Exhibit 10.3

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”), is made as of the 25th
day of July, 2014 (the “Agreement Date”), by and among Paulson Capital
(Delaware) Corp., a Delaware corporation (to be renamed VBI Vaccines, Inc.
following the Merger, as defined below) (the “Company”), Variation
Biotechnologies (US), Inc., a Delaware corporation (“VBI”), and each of the
other Persons executing a signature page hereto and further set forth on
Schedule 1 hereto (referred to herein, collectively, as the “Purchasers” and,
individually, as a “Purchaser”).

 

RECITALS

 

WHEREAS, the Boards of Directors of the Company; VBI; and VBI Acquisition Corp.,
a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger
Sub”), have, upon the terms and subject to the conditions set forth in that
certain Agreement and Plan of Merger dated May 8, 2014 (the “Merger Agreement”),
determined that it is in the best interests of such corporations and their
respective stockholders to consummate the merger of Merger Sub with and into VBI
(the “Merger”), with VBI continuing as the surviving corporation, in accordance
with the applicable provisions of the Delaware General Corporation Law;

 

WHEREAS, as a condition to and inducement of VBI’s willingness to enter into the
Merger Agreement, VBI and the Company have agreed that VBI and the Company shall
have in escrow for the benefit of VBI aggregate gross proceeds of at least
$11,000,000 (rounded up to the nearest thousand) (the “Maximum Amount”) (or such
lesser amount agreed to in writing by VBI in its sole discretion) received
pursuant to a private placement (the “Offering”) of the Company’s common stock,
par value $0.0001 per share (the “Common Stock”), solely to accredited investors
in compliance with the exemption from registration provided by Section 4(a)(2)
of the Securities Act of 1933, as amended (the “Securities Act”), or Rule 506 of
Regulation D thereunder or to “non-U.S. persons” pursuant to Regulation S, on
terms satisfactory to VBI and the Company; and the conditions to closing such
Offering shall have been satisfied and such amount of gross proceeds shall be
unencumbered cash available to VBI at the effective time of the Merger;

 

WHEREAS, of the Offering proceeds, the Pre-Merger Company Shareholders (as
defined in the Merger Agreement) shall be responsible for investing
approximately $6,000,000 and additional investors sourced by VBI shall be
responsible for investing approximately $5,000,000, such that the shares of the
Company’s Common Stock issuable pursuant to the Offering, together with the
Merger Consideration (as defined in the Merger Agreement), each individually and
on a combined basis, shall be as set forth in Exhibit B to the Merger Agreement
(the “Post-Merger Parent Capitalization”);

 

WHEREAS, the Company has authorized the issuance and sale of up to 25,640,318
shares (the “Shares) of the Company’s Common Stock at a purchase price of $0.429
per Share (subject to adjustment for any stock split or combination occurring
prior to the Closing, as defined below), for maximum aggregate proceeds up to
the Maximum Amount; and

 

WHEREAS, each Purchaser desires to purchase and the Company desires to sell
shares of Common Stock on the terms and conditions described herein.

 

 

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AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing, and the representations,
warranties, covenants and conditions set forth below, the Company, VBI and the
Purchasers, intending to be legally bound, hereby agree as follows:

 

1.             Issuance and Sale of Common Stock.

 

1.1     Subject to the terms and conditions of this Agreement, each Purchaser
agrees to purchase at the Closing, and the Company agrees to sell and issue to
each Purchaser, the number of Shares of the Company’s Common Stock set forth on
such Purchaser’s signature page hereto, at a price of $0.429 per Share (subject
to adjustment for any stock split or combination occurring prior to the
Closing), for the aggregate purchase price set forth on the signature page
hereto and next to the Purchaser’s name on Schedule 1 hereto (the “Purchase
Price”). The Shares hereinafter may be referred to herein as the “Securities.”

 

1.2.     The purchase and sale of the Shares shall take place at a closing to be
held remotely via the exchange of documents and signatures, immediately upon the
Effective Time (as defined in the Merger Agreement) of the Merger pursuant to
the Merger Agreement (which time and place shall be designated hereunder as the
“Closing”).

 

1.3.     Prior to the Closing, the Purchaser will deliver to Richardson & Patel,
LLP, in its capacity as escrow agent for the Offering (the “Escrow Agent”), into
a non-interest-bearing escrow account, pursuant to the wire instructions which
are provided as Exhibit A hereto (the “Escrow Account”), a wire transfer of
funds in the amount of the Purchase Price and within a reasonable time after the
Closing, and in any event within 5 days of Closing, the Company will issue and
deliver to the Purchaser a certificate representing the Shares purchased by the
Purchaser. All funds deposited in the Escrow Account pursuant to this Agreement
shall remain in the Escrow Account until the earliest to occur of (a) the
Closing, at which time such funds shall be immediately delivered by the Escrow
Agent to the Company, or (b) the termination of the Offering by the Company, at
which time such funds shall immediately be returned by the Escrow Agent to the
applicable Purchaser(s). The Escrow Agent shall otherwise act in accordance with
the written instruction(s) of VBI and the Required Purchasers.

 

1.4      Certain Defined Terms Used in this Agreement. The following terms used
in this Agreement shall be construed to have the meanings set forth or
referenced below.

 

“Affiliate” means, with respect to any specified Person, any other Person who or
which, directly or indirectly, controls, is controlled by, or is under common
control with such specified Person, including, without limitation, any general
partner, officer, director, or manager of such Person and any venture capital or
private equity fund now or hereafter existing that is controlled by one or more
general partners or managing members of, or shares the same management company
with, such Person.

 

“Code” means the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.

 

“Environmental Laws” means any law, regulation, or other applicable requirement
in the United States or Canada relating to (i) releases or threatened release of
Hazardous Substance, (ii) pollution or protection of employee health or safety,
public health or the environment, or (iii) the manufacture, handling, transport,
use, treatment, storage, or disposal of Hazardous Substances.

 

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

 

“Material Adverse Effect” means a material adverse effect on the business,
assets (including intangible assets), liabilities, financial condition,
property, prospects or results of operations of the Company or any of its
subsidiaries, or VBI or the VBI Subsidiary, in each case before or after the
Merger.

 

“Perceptive” means Perceptive Life Science Master Fund Ltd., a New York limited
partnership and Titan-Perc Ltd., a New York limited partnership.

 

“Person” means any individual, corporation, partnership, trust, limited
liability company, association or other entity.

 

“Required Purchasers” means the holders of Shares constituting at least
sixty-six and two-thirds percent (66 2/3%) of the aggregate of all the Shares.

 

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

 

“VBI Intellectual Property” means all patents, patent applications, trademarks,
trademark applications, service marks, tradenames, copyrights, trade secrets,
licenses, domain names, mask works, information and proprietary rights and
processes as are necessary to the conduct of VBI’s business as now conducted and
as presently proposed to be conducted.

 

“VBI Key Employees” means, collectively, Jeff Baxter, David Anderson and Egidio
Nascimento.

 

“VBI Products” means (a) the products that VBI (i) currently manufactures,
markets, sells or licenses or (ii) currently is testing or has proposed for
future manufacture, market, sale or license in the future, and (b) the services
that VBI currently provides or currently proposes to provide.

 

“VBI Series A Preferred Stock” means the Series A Convertible Preferred Stock,
$0.01 par value per share, of VBI.

 

“VBI Subsidiary” means Variation Biotechnologies, Inc., a corporation
incorporated under the laws of Canada.

 

2.             Use of Proceeds. In accordance with the directions of the
Company’s Board of Directors, the Company will use the proceeds from the sale of
the Shares hereunder to provide the required unencumbered cash to VBI pursuant
to the Merger Agreement and thereafter for general working capital of the
Company, VBI and the VBI Subsidiary, following the Merger.

 

3.             Representations and Warranties of the Company.

 

The Company hereby represents and warrants to each Purchaser that, except as set
forth on the Company Disclosure Schedule attached as Exhibit B to this
Agreement, which exceptions shall be deemed to be part of the representations
and warranties made hereunder, the representations and warranties set forth
below are true and complete as of the date of the Closing, except as otherwise
indicated. The Company Disclosure Schedule shall be arranged in sections
corresponding to the numbered and lettered sections and subsections contained in
this Section 3, and the disclosures in any section or subsection of the Company
Disclosure Schedule shall qualify other sections and subsections in this Section
3 only to the extent it is readily apparent from a reading of the disclosure
that such disclosure is applicable to such other sections and subsections. For
purposes of these representations and warranties, unless otherwise indicated,
the term “the Company” shall include any subsidiaries of the Company, unless
otherwise noted herein.

 

 
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3.1     Organization and Qualification. The Company (i) is on the Agreement Date
and will be at the Closing a legal entity duly incorporated, validly existing
and in good standing under the laws of Delaware, (ii) has on the Agreement Date
and at the Closing will have, the requisite corporate power to carry on its
business as now conducted, (iii) is qualified to do business and in good
standing (to the extent the relevant jurisdiction recognizes such concept of
good standing) as a foreign corporation where the ownership, leasing or
operation of its assets or properties or conduct of its business requires such
qualification, except where the failure to be so organized, qualified or in good
standing, could not have, individually or in the aggregate, a Material Adverse
Effect and (iv) has all requisite corporate power and authority to execute,
deliver and perform their obligations under this Agreement and to consummate the
transactions contemplated thereby.

 

3.2     No Conflicts. The Company is not subject to, or obligated under, any
provision of (i) its certificate of incorporation or bylaws, (ii) any agreement,
arrangement or understanding, (iii) any license, franchise or permit, nor (iv)
any law, regulation, order, judgment or decree, which would conflict with, be
breached or violated, or in respect of which a right of termination or
acceleration or any security interest, charge or encumbrance on any of its
assets would be created, by the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby, other
than any such conflicts, breaches, violations, rights of termination or
acceleration or security interests, charges or encumbrances which, could not
have, individually or in the aggregate, a Material Adverse Effect.

 

3.3     Capitalization/Validity of the Shares.

 

(a)     As of the date hereof, the Company is authorized to issue an aggregate
of 120,000,000 shares of capital stock, of which (i) 90,000,000 are shares of
Common Stock, of which 72,965,075 will be outstanding immediately following the
Effective Time of the Merger and at Closing (not including the Shares issued
under this Agreement), and (ii) 30,000,000 are shares of preferred stock, par
value $0.0001 per share (the “Preferred Stock”), of which 500,000 are designated
as Series A Preferred Stock, all of which are issued and outstanding, but none
of which will be outstanding immediately after the Closing.

 

Except as provided in the foregoing sentence, shares issuable pursuant to the
Incentive Plans (as defined below) and shares issuable to satisfy the Pubco
Equity Conditions (as defined in the Merger Agreement) upon conversion of
outstanding convertible debt, there will be no shares of Common Stock and no
shares of Preferred Stock issued and outstanding immediately prior to the
Closing. The issued and outstanding shares of Common Stock and Preferred Stock
have been duly authorized, validly issued, are fully paid and nonassessable and
have been issued in compliance with any applicable preemptive rights and
applicable laws (including federal and state securities laws) and are free from
any restrictions on transfer (other than restrictions under the Securities Act
or state securities laws) or any option, lien, pledge, security interest,
encumbrance, restriction or charge of any kind. As of the Closing, there will be
no agreements or other obligations (contingent or otherwise) which may require
the Company to repurchase or otherwise acquire any shares of its capital stock.

 

(b)     At Closing, other than as set forth in this Section 3.3, no other
securities of the Company, including equity securities or securities containing
any equity features are authorized, or shall be issued or outstanding. Other
than incentive awards made under the Paulson Capital Corp. 2013 Equity Incentive
Plan, the 2006 VBI Stock Option Plan or the 2014 Equity Incentive Plan (the
“Incentive Plans”), the Company does not have any outstanding stock options,
restricted stock, restricted stock units, phantom stock, performance stock or
other compensatory equity or equity-linked awards. At Closing, other than the
Preferred Stock, and the Incentive Awards (as defined in the Merger Agreement),
except as set forth in Section 3.3(b) of the Company Disclosure Schedule, there
are no commitments, obligations, agreements or other rights or arrangements
(contingent or otherwise) existing that provide for the sale or issuance of
capital stock by the Company and there are no rights, subscriptions, warrants,
options, conversion rights or agreements of any kind (contingent or otherwise)
outstanding to purchase or otherwise acquire from the Company any shares of
capital stock or other securities of the Company of any kind, and there will not
be any of the foregoing prior to or at the Closing.

 

 
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(c)     Other than the Parent Voting Agreements (as defined in the Merger
Agreement), the Company is not a party to, and, to its Knowledge (as defined in
the Merger Agreement), there do not exist, any voting trusts, proxies, or other
contracts with respect to the voting of shares of capital stock of the Company.

 

(d)     Except as contemplated by this Agreement or as set forth in Section
3.3(d) of the Company Disclosure Schedule, the Company is not a party to, and,
to its Knowledge, there do not exist any voting trusts, proxies, or other
contracts with respect to the voting of shares of its capital stock. Except as
contemplated by the Merger Agreement or set forth in Section 3.3(d) of the
Company Disclosure Schedule, there are no outstanding obligations of the Company
(i) restricting the transfer of, (ii) affecting the voting rights of, (iii)
requiring the repurchase, redemption or disposition of, or containing any right
of first refusal with respect to, (iv) requiring the registration for sale of or
(v) granting any preemptive or antidilutive rights with respect to, any shares
of the Company’s capital stock.

 

(e)     The assets of the Liquidating Trust (as defined in the Merger
Agreement), when formed, shall be substantially as set forth and described in
Section 3.3(e) of the Company Disclosure Schedule.

 

(f)      Except as contemplated by Section 6.14 of the Merger Agreement or as
set forth in Section 3.3(f) of the Company Disclosure Schedule, no registration
rights have been granted to holders or subscribers of the Company’s capital
stock.

 

(g)     The Shares, when issued, sold and delivered in accordance with the terms
and for the consideration expressed in this Agreement, shall be duly and validly
issued, fully-paid and nonassessable and neither the Company nor the holder
thereof shall be subject to any preemptive or similar right with respect
thereto. Subject to the accuracy of the Purchasers’ representations and
warranties in Section 5 hereof, the offer, sale and issuance of the Shares
constitute transactions exempt from the registration requirements of Section 5
of the Securities Act any applicable state securities laws. Neither the Company
nor, to the Company’s knowledge, any person acting on behalf of the Company has
offered or sold any of the Shares by any form of general solicitation or general
advertising.

 

(h)     None of the Company, any of its predecessors, any affiliated issuer, or
any Insider (as defined below) is subject to any Disqualification Event (as
defined below) except for a Disqualification Event covered by Rule 506(d)(2) or
(d)(3) under the Securities Act.  The Company has exercised reasonable care,
including without limitation, conducting a factual inquiry that is appropriate
in light of the circumstances, into whether any Insider is subject to a
Disqualification Event. The Company has furnished to each Purchaser, a
reasonable time prior to the date hereof, a description in writing of any
matters relating to the Company or any Insider that would have triggered
disqualification under Rule 506(d) under the Securities Act but which occurred
before September 23, 2013, in each case, in compliance with the disclosure
requirements of Rule 506(e).  Any outstanding securities of the Company (of any
kind or nature) that were issued in reliance on Rule 506 under the Securities
Act at any time on or after September 23, 2013 have been issued in compliance
with Rule 506(d) and (e) under the Securities Act. For purposes of this
Agreement, (i) “Insider” means, each director, executive officer, other officer
of the Company participating in the offering, any beneficial owner of 20% or
more of the Company’s outstanding voting equity securities, calculated on the
basis of voting power and any promoter (as that term is defined in Rule 405
under the Securities Act) connected with the Company in any capacity at the time
of sale and (ii) “Disqualification Event” means any “Bad Actor”
disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities
Act.

 

 
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3.4     Authorization/No Conflict with Other Instruments/Government Consents.

 

(a)     All corporate action on the part of the Company, its officers, directors
and stockholders necessary for the authorization, execution, delivery and
performance of all obligations under this Agreement and for the issuance and
delivery of the Shares has been taken, and this Agreement constitutes a valid
and legally binding obligation of the Company enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or affecting
enforcement of creditors’ rights and rules of law concerning equitable remedies.

 

(b)     The execution, delivery and performance of this Agreement will not
result in any violation of, be in conflict with, or constitute a violation of or
default under, with or without the passage of time or the giving of notice: (i)
any provision of the Company’s certificate of incorporation, or the Company’s
bylaws; (ii) any provision of any judgment, decree or order to which the Company
is a party or by which it is bound; (iii) any material contract, obligation or
commitment to which the Company is a party or by which it is bound; or (iv) to
the Company’s knowledge, any statute, rule or governmental regulation applicable
to the Company.

 

(c)     No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state or
local governmental authority, including Financial industry Regulatory Authority
(FINRA) and the NASDAQ Stock Market, on the part of the Company is required in
connection with the consummation of the transactions contemplated by this
Agreement, except for such qualifications or filings under applicable federal
and state securities laws as may be required in connection with the transactions
contemplated by the Agreement, which qualification or filings will be made on a
timely basis.

 

3.5     Company SEC Filings; Financial Statements; Exchange Act and Listing
Requirements; Investment Company.

 

(a)     Except as set forth in Section 3.5(a) of the Company Disclosure
Schedule, since the filing of the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2011 filed on March 8, 2012 (the “2011 Annual
Report”), the Company has timely filed all reports, forms, financial statements
and documents that it was required to file with the Securities and Exchange
Commission (the “SEC”) pursuant to the Exchange Act, including, without
limitation, filing its Annual Report on Form 10-K for the year ended December
31, 2013 prior to the date of this Agreement (the “2013 Annual Report”) (all
such reports, forms, financial statements and documents are referred to herein
collectively as the “Previous Filings” and such Previous Filings and any other
documents filed by the Company with the SEC through the Closing, as supplemented
and amended since the time of filing, including the definitive Proxy Statement
on Schedule 14A filed with the SEC on June 30, 2014, collectively the “SEC
Filings”). As of their respective filing dates (or if amended or superseded by a
subsequent filing prior to the date of this Agreement, on the date of such
amending or superseding filing), each of the SEC Filings (i) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and (ii) complied in
all material respects with the applicable requirements of the Securities Act or
the Exchange Act, as applicable, and the applicable rules and regulations of the
SEC promulgated thereunder.

 

 
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(b)     Except as set forth in Section 3.5(b) of the Company Disclosure
Schedule, the financial statements (including footnotes thereto) included in or
incorporated by reference into the SEC Filings (the “Financial Statements”) were
complete and correct in all material respects as of their respective filing
dates, complied as to form in all material respects with the Securities Act or
the Exchange Act, as applicable, and the applicable accounting requirements,
rules and regulations of the SEC promulgated thereunder as of their respective
dates and have been prepared in accordance with generally accepted accounting
principles in the United States (“GAAP”) applied on a consistent basis during
the periods involved (except as otherwise noted therein). The Financial
Statements fairly present in all material respects the financial condition of
the Company and its subsidiaries as of the dates thereof and results of
operations, cash flows and stockholders’ equity for the periods referred to
therein (subject, in the case of unaudited Financial Statements, to normal
recurring year-end adjustments). There has been no change in Company accounting
policies except as described in the notes to the Financial Statements.

 

(c)     Each of the principal executive officers of the Company and the
principal financial officer of the Company (and each former principal executive
officer of the Company and each former principal financial officer of the
Company, as applicable) has made all certifications required by Rule 13a-14 or
15d-14 under the Exchange Act or Sections 302 and 906 of the Sarbanes-Oxley Act
of 2002 (“SOX”) and the rules and regulations of the SEC promulgated thereunder
with respect to the SEC Filings. For purposes of this Section 3.5(c), “principal
executive officer” and “principal financial officer” have the meanings given to
such terms in SOX. Neither the Company nor any of its subsidiaries has
outstanding, or has arranged any outstanding, “extensions of credit” to
directors or executive officers within the meaning of Section 402 of SOX. The
Company is in compliance in all material respects with SOX.

 

(d)      The Company has designed and maintains “internal controls over
financial reporting” (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) to provide reasonable assurances regarding the reliability of
financial reporting and the preparation of the Financial Statements for external
purposes in accordance with GAAP.

 

(e)      The Company has designed and maintains “disclosure controls and
procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)
to ensure that material information that is required to be disclosed by the
Company in the SEC Filings is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms and is
accumulated and communicated to its principal executive officer and principal
financial officer as appropriate to allow timely decisions regarding required
disclosure.

 

(f)      The Company has disclosed, based on its most recent evaluation prior to
the date hereof, to its outside auditors and the audit committee of the Company
(i) all significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) that could have, individually or
in the aggregate, a Material Adverse Effect or materially affect the Company’s
ability to record, process, summarize and report financial data, and (ii) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the Company’s internal controls over financial
reporting. Except as set forth in Section 3.5(f) of the Company Disclosure
Schedule, since January 1, 2012, the Company has not received from its
independent auditors any oral or written notification of a (x) “significant
deficiency” or (y) “material weakness” in the Company’s internal controls. For
purposes of this Agreement, the terms “significant deficiency” and “material
weakness” shall have the meanings assigned to them in the Statements of Auditing
Standards No. 115, as in effect on the date hereof.

 

 
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(g)      To the Knowledge of the Company: (x) no director or officer of the
Company or any of its subsidiaries has engaged in any “insider trading” in
violation of applicable law with respect to any security issued by the Company
or any of its subsidiaries; and (y) no such director or officer has made any
false certifications or statements under (i) Rule 13a-14 or 15d-14 under the
Exchange Act or (ii) 18 U.S.C. §1350 (Section 906 of SOX) with respect to any
SEC Filings.

 

(h)     The Company’s Common Stock is registered pursuant to Section 12(b) or
12(g) of the Exchange Act, and the Company has taken no action designed to
terminate the registration of the Common Stock under the Exchange Act, nor has
the Company received any notification that the SEC is contemplating terminating
such registration. Except as set forth in Section 3.5(h) of the Company
Disclosure Schedule, the Company has not, in the 12 months preceding the date
hereof, received written notice from the NASDAQ Capital Market to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such market. The Company is, and has no reason to believe that
it will not in the foreseeable future continue to be in compliance with all
listing and maintenance requirements of the NASDAQ Capital Market.

 

(i)     The Company is not, and is not an Affiliate of, and immediately after
receipt of payment for the Shares, will not be or be an Affiliate of, an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended. The Company shall conduct its business in a manner so that it will
not become subject to the Investment Company Act of 1940, as amended.

 

3.6         Material Changes. Since the date of the latest financial statements
included within the SEC Filings, except as specifically disclosed in a
subsequent SEC Filings filed or furnished prior to the date hereof, there have
been no events, occurrences or developments that have had or could have,
individually or in the aggregate, a Material Adverse Effect.

 

4.             Representations and Warranties of VBI. VBI hereby represents and
warrants to each Purchaser that, except as set forth on the VBI Disclosure
Schedule attached as Exhibit C to this Agreement, which exceptions shall be
deemed to be part of the representations and warranties made hereunder, the
representations and warranties set forth below are true and complete as of the
date of the Closing, except as otherwise indicated. The VBI Disclosure Schedule
shall be arranged in sections corresponding to the numbered and lettered
sections and subsections contained in this Section 4, and the disclosures in any
section or subsection of the VBI Disclosure Schedule shall qualify other
sections and subsections in this Section 4 only to the extent it is readily
apparent from a reading of the disclosure that such disclosure is applicable to
such other sections and subsections. For purposes of these representations and
warranties (other than those in Sections 4.1, 4.2, 4.3 and 4.6), the term “VBI”
shall include any subsidiaries of VBI, including the VBI Subsidiary, unless
otherwise noted herein.

 

4.1.     Organization, Good Standing, Corporate Power and Qualification. VBI is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as presently conducted and as proposed to be
conducted. VBI is duly qualified to transact business and is in good standing in
each jurisdiction in which the failure to so qualify could have, individually or
in the aggregate, a Material Adverse Effect.

 

4.2.     Capitalization. Prior to the Effective Time of the Merger all issued
and outstanding shares of VBI Capital Stock and Company Convertible Notes of VBI
(each as defined in the Merger Agreement) were converted pursuant to the Merger
Agreement.

 

 
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(a)     At Closing there are no other outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal or
similar rights) or agreements, orally or in writing, to purchase or acquire from
VBI any shares of VBI Common Stock (as defined in the Merger Agreement) or VBI
Series A Preferred Stock, or any securities convertible into or exchangeable for
shares of VBI Common Stock or VBI Series A Preferred Stock.

 

(b)     Except as set forth in Section 4.2(b) of the VBI Disclosure Schedule,
none of VBI’s stock purchase agreements or stock option documents contains a
provision for acceleration of vesting (or lapse of a repurchase right) or other
changes in the vesting provisions or other terms of such agreement or
understanding upon the occurrence of any event or combination of events. Except
in connection with the Merger, VBI has never adjusted or amended the exercise
price of any stock options previously awarded, whether through amendment,
cancellation, replacement grant, repricing, or any other means. Except as set
forth in its Certificate of Incorporation, VBI has no obligation (contingent or
otherwise) to purchase or redeem any of its capital stock.

 

(c)     No stock options, stock appreciation rights or other equity-based awards
issued or granted by VBI are subject to the requirements of Section 409A of the
Code. Each “nonqualified deferred compensation plan” (as such term is defined
under Section 409A(d)(1) of the Code and the guidance thereunder) under which
VBI makes, is obligated to make or promises to make, payments (each, a “409A
Plan”) complies in all material respects, in both form and operation, with the
requirements of Section 409A of the Code and the guidance thereunder. No payment
to be made under any 409A Plan is, or to the knowledge of VBI will be, subject
to the penalties of Section 409A(a)(1) of the Code.

 

4.3.     Subsidiaries.

 

(a)     The VBI Subsidiary is a corporation duly incorporated, validly existing
and in good standing under the laws of the Canada.

 

(b)     The VBI Subsidiary is duly qualified to conduct business and is in good
standing in Ontario and Quebec and each other jurisdiction in which the nature
of its business or the ownership or leasing of its properties requires such
qualification, except where the failure to so qualify could not have,
individually or in the aggregate, a Material Adverse Effect. The VBI Subsidiary
has all requisite power and authority to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it.

 

(c)     All of the issued and outstanding shares of capital stock of the VBI
Subsidiary are duly authorized, validly issued, fully paid, nonassessable and
are held of record and beneficially by VBI, free and clear of any restrictions
on transfer (other than restrictions under the Securities Act and other
applicable securities laws), claims, security interests, options, warrants,
rights, contracts, calls, commitments, equities and demands. There are no
outstanding or authorized options, warrants, rights, agreements or commitments
to which VBI or the VBI Subsidiary is a party or which are binding on any of
them providing for the issuance, disposition or acquisition of any share capital
of the VBI Subsidiary. There are no outstanding stock appreciation, phantom
stock or similar rights with respect to the VBI Subsidiary.

 

(d)     As of the date of the Closing, neither the VBI Subsidiary nor VBI is a
party or subject to any agreement or understanding, and, to VBI’s knowledge,
there is no agreement or understanding between any persons and/or entities,
which affects or relates to the voting or giving of written consents with
respect to any security or by a director or member of the supervisory board of
the VBI Subsidiary.

 

 
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(e)     Except for the VBI Subsidiary, VBI does not own or control, directly or
indirectly, any shares of capital stock of any other corporation or any interest
in any partnership, limited liability company, joint venture or other
non-corporate business enterprise.

 

4.4.     Litigation. Except as set forth in Section 4.4 of the VBI Disclosure
Schedule, there is no claim, action, suit, proceeding, arbitration, complaint,
charge or investigation pending or, to VBI’s knowledge, currently threatened (i)
against VBI or any officer, director or VBI Key Employee, (ii) that questions
the validity of this Agreement or the right of VBI to enter into them, or to
consummate the transactions contemplated by this Agreement, or (iii) to VBI’s
knowledge, that could have, individually or in the aggregate, a Material Adverse
Effect, nor is VBI aware that there is any reasonable basis for the foregoing.
Neither VBI nor, to VBI’s knowledge, any of its officers, directors or VBI Key
Employees is a party or is named as subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality (in the case of officers, directors or VBI Key Employees, such
as would affect VBI). There is no action, suit, proceeding or investigation by
VBI pending or which VBI intends to initiate. The foregoing includes, without
limitation, actions, suits, proceedings or investigations pending or threatened
in writing (or any basis therefor known to VBI) involving the prior employment
of any of VBI’s employees, their services provided in connection with VBI’s
business, or any information or techniques allegedly proprietary to any of their
former employers, or their obligations under any agreements with prior
employers.

 

4.5.     VBI Intellectual Property. VBI owns or possesses or believes it can
acquire on commercially reasonable terms sufficient legal rights to all VBI
Intellectual Property without any known conflict with, or infringement of, the
rights of others. To VBI’s knowledge, no product or service marketed or sold (or
proposed to be marketed or sold) by VBI violates or will violate any license or
infringes or will infringe any intellectual property rights of any other party.
Other than with respect to commercially available software products under
standard end-user object code license agreements, there are no outstanding
options, licenses, agreements, claims, encumbrances or shared ownership
interests of any kind relating to VBI Intellectual Property, nor is VBI bound by
or a party to any options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of any other Person. VBI
has not received any communications alleging that VBI has violated or, by
conducting its business, would violate any of the patents, trademarks, service
marks, tradenames, copyrights, trade secrets, mask works or other proprietary
rights or processes of any other Person. VBI has obtained and possesses valid
licenses to use all of the software programs present on the computers and other
software-enabled electronic devices that it owns or leases or that it has
otherwise provided to its employees for their use in connection with VBI’s
business. To VBI’s knowledge, it will not be necessary to use any inventions of
any of its employees or consultants (or Persons it currently intends to hire)
made prior to their employment by VBI. Except as identified in Section 4.5 of
the VBI Disclosure Schedule as “Non-Assigning Employees or Consultants”, each
current and former employee and consultant has assigned to VBI all intellectual
property rights he or she owns that are related to VBI’s business. The employees
and consultants identified under the heading “Non-Assigning Employees or
Consultants” in Section 4.5 of the VBI Disclosure Schedule have not developed
any of VBI Intellectual Property. Section 4.5 of the VBI Disclosure Schedule
lists all VBI Intellectual Property. For purposes of this Section 4.5, VBI shall
be deemed to have knowledge of a patent right if VBI has actual knowledge of the
patent right or would be found to be on notice of such patent right as
determined by reference to United States and Canadian patent laws.

 

 
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4.6.     Compliance with Other Instruments. Neither VBI or the VBI Subsidiary is
in violation or default (a) of any provisions of its respective Certificate of
Incorporation or its respective Bylaws, (b) of any instrument, judgment, order,
writ or decree, (c) under any note, indenture or mortgage, or (d) under any
lease, agreement, contract or purchase order to which it is a party or by which
it is bound that is required to be listed on the VBI Disclosure Schedule, or of
any provision of federal, provincial, state or foreign statute, rule or
regulation applicable to VBI or the VBI Subsidiary, the violation of which could
have, individually or in the aggregate, a Material Adverse Effect. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated by this Agreement will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, either (i) a default under any such provision,
instrument, judgment, order, writ, decree, contract or agreement, or (ii) an
event which results in the creation of any lien, charge or encumbrance upon any
assets of VBI or the VBI Subsidiary or the suspension, revocation, forfeiture,
or nonrenewal of any material permit or license applicable to VBI or the VBI
Subsidiary.

 

4.7.     Agreements; Actions.

 

(a)     Except as set forth in Section 4.7(a) of the VBI Disclosure Schedule,
there are no agreements, understandings, instruments, contracts or proposed
transactions to which VBI is a party or by which it is bound that involve
(i) obligations (contingent or otherwise) of, or payments to, VBI in excess of
$25,000, (ii) the license of any patent, copyright, trademark, trade secret or
other proprietary right to or from VBI, (iii) the grant of rights to
manufacture, produce, assemble, license, market, or sell its products to any
other Person that limit VBI’s exclusive right to develop, manufacture, assemble,
distribute, market or sell its products, or (iv) indemnification by VBI with
respect to infringements of proprietary rights.

 

(b)     VBI has not (i) declared or paid any dividends, or authorized or made
any distribution upon or with respect to any class or series of its capital
stock, (ii) except as set forth in Section 4.7(b) of the VBI Disclosure Schedule
and except for the Venture Debt (as defined in the Merger Agreement), incurred
any indebtedness for money borrowed or incurred any other liabilities
individually in excess of $25,000 or in excess of $50,000 in the aggregate,
(iii) made any loans or advances to any Person, other than ordinary advances for
travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business. For the purposes of subsections (b) and (c) of this Section 4.7, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same Person (including Persons VBI has
reason to believe are affiliated with each other) shall be aggregated for the
purpose of meeting the individual minimum dollar amounts of such subsection.

 

(c)     VBI is not a guarantor or indemnitor of any indebtedness of any other
Person.

 

(d)     Except as set forth in Section 4.7(d) of the VBI Disclosure Schedule,
neither VBI nor its Affiliates has in the past twelve (12) months entered into
any written memorandum of understanding or letter of intent with any
representative of any Person regarding (i) a sale or exclusive license of all or
substantially all of VBI’s assets, or (ii) any merger, consolidation or other
business combination transaction of VBI with or into another Person.

 

4.8.     Certain Transactions.

 

(a)     Except as set forth in Section 4.8(a) of the VBI Disclosure Schedule,
other than (i) standard employee benefits generally made available to all
employees, (ii) standard director and officer indemnification agreements
approved by the Board of Directors of VBI, (iii) the purchase of shares of VBI’s
capital stock and the issuance of options to purchase shares of VBI Common
Stock, in each instance approved in the written minutes or consents of the Board
of Directors of VBI, there are no agreements, understandings or proposed
transactions between VBI and any of its officers, directors, consultants or VBI
Key Employees, or any Affiliate thereof.

 

 
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(b)     VBI is not indebted, directly or indirectly, to any of its directors,
officers or employees or to their respective spouses or children or to any
Affiliate of any of the foregoing, other than in connection with expenses or
advances of expenses incurred in the ordinary course of business or employee
relocation expenses and for other customary employee benefits made generally
available to all employees. None of VBI’s directors, officers or employees, or
any members of their immediate families, or any Affiliate of the foregoing (i)
are, directly or indirectly, indebted to VBI or, (ii) to VBI’s knowledge, have
any direct or indirect ownership interest in any firm or corporation with which
VBI is affiliated or with which VBI has a business relationship, or any firm or
corporation which competes with VBI except that directors, officers or employees
or stockholders of VBI may own stock in (but not exceeding 2% of the outstanding
capital stock of) publicly traded companies that may compete with VBI. To VBI’s
knowledge, none of VBI’s VBI Key Employees or directors or any members of their
immediate families or any Affiliate of any of the foregoing are, directly or
indirectly, interested in any contract with VBI. To VBI’s knowledge, none of its
directors or officers, or any members of their immediate families, has any
material commercial, industrial, banking, consulting, legal, accounting,
charitable or familial relationship with any of VBI’s customers, suppliers,
service providers, joint venture partners, licensees and competitors.

 

4.9.     Absence of Liens. Except as set forth in Section 4.9 of the VBI
Disclosure Schedule with respect to the VBI Subsidiary, the property and assets
that VBI owns are free and clear of all mortgages, deeds of trust, liens, loans
and encumbrances, except for statutory liens for the payment of current taxes
that are not yet delinquent and encumbrances and liens that arise in the
ordinary course of business and do not materially impair VBI’s ownership or use
of such property or assets. With respect to the property and assets it leases,
VBI is in compliance with such leases and, to its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances other than those of
the lessors of such property or assets.

 

4.10.    Financial Statements. VBI has delivered to each Purchaser the audited
consolidated financial statements of VBI as of December 31, 2013 and for the
fiscal year then ended and unaudited consolidated financial statements of VBI as
of March 31, 2014 (collectively, the “VBI Financial Statements”). The VBI
Financial Statements have been prepared in accordance with generally accepted
accounting principles in the Unites States applied on a consistent basis
throughout the periods indicated. The VBI Financial Statements fairly present in
all material respects the financial condition and operating results of VBI and
the VBI Subsidiary as of the dates, and for the periods, indicated therein,
subject in the case of the unaudited VBI Financial Statements to normal year-end
audit adjustments and footnote disclosures. Except as set forth in Section 4.10
of the VBI Disclosure Schedule and in the VBI Financial Statements, neither VBI
nor the VBI Subsidiary has any material liabilities or obligations, contingent
or otherwise, other than liabilities of the VBI Subsidiary (i) incurred in the
ordinary course of business subsequent to March 31, 2014, (ii) obligations under
contracts and commitments incurred in the ordinary course of business and (iii)
liabilities and obligations of a type or nature not required under generally
accepted accounting principles to be reflected in the VBI Financial Statements,
which, in all such cases, individually and in the aggregate would not have a
Material Adverse Effect. VBI and the VBI Subsidiary maintain and will continue
to maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.

 

4.11.    Changes. Since March 31, 2014, there have been no events or
circumstances of any kind that have had or could reasonably be expected to
result in a Material Adverse Effect.

 

4.12.    Employee Matters.

 

(a)     As of the Agreement Date, VBI employs fifteen (15) full-time employees
and three (3) part-time and temporary (i.e., subject to term agreements)
employees, and engages twelve (12) consultants or independent contractors.
Section 4.12(a) of the VBI Disclosure Schedule sets forth a detailed description
of all compensation, including salary, bonus, severance obligations and deferred
compensation paid or payable for each officer, employee, consultant and
independent contractor of VBI who is anticipated to receive compensation in
excess of $75,000 for the fiscal year ending December 31, 2014.

 

 
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(b)     To VBI’s knowledge, none of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would materially interfere with such employee’s
ability to promote the interest of VBI or that would conflict with VBI’s
business. Neither the execution or delivery of this Agreement, nor the carrying
on of VBI’s business by the employees of VBI, nor the conduct of VBI’s business
as now conducted and as presently proposed to be conducted, will, to VBI’s
knowledge, conflict with or result in a breach of the terms, conditions, or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any such employee is now obligated.

 

(c)     VBI is not delinquent in payments to any of its employees, consultants,
or independent contractors for any wages, salaries, commissions, bonuses, or
other direct compensation for any service performed for it to the date hereof or
amounts required to be reimbursed to such employees, consultants, or independent
contractors. VBI has complied in all material respects with all applicable laws
related to employment, including those related to wages, hours, worker
classification, and collective bargaining. VBI has withheld and paid to the
appropriate governmental entity or is holding for payment not yet due to such
governmental entity all amounts required to be withheld from employees of VBI
and is not liable for any arrears of wages, taxes, penalties, or other sums for
failure to comply with any of the foregoing.

 

(d)     To VBI’s knowledge, no VBI Key Employee intends to terminate employment
with VBI or is otherwise likely to become unavailable to continue as a VBI Key
Employee, nor does VBI have a present intention to terminate the employment of
any of the foregoing. With respect to employees who reside in the United States,
the employment of each employee of VBI is terminable at the will of VBI. With
respect to employees who reside in Canada, VBI is not a party to and is not
bound by any contract of employment that cannot be terminated without cause on
provision of notice limited to the minimum notice requirements under the
Employment Standards Act, 2000 (Ontario). Except as set forth in Section 4.12(d)
of the VBI Disclosure Schedule or as required by law, upon termination of the
employment of any such employees, no severance or other payments will become
due. Except as set forth in Section 4.12(d) of the VBI Disclosure Schedule, VBI
has no policy, practice, plan, or program of paying severance pay or any form of
severance compensation in connection with the termination of employment
services.

 

(e)     VBI has not made any representations regarding equity incentives to any
officer, employees, director or consultant that are inconsistent with the share
amounts and terms set forth in the minutes of meetings of VBI’s Board of
Directors.

 

(f)     Except for Nancy Bouveret (who was included in the definition of VBI Key
Employee in the November 2010 Note Purchase Agreement and the June 2011 Note
Purchase Agreement) (each as defined in the Merger Agreement), VBI has no former
VBI Key Employees.

 

(g)     VBI does not have any Employee Benefit Plan, as defined in the Employee
Retirement Income Security Act of 1974, as amended, or any superannuation fund,
retirement benefit or other pension schemes or arrangements.

 

 
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(h)     To VBI’s knowledge, none of the VBI Key Employees or directors of VBI
has been (a) subject to voluntary or involuntary petition under applicable
bankruptcy laws or insolvency law or the appointment of a receiver, fiscal agent
or similar officer by a court for his business or property, (b) convicted in a
criminal proceeding or named as a subject of a pending criminal proceeding
(excluding traffic violations and other minor offenses), (c) subject to any
order, judgment, or decree (not subsequently reversed, suspended, or vacated) of
any court of competent jurisdiction permanently or temporarily enjoining him
from engaging, or otherwise imposing limits or conditions on his engagement in
any securities, investment advisory, banking, insurance, or other type of
business or acting as an officer or director of a public company, or (d) found
by a court of competent jurisdiction in a civil action or by any regulatory or
self-governing body to have violated any securities, commodities, or unfair
trade practices law or regulation, which such judgment or finding has not been
subsequently reversed, suspended, or vacated.

 

4.13.     Tax Returns and Payments; PFIC.

 

(a)     There are no federal, state, provincial, county, local or foreign taxes
due and payable by VBI which have not been timely paid. There are no accrued and
unpaid federal, state, country, local or foreign taxes of VBI which are due,
whether or not assessed or disputed. There have been no examinations or audits
of any tax returns or reports by any applicable federal, state, local or foreign
governmental agency. VBI has duly and timely filed all federal, state, county,
local and foreign tax returns required to have been filed by it and there are in
effect no waivers of applicable statutes of limitations with respect to taxes
for any year.

 

(b)     For the fiscal year of the VBI Subsidiary in which the Closing occurs,
the VBI Subsidiary will not be a “passive foreign investment company” within the
meaning of Section 1297 of the Code, and the VBI Subsidiary expects that it will
not become a passive foreign investment company for any fiscal year thereafter.
The fiscal year of the VBI Subsidiary is the period ending on December 31 of
each year.

 

4.14.     Insurance. VBI has in full force and effect fire and casualty
insurance policies with extended coverage, sufficient in amount (subject to
reasonable deductions) to allow it to replace any of its properties that might
be damaged or destroyed. VBI has in full force and effect (a) errors and
omissions insurance in amounts customary for companies similarly situated and
(b) directors and officers insurance in amounts customary for companies
similarly situated.

 

4.15.     Confidential Information and Invention Assignment Agreements. Each
current and former employee, consultant and officer of the Company has executed
an agreement with VBI regarding confidentiality and proprietary information (the
“Confidential Information Agreements”). No current or former VBI Key Employee
has excluded works or inventions from his or her assignment of inventions
pursuant to such VBI Key Employee’s Confidential Information Agreement. VBI is
not aware that any of its VBI Key Employees is in violation thereof.

 

4.16.     Permits. VBI has all franchises, permits, licenses and any similar
authority necessary for the conduct of its business, the lack of which could
have, individually or in the aggregate, a Material Adverse Effect. VBI is not in
default in any material respect under any of such franchises, permits, licenses
or other similar authority.

 

4.17.     Corporate Documents. VBI’s Certificate of Incorporation and Bylaws are
in the form provided to the Purchasers. The copy of the minute books of VBI
provided to the Purchasers contains minutes of all meetings of directors and
stockholders of VBI and all actions by written consent without a meeting by the
directors and stockholders of VBI since the date of incorporation of VBI and
accurately reflects in all material respects all actions by the directors (and
any committee of directors) and stockholders of VBI with respect to all
transactions referred to in such minutes.

 

 
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4.18.     Real Property Holding Corporation. VBI is not now and has never been a
“United States real property holding corporation” as defined in the Code and any
applicable regulations promulgated thereunder. VBI has filed with the Internal
Revenue Service all statements, if any, with its United States income tax
returns which are required under such regulations.     

 

4.19.     Environmental and Safety Laws. Except as could not have, individually
or in the aggregate, a Material Adverse Effect (a) VBI is and has been in
compliance with all Environmental Laws, (b) there has been no release or, to
VBI’s knowledge, threatened release of any pollutant, contaminant or toxic or
hazardous material, substance or waste, or petroleum or any fraction thereof,
(each a “Hazardous Substance”) on, upon, into or from any site currently or
heretofore owned, leased or otherwise used by VBI, (c) there have been no
Hazardous Substances generated by VBI that have been disposed of or come to rest
at any site that has been included in any published federal, provincial or local
“superfund” site list or any other similar list of hazardous or toxic waste
sites published by any governmental authority in the United States or Canada,
and (d) there are no underground storage tanks located on, no polychlorinated
biphenyls (“PCBs”) or PCB-containing equipment used or stored on, and no
hazardous waste as defined by the Resource Conservation and Recovery Act, as
amended, or any applicable federal or provincial Canadian law, stored on, any
site owned or operated by VBI, except for the storage of hazardous waste in
compliance with Environmental Laws. VBI has made available to the Purchasers
true and complete copies of all material environmental records, reports,
notifications, certificates of need, permits, pending permit applications,
correspondence, engineering studies, and environmental studies or assessments.

 

4.20.     Regulatory Matters.

 

(a)     To VBI’s knowledge, (i) any regulatory filings required to be made with
respect to VBI Products have been 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 VBI according to all applicable laws and regulations along
with appropriate monitoring of clinical investigator trial sites for their
compliance, and (iii) VBI has disclosed to the Purchasers all such regulatory
filings and all material communications between representatives of VBI and any
such regulatory agency.

 

(b)     VBI and, to VBI’s knowledge, VBI’s agents, are in compliance in all
material respects with all applicable statutes, rules and regulations of the
United States Food and Drug Administration (the “FDA”), the Department of Health
(Canada) (the “DOH”) or similar federal, state, provincial or local governmental
authority (together with the FDA and DOH, the “Regulatory Authorities”) with
respect to the design, manufacture, packaging, sale, labeling, storage, testing,
distribution or marketing of any VBI Products. VBI has all the necessary and
requisite permits, approvals, clearances, registrations, licenses or the like
from the Regulatory Authorities to conduct its business as it is currently, and
currently proposed to be, conducted. VBI is in compliance in all material
respects with all applicable registration and listing requirements set forth in
the Federal Food, Drug & Cosmetic Act (the “Act”), 21 U.S.C. § 360, and all
similar applicable laws, including the Food and Drugs Act (R.S., 1985, c.F-27)
in Canada. VBI adheres in all material respects to applicable regulations in the
manufacture of Company Products, 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)     VBI has not received from the Regulatory Authorities any notice of
adverse findings, FDA Form 483 inspectional observations, notices of violations,
Warning Letters, criminal proceeding notices under Section 305 of the Act, or
other similar communication from the Regulatory Authorities. There have been no
seizures conducted or, to VBI’s knowledge, threatened by the Regulatory
Authorities, and no recalls, market withdrawals, field notifications,
notifications of misbranding or adulteration or safety alerts conducted,
requested or, to VBI’s knowledge, threatened by the Regulatory Authorities, and
no recalls, market withdrawals, field notifications, notifications of
misbranding or adulteration or safety alerts have been conducted, requested or,
to VBI’s knowledge, threatened by the Regulatory Authorities relating to VBI
Products. VBI has not received any written notification that remains unresolved
from the FDA or other Regulatory Authorities indicating that any Company Product
is misbranded or adulterated as defined in the Act or the rules and regulations
promulgated thereunder.

 

(d)     Neither VBI nor any officer, employee or, to VBI’s knowledge, agent of
VBI has made an untrue statement of a material fact or fraudulent statements to
the FDA or other authorities, failed to disclose a material fact required to be
disclosed to the FDA or other authorities, or committed an act, made a
statement, or failed to make a statement that, at the time such disclosure was
made, could reasonably be expected to provide a basis for the FDA or other
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)     VBI has not received any written notice that the FDA or other
authorities has commenced, or, to VBI’s knowledge, threatened, to initiate any
action to withdraw its approval or clearance of or requested the recall of any
VBI Products or commenced or, to VBI’s knowledge, overtly threatened to
initiate, any action to enjoin production at any facility of VBI.

 

(f)     The clinical, preclinical, safety and other studies and tests conducted
by or on behalf of or sponsored by VBI or in which VBI’s 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. VBI has operated within, and currently is in compliance in all
material respects with, all applicable laws as well as the rules and regulations
of the FDA 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 other authorities regarding its clinical
studies. VBI has not received any notices or other correspondence from the FDA
or other authorities requiring the termination or suspension of any clinical,
preclinical, safety or other studies or tests used to support regulatory
clearance of VBI’s Products.

 

5.            Representations and Warranties of the Purchasers. Each Purchaser
hereby represents and warrants to the Company and VBI, severally and not
jointly, as of the date of the Closing, that:

 

5.1.     Authorization. The Purchaser has full power and authority to enter into
this Agreement which, when executed and delivered by the Purchaser, will
constitute the valid and legally binding obligation of the Purchaser,
enforceable in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and
any other laws of general application affecting enforcement of creditors’ rights
generally, and as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.

 

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

 

 
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5.3.     Disclosure of Information. The Purchaser has had an opportunity to
discuss the Company’s and VBI’s respective business, management, financial
affairs and the terms and conditions of the offering of the Securities, with the
Company’s and VBI’s management and has had an opportunity to review the
Company’s and VBI’s facilities. The foregoing, however, does not limit or modify
the representations and warranties of the Company in in Section 3 of this
Agreement (as modified by the Company Disclosure Schedule attached as Exhibit B
to this Agreement) or the representations and warranties of VBI in in Section 4
of this Agreement (as modified by the VBI Disclosure Schedule attached as
Exhibit C to this Agreement), or the right of the Purchasers to rely thereon.

 

5.4.     Restricted Securities. The Purchaser understands that the Securities
have not been, and will not be, registered under the Securities Act, by reason
of a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Purchaser’s representations as expressed herein.
The Purchaser understands that the Securities are or will be, “restricted
securities” under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Purchaser must hold the Securities indefinitely,
unless they are registered with the SEC and qualified by state authorities, or
an exemption from such registration and qualification requirements is available.
The Purchaser acknowledges that the Company has no obligation under this
Agreement to register or qualify the Securities for resale. The Purchaser
further acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Securities,
and on requirements relating to the Company which are outside of the Purchaser’s
control, and which the Company is under no obligation and may not be able to
satisfy.

 

5.5.     Legends. The Purchaser understands and agrees that the Securities shall
bear substantially the following legends until (i) such Securities shall have
been registered under the Securities Act and effectively disposed of in
accordance with a registration statement that has been declared effective or
(ii) the delivery of an assurance letter from the Purchaser stating that such
Purchaser is not an Affiliate of the Company or VBI (as the case may be) and the
requisite holding period has elapsed pursuant to Rule 144 under the Securities
Act:

 

(a)     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED (I) IN THE
ABSENCE OF (A) A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH
SECURITIES UNDER THE ACT OR (B) AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER
THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE
WITH RESPECT TO SUCH TRANSFER OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER THE ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES EVIDENCED BY
THIS CERTIFICATE MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

 

(b)     Any legend required by the securities laws of any state to the extent
such laws are applicable to the Securities represented by the certificate so
legended.

 

5.6.     Accredited Investor. The Purchaser is an “accredited investor”, as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act, as
currently in effect.

 

 
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5.7.     No General Solicitation. Neither the Purchaser, nor any of its
officers, directors, employees, agents, stockholders or partners has either
directly or indirectly, including through a broker or finder (a) engaged in any
general solicitation, or (b) published any advertisement in connection with the
offer and sale of the Shares.

 

5.8.     Residence. If the Purchaser is an individual, then the Purchaser
resides in the state or province identified in the address of the Purchaser set
forth on such Purchaser’s signature page hereto; if the Purchaser is a
partnership, corporation, limited liability company or other entity, then the
office or offices of the Purchaser in which its principal place of business is
identified in the address or addresses of the Purchaser set forth such
Purchaser’s signature page hereto.

 

5.9.     Agreement Drafted by Counsel to VBI. Each Purchaser, by signing this
Agreement, acknowledges that it (a) has had the opportunity to obtain separate
and independent counsel of its choice prior to signing this Agreement and has
relied on the advice of its own counsel or knowingly and willingly waived such
right to obtain counsel; and (b) understands that this Agreement has been
drafted by Richardson & Patel LLP, counsel to VBI, and that Richardson & Patel
LLP does not represent any Purchaser.

 

5.10.   Broker’s Fees. Each Purchaser acknowledges and agrees that in connection
with the Offering VBI has agreed to pay Middlebury Securities, LLC a commission
equal to 6% of the$5,000,000 equity investment by Perceptive hereunder or 6% of
any lesser total amount invested by Perceptive hereunder.

 

5.11.   Escrow Agent. The Purchaser hereby acknowledges and understands that the
Escrow Agent has acted as legal counsel for VBI, and may continue to act as
legal counsel for the Company from time to time, notwithstanding its duties as
the Escrow Agent hereunder. The Purchaser hereby consents to the Escrow Agent
acting in such capacity as legal counsel for VBI and waives any claim that such
representation represents a conflict of interest on the part of the Escrow
Agent. The Purchaser understands and acknowledges that VBI and the Escrow Agent
are relying explicitly on the foregoing provision.

 

6.             Conditions to the Purchasers’ Obligations at Closing. The
obligation of each Purchaser to purchase Shares at the Closing is subject to the
fulfillment, at or before the Closing, of each of the following conditions,
unless otherwise waived by the Required Purchasers:

 

6.1.     Representations and Warranties. The representations and warranties of
the Company contained in Section 3 hereof, as modified by the Company Disclosure
Schedule and the representations and warranties of VBI contained in Section 4
hereof, as modified by the VBI Disclosure Schedule, shall be true and correct in
all material respects as of the Closing, except that any such representations
and warranties shall be true and correct in all respects where such
representation and warranty is qualified with respect to materiality.

 

6.2     Performance. The Company and VBI shall have performed and complied with
all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by the Company or
VBI on or before the Closing.

 

6.3.     Compliance Certificate. The Presidents of the Company and VBI shall
deliver to the Purchasers at the Closing a certificate certifying that the
conditions specified in Sections 6.1 and 6.2 have been fulfilled.

 

 
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6.4.     Qualifications. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Shares pursuant to this Agreement shall be obtained and effective as of the
Closing.

 

6.5.      Secretary’s Certificate. The Secretary of the Company and VBI shall
have delivered to the Purchasers at the Closing a certificate certifying the
resolutions of the Board of Directors of the Company and VBI, respectively,
approving this Agreement and the transactions contemplated hereunder.

 

6.6.     Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to each
Purchaser, and each Purchaser (or its counsel) shall have received all such
counterpart original and certified or other copies of such documents as
reasonably requested. Such documents may include good standing certificates.

 

6.7.     Preemptive Rights. The Company shall have fully satisfied (including
with respect to rights of timely notification), or obtained enforceable waivers
in respect of, any preemptive or similar rights directly or indirectly affecting
any of its securities.

 

6.8     Legal Opinion. The Purchasers shall have received an opinion of counsel
reasonably acceptable to the Purchasers as to the due authorization and valid
issuance of the Shares in compliance with the Securities Act.

 

6.9     Instruction Letter. The Company shall deliver to the Purchasers a duly
executed irrevocable transfer agent instructions acknowledged in writing by the
Company’s transfer agent instructing such transfer agent to deliver, on an
expedited basis, a certificate evidencing a number of Shares equal to the number
of Shares each such Purchaser is purchasing under this Agreement as set forth on
Schedule 1 hereto.

 

6.10   Good Standing Certificates. The Purchasers shall have received a
certificate evidencing the formation and good standing of each of the Company
and VBI issued by the Secretary of State of the State of Delaware as of a date
within five days of the Closing as well as certificates evidencing the Company’s
and VBI’s qualification as a foreign corporation and good standing issued by the
Secretary of State of each state where the Company and VBI are so qualified,
each as of a date within five days of the Closing.

 

6.11   Listing of Shares. The Common Stock shall not have been suspended, as of
the Closing, by the SEC or the NASDAQ Capital Market from trading on the NASDAQ
Capital Market nor shall suspension by the SEC or the NASDAQ Capital Market have
been threatened, as of the Closing, either (A) in writing by the SEC or the
NASDAQ Capital market or (B) by falling below the minimum listing maintenance
requirements of the NASDAQ Capital Market; and the Shares shall be approved for
listing on the NASDAQ Capital Market.

 

6.12   Minimum Proceeds. The Company shall have received an amount immediately
before the Closing pursuant to this Agreement (which amounts shall be held by
the Escrow Agent until Closing) as payment for the aggregate gross purchase
price of the Shares of no less than the Maximum Amount.

 

6.13   Completion of the Merger. The Merger shall have been effectuated pursuant
to the Merger Agreement.

 

 
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6.14   Termination. This Agreement shall not have been terminated as to such
Purchaser in accordance with Section 8.19 herein.

 

7.            Conditions of the Company’s Obligations at Closing. The obligation
of the Company to sell Shares at the Closing is subject to the fulfillment, at
or before the Closing, of each of the following conditions, unless otherwise
waived:

 

7.1.     Representations and Warranties. The representations and warranties of
each Purchaser contained in Section 5 shall be true and correct in all material
respects as of the Closing, except that any such representations and warranties
shall be true and correct in all respects where such representation and warranty
is qualified with respect to materiality.

 

7.2.     Performance. The Purchasers shall have performed and complied with all
covenants, agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by them at or before the
Closing.

 

7.3.     Qualifications. All authorizations, approvals or permits, if any, of
any self-regulatory organization (such as Nasdaq or FINRA) or any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the issuance and sale of the Shares pursuant to this
Agreement shall be obtained and effective as of the Closing.

 

8.             Miscellaneous.

 

8.1.     Survival of Warranties/Liability/Indemnification.

 

(a)     Unless otherwise set forth in this Agreement, the representations and
warranties of the Company, VBI and the Purchasers contained in or made pursuant
to this Agreement shall survive the execution and delivery of this Agreement and
the Closing and shall in no way be affected by any investigation or knowledge of
the subject matter thereof made by or on behalf of the Purchasers, VBI or the
Company.

 

(b)     The Company’s and VBI’s liability under this Agreement shall be joint
and several. Subject to the provisions of this Section 8.1(b), the Company and
VBI will indemnify and hold each Purchaser and its directors, officers,
shareholders, members, partners, employees and agents (and any other Persons
with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company or VBI in this Agreement
or (ii) any action instituted against a Purchaser in any capacity, or any
Purchaser Party or their respective Affiliates, by any stockholder of the
Company or VBI who is not an Affiliate of such Purchaser seeking
indemnification, with respect to any of the transactions contemplated by this
Agreement (unless such action is based upon a breach of such Purchaser’s
representations, warranties or covenants under this Agreement or any other
agreement with the Company or VBI, or any agreements or understandings such
Purchaser may have with any such stockholder or any violations by the Purchaser
of state or federal securities laws or any conduct by such Purchaser which
constitutes fraud, gross negligence, willful misconduct or malfeasance).
Promptly after receipt by any such Person (the “Indemnified Person”) of notice
of any demand, claim or circumstances which would or might give rise to a claim
or the commencement of any action, proceeding or investigation in respect of
which indemnity may be sought pursuant to this Section 8.1(b), such Indemnified
Person shall promptly notify the Company and VBI in writing and the Company
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Person, and shall assume the payment of all
fees and expenses relating to such action, proceeding or investigation;
provided, however, that the failure of any Indemnified Person so to notify the
Company and VBI shall not relieve the Company of its obligations hereunder
except to the extent that the Company is actually and materially prejudiced by
such failure to notify. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless: (i) the
Company, VBI and the Indemnified Person shall have mutually agreed to the
retention of such counsel; (ii) the Company shall have failed promptly to assume
the defense of such proceeding and to employ counsel reasonably satisfactory to
such Indemnified Person in such proceeding; or (iii) in the reasonable judgment
of counsel to such Indemnified Person, representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. The Company and VBI shall not be liable for any
settlement of any proceeding effected without its prior written consent, which
consent shall not be unreasonably withheld, delayed or conditioned. Without the
prior written consent of the Indemnified Person, which consent shall not be
unreasonably withheld, delayed or conditioned, the Company or VBI shall not
effect any settlement of any pending or threatened proceeding in respect of
which any Indemnified Person is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Person, unless such settlement
includes an unconditional release of such Indemnified Person from all liability
arising out of such proceeding.

 

 
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8.2.     Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.

 

8.3.     Governing Law. This Agreement and any controversy arising out of or
relating to this Agreement shall be governed by and construed in accordance with
the laws of the state of New York, without regard to conflict of law principles
thereof.

 

8.4.     Counterparts; Facsimile. This Agreement may be executed and delivered
by facsimile or electronic signature and in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

 

8.5.     Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.

 

8.6.     Notices. All notices and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed effectively given: (a)
upon personal delivery to the party to be notified, (b) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient, and if not so confirmed, then on the next business day, (c) five (5)
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) business day after deposit with a
nationally recognized overnight courier, specifying next business day delivery,
with written verification of receipt. All communications shall be sent to the
respective parties at their address as set forth on the signature page hereto,
or to such email address, facsimile number or address as subsequently modified
by written notice given in accordance with this Section 8.6. If notice is given
to the Company or VBI, a copy (which shall not constitute notice) shall also be
given to Richardson & Patel LLP, The Chrysler Building, 405 Lexington Ave., 49th
Floor, Attention: Kevin Friedmann, Esq., Facsimile: (917) 591-6898, email:
kfriedmann@richardsonpatel.com.

 

 
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8.7.     No Finder’s Fees. Other than as described in Section 5.10 above, each
party represents that it neither is nor will be obligated for any finder’s fee
or commission in connection with this transaction. Each Purchaser agrees to
indemnify and to hold harmless the Company and VBI from any liability for any
commission or compensation in the nature of a finder’s or broker’s fee arising
out of this transaction (and the costs and expenses of defending against such
liability or asserted liability) for which each Purchaser or any of its
officers, employees, or representatives is responsible. The Company and VBI
agree to indemnify and hold harmless each Purchaser from any liability for any
commission or compensation in the nature of a finder’s or broker’s fee arising
out of this transaction (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or VBI or any of their
respective officers, employees or representatives is responsible.

 

8.8.     Amendments and Waivers. Any term of this Agreement may be amended,
terminated or waived only with the written consent of (a) the Company, (b) VBI,
and (c) the Required Purchasers. Any amendment or waiver effected in accordance
with this Section 8.8 shall be binding upon the Purchasers and each transferee
of the Shares, each future holder of all such securities, and the Company,
provided that no such amendment or waiver approved by the Required Purchasers
shall disproportionately favor or adversely affect any single Purchaser. Any
waiver by any party of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach of that provision
or of any other provision hereof. Any waiver effected in accordance with this
Section 8.8 shall be binding upon each party hereto. The Company and VBI shall
be prohibited from offering any additional consideration (other than the
reimbursement of legal fees) to any Purchaser (or such original Purchaser’s
transferee) for the purposes of inducing such person to change, modify, waive or
amend any term of this Agreement without making the same offer on a pro-rata
basis to all other Purchasers (and those transferees) allocable to the
Securities held by the Purchasers and such transferee(s). Each of the parties
hereto agrees to execute all such further instruments and documents and to take
all such further action as any other party may reasonably require in order to
effectuate the terms and purposes of this Agreement.

 

8.9.     Severability. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.

 

8.10.   Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any party under this Agreement, upon any breach or default
of any other party under this Agreement, shall impair any such right, power or
remedy of such non-breaching or non-defaulting party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any breach or
default under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.

 

8.11.   Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with respect to the subject
matter hereof, and any other written or oral agreement relating to the subject
matter hereof existing between the parties are expressly canceled.

 

 
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8.12.   Jurisdiction. The parties (a) hereby irrevocably and unconditionally
submit to the jurisdiction of the state of New York or the United States
District Court for the Sothern District of New York for the purpose of any suit,
action or other proceeding arising out of or based upon this Agreement, (b)
agree not to commence any suit, action or other proceeding arising out of or
based upon this Agreement except in the state courts of the state of New York or
the United States District Court for the Southern District of New York, and (c)
hereby waive, and agree not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that the suit, action
or proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in or by such court.

 

8.13   Legend Removal. The legend set forth in Section 5.5 above shall be
removed and the Company shall issue a certificate without such legend or any
other legend to the holder of the applicable Shares upon which it is stamped or
issue to such holder by electronic delivery at the applicable balance account at
the Depository Trust Company (“DTC”), if (i) such Shares are registered for
resale under the Securities Act (provided that, if a Purchaser is selling
pursuant to the applicable Registration Statement, such Purchaser agrees to only
sell such Shares during such time that such Registration Statement is effective
and not withdrawn or suspended, and only as permitted by such Registration
Statement), (ii) such Shares are sold or transferred pursuant to Rule 144 (if
the transferor is not an Affiliate of the Company), or (iii) such Shares are
eligible for sale under Rule 144, without the requirement for the Company to be
in compliance with the current public information required under Rule 144 as to
such securities and without volume or manner-of-sale restrictions. Following the
earlier of (i) the effective date of the initial Registration Statement covering
the resale of the Shares (the “Effective Date”) or (ii) Rule 144 becoming
available for the resale of Shares, without the requirement for the Company to
be in compliance with the current public information required under Rule 144 as
to such securities and without volume or manner-of-sale restrictions, the
Company shall deliver to the Company’s transfer agent irrevocable instructions
that the transfer agent shall reissue a certificate representing the applicable
Shares without legend upon receipt by the transfer agent of the legended
certificates for such Shares. Any fees (with respect to the transfer agent or
otherwise) associated with the removal of such legend shall be borne by the
Company. Following the Effective Date, or at such earlier time as a legend is no
longer required for certain Shares (in which case a Purchase shall also be
required to provide reasonable assurances (in the form of seller and, if
applicable, broker representation letters), the Company will no later than three
trading days following the delivery by a Purchaser to the Company or the
transfer agent (with notice to the Company) of a legended certificate
representing Shares (endorsed or with stock powers attached, signatures
guaranteed, and otherwise in form necessary to affect the reissuance and/or
transfer), deliver or cause to be delivered to the transferee of such Purchaser
or such Purchaser, as applicable, a certificate representing such Shares that is
free from all restrictive and other legends. Certificates for Shares subject to
legend removal hereunder may be transmitted by the transfer agent to a Purchaser
by crediting the account of such Purchaser’s prime broker with DTC as directed
by such Purchaser.

 

8.14   Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof and prior to
the Closing, each reference in this Agreement to a number of shares or a price
per share shall be deemed to be amended to appropriately account for such event.

 

 
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8.15   Independent Nature of Purchasers' Obligations and Rights. The obligations
of each Purchaser under this Agreement are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance of the obligations of any other Purchaser under this
Agreement. The decision of each Purchaser to purchase Shares pursuant to this
Agreement has been made by such Purchaser independently of any other Purchaser
and independently of any information, materials, statements or opinions as to
the business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company, VBI
or any of their respective subsidiaries which may have been made or given by any
other Purchaser or by any agent or employee of any other Purchaser, and no
Purchaser and any of its agents or employees shall have any liability to any
other Purchaser (or any other Person) relating to or arising from any such
information, materials, statement or opinions. Nothing contained herein and no
action taken by any Purchaser pursuant thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by this Agreement. Each Purchaser acknowledges that no
other Purchaser has acted as agent for such Purchaser in connection with making
its investment hereunder and that no Purchaser will be acting as agent of such
Purchaser in connection with monitoring its investment in the Shares or
enforcing its rights under this Agreement. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in its review and negotiation of this Agreement.

 

8.16   Replacement of Securities. If any certificate or instrument evidencing
any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company and the Company’s transfer agent of such loss, theft or destruction and
the execution by the holder thereof of a customary lost certificate affidavit of
that fact and an agreement to indemnify and hold harmless the Company and such
transfer agent for any losses in connection therewith or, if required by such
transfer agent, a bond in such form and amount as is required by such transfer
agent. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with
the issuance of such replacement Shares. If a replacement certificate or
instrument evidencing any Shares is requested due to a mutilation thereof, the
Company may require delivery of such mutilated certificate or instrument as a
condition precedent to any issuance of a replacement.

 

8.17   Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers,
the Company and VBI will be entitled to specific performance under this
Agreement. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agree to waive in any action for
specific performance of any such obligation (other than in connection with any
action for a temporary restraining order) the defense that a remedy at law would
be adequate.

 

8.18   Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all of its
transfer agent fees (including, without limitation, any fees required for
processing of any instruction letter delivered by the Company), stamp taxes and
other taxes and duties levied in connection with the delivery of any Shares to
the Purchasers.

 

 
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8.19   Termination. This Agreement may be terminated and the sale and purchase
of the Shares abandoned at any time prior to the Closing by either the Company
or VBI or any Purchaser (with respect to itself only) upon written notice to the
other parties to this Agreements, if the Merger Agreement has been terminated
before the Effective Time of the Merger; provided, however, that the right to
terminate this Agreement under this Section 8.19 shall not be available to any
Person whose failure to comply with its obligations under this Agreement has
been the cause of or resulted in such termination of the Merger Agreement.
Nothing in this Section 8.19 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions of this
Agreement or to impair the right of any party to compel specific performance by
any other party of its obligations under this Agreement. In the event of a
termination pursuant to this Section 8.19, the Company and VBI shall promptly
notify all non-terminating Purchasers. Upon a termination in accordance with
this Section 8.19, the Company, VBI and the terminating Purchaser(s) shall not
have any further obligation or liability (including arising from such
termination) to the other, and no Purchaser will have any liability to any other
Purchaser under this Agreement as a result therefrom.

 

 

 

 

 

 

 

 

 

 

 

(Signature pages follow.)

 

 
25

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

 

 

IN WITNESS WHEREOF, the undersigned have executed this Securities Purchase
Agreement as of the date first above written.

 

 

 

COMPANY:

 

PAULSON CAPITAL (DELAWARE) CORP.

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

Trent Davis

 

 

Title:

President

 

          Address prior to the Merger:              

1331 NW Lovejoy Street, Suite 720

Portland, Oregon 97209

eFacsimile: 503-248-2390 

Email: tdavis@plccpdx.com

            Address following the Merger:              

222 Third Street, Suite 2241
Cambridge, MA 02142
eFacsimile: 888-391-2579

Email: jbaxter@vbivaccines.com

                    VARIATION BIOTECHNOLOGIES (US), INC.                     By:
       Name: Jeff Baxter     Title:

President and

      Chief Executive Officer  

 

 

 

 

 

 

[Signature Page to PLCC Securities Purchase Agreement]

 

 
 

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

 

 

 

PURCHASER:

 

 

 

 

 

Purchaser Name (Print)

 

 

 

 

 

Authorized Person (if Purchaser is an entity or trust)

 

 

 

 

  Signature of Purchaser or Authorized Person           Aggregate Purchase Price
          Number of Shares

  

 

 

 

 

 

[Signature Page to PLCC Securities Purchase Agreement]

 

 

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

 

 

SCHEDULE 1

 

 

Investor

Shares

Purchase Price

Titan-Perc Ltd.

1,544,246

$662,481.53 

Perceptive Life Sciences Master Fund Ltd.

10,110,444

$4,337,380.48 

Clarus Lifesciences I, L.P.

5,594,251

$2,399,933.68

Arch Venture Fund VI, LP

5,594,251

$2,399,933.68

5AM Ventures II, LP

2,690,947

$1,154,416.26

5AM Co-Investors II, LP

106,179

$45,550.79

 

25,640,318

$10,999,696.42

 

 

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

 

 

EXHIBIT A

 

Escrow Account Wire Instructions

 

 

Account Name: Richardson & Patel LLP Client Trust Account

1100 Glendon Avenue, 8th Floor

Los Angeles, CA 90024

COMERICA BANK OF CALIFORNIA

Westwood Office

1021 Glendon Avenue

Los Angeles, CA 90024

800-888-3595

 

ABA Number: 121137522

Account Number: 1894608122

Beneficiary: Richardson & Patel LLP Client Trust Account

Ref: Variation Biotechnologies (US), Inc.

[Purchaser name], [Social Security Number] and [Address]

 

 

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

 

 

EXHIBIT B

 

Company Disclosure Schedule

 

Representations and Warranties of the Company

 

The Company hereby represents and warrants to each Purchaser that, except as set
forth on the Company Disclosure Schedule attached hereto, which exceptions shall
be deemed to be part of the representations and warranties made hereunder, the
representations set forth in Section 3 of this Agreement are true and complete
as of the date of the Closing, except as otherwise indicated. The Company
Disclosure Schedule is arranged in sections corresponding to the numbered and
lettered sections and subsections contained in Section 3 of this Agreement, and
the disclosures in any section or subsection of the Disclosure Schedule shall
qualify other sections and subsections in Section 3 of this Agreement only to
the extent it is readily apparent from a reading of the disclosure that such
disclosure is applicable to such other sections and subsections. For purposes of
these representations and warranties, the term “the Company” shall include any
subsidiaries of the Company, unless otherwise noted herein.

 

 

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

 

 

EXHIBIT C

 

VBI Disclosure Schedule

 

Representations and Warranties of VBI

 

VBI hereby represents and warrants to each Purchaser that, except as set forth
on the VBI Disclosure Schedule attached hereto, which exceptions shall be deemed
to be part of the representations and warranties made hereunder, the
representations set forth in Section 4 of this Agreement are true and complete
as of the date of the Closing, except as otherwise indicated. The VBI Disclosure
Schedule is arranged in sections corresponding to the numbered and lettered
sections and subsections contained in Section 4 of this Agreement, and the
disclosures in any section or subsection of the VBI Disclosure Schedule shall
qualify other sections and subsections in Section 4 of this Agreement only to
the extent it is readily apparent from a reading of the disclosure that such
disclosure is applicable to such other sections and subsections. For purposes of
these representations and warranties, the term “VBI” shall include any
subsidiaries of VBI, unless otherwise noted herein.