EXHIBIT 10.1
 
 
 
CONTINGENT VALUE RIGHTS AGREEMENT
 
THIS CONTINGENT VALUE RIGHTS AGREEMENT, dated as of ____, 2019 (this
“Agreement”), is entered into by and among Aytu Bioscience Inc., a Delaware
corporation (the “Company”), Vivian Liu as representative of the Holders (the
“Holders’ Representative”) and ____________ (the “Rights Agent”).
 
A.           The Company, Aytu Acquisition Sub, Inc., a wholly owned subsidiary
of the Company (“Merger Sub”), and Innovus Pharmaceuticals, Inc., a Nevada
corporation (“Innovus”) have entered into an Agreement and Plan of Merger dated
as of September 12, 2019 (the “Merger Agreement”), pursuant to which Merger Sub
will merge with and into Innovus (the “Merger”).
 
B.           In connection with the effectiveness of the Merger, the Company
wishes to create and issue contingent value rights containing the rights
described herein to the record holders of the Company Common Stock (as
hereinafter defined) as of a record date prior to the effectiveness of the
Merger.
 
Accordingly, and in consideration of the premises and the consummation of the
transactions referred to above, it is mutually covenanted and agreed, for the
benefit of the Holders (as hereinafter defined), as follows:
 
ARTICLE I.
Definitions
 
1.1    

Definitions.
 
(a)           For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
 
(i)           all accounting terms used herein and not expressly defined herein
have the meanings assigned to such terms in accordance with United States
generally accepted accounting principles, as in effect on the date hereof;
 
(ii)           unless the context otherwise requires, words describing the
singular number include the plural and vice versa, words denoting any gender
include all genders and words denoting natural Persons include corporations,
partnerships and other Persons and vice versa;
 
(iii)           the words “include” and “including” and variations thereof will
not be deemed to be terms of limitation, but rather will be deemed to be
followed by the words “without limitation”;
 
(iv)           the terms “hereof”, “hereunder”, “herein” and words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement; and
 
 

 
 
 
 
(v)           the Article and Section headings contained in this Agreement are
for reference purposes only and do not limit or otherwise affect any of the
substance of this Agreement.
 
(b)           The following terms have the meanings ascribed to them as follows:
 
“Achievement Certificate” has the meaning set forth in Section 2.4(a).
 
“Acting Holders” means a majority in interest of the Holders, but excluding any
Holders that serve or have served as an officer of the Company or on the
Company’s Board of Directors.
 
“Affiliates” means, with respect to any Person, any other Person that directly
or indirectly controls, is controlled by, or is under common control with, such
first Person.
 
“Board of Directors” means the board of directors of the Company.
 
“Board Resolution” means a copy of a resolution certified by the secretary or an
assistant secretary of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification,
and delivered to the Rights Agent.
 
“Business Day” means each day other than a Saturday, Sunday or any other day on
which commercial banks in New York, New York are authorized or required by law
to close.
 
“Change of Control” means (x) (i) any consolidation or merger of the Company
with or into any other corporation or entity or Person or (ii) any other
corporate reorganization, in which the stockholders of the Company immediately
prior to such consolidation, merger or reorganization, own less than 50% of the
voting power of the surviving entity immediately after such consolidation,
merger or reorganization, or (y) any sale of all or substantially all of the
assets of the Company.
 
“Common Stock” means the common stock, $0.0001 par value, of the Company.
 
“Consumer Business Unit” means all the product lines and products in development
by Innovus and acquired by the Company as a result of the Merger, together with
all future products lines developed or acquired primarily as a result of the
Merger or primarily developed by Dr. Bassam Damaj.
 
 “CVR Payment Amount” means the amount payable with respect to the relevant
Earnout Achievement, as determined on Exhibit A hereto.
 
“CVR Payment Date” means the date (if any and if ever) that a CVR Payment Amount
is payable by the Company to the Holders, which date will be established
pursuant to Section 2.4.
 
“CVR Payment Shares” means, for any particular CVR Payment Amount, that number
of shares of Common Stock determined by multiplying such CVR Payment Amount by
an exchange ratio, which shall be the lesser of (i) one divided by the volume
weighted average price of Common Stock as reported by Bloomberg for a twenty
(20) day trading period ending on the Share Determination Date that is
applicable to the Milestone Period to which the CVR Payment Amount relates, and
(ii) .1667.
 
 
 

 
 
 
 
“CVR Register” has the meaning set forth in Section 2.3(b).
 
“CVR Registrar” has the meaning set forth in Section 2.3(b).
 
“CVR Shortfall” has the meaning set forth in Section 4.5(b).
 
“CVRs” means the contingent value rights issued by the Company pursuant to this
Agreement.
 
“De Minimis” has the meaning set forth in Section 6.2.
 
 “Effective Time” means the effective time of the Merger, pursuant to the Merger
Agreement. The Company shall notify the Rights Agent of the Effective Time
promptly after the occurrence thereof.
 
“Holder” means a Person in whose name a CVR is registered in the CVR Register.
 
“Holder Buyout Value” has the meaning set forth in Section 6.2.
 
“Holders’ Representative” means the Holders’ Representative named in the first
paragraph of this Agreement, until a successor Holders’ Representative has
become such pursuant to the applicable provisions of this Agreement, and
thereafter “Holders’ Representative” will mean such successor Holders’
Representative.
 
“Independent Accountant” means an independent certified public accounting firm
of nationally recognized standing designated either (a) jointly by the Holders’
Representative and the Company, or (b) if the parties hereto fail to make a
designation, jointly by an independent public accounting firm selected by the
Company and an independent public accounting firm selected by the Holders’
Representative.
 
 “Earnout Achievement” means the achievement of one or more of the targets in
the various Milestones, as described in Exhibit A hereto.
 
“Milestone” means each of the five earnout milestones set forth on Exhibit A.
 
“Milestone Period” means the calendar year-long measurement periods for each
Milestone set forth on Exhibit A.
 
 “Non-Achievement Certificate” has the meaning set forth in Section 2.4(b).
 
“Notice of Objection” has the meaning set forth in Section 2.4(c).
 
“Objection Period” has the meaning set forth in Section 2.4(c).
 
 
 

 
 
 
 
“Officer’s Certificate” means a certificate signed by the chief executive
officer, president, chief financial officer or secretary of the Company, in his
or her capacity as such an officer, and delivered to the Rights Agent.
 
“Permitted Transfer” means: (i) the transfer of any or all of the CVRs (upon the
death of the Holder) by will or intestacy; (ii) transfer by instrument to an
inter vivos or testamentary trust in which the CVRs are to be passed to
beneficiaries upon the death of the trustee; (iii) transfers made pursuant to a
court order of a court of competent jurisdiction (such as in connection with
divorce, bankruptcy or liquidation); (iv) if the Holder is a partnership or
limited liability company, a pro-rata distribution by the transferring
partnership or limited liability company to its partners or members, as
applicable; (v) a transfer made by operation of law (including a consolidation
or merger) or in connection with the dissolution, liquidation or termination of
any corporation, limited liability company, partnership or other entity; (vi) a
transfer from a participant’s account in a tax-qualified employee benefit plan
to the participant or to such participant’s account in a different tax-qualified
employee benefit plan or to a tax-qualified individual retirement account for
the benefit of such participant; (vii) a transfer from a participant in a
tax-qualified employee benefit plan, who received the CVRs from such
participant’s account in such tax-qualified employee benefit plan, to such
participant’s account in a different tax-qualified employee benefit plan or to a
tax-qualified individual retirement account for the benefit of such participant;
(viii) if a Holder is holding on behalf of a beneficial owner, a transfer to
such beneficial owner or (ix) the transfer of any or all of the CVRs to the
Company or an Affiliate of the Company in a privately negotiated transaction or
a tender offer.
 
“Person” means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or any agency or instrumentality
thereof.
 
“Pro Rata Share” means each Holder’s pro rata share of a CVR Payment Amount
based on the number of CVRs held by such Holder as of the date of the
Achievement Certificate (or the date of final determination pursuant to Section
2.4(c), as applicable) as reflected on the CVR Register in proportion to all
CVRs issued at any time (regardless of whether or not some CVRs are no longer
outstanding due to having been acquired by the Company or for any other reason).
 
“Revenue Target Achievement” means the achievement of the revenue target
associated with a particular Milestone.
 
“Rights Agent” means the Rights Agent named in the first paragraph of this
Agreement, until a successor Rights Agent has become such pursuant to the
applicable provisions of this Agreement, and thereafter “Rights Agent” will mean
such successor Rights Agent.
 
“Rights Agent Fee” means the agreed-upon fee of the Rights Agent to act in such
capacity pursuant to the terms of this Agreement.
 
“Share Determination Date” has the meaning set forth in Section 2.4(d).
 
“Subsidiary” means any corporation or other entity in which the Company owns at
least a majority of the stock or other equity interests.
 
 
 

 
 

“Surviving Person” has the meaning set forth in Section 6.1(a)(i).
 
ARTICLE II.
Contingent Value Rights
 
2.1        

Authority; Issuance of CVRs; Appointment of Rights Agent.
 
(a)           The Company has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
No consent, approval, order or authorization of, or registration, declaration or
filing with, any government authority is required by or with respect to the
Company in connection with the execution and delivery of this Agreement by the
Company or the consummation by Company of the transactions contemplated hereby.
 
(b)           The CVRs are a form of Merger Consideration described in the
Merger Agreement and will be issued in accordance with the terms and conditions
set forth in the Merger Agreement and this Agreement.
 
(c)           The Company hereby appoints the Rights Agent to act as rights
agent for the Company in accordance with the instructions hereinafter set forth
in this Agreement, and the Rights Agent hereby accepts such appointment.
 
2.2     

Nontransferable.
 
The CVRs may not be sold, assigned, transferred, pledged, encumbered or in any
other manner transferred or disposed of, in whole or in part, other than through
a Permitted Transfer.
 
2.3       

No Certificate; Registration; Registration of Transfer; Change of Address.
 
(a)           The CVRs will be issued in book-entry form only and will not be
evidenced by a certificate or other instrument.
 
(b)           The Rights Agent will keep a register (the “CVR Register”) for the
registration of CVRs. The Rights Agent is hereby initially appointed CVR
Registrar (the “CVR Registrar”) for the purpose of registering CVRs and
Permitted Transfers of CVRs as herein provided. Upon any change in the identity
of the Rights Agent, the successor Rights Agent will automatically also become
the successor CVR Registrar.
 
 
 

 
 
 
 
(c)           Subject to the restrictions on transferability set forth in
Section 2.2, every request made to effect a Permitted Transfer of a CVR must be
in writing and accompanied by a written instrument or instruments of transfer
and any other requested documentation in a form reasonably satisfactory to the
Company and the CVR Registrar, duly executed by the registered Holder or Holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney, including the evidence of authority of the party presenting
the CVR for transfer which authority may include, if applicable, a signature
guarantee from an eligible guarantor institution participating in a signature
guarantee program approved by the Securities Transfer Association. A request for
a transfer of a CVR must be accompanied by such documentation establishing that
the transfer is a Permitted Transfer as may be reasonably requested by the
Company and/or the CVR Registrar, if appropriate. Upon receipt of such written
request and materials, the CVR Registrar will, subject to its reasonable
determination that the transfer instrument is in proper form and the transfer
otherwise complies with the other terms and conditions herein, register the
transfer of the CVRs in the CVR Register. All duly transferred CVRs registered
in the CVR Register will be the valid obligations of the Company, evidencing the
same right and will entitle the transferee to the same benefits and rights under
this Agreement, as those previously held by the transferor. No transfer of a CVR
will be valid until registered in the CVR Register, and any transfer not duly
registered in the CVR Register will be void and invalid. All costs and expenses
related to any transfer or assignment of the CVRs (including the cost of any
transfer tax) will be the responsibility of the transferor.
 
(d)           A Holder (or an authorized representative thereof) may make a
request to the CVR Registrar to change such Holder’s address of record in the
CVR Register. Upon receipt of such request, the CVR Registrar will promptly
record the change of address in the CVR Register.
 
2.4     

Payment Procedures.
 
(a)           No later than February 28 of the year following the Milestone
Period relating to a particular Earnout Achievement, the Company will deliver to
the Holders’ Representative and the Rights Agent a certificate (the “Achievement
Certificate”), certifying that the Holders are entitled to receive a CVR Payment
Amount (and setting forth the calculation of such CVR Payment Amount). A
Milestone Period can be used to measure the attainment of more than one Revenue
Target Achievement in the following circumstances: if the Consumer Business Unit
records any of the annual revenue targets in a Milestone Period that is earlier
than the identified Milestone Period for such target, then the Company shall
calculate and deliver the applicable CVR Payment Amount also at that earlier
time. For example, if the Consumer Business Unit achieves $40 million in
revenues in calendar year 2020, then, no later than February 28, 2021, the
Company will deliver to the Holders’ Representative and the Rights Agent an
Achievement Certificate certifying that the Holders are entitled to receive the
CVR Payment Amounts associated with the Revenue Target Achievement for both
Milestone 2 and Milestone 3. For the avoidance of doubt, a CVR Payment Amount
may be earned only once following the initial Earnout Achievement of each
revenue target and no amounts shall be due or payable for subsequent or repeated
achievement of the same revenue target.
 
(b)           If no Earnout Achievement has occurred during a particular
Milestone Period, then, as soon as reasonably practicable after the end of such
Milestone Period, but in no event later than February 28 of the year following
such Milestone Period, the Company will deliver to the Holders’ Representative
and the Rights Agent a certificate (the “Non-Achievement Certificate”), stating
that no Earnout Achievement occurred.
 
 
 

 
 
 
 
(c)           During the period from February 28 to May 31 of each year
following a particular Milestone Period (the “Objection Period”), the Holders’
Representative may send a notice (the “Notice of Objection”) to the Rights Agent
detailing either their objection to the proposed calculation of the CVR Payment
Amount for the prior Milestone Period set forth in the Achievement Certificate
or their objection to the Non-Achievement Certificate, in either case by
providing a basis for their objection. Following the receipt of a Notice of
Objection, the Company shall permit, and shall cause its Affiliates to permit,
the Holders’ Representative, and, if requested by the Holders’ Representative,
the Independent Accountant, to have access to the records of the Company or its
Affiliates as may be reasonably necessary to investigate the basis for the
Notice of Objection. Any dispute arising from a Notice of Objection will be
resolved in accordance with the procedure set forth in Section 9.10, which
decision will be binding on the parties hereto and every Holder. If a Notice of
Objection has not been delivered to the Company within the Objection Period for
a particular Milestone Period, then the Holders’ Representative will have no
right to receive the disputed CVR Payment Amount, and the Company and the Rights
Agent will have no further obligations with respect to such CVR Payment Amount.
 
(d)           If the Company delivers an Achievement Certificate to the Rights
Agent, no later than March 20 of the year following the Milestone Period during
which an Earnout Achievement was met (the “Share Determination Date”), the
Company will deposit with the Rights Agent certificates representing the CVR
Payment Shares relating to the applicable CVR Payment Amount (or make
appropriate alternative arrangements if uncertificated shares of Common Stock
represented by book-entry shares will be issued); provided however, rather than
depositing CVR Payment Shares, the Company may at its sole election deposit with
the Rights Agent a cash amount (the “Cash Replacement Amount”) reflecting all or
a part of the applicable CVR Payment Amount, in which case the number of
applicable CVR Payment Shares will be appropriately reduced. In no case shall
the sum of (i) the fair value of CVR Payment Shares to be issued and (ii) Cash
Replacement Amount be less than the total Milestone Payment Amount. No later
than ten (10) calendar days after the applicable Share Determination Date, the
Rights Agent will then distribute to each Holder the portion of the CVR Payment
Amount that is equal to such Holder’s Pro Rata Share by (i) depositing the
applicable number of CVR Payment Shares in the account of such Holder pursuant
to procedures communicated by the Rights Agent and (ii) with respect to any Cash
Replacement Amount, distributing the applicable amount to each Holder either by
check mailed to the address of each such respective Holder as reflected in the
CVR Register, or, with respect to any Holder who has provided the Rights Agent
with wire transfer instructions meeting the Rights Agent’s requirements, by wire
transfer of immediately available funds to such account. Notwithstanding the
above, to the extent a Holder’s Pro Rata Share would result in such Holder
receiving a fractional share of Common Stock, such Holder shall instead receive
a full additional share if the fractional share is .5 or greater and shall
forfeit such fractional share if the fractional share is less than .5.
 
(e)           If a CVR Payment Amount is determined to be payable following a
Notice of Objection pursuant to Section 2.4(c) above (whether by agreement of
the parties or the decision of an arbitrator under Section 9.10), then within
ten (10) Business Days of such determination, the Company will deposit with the
Rights Agent certificates representing the applicable CVR Payment Shares (or
make appropriate alternative arrangements if uncertificated shares of Common
Stock represented by book-entry shares will be issued); provided however, rather
than depositing CVR Payment Shares, the Company may at its sole election deposit
with the Rights Agent a Cash Replacement Amount reflecting all or a part of the
applicable CVR Payment Amount, in which case the number of CVR Payment Shares
will be appropriately reduced. In no case shall the sum of (i) the fair value of
CVR Payment Shares to be issued and (ii) Cash Replacement Amount be less than
the total Milestone Payment Amount. No later than ten (10) Business Days later,
the Rights Agent will then distribute to each Holder the portion of the CVR
Payment Amount that is equal to such Holder’s Pro Rata Share by (i) depositing
the applicable number of CVR Payment Shares in the account of such Holder
pursuant to procedures communicated by the Rights Agent and (ii) with respect to
any Cash Replacement Amount, distributing the applicable amount to each Holder
either by check mailed to the address of each such respective Holder as
reflected in the CVR Register, or, with respect to any Holder who has provided
the Rights Agent with wire transfer instructions meeting the Rights Agent’s
requirements, by wire transfer of immediately available funds to such account.
Notwithstanding the above, to the extent a Holder’s Pro Rata Share would result
in such Holder receiving a fractional share of Common Stock, such Holder shall
instead receive a full additional share if the fractional share is .5 or greater
and shall forfeit such fractional share if the fractional share is less than .5.
 
 
 

 
 
 
 
(f)           The Company will be entitled to deduct and withhold, or cause to
be deducted or withheld, from each CVR Payment Amount otherwise payable pursuant
to this Agreement, CVR Payment Shares or Cash Replacement Amounts, as
applicable, in such amount as the Company or the applicable Affiliate of the
Company is required to deduct and withhold with respect to the making of such
payment under the Internal Revenue Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld are paid over to or
deposited with the relevant governmental entity, such withheld amounts will be
treated for all purposes of this Agreement as having been paid to the Holder in
respect of which such deduction and withholding was made.
 
(g)           The Company will promptly furnish to the Rights Agent all
information and documentation in connection with this Agreement and the CVRs
that the Rights Agent may reasonably request in order to perform under this
Agreement.
 
2.5       

No Voting, Dividends or Interest; No Equity or Ownership Interest in the
Company.
 
(a)           Except for those associated with actual CVR Payment Shares, if and
when issued, the CVRs will not have any voting or dividend rights, and interest
will not accrue on any amounts payable on the CVRs to any Holder.
 
(b)           Except for those associated with the actual CVR Payment Shares, if
and when issued, the CVRs will not represent any equity or ownership interest in
the Company.
 
(c)           Each Holder acknowledges and agrees to the appointment and
authority of the Holders’ Representative to act as the exclusive representative,
agent and attorney-in-fact of such Holder and all Holders as set forth in this
Agreement. Each Holder agrees that such Holder will not challenge or contest any
action, inaction, determination or decision of the Holders’ Representative or
the authority or power of the Holders’ Representative and will not threaten,
bring, commence, institute, maintain, prosecute or voluntarily aid any action,
which challenges the validity of or seeks to enjoin the operation of any
provision of this Agreement, including, without limitation, the provisions
related to the authority of the Holders’ Representative to act on behalf of such
Holder and all Holders as set forth in this Agreement.
 
 
 

 
 
 
 
ARTICLE III.
The Rights Agent
 
3.1         

Certain Duties and Responsibilities.
 
(a)           The Rights Agent will not have any liability for any actions taken
or not taken in connection with this Agreement, except to the extent of its
willful misconduct, bad faith or gross negligence. No provision of this
Agreement will require the Rights Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers. Notwithstanding
anything contained herein to the contrary, the Rights Agent’s aggregate
liability under this Agreement, or from all services provided or omitted to be
provided under this Agreement, whether in contract, or in tort, or otherwise, is
limited to, and shall not exceed, the amounts paid hereunder by the Company to
the Rights Agent as fees and charges, but not including reimbursable expenses.
 
(b)           All rights of action under this Agreement may be enforced by the
Rights Agent, and any action, suit or proceeding instituted by the Rights Agent
will be brought in its name as Rights Agent, and any recovery of judgment will
be for the ratable benefit of all the Holders, as their respective rights or
interests may appear.
 
3.2     

Certain Rights of Rights Agent.
 
The Rights Agent undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement, and no implied covenants or
obligations will be read into this Agreement against the Rights Agent. In
addition:
 
(a)           the Rights Agent may rely and will be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
 
(b)           whenever the Rights Agent will deem it desirable that a matter be
proved or established before taking, suffering or omitting any action hereunder,
the Rights Agent may, in the absence of willful misconduct, bad faith or gross
negligence on its part, rely upon an Officer’s Certificate;
 
(c)           the Rights Agent may engage and consult with counsel of its
selection and the written advice of such counsel or any opinion of counsel will
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon;
 
(d)           The Rights Agent shall act hereunder solely as agent for the
Company and it shall not assume any obligations or relationship of agency or
trust with any of the Holders or the Holders’ Representative;
 
(e)           in the event of arbitration, the Rights Agent may engage and
consult with tax experts, valuation firms and other experts and third parties
that it, in its sole and absolute discretion, deems appropriate or necessary to
enable it to discharge its duties hereunder;
 
(f)           the permissive rights of the Rights Agent to do things enumerated
in this Agreement will not be construed as a duty;
 
 
 

 
 
 
 
(g)           the Rights Agent will not be required to give any note or surety
in respect of the execution of such powers or otherwise in respect of the
premises;
 
(h)           the Company agrees to indemnify the Rights Agent for, and hold the
Rights Agent harmless against, any loss, liability, claim, demands, suits or
expense (in each case pertaining to the Rights Agent’s own account only) arising
out of or in connection with the Rights Agent’s duties under this Agreement,
including the costs and expenses of defending the Rights Agent against any
claims, charges, demands, suits or loss, unless such loss has been determined by
a court of competent jurisdiction to be a result of the Rights Agent’s willful
misconduct, bad faith or gross negligence; and
 
(i)           the Company agrees (i) to pay the fees and expenses of the Rights
Agent in connection with this Agreement, and (ii) to reimburse the Rights Agent
for all taxes and governmental charges, reasonable expenses and other charges of
any kind and nature incurred by the Rights Agent in the execution of this
Agreement (other than taxes measured by the Rights Agent’s net income). The
Rights Agent will also be entitled to reimbursement from the Company for all
reasonable and necessary out-of-pocket expenses (including reasonable fees and
expenses of the Rights Agent’s counsel and agent) paid or incurred by it in
connection with the administration by the Rights Agent of its duties hereunder.
An invoice for the Rights Agent Fee will be rendered a reasonable time before,
and paid on, the effective date of the applicable transaction. An invoice for
any out-of-pocket expenses and per item fees realized will be rendered and
payable within thirty (30) calendar days after receipt by the Company. The
Company agrees to pay to Rights Agent any amounts, including fees and expenses,
payable in favor of the Rights Agent in connection with any dispute, resolution
or arbitration arising under or in connection with the Agreement. In no event
will any expense incurred by the Company pursuant to this Section 3.2 be
deducted from any CVR Payment Amount.
 
3.3       

Resignation and Removal; Appointment of Successor.
 
(a)           The Rights Agent may resign at any time by giving written notice
thereof to the Company specifying a date when such resignation will take effect,
which notice will be sent at least thirty (30) days before the date so
specified.
 
(b)           If the Rights Agent will resign, be removed or become incapable of
acting, the Company, by way of a Board Resolution, will promptly appoint a
qualified successor Rights Agent who, unless otherwise consented to in writing
by the Holders’ Representative, shall be a stock transfer agent of national
reputation or the corporate trust department of a commercial bank. The successor
Rights Agent so appointed will, forthwith upon its acceptance of such
appointment in accordance with this Section 3.3(b), become the successor Rights
Agent.
 
(c)           The Company will give notice of each resignation and each removal
of a Rights Agent and each appointment of a successor Rights Agent by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders as their names and addresses appear in the CVR Register. Each notice
will include the name and address of the successor Rights Agent. If the Company
fails to send such notice within five (5) Business Days after acceptance of
appointment by a successor Rights Agent, upon Company’s request the successor
Rights Agent will cause such notice to be mailed at the expense of the Company.
In no event will any expense incurred by the Company pursuant to this Section
3.3 be deducted from any CVR Payment Amount.
 
 
 

 
 
 
 
3.4     

Acceptance of Appointment by Successor.
 
Every successor Rights Agent appointed hereunder will execute, acknowledge and
deliver to the Company and to the retiring Rights Agent an instrument accepting
such appointment and a counterpart of this Agreement, and thereupon such
successor Rights Agent, without any further act, deed or conveyance, will become
vested with all the rights, powers, trusts and duties of the retiring Rights
Agent; provided, however, that upon the request of the Company or the successor
Rights Agent, such retiring Rights Agent will cooperate in the transfer of all
relevant data, including the CVR Register, to the successor Rights Agent.
 
ARTICLE IV.
Covenants
 
4.1       

List of Holders.
 
The Company will furnish or cause to be furnished to the Rights Agent in such
form as the Company receives from its transfer agent (or other agent performing
similar services for the Company), the names, addresses and shareholdings of
registered holders of Common Stock as of the Effective Time. The Rights Agent
will share with the Company, upon the Company’s request, a copy of the CVR
Register and other information relating to the Holders, including any
correspondence, unless the Rights Agent is restricted by law from sharing any
such information, in which case the portion protected by law (and only such
portion) will be redacted or otherwise subtracted from the materials provided to
the Company.
 
4.2     

Payment of CVR Payment Amount.
 
The Company will duly and promptly issue to Rights Agent the CVR Payment Amount,
when and if payable, in shares of Common Stock to be distributed to the Holders
in the manner provided for in Section 2.4 and in accordance with the terms of
this Agreement.
 
4.3      

Operating Covenants & Keepwell
 
(a)           Until the earlier of the termination of this Agreement or December
31, 2024, the Company will account for the results of the Consumer Business Unit
pursuant to segment level reporting (whether or not it is in fact reported as a
segment of the Company). Such reporting will be done in accordance with GAAP,
except that appropriate adjustments for allocations of overhead consisting of
those incremental costs incurred by the Company as a result of the Merger and
other costs that are intended to fairly reflect the historical costs of the
Consumer Business Unit, including any adjustments that may occur in accordance
with Section 4.5, shall be applied.
 
(b)           Until the earlier of the termination of this Agreement or December
31, 2024, the Company will provide (on the whole) reasonably sufficient
commercial support to the Consumer Business Unit to allow it to meet the Revenue
Target Achievement for each Milestone Period; provided however, that in any
event the Company will not be required to provide more commercial support (on
the whole) in any particular Milestone Period and on a proportionate basis
relative to the Revenue Target Achievement for that period, than the amount of
commercial support (on the whole) provided to such business by Innovus in 2018
relative to the revenue achieved in 2018.
 
 
 

 
 
 
 
(c)           Until the earlier of the termination of this Agreement or December
31, 2024, the Company will also maintain product registrations, licenses and
approvals and respond to queries and challenges and perform marketing activities
of core products in a manner consistent with Innovus management of the Consumer
Business Unit throughout 2018. After December 31, 2024, Company management will
manage such matters in the Consumer Business Unit as they would in the ordinary
course of business depending on prospects and expected performance of the
Consumer Business Unit and its various product lines. In no event will the
Company or its management team operate in bad faith with an intention to
undermine the ability of the Consumer Business Unit from achieving the
applicable Milestones.
 
4.4       

Books and Records; Holders’ Representative Operating Covenant Review.
 
The Company shall, and shall cause its Affiliates to, keep true, complete and
accurate records in sufficient detail to enable the Holders and their
consultants or professional advisors to confirm the applicable CVR Payment
Amount payable to each Holder hereunder in accordance with the terms specified
in this Agreement. In connection with the Company’s obligations pursuant to
Section 4.3, the Holders’ Representative shall have the right to reasonably
inspect and review the Company’s compliance with such obligations and, if the
Holders’ Representative objects to the Company’s compliance related to Section
4.3, then the Company and the Holders’ Representative shall reasonably negotiate
to resolve such dispute; provided, that if such dispute cannot be resolved
despite the parties’ best commercially reasonable efforts to resolve such
dispute within 15 business days, then the dispute shall be resolved via
arbitration pursuant to Section 9.10 hereof.
 
4.5    

Audits.
 
(a)           In addition to the right of the Holders’ Representative to inspect
the records of the Company in connection with a Notice of Objection as set forth
in Section 2.4(c), upon the written request of the Holders’ Representative
provided to the Company not less than forty-five (45) days in advance (such
request not to be made more than once in any twelve (12) month period), the
Company shall permit, and shall cause its Affiliates to permit, the Independent
Accountant to have access during normal business hours to such of the records of
the Company or its Affiliates as may be reasonably necessary to determine the
accuracy of the results of the Consumer Business Unit reported by the Company,
particularly as it pertains to the achievement or non-achievement, as the case
may be, of any Milestones and the payment of any applicable CVR Payment
Amounts.  The Company shall, and shall cause to its Affiliates to, furnish to
the Independent Accountant such access, work papers and other documents and
information reasonably necessary for the Independent Accountant to calculate and
verify the results of the Consumer Business Unit; provided that the Company may,
and may cause its Affiliates to, redact documents and information not relevant
for such calculation pursuant to this Section 4.5.  The Independent Accountant
shall disclose to the Company and the Holders’ Representative any matters
directly related to its findings to the extent reasonably necessary to verify
the results of the Consumer Business Unit.
 
 
 

 
 
 
 
(b)           If the Independent Accountant concludes that a Milestone was
achieved for which a Non-Achievement Certificate was previously delivered to the
Holders’ Representative and the Rights Agent for which a CVR Payment Amount was
properly due but not paid to the Rights Agent, or that any CVR Payment Amount
made was in an amount less than the amount due, the Company shall pay the CVR
Payment Amount or underpayment thereof to the Rights Agent for further
distribution to the Holders plus interest on such amount at the “prime rate” as
published in The Wall Street Journal or similar reputable data source from time
to time, calculated from when the full CVR Payment Amount should have been paid
to the date of actual payment (such amount including interest being the “CVR
Shortfall”).  The CVR Shortfall shall be paid within ten (10) Business Days
after the date the Independent Accountant delivers to Company and the Holders’
Representative the Independent Accountant’s written report.  The decision of the
Independent Accountant shall be final, conclusive and binding on Company and the
Holders, shall be non-appealable and shall not be subject to further review. The
fees charged by the Independent Accountant shall be paid by the Company.
 
(c)           Each Person seeking to receive information from the Company in
connection with a review pursuant to this Section 4.5 shall enter into, and
shall cause its accounting firm to enter into, a reasonable and mutually
satisfactory confidentiality agreement with the Company or any controlled
Affiliate obligating such party to retain all such information disclosed to such
party in confidence pursuant to such confidentiality agreement.
 
ARTICLE V.
Amendments
 
5.1        

Amendments Without Consent of Holders.
 
(a)           Without the consent of any Holders or the Holders’ Representative,
the Company, when authorized by a Board Resolution, at any time and from time to
time, may enter into one or more amendments hereto, to evidence the succession
of another Person to the Company and the assumption by any such successor of the
covenants of the Company herein in a transaction contemplated by Section 6.1
hereof.
 
(b)           Without the consent of any Holders or the Holders’ Representative,
the Company, when authorized by a Board Resolution, together with the Rights
Agent, in the Rights Agent’s sole and absolute discretion, may at any time and
from time to time, enter into one or more amendments hereto:
 
(i)           to evidence the succession of another Person as a successor Rights
Agent and the assumption by any successor of the covenants and obligations of
the Rights Agent herein;
 
(ii)           to add to the covenants of the Company such further covenants,
restrictions, conditions or provisions as the Board of Directors and the Rights
Agent will consider to be for the protection of the Holders;
 
(iii)           to cure any ambiguity, to correct or supplement any provision
herein that may be defective or inconsistent with any other provision herein;
provided, however, that in each case, such provisions will not materially
adversely affect the interests of the Holders or the ability of the Consumer
Business Unit to achieve the Milestones in any way; or
 
 
 

 
 
 
 
(iv)           to add, eliminate or change any provision of this Agreement
unless such addition, elimination or change is adverse to the interests of the
Holders.
 
Promptly after the execution by the Company and the Rights Agent of any
amendment pursuant to the provisions of this Section 5.1, the Company will
deliver a notice thereof to each Holder at its address as it appears on the CVR
Register, setting forth in general terms the substance of such amendment.
 
5.2       

Amendments with Consent of Holders.
 
(a)           Subject to Section 5.1 (which amendments pursuant to Section 5.1
may be made without the consent of the Holders or the Holders’ Representative),
the Company, when authorized by a Board Resolution, the Rights Agent, the
Holders’ Representative and the Acting Holders may enter into one or more
amendments hereto for the purpose of adding, eliminating or changing any or all
provisions of this Agreement.
 
(b)           Promptly after the execution by the Company, the Holders’
Representative and the Rights Agent of any amendment pursuant to the provisions
of this Section 5.2, the Company will deliver a notice thereof to each Holder at
its address as it appears on the CVR Register, setting forth in general terms
the substance of such amendment. 
 
5.3       

Execution of Amendments.
 
In executing any amendment permitted by this Article V, the Rights Agent will be
entitled to receive, and will be fully protected in relying upon, an opinion of
counsel of the Company, at Company’s sole expense, stating that the execution of
such amendment is authorized or permitted by this Agreement. The Rights Agent
may, but is not obligated to, enter into any such amendment that affects the
Rights Agent’s own rights, privileges, covenants or duties under this Agreement
or otherwise.
 
5.4       

Effect of Amendments.
 
Upon the execution of any amendment under this Article V, this Agreement will be
modified in accordance therewith, such amendment will form a part of this
Agreement for all purposes and every Holder will be bound thereby. In the event
this Agreement is modified in accordance with this Article V, the Rights Agent
will, to the extent practicable, deliver to the Holders a notice of such
amendment.
 
5.5        

Amendment Prior to Effective Time.
 
            
This Agreement may not be amended prior to the Effective Time without the prior
written consent of Innovus.
 
 
 

 
 
 
 
ARTICLE VI.
Consolidation, Merger, Sale or Conveyance
 
6.1         

Consolidation
 
(a)           Except as contemplated by the Merger, the Company will not
consolidate with or merge into any other Person or convey, transfer or lease its
properties and assets substantially as an entirety to any Person, unless:
 
(i)           the Person formed by such consolidation or into which the Company
is merged or the Person that acquires by conveyance or transfer, or that leases,
the properties and assets of the Company substantially as an entirety (the
“Surviving Person”) will expressly assume payment (if and to the extent required
hereunder) of amounts on all the CVRs and the performance of every duty and
covenant of this Agreement on the part of the Company to be performed or
observed; and
 
(ii)           the Company has delivered to the Rights Agent an Officer’s
Certificate, stating that such consolidation, merger, conveyance, transfer or
lease complies with this Article VI and that all conditions precedent herein
provided for relating to such transaction have been complied with.
 
(b)           In the event the Company conveys, transfers or leases its
properties and assets substantially as an entirety in accordance with the terms
and conditions of this Section 6.1, the Surviving Person will be liable for the
payment of the CVR Payment Amount and the performance of every duty and covenant
of this Agreement on the part of the Company to be performed or observed.
 
6.2       

Buyback of De Minimis CVRs.
 
At any time, the Company will have the right to purchase all the outstanding
CVRs of any Holder having a De Minimis amount of CVRs by paying that Holder an
amount in cash that is equivalent to the aggregate consideration such Holder
would be owed if all future Achievement Certificates were delivered (assuming an
exchange ratio of .1667) (such amount, the “Holder Buyout Value”). For purposes
of this section, a “De Minimis” amount of CVRs is an amount for which the Holder
Buyout Value is less than $100.
 
6.3       

Successor Substituted.
 
Upon any consolidation of or merger by the Company with or into any other
Person, or any conveyance, transfer or lease of the properties and assets
substantially as an entirety to any Person in accordance with Section 6.1, the
Surviving Person will succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Agreement with the same effect as if
the Surviving Person had been named as the Company herein, and thereafter the
predecessor Person will be relieved of all obligations and covenants under this
Agreement and the CVRs.
 
 
 

 
 
 
 
ARTICLE VII.
Management Discretion; No Fiduciary Duties
 
7.1     

Management of Consumer Business Unit. For the avoidance of doubt, subject to and
consistent with its obligations set forth in this Agreement, management of the
Company shall have full discretion in management of the Consumer Business Unit
in all respects, including without limitation decisions relating to taxes,
application of US GAAP, selection of auditor, questions of accounting policy
decisions/elections, working capital management, risk management, business
opportunities, hiring and terminations of employees and consultants, etc.
 
7.2     

No Fiduciary Duties. Neither the Company’s officers nor its directors owe
fiduciary duties of any kind to the Holders of the CVRs.
 
ARTICLE VIII.
The Holders’ Representative
 
8.1      

Appointment of Holders’ Representative.  To the extent valid and binding under
applicable law, the Holders’ Representative is hereby appointed, authorized and
empowered to be the exclusive representative, agent and attorney-in-fact of each
Holder, with full power of substitution, to make all decisions and
determinations and to act (or not act) and execute, deliver and receive all
agreements, documents, instruments and consents on behalf of and as agent for
each Holder at any time in connection with, and that may be necessary or
appropriate to accomplish the intent and implement the provisions of this
Agreement and to facilitate the consummation of the transactions contemplated
hereby, including without limitation for purposes of (i) negotiating and
settling, on behalf of the Holders, any dispute that arises under this
Agreement, (ii) confirming the satisfaction of the Company’s obligations under
this Agreement and (iii) negotiating and settling matters with respect to the
amounts to be paid to the Holders pursuant to this Agreement.
 
8.2      

Authority.  To the extent valid and binding under applicable law, the
appointment of the Holders’ Representative by the Holders in accordance with
this Agreement is coupled with an interest and may not be revoked in whole or in
part (including, without limitation, upon the death or incapacity of any
stockholder). Subject to the prior qualifications, such appointment shall be
binding upon the heirs, executors, administrators, estates, personal
representatives, officers, directors, security holders, successors and assigns
of each Holder. To the extent valid and binding under applicable law, all
decisions of the Holders’ Representative shall be final and binding on all
Holders. The Company and the Rights Agent shall be entitled to rely upon,
without independent investigation, any act, notice, instruction or communication
from the Holders’ Representative and any document executed by the Holders’
Representative on behalf of any Holder and shall be fully protected in
connection with any action or inaction taken or omitted to be taken in reliance
thereon, absent willful misconduct by the Company or the Rights Agent (as such
willful misconduct is determined by a final, non-appealable judgment of a court
of competent jurisdiction). The Holders’ Representative shall not be
responsible, and shall be indemnified by the Holders and the Company, for any
loss suffered by, or liability of any kind to the Holders, including as a result
of legal action, arising out of any act done or omitted by the Holders’
Representative in connection with the acceptance or administration of the
Holders’ Representative’s duties hereunder, unless such act or omission involves
gross negligence or willful misconduct.
 
 
 

 
 
 
 
8.3  

Successor Holders’ Representative.  The Holders’ Representative may be removed
for any reason or no reason by written consent of the Acting Holders. In the
event that the Holders’ Representative dies, becomes unable to perform his or
her responsibilities hereunder or resigns or is removed from such position, the
Acting Holders shall be authorized to and shall select another representative to
fill such vacancy and such substituted representative shall be deemed to be the
Holders’ Representative for all purposes of this Agreement. The newly-appointed
Holders’ Representative shall notify the Company, the Rights Agent and any other
appropriate Person in writing of his or her appointment, provide evidence that
the Acting Holders approved such appointment and provide appropriate contact
information for purposes of this Agreement. The Company and the Rights Agent
shall be entitled to rely upon, without independent investigation, the identity
and validity of such newly-appointed Holders’ Representative as set forth in
such written notice. In the event that within 30 days after the Holders’
Representative dies, becomes unable to perform his or her responsibilities
hereunder or resigns or is removed from such position, no successor Holders’
Representative has been so selected, the Company shall cause the Rights Agent to
notify the Person holding the largest quantity of the outstanding CVRs (and who
is not the Company or, to the Rights Agent’s actual knowledge, any Affiliate of
the Company) that such Person is the successor Holders’ Representative, and such
Person shall be the successor Holders’ Representative hereunder. If such Person
notifies the Rights Agent in writing that such Person declines to serve, the
Rights Agent shall forthwith notify the Person holding the next-largest quantity
of the outstanding CVRs (and who is not the Company or, to the Rights Agent’s
actual knowledge, any Affiliate of the Company) that such next-largest-quantity
Person is the successor Holders’ Representative, and such next-largest-quantity
Person shall be the successor Holders’ Representative hereunder. (And so on, to
the extent as may be necessary.) The Holders are intended third party
beneficiaries of this Section 8.3. If a successor Holders’ Representative is not
appointed pursuant to the preceding procedure within 60 days after the Holders’
Representative dies, becomes unable to perform his or her responsibilities
hereunder or resigns or is removed from such position, the Company shall appoint
a successor Holders’ Representative.
 
8.4     

Termination of Duties and Obligations.  The Holders’ Representative’s duties and
obligations under this Agreement shall survive until no CVRs remain outstanding
or until this Agreement expires or is terminated pursuant to Section 9.8,
whichever is earlier.
 
 
ARTICLE IX.
Other Provisions of General Application
 
9.1      

Notices to Rights Agent and Company.
 
Subject to Section 9.2, all notices, requests, demands, claims and other
communications that are required to be or may be given under this Agreement must
be in writing and will be deemed to have been effectively given: (a) upon
personal delivery to the recipient; (b) when sent by email or confirmed
facsimile, if sent during normal business hours of the recipient; if not, then
on the next Business Day; or (c) one Business Day after deposit with a
nationally recognized overnight courier, specifying next-day delivery, with
written verification of receipt, in each case to the intended recipient at the
following addresses:
 
 
 

 
 
 
 
(a)           if to the Company, to
 
Aytu Bioscience Inc.
373 Inverness Parkway, Suite 206
Englewood, CO 80112
Attention: Joshua Disbrow
Josh.Disbrow@aytubio.com
 
with a copy to
 
Dorsey & Whitney LLP
111 South Main Street
21st Floor
Salt Lake City, UT 84111
Attention: Nolan Taylor, Esq.
Taylor.nolan@dorsey.com
 
(b)           if to the Holders’ Representative, to
 
[ ]
 
 
with a copy to
 
[ ]
 
(c)           if to the Rights Agent, to
 
[ ]
 
with a copy to
 
[ ]
 
or to such other address as either party has furnished to the other by notice
given in accordance with this Section 9.1.
 
9.2       

Notice to Holders.
 
Where this Agreement provides for notice to Holders, such notice will be
sufficiently given (unless otherwise herein expressly provided) (i) if in
writing and mailed, first-class postage prepaid, to each Holder affected by such
event, at his, her or its address as it appears in the CVR Register, or (ii) if
sent via email or email with PDF attachment at email addresses previously
confirmed by Holders, in either case not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. In any
case where notice to Holders is given by mail or email, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any particular
Holder will affect the sufficiency of such notice with respect to other Holders.
 
 
 

 
 
 
 
9.3   

Assignment; Third Party Beneficiaries.
 
Neither this Agreement nor any right, interest or obligation hereunder may be
assigned by any of the parties hereto without the prior written consent of the
other parties hereto; provided, however, that the Rights Agent may, without
further consent of the other parties hereto, assign any of its rights and
obligations hereunder to any affiliated transfer agent registered under Rule
17Ac2-1 promulgated under the Securities Exchange Act of 1934, as amended. This
Agreement will be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, will give to any Person (other than the parties
hereto, the Holders and their permitted successors and assigns hereunder) any
benefit or any legal or equitable right, remedy or claim under this Agreement or
under any covenant or provision herein contained, all such covenants and
provisions being for the sole benefit of the parties hereto, the Holders and
their permitted successors and assigns. The Holders will not have any rights or
remedies with respect to the CVRs except as expressly set forth herein.
 
9.4       

Governing Law.
 
This Agreement and the CVRs will be governed by the laws of the State of
Delaware without reference to principles of conflicts of laws that would result
in the application of the laws of any other jurisdiction.
 
9.5      

Legal Holidays.
 
If a CVR Payment Date is not a Business Day, then, notwithstanding any provision
of this Agreement to the contrary, any payment required to be made in respect of
the CVRs on such date need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the CVR
Payment Date.
 
9.6       

Severability Clause.
 
Any term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction will not affect the validity or enforceability of
the remaining terms and provisions of this Agreement or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction. If a final judgment of a court of competent jurisdiction
declares that any term or provision of this Agreement is invalid or
unenforceable, the parties hereto agree that the court making such determination
will have the power to limit such term or provision, to delete specific words or
phrases or to replace such term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement will be valid and
enforceable as so modified. In the event such court does not exercise the power
granted to it in the prior sentence, the parties hereto agree to replace such
invalid or unenforceable term or provision with a valid and enforceable term or
provision that will achieve, to the extent possible, the economic, business and
other purposes of such invalid or unenforceable term or provision.
 
 
 

 
 
 
 
9.7       

Counterparts.
 
This Agreement may be executed in any number of counterparts and by facsimile
signatures, any one of which need not contain the signatures of more than one
party and each of which will be an original, but all such counterparts taken
together will constitute one and the same instrument. The exchange of copies of
this Agreement or amendments thereto and of signature pages by facsimile
transmission or by e-mail transmission in portable digital format (or similar
format) will constitute effective execution and delivery of such instrument(s)
as to the parties and may be used in lieu of the original Agreement or amendment
for all purposes. Signatures of the parties transmitted by facsimile or by
e-mail transmission in portable digital format (or similar format) will be
deemed to be their original signatures for all purposes.
 
9.8      

Termination.
 
This Agreement will terminate and be of no further force or effect, and the
parties hereto will have no liability hereunder, upon the earliest to occur of
(a) the payment of the last possible CVR Payment Amount due hereunder, (b) if a
Notice of Objection is not delivered within the Objection Period relating to the
last Milestone for which an Achievement Certificate has not been issued, the
expiration of such Objection Period, (c) in the event of the delivery of a
Notice of Objection for such last Milestone period, either (i) the final
determination in accordance with this Agreement that no further Earnout
Achievement has been achieved or (ii) the fulfillment of any payment obligation
required pursuant to a final determination made in accordance with this
Agreement or (d) the date on which no CVRs are outstanding.
 
9.9      

Entire Agreement.
 
This Agreement represents the entire understanding of the parties hereto with
reference to the CVRs and this Agreement supersedes any and all other oral or
written agreements made with respect to the CVRs.
 
9.10     

Arbitration.
 
Any claim which the Holders’ Representative or the Holders have the right to
assert hereunder (including any claims brought by the Acting Holders on behalf
of the Holders) will be settled by arbitration administered by the American
Arbitration Association under its Commercial Arbitration Rules, and judgment on
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Only the Company, the Rights Agent, the Holders’
Representative and/or the Acting Holders may initiate an arbitration for any
matter relating to this Agreement. However, in the event of a dispute arising
from the delivery of a Notice of Objection, the sole matter to be settled by
arbitration will be whether an Earnout Achievement has occurred. The number of
arbitrators will be one, and such arbitrator will be selected by the American
Arbitration Association. The place of the arbitration will be Denver, Colorado.
The arbitrator will be a lawyer or retired judge or accountant with experience
in the pharmaceutical industry and with mergers and acquisitions. Except as may
be required by law, neither a party nor the arbitrator may disclose the
existence, content or results of any arbitration hereunder without the prior
written consent of the other parties (provided that the Holders’ Representative
may disclose to the Holders any such information without the consent of the
Company). Any award payable in favor of the Holders or the Rights Agent as a
result of arbitration will be distributed to the Holders based on their Pro Rata
Share. The Company will pay all fees and expenses of the arbitration, including
the costs and expenses billed by the arbitrator in connection with the
performance of its duties described herein; provided, however, that if the
arbitrator rules in favor of the Company, the arbitrator’s fees and expenses
will be offset against any CVR Payment Amount or any other payment to be made
thereafter hereunder. Each party will be responsible for its own attorney fees,
expenses and costs of investigation.
 
 
 

 
 
 
 
9.11       

Survival.
 
Notwithstanding anything in this Agreement to the contrary, all provisions
regarding indemnification, warranty, liability and limits thereon, and
confidentiality and protection of proprietary rights and trade secrets shall
survive the termination or expiration of this Agreement.
 
9.12      

Force Majeure.
 
Notwithstanding anything to the contrary contained herein, the Rights Agent
shall not be liable for any delays or failures in performance resulting from
acts beyond its reasonable control including, without limitation, acts of God,
terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or
malfunctions of computer facilities, or loss of data due to power failures or
mechanical difficulties with information storage or retrieval systems, labor
difficulties, war or civil unrest.
 
9.13       

Confidentiality
 
(a)           Definition. “Confidential Information” shall mean any and all
technical or business information relating to a party, including, without
limitation, financial, marketing and product development information,
stockholder information (including any non-public information of such
stockholder), and proprietary information that is disclosed or otherwise becomes
known to the other party or its affiliates, agents or representatives before or
during the term of this Agreement. Confidential Information constitutes trade
secrets and is of great value to the owner (or its affiliates). Confidential
Information shall not include any information that is: (a) already known to the
other party or its affiliates at the time of the disclosure, provided that such
prior knowledge can be substantiated by the written records of such party; (b)
publicly known at the time of the disclosure or becomes publicly known through
no wrongful act or failure of the other party; (c) subsequently disclosed to the
other party or its affiliates on a non-confidential basis by a third party not
having a confidential relationship with the owner and which rightfully acquired
such information; or (d) independently developed by one party without access to
the Confidential Information of the other, provided that such independent
development can be substantiated by the written records of such party. This
Agreement, including all of its terms and conditions, will not be deemed to be
Confidential Information and may be publicly disclosed by Company.
 
(b)            Use and Disclosure. All Confidential Information of a party will
be held in confidence by the other party with at least the same degree of care
as such party protects its own confidential or proprietary information of like
kind and import, but not less than a reasonable degree of care. Neither party
will disclose in any manner Confidential Information of the other party in any
form to any person or entity without the other party’s prior consent. However,
each party may disclose relevant aspects of the other party’s Confidential
Information to its officers, affiliates, agents, subcontractors and employees to
the extent reasonably necessary to perform its duties and obligations under this
Agreement. Without limiting the foregoing, each party will implement such
physical and other security measures and controls as are necessary to protect
(a) the security and confidentiality of Confidential Information; (b) against
any threats or hazards to the security and integrity of Confidential
Information; and (c) against any unauthorized access to or use of Confidential
Information. To the extent that a party delegates any duties and
responsibilities under this Agreement to an agent or other subcontractor, the
party ensures that such agent and subcontractor are contractually bound to
confidentiality terms consistent with the terms of this Section 9.13.
 
 
 

 
 
 
 
(c)           Required or Permitted Disclosure. In the event that any requests
or demands are made for the disclosure of Confidential Information, other than
requests to Rights Agent for stockholder records pursuant to standard subpoenas
from state or federal government authorities (e.g., divorce and criminal
actions), the party receiving such request will promptly notify the other party
to secure instructions from an authorized officer of such party as to such
request and to enable the other party the opportunity to obtain a protective
order or other confidential treatment, unless such notification is otherwise
prohibited by law or court order. Each party expressly reserves the right,
however, to disclose Confidential Information to any person whenever it is
advised by counsel that it may be held liable for the failure to disclose such
Confidential Information or if required by law or court order.
 
(d)           Unauthorized Disclosure. As may be required by law and without
limiting any party's rights in respect of a breach of this Section 9.13, each
party will promptly:
 
(i)           notify the other party in writing of any unauthorized possession,
use or disclosure of the other party’s Confidential Information by any person or
entity that may become known to such party;
 
(ii)           furnish to the other party full details of the unauthorized
possession, use or disclosure; and
 
(iii)           use commercially reasonable efforts to prevent a recurrence of
any such unauthorized possession, use or disclosure of Confidential Information.
 
(e)           Costs. Each party will bear the costs it incurs as a result of
compliance with this Section 9.13.
 
 
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
 
 

 
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
on its behalf by its duly authorized officers as of the day and year first above
written.
 
 
 
Aytu Bioscience Inc.
 
 
By:                                                                     

 
Name: Josh Disbrow
 
Title: President and Chief Executive Officer
 
 
 
 
[Rights Agent]
 
 
By:                                                                      
 
Name:
 
Title:
 
 
 
 
 
And solely as the Holders’ Representative:
 
 
 
                                                                             

 
Vivian Liu
 
 
 

 

 
 
 
 
 

 
Exhibit A
 
Earnout Milestones and Payment Amounts
 
1. 
Milestone #1: If the Consumer Business Unit records $24 million in revenue for
calendar 2019, the CVR Payment Amount for this Milestone will be $2,000,000 (as
such amount may be adjusted pursuant to the Riders below).
 
2. 
Milestone #2: If the Consumer Business Unit records $30 million in revenue for
calendar 2020, the CVR Payment Amount for this Milestone will be $1,000,000 (as
such amount may be adjusted pursuant to the Riders below). If the Consumer
Business Unit achieves break-even in terms of profitability from operations for
calendar 2020, then the CVR Payment Amount for this Milestone will be increased
by $1,000,000 (as such amount may be adjusted pursuant to the Riders below).
 
3. 
Milestone #3: If the Consumer Business Unit records $40 million in revenue for
calendar 2021, the CVR Payment Amount for this Milestone will be $1,000,000 (as
such amount may be adjusted pursuant to the Riders below). If the Consumer
Business Unit achieves profitability from operations for calendar 2021, then the
CVR Payment Amount for this Milestone will be increased by $1,000,000 (as such
amount may be adjusted pursuant to the Riders below).
 
4. 
Milestone #4: If the Consumer Business Unit records $50 million in revenue for
calendar 2022, the CVR Payment Amount for this Milestone will be $2,500,000 (as
such amount may be adjusted pursuant to the Riders below). If the Consumer
Business Unit achieves profitability from operations for calendar 2022, then the
CVR Payment Amount for this Milestone will be increased by $2,500,000 (as such
amount may be adjusted pursuant to the Riders below).
 
5. 
Milestone #5: If the Consumer Business Unit records $75 million in revenue for
calendar 2023, the CVR Payment Amount for this Milestone will be $2,500,000 (as
such amount may be adjusted pursuant to the Riders below). If the Consumer
Business Unit achieves profitability from operations for calendar 2023, then the
CVR Payment Amount for this Milestone will be increased by $2,500,000 (as such
amount may be adjusted pursuant to the Riders below).
 
Warrant Rider: If any warrant issued by Innovus prior to the Merger (an
“Outstanding Warrant”) is exercised during the term of this Agreement, then the
holder of such Outstanding Warrant will be issued one CVR for each share of
Common Stock received upon exercise of such Outstanding Warrant and shall become
a Holder of CVRs hereunder from that time forward. Any such Holder shall then be
entitled to participate with other Holders in receiving its Pro Rata Share of
CVR Payment Amounts, but only with respect to any Milestone Earnouts for which
the Achievement Certificate is prepared and delivered after the date such
Outstanding Warrants are exercised, but shall not be entitled to receive any CVR
Payment Amount for any Earnout Achievement for which the Achievement Certificate
has already been delivered.
 
 
 

 
 
 
 
Litigation Rider: To the extent that the Company’s costs (including any legal
fees, judgments, settlement payments, etc.) in connection with or relating to
the matters referenced in the letter to Innovus from the Marin County District
Attorney’s Office on August 24, 2018 exceed $300,000, the Company may in its
discretion reduce one or more CVR Payment Amounts to offset such excess amounts.
Additionally, to the extent that the Company’s costs (including any legal fees,
judgments, settlement payments, etc.) in connection with or relating to the
current dispute with Hikma Pharmaceuticals exceed $500,000, excluding the costs
of purchasing a reasonable supply of FlutiCare expected to be sold in the
ordinary course, the Company may in its discretion reduce one or more CVR
Payment Amounts to offset such excess amounts.
 
Anti-dilution Rider: Notwithstanding the exchange ratio calculations in 1-5
above, if the Company at any time or from time to time during the term of this
Agreement effects a subdivision or combination of its Common Stock, then the
exchange ratios determined after such subdivision or combination shall be
proportionately decreased or increased, as appropriate.