iii)     If a Piggyback Registration is initiated as an underwritten offering
on behalf of one or more holders of Common Stock other than Warrant Shares, and
the managing underwriter advises the Company in writing that in its opinion the
number of shares of Common Stock proposed to be included in such registration,
including all Warrant Shares and all other shares of Common Stock proposed to be
included in such underwritten offering, exceeds the number of shares of Common
Stock which can be sold in such offering and/or that the number of shares of
Common Stock proposed to be included in any such registration would adversely
affect the price per share of the Common Stock to be sold in such offering, the
Company shall, subject to the proviso below, include in such registration (i)
first, the number of shares of Common Stock requested to be included therein by
the Holder (on a fully diluted, as converted basis); and (ii) second, the number
of shares of Common Stock requested to be included therein by other holders of
Common Stock, allocated among such holders in such manner as they may agree;
provided that, in the event of a registration resulting from a Merger Agreement
Demand, the Company shall include in such registration, on a pro rata basis, (x)
those shares of Common Stock (other than Warrant Shares) of the holders thereof
requesting such Merger Agreement Demand, and (y) those Warrant Shares requested
to be included in such registration by the Holder.

 

(iv)     If any Piggyback Registration is initiated as a primary underwritten
offering on behalf of the Company, the Company shall select the investment
banking firm or firms to act as the managing underwriter or underwriters in
connection with such offering.

 

(c)     Registration Procedures. If and whenever the Holder requests that any
Warrant Shares be registered pursuant to the provisions of this Warrant, the
Company shall use its best efforts to effect the registration and the sale of
such Warrant Shares in accordance with the intended method of disposition
thereof, and pursuant thereto the Company shall as soon as practicable:

 

 
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(i)     subject to Section 6(a)(i) and Section 6(a)(ii), prepare and file with
the Commission a Registration Statement with respect to such Warrant Shares and
use its best efforts to cause such Registration Statement to become effective;

 

(ii)     prepare and file with the Commission such amendments, post-effective
amendments and supplements to such Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for a period of not less than thirty (30) days, or if
earlier, until all of such Warrant Shares have been disposed of and to comply
with the provisions of the Securities Act with respect to the disposition of
such Warrant Shares in accordance with the intended methods of disposition set
forth in such Registration Statement;

 

(iii)     at least fifteen (15) Business Days before filing such Registration
Statement, Prospectus or amendments or supplements thereto, furnish to counsel
of the Holder copies of such documents proposed to be filed, which documents
shall be subject to the review, comment and approval of such counsel;

 

(iv)     notify the Holder, promptly after the Company receives notice thereof,
of the time when such Registration Statement has been declared effective or a
supplement to any Prospectus forming a part of such Registration Statement has
been filed;

 

(v)     furnish to the Holder such number of copies of the Prospectus included
in such Registration Statement (including each preliminary Prospectus) and any
supplement thereto (in each case including all exhibits and documents
incorporated by reference therein) and such other documents as the Holder may
request in order to facilitate the disposition of the Warrant Shares;

 

(vi)     use its best efforts to register or qualify such Warrant Shares under
such other securities or "blue sky" laws of such jurisdictions as any selling
holder requests and do any and all other acts and things which may be necessary
or advisable to enable the Holder to consummate the disposition; provided, that
the Company shall not be required to qualify generally to do business, subject
itself to general taxation or consent to general service of process in any
jurisdiction where it would not otherwise be required to do so but for this
Section 6(c)(vi);

 

(vii)     notify the Holder, at any time when a Prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the Prospectus included in such Registration Statement
contains an untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading, and, at the request of any such
holder, the Company shall prepare a supplement or amendment to such Prospectus
so that, as thereafter delivered to the purchasers of such Warrant Shares, such
Prospectus shall not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;

 

 
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(viii)     make available for inspection by the Holder, any underwriter
participating in any disposition pursuant to such Registration Statement and any
attorney, accountant or other agent retained by the Holder or any such
underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records"), and cause the Company's officers, directors and employees to supply
all information requested by any such Inspector in connection with such
Registration Statement;

 

(ix)     use its best efforts to cause such Warrant Shares to be listed on each
securities exchange on which the Common Stock is then listed or, if the Common
Stock is not then listed, on a national securities exchange selected by the
Holder;

 

(x)     in connection with an underwritten offering, enter into such customary
agreements (including underwriting and lock-up agreements in customary form) and
take all such other customary actions as the Holder or the managing underwriter
of such offering request in order to expedite or facilitate the disposition of
such Warrant Shares (including, without limitation, making appropriate officers
of the Company available to participate in "road show" and other customary
marketing activities (including one-on-one meetings with prospective purchasers
of the Warrant Shares);

 

(xi)     otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission and make available to its stockholders an earnings
statement (in a form that satisfies the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder) no later than thirty (30) days after the
end of the 12-month period beginning with the first day of the Company's first
full fiscal quarter after the effective date of such Registration Statement,
which earnings statement shall cover said 12-month period, and which requirement
will be deemed to be satisfied if the Company timely files complete and accurate
information on Forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise
complies with Rule 158 under the Securities Act;

 

(xii)     furnish to the Holder and each underwriter, if any, with (i) a legal
opinion of the Company's outside counsel, dated the effective date of such
Registration Statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), in form and substance as is customarily given in opinions of the
Company's counsel to underwriters in underwritten public offerings; and (ii) a
"comfort" letter signed by the Company's independent certified public
accountants in form and substance as is customarily given in accountants'
letters to underwriters in underwritten public offerings;

 

(xiii)     without limiting Section 6(c)(vi) above, use its best efforts to
cause such Warrant Shares to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Holder to consummate the
disposition of such Warrant Shares in accordance with their intended method of
distribution thereof;

 

 
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(xiv)     notify the Holder promptly of any request by the Commission for the
amending or supplementing of such Registration Statement or Prospectus or for
additional information;

 

(xv)     advise the Holder, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such Registration Statement or the initiation or
threatening of any proceeding for such purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal at the
earliest possible moment if such stop order should be issued; and

 

(xvi)     otherwise use its best efforts to take all other steps necessary to
effect the registration of such Warrant Shares contemplated hereby.

 

7.     Transfer of Warrant. Subject to the transfer conditions referred to in
the legend endorsed hereon, this Warrant and all rights hereunder are freely
transferable, in whole or in part, by the Holder without charge to the Holder,
upon delivery to the Company of a written request for assignment in the form
attached hereto as Exhibit C (each, an “Assignment”) by the Holder and surrender
of this Warrant to the Company at its then principal executive offices, together
with funds sufficient to pay any transfer taxes described in Section 3(f)(v) in
connection with the making of such transfer. If requested by the Company, the
Holder will also provide an opinion of counsel satisfactory to the Company to
the effect that the transfer or assignment is in compliance with (or is exempt
from) applicable federal and state securities laws. Upon such compliance,
surrender and delivery and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant, if
any, not so assigned and this Warrant shall promptly be cancelled.

 

8.     Holder Not Deemed a Stockholder; Limitations on Liability. Except as
otherwise specifically provided herein (including Section 4(a)), prior to the
issuance to the Holder of the Warrant Shares to which the Holder is then
entitled to receive upon the due exercise of this Warrant, the Holder shall not
be entitled to vote or receive dividends or be deemed the holder of shares of
capital stock of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the Holder, as such, any of the rights
of a stockholder of the Company or any right to vote, give or withhold consent
to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise. In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on the Holder to purchase any securities (upon exercise
of this Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 0, the Company shall provide the Holder with copies
of the same notices and other information given to the stockholders of the
Company generally, contemporaneously with the giving thereof to the
stockholders.

 

 
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9.     Replacement on Loss; Division and Combination.

 

(a)     Replacement of Warrant on Loss. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it
being understood that a written indemnification agreement or affidavit of loss
of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon
surrender of such Warrant for cancellation to the Company, the Company at its
own expense shall execute and deliver to the Holder, in lieu hereof, a new
Warrant of like tenor and exercisable for an equivalent number of Warrant Shares
as the Warrant so lost, stolen, mutilated or destroyed; provided, that, in the
case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.

 

(b)     Division and Combination of Warrant. Subject to compliance with the
applicable provisions of this Warrant as to any transfer or other assignment
which may be involved in such division or combination, this Warrant may be
divided or, following any such division of this Warrant, subsequently combined
with other Warrants, upon the surrender of this Warrant or Warrants to the
Company at its then principal executive offices, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the respective Holders or their agents or attorneys. Subject to
compliance with the applicable provisions of this Warrant as to any transfer or
assignment which may be involved in such division or combination, the Company
shall at its own expense execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants so surrendered in accordance with such
notice. Such new Warrant or Warrants shall be of like tenor to the surrendered
Warrant or Warrants and shall be exercisable in the aggregate for an equivalent
number of Warrant Shares as the Warrant or Warrants so surrendered in accordance
with such notice.

 

10.     No Impairment. The Company shall not, by amendment of its Certificate of
Incorporation or Bylaws, or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or circumvent or seek to avoid or circumvent the
observance or performance of any of the terms to be observed or performed by it
hereunder, but shall at all times in good faith assist in the carrying out of
all the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the Holder in order to protect the exercise rights of
the Holder against dilution or other impairment, consistent with the tenor and
purpose of this Warrant.

 

11.     Compliance with the Securities Act. The Holder, by acceptance of this
Warrant, agrees to comply in all respects with the provisions of this Section 0
and the restrictive legend requirements set forth on the face of this Warrant
and further agrees that such Holder shall not offer, sell or otherwise dispose
of this Warrant or any Warrant Shares to be issued upon exercise hereof except
under circumstances that will not result in a violation of the Securities Act.
This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless
registered under the Securities Act) shall be stamped or imprinted with a legend
in substantially the following form:

 

 
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"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS
(I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND
IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT
AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW."

 

12.     Representations of the Holder. In connection with the issuance of this
Warrant, the Holder specifically represents, as of the date hereof, to the
Company by acceptance of this Warrant as follows:

 

(a)     The Holder is an "accredited investor" as defined in Rule 501 of
Regulation D promulgated under the Securities Act. The Holder is acquiring this
Warrant and the Warrant Shares to be issued upon exercise hereof for investment
for its own account and not with a current view towards, or for resale in
connection with, the public sale or distribution of this Warrant or the Warrant
Shares, except pursuant to sales registered or exempted under the Securities
Act.

 

(b)     The Holder understands and acknowledges that this Warrant and the
Warrant Shares to be issued upon exercise hereof are "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that, under such
laws and applicable regulations, such securities may be resold without
registration under the Securities Act only in certain limited circumstances. In
addition, the Holder represents that it is familiar with Rule 144 under the
Securities Act, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.

 

(c)     The Holder acknowledges that it can bear the economic and financial risk
of its investment for an indefinite period, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Warrant and the Warrant Shares. The
Holder has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Warrant and
the business, properties, prospects and financial condition of the Company.

 

13.     Warrant Register. The Company shall keep and properly maintain at its
principal executive offices books for the registration of the Warrant and any
transfers thereof. The Company may deem and treat the Person in whose name the
Warrant is registered on such register as the Holder thereof for all purposes,
and the Company shall not be affected by any notice to the contrary, except any
assignment, division, combination or other transfer of the Warrant effected in
accordance with the provisions of this Warrant.

 

 
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14.     Notices. All notices and other communications provided hereunder shall
be in writing or by facsimile and addressed, delivered or transmitted, if to the
Company or the Holder, to the applicable party at its address or facsimile
number set forth on the signature pages hereto, or at such other address or
facsimile number as may be designated by such party in a notice to the other
party. Any notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any notice, if transmitted by facsimile, shall be deemed given
when the confirmation of transmission thereof is received by the transmitter.
Unless otherwise indicated, all references to the time of a day shall refer to
New York City time.

 

15.     Cumulative Remedies. Except to the extent expressly provided in Section
0 to the contrary, the rights and remedies provided in this Warrant are
cumulative and are not exclusive of, and are in addition to and not in
substitution for, any other rights or remedies available at law, in equity or
otherwise.

 

16.     Equitable Relief. Each of the Company and the Holder acknowledges that a
breach or threatened breach by such party of any of its obligations under this
Warrant would give rise to irreparable harm to the other party hereto for which
monetary damages would not be an adequate remedy and hereby agrees that in the
event of a breach or a threatened breach by such party of any such obligations,
the other party hereto shall, in addition to any and all other rights and
remedies that may be available to it in respect of such breach, be entitled to
equitable relief, including a restraining order, an injunction, specific
performance and any other relief that may be available from a court of competent
jurisdiction.

 

17.     Finder’s Fee. Each party represents to the other party that it is not
and will not be obligated for any finder’s fee or commission in connection with
the transactions contemplated by this Warrant. The Holder agrees to indemnify
and to hold harmless the Company from any liability for any commission or
compensation in the nature of a finder’s fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Holder or
any of its officers, employees or representatives is responsible. The Company
agrees to indemnify and hold harmless the Holder from any liability for any
commission or compensation in the nature of a finder’s fee (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company or any of its officers, employees or representatives is responsible.

 

18.     Expenses; Indemnification.

 

(a)     The Company will reimburse the reasonable fees and expenses of the
Holder, including reasonable legal fees and expenses, with respect to the
negotiation, execution and delivery of this Warrant as provided in Section 11.3
of the Credit Agreement.

 

 
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(b)     In further consideration of the Holder’s acquiring the Warrant hereunder
and in addition to all of the Company’s other obligations hereunder, the Company
will defend, protect, indemnify and hold harmless the Holder and each other
holder of the Warrant and all of their shareholders, partners, members,
officers, directors, employees and direct or indirect investors and any of the
foregoing Persons’ agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated
hereby) (collectively, the “Indemnitees”) from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or
relating to (i) any misrepresentation or breach of any representation or
warranty made by the Company in this Warrant or any other certificate,
instrument or document contemplated hereby or thereby, (ii) any breach of any
covenant, agreement or obligation of the Company contained in this Warrant or
any other certificate, instrument or document contemplated hereby or thereby, or
(iii) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (A) the execution,
delivery, performance or enforcement of this Warrant or any other certificate,
instrument or document contemplated hereby or thereby, or (B) the status of the
Holder or holder of the Warrant as an investor in the Company pursuant to the
transactions contemplated hereby. To the extent that the foregoing undertaking
by the Company may be unenforceable for any reason, the Company will make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.

 

19.     Entire Agreement. This Warrant constitutes the sole and entire agreement
of the parties to this Warrant with respect to the subject matter contained
herein, and supersedes all prior and contemporaneous understandings and
agreements, both written and oral, with respect to such subject matter.

 

20.     Successor and Assigns. This Warrant and the rights evidenced hereby
shall be binding upon and shall inure to the benefit of the parties hereto and
the successors of the Company and the successors and permitted assigns of the
Holder. Such successors and/or permitted assigns of the Holder shall be deemed
to be a Holder for all purposes hereunder.

 

21.     No Third-Party Beneficiaries. This Warrant is for the sole benefit of
the Company and the Holder and their respective successors and, in the case of
the Holder, permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other Person any legal or equitable right,
benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

 

22.     Headings. The headings in this Warrant are for reference only and shall
not affect the interpretation of this Warrant.

 

 
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23.     Amendment and Modification; Waiver. Except as otherwise provided herein,
this Warrant may only be amended, modified or supplemented by an agreement in
writing signed by each party hereto. No waiver by the Company or the Holder of
any of the provisions hereof shall be effective unless explicitly set forth in
writing and signed by the party so waiving. No waiver by any party shall operate
or be construed as a waiver in respect of any failure, breach or default not
expressly identified by such written waiver, whether of a similar or different
character, and whether occurring before or after that waiver. No failure to
exercise, or delay in exercising, any rights, remedy, power or privilege arising
from this Warrant shall operate or be construed as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.

 

24.     Severability. If any term or provision of this Warrant is invalid,
illegal or unenforceable in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other term or provision of this Warrant or
invalidate or render unenforceable such term or provision in any other
jurisdiction.

 

25.     Governing Law. This Warrant shall be governed by and construed in
accordance with the internal laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of laws of any
jurisdiction other than those of the State of New York.

 

26.     Submission to Jurisdiction. Any legal suit, action or proceeding arising
out of or based upon this Warrant or the transactions contemplated hereby may be
instituted in the federal courts of the United States of America or the courts
of the State of New York, in either case sitting in the Borough of Manhattan,
and each party irrevocably submits to the exclusive jurisdiction of such courts
in any such suit, action or proceeding. Service of process, summons, notice or
other document by certified or registered mail to such party's address set forth
herein shall be effective service of process for any suit, action or other
proceeding brought in any such court. The parties irrevocably and
unconditionally waive any objection to the laying of venue of any suit, action
or any proceeding in such courts and irrevocably waive and agree not to plead or
claim in any such court that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.

 

27.     Waiver of Jury Trial. Each party acknowledges and agrees that any
controversy which may arise under this Warrant is likely to involve complicated
and difficult issues and, therefore, each such party irrevocably and
unconditionally waives any right it may have to a trial by jury in respect of
any legal action arising out of or relating to this Warrant or the transactions
contemplated hereby.

 

28.     Counterparts. This Warrant may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall be deemed to
be one and the same agreement. A signed copy of this Warrant delivered by
facsimile, e-mail or other means of electronic transmission shall be deemed to
have the same legal effect as delivery of an original signed copy of this
Warrant.

 

 
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29.     No Strict Construction. This Warrant shall be construed without regard
to any presumption or rule requiring construction or interpretation against the
party drafting an instrument or causing any instrument to be drafted.

 

 

 

[SIGNATURE PAGE FOLLOWS]

 

 
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IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original
Issue Date.

 

 

VBI VACCINES INC.

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

Accepted and agreed,

 

PCOF 1, LLC

 

By: _____________________

Name:

Title:

 

  

 
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EXHIBIT A

 

FORM OF SUBSCRIPTION AGREEMENT

 

(To be signed only upon exercise of Warrant)

 

To:__________________________

 

 

 

The undersigned, as holder of a right to purchase shares of Common Stock of VBI
VACCINES INC., a Delaware corporation (the “Company”), pursuant to that certain
Warrant of VBI VACCINES INC. (the “Warrant”), dated as of [__________ __],
201[_], hereby irrevocably elects to exercise the purchase right represented by
such Warrant for, and to purchase thereunder, __________________________
(_________) shares of Common Stock of the Company and herewith makes payment of
_________________________________ Dollars ($__________) therefor by the
following method:

(Check all that apply):

 

_______ (check if applicable)

The undersigned hereby elects to make payment of the Aggregate Exercise Price of
______________ Dollars ($___________) in cash for _____________ (_________)
shares of Common Stock using the method described in Section 3(b)(i).

 

_______ (check if applicable)

The undersigned hereby elects to make payment of the Aggregate Exercise Price of
______________ Dollars ($___________) for _____________ (_________) shares of
Common Stock using the method described in Section 3(b)(ii) of the Warrant.

 

_______ (check if applicable)

The undersigned hereby elects to make payment of the Aggregate Exercise Price of
______________ Dollars ($___________) for _____________ (_________) shares of
Common Stock using the method described in Section 3(b)(iii) of the Warrant.

Requested Denomination of

Common Stock:

__________________ shares

 

Registered Holder:

__________________

 

In order to induce the issuance of such securities the undersigned makes to the
Company, as of the date hereof, the representations and warranties set forth in
Section 12 of the Warrant. Unless otherwise defined herein, capitalized terms
have the meanings provided in the Warrant.

 

 
 

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DATED: ________________

 

 

  PCOF 1, LLC  

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

  Name:            

 

Title:

 

 

 

 
 

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EXHIBIT B

 

FORM OF ACKNOWLEDGMENT

 

To: PCOF 1, LLC

 

The undersigned hereby acknowledges that as of the date hereof,
__________________ (___________) shares of Common Stock remain subject to the
right of purchase in favor of PCOF 1, LLC pursuant to that certain Warrant of
VBI VACCINES INC. in favor of PCOF 1, LLC, dated as of [__________ __], 201[_].

 

DATED: ________________

 

 

  VBI VACCINES INC.  

 

 

 

 

 

 

 

 

       

 

By:

 

 

 

 

 

 

 

Name:

 

 

          Title:    

 

 
 

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EXHIBIT C

 

FORM OF ASSIGNMENT

 

FOR VALUE RECEIVED, the undersigned Holder of record of this Warrant of VBI
VACCINES INC. (the “Company”), which is dated ___________, hereby sells, assigns
and transfers unto the Assignee named below all of the rights, including,
without limitation, the Purchase Rights (as such term is defined in this
Warrant) of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:

 

Name of Transferee/Assignee  

Address

 No. of Shares

                                

 

and does hereby irrevocably constitute and appoint the Secretary of VBI VACCINES
INC. to make such transfer on the books of VBI VACCINES INC., maintained for the
purpose, with full power of substitution in the premises.

 

Attached hereto, if and to the extent requested by the Company, is an opinion of
counsel that the assignment is in compliance with or is exempt from, applicable
federal and state securities laws. As provided in the Warrant, including but not
limited to Section 7 of the Warrant, the Company may, in its sole discretion,
decide whether such opinion is satisfactory, and Assignee and Holder agree to
any reasonable delay in transfer caused by such evaluation.

 

The Assignee acknowledges and agrees that this Warrant and the shares of Common
Stock to be issued upon exercise hereof or conversion thereof are being acquired
for investment and that the Assignee will not offer, sell or otherwise dispose
of this Warrant or any shares of stock to be issued upon exercise hereof or
conversion thereof except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the “Act”), or any
applicable state securities laws.

 

Accordingly, the following restrictive legend is made applicable to this
assignment (and to this Warrant and securities covered by this Warrant as
assigned hereby to Assignee):

 

This Assignment and this Warrant and the securities underlying this Warrant as
assigned hereby, have not been registered under the Act, and may not be offered,
sold or otherwise transferred, assigned, pledged or hypothecated in the absence
of such registration or an exemption therefrom under such Act, any applicable
state securities laws and the rules and regulations thereunder.

 

 
 

--------------------------------------------------------------------------------

 

 

Dated: ____________________

HOLDER:

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

        Dated: ____________________ ASSIGNEE:               By:        Name:    
  Title:     

  

 
 

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EXHIBIT G

 

Intercompany Subordinated Note Provisions

 

 

 

Reference is made to that certain Credit Agreement and Guaranty, dated as of
July 25, 2014 (as amended, extended, increased or otherwise modified from time
to time, the “Credit Agreement”), by and among Variation Biotechnologies (US),
Inc., as Borrower (the “Borrower”), each Guarantor party thereto and PCOF 1,
LLC, as Lender (the “Lender”).  Unless otherwise defined, capitalized terms used
herein have the meanings provided in the Credit Agreement.

 

The [INSERT NAME OF (OR DEFINED FOR) THE ISSUER OF THE NOTE] and, by its
acceptance hereof, any holder of this promissory note (together with any
successor, transferee or assign, a “Holder”), each hereby unconditionally agrees
that all obligations hereunder (collectively, the “Junior Obligations”) shall be
subordinated in full to the prior payment in full in cash of all Obligations (as
defined in the Credit Agreement), notwithstanding the maturity date hereof, any
default by or insolvency of [INSERT NAME OF (OR DEFINED FOR) THE ISSUER OF THE
NOTE] or otherwise. This agreement to subordinate is for the benefit of and
shall be enforceable by the Lender and each of its successors and permitted
transferees and assigns (collectively, the “Senior Creditor”). 

 

Until all Obligations have been paid in full in cash, neither the [INSERT NAME
OF (OR DEFINED FOR) THE ISSUER OF THE NOTE] may make, and no Holder shall
accept, receive or collect, any direct or indirect payment or distribution of
any kind or character whatsoever (in cash, securities, other property, by
setoff, or otherwise) of any properties or assets of [INSERT NAME OF (OR DEFINED
FOR) THE ISSUER OF THE NOTE], or otherwise from the [INSERT NAME OF (OR DEFINED
FOR) THE ISSUER OF THE NOTE], on account of the Junior Obligations. Under no
circumstance may any payment of the Junior Obligations be accelerated.

 

In the event that, notwithstanding the foregoing, the [INSERT NAME OF (OR
DEFINED FOR) THE ISSUER OF THE NOTE] shall make any payment or distribution to
any Holder prohibited by the foregoing provisions, then, until the Obligations
have been repaid in full in cash, such payment or distribution shall be held in
trust by the Holder for the benefit of and promptly shall be paid over to the
Senior Creditor for application against the Obligations until paid in full in
cash.