Exhibit 10.12

 

November 14, 2014

 

VBI Vaccines Inc.
222 Third Street, Suite 2241
Cambridge, MA 02142
Attn: Jeff Baxter

 

Dear Sirs:

 

This agreement amends and restates in its entirety the Leak-Out Agreement
between us dated September 22, 2014 (this “Amended Leak-Out Agreement”) and is
being delivered to you in connection with that certain Agreement and Plan of
Merger (the “Merger Agreement”), dated as of May 8, 2014 (the “Execution Date”),
by and among VBI Vaccines Inc., a Delaware corporation whose common stock
(“Common Stock”) is listed on the NASDAQ Capital Market under the symbol VBIV
(the “Company”); Variation Biotechnologies (US), Inc., a Delaware corporation
(the “Subsidiary”); and VBI Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of the Company (“Merger Sub”). On July 25, 2014 (the
“Merger Date”), the Subsidiary merged into the Merger Sub, with the Subsidiary
being the surviving company (the “Merger”).

 

The undersigned holder (the “Holder”) of securities of the Company (consisting
exclusively of (A) securities acquired by members of the Holder upon the
purchase or exercise of any securities acquired (the “Units”) pursuant to that
certain Subscription Agreement dated as of July 25, 2013 (the “SPA”) and (B)
securities issued in replacement of the Units and securities issued thereunder
upon conversion, exercise, exchange or adjustment pursuant to the Merger
Agreement, on an as-converted, or as-exercised basis, if applicable, and without
regard to any limitations on conversion or exercise applicable thereto, if any,
collectively, the “Restricted Securities”), in each case, as described on the
Holder’s signature page hereto, agrees with the Company as follows:

 

During the period commencing on the Execution Date and ending on the earlier of:
(a) January 21, 2015, (b) the time of filing with the Securities and Exchange
Commission by the Company (or any of its subsidiaries) of any registration
statement (other than on Form S-8), including without limitation, Form S-1, S-4
or S-3, with respect to the issuance or resale of any securities of the Company
(or any of its subsidiaries) (other than a registration statement filed by the
Company solely registering Restricted Securities held by an original Unit
purchaser under the SPA or their respective Affiliates, successors or assigns);
(c) the time of release (whether by termination of an applicable leak-out
agreement or otherwise), in whole or in part, of any securities of the Company
from all, or any part, of any leak-out agreement, transfer or sale restrictions
set forth in any other leak-out agreement entered into in connection with the
Merger or otherwise or (d) any breach by the Company of any term of this Amended
Leak-Out Agreement that is not cured within 5 business days following delivery
of written notice of such breach by the Holder to the Company (“Cured”), neither
the Holder, nor any of its Affiliates, collectively, shall (i) sell more than
the Sale Limit (as defined below) of Restricted Securities in any calendar month
or (ii) sell any Restricted Securities for less than $2.75 per share (subject to
adjustment for any stock splits or combinations, stock dividends,
recapitalizations or similar event after the date hereof); provided, that the
forgoing restrictions shall not apply to any sale of Restricted Securities at a
price equal to or greater than $7.00 per share (subject to adjustment for any
stock splits or combinations, stock dividends, recapitalizations or similar
events after the date hereof).

  

 
 

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Notwithstanding the foregoing, (a) the Holder shall be permitted to effect one
or more private block trades of at least 100,000 shares of Common Stock to any
Person (as defined below) who is not an Affiliate of the Holder (each, a
“Private Block Trade”), which Private Block Trades shall not be subject to the
terms of this Amended Leak-Out Agreement and shall not be considered a sale by
the Holder in any calculation of the Sale Limit or Cumulative Unsold Amount
hereunder, and (b) the Holder shall be permitted to effect one or more open
market trades in blocks of no less than 50,000 shares of Common Stock (subject
to adjustment for any stock splits or combinations, stock dividends,
recapitalizations or similar events after the date hereof) at a price no less
than $2.30 per share (subject to adjustment for any stock splits or
combinations, stock dividends, recapitalizations or similar events after the
date hereof) (“Public Block Trades”) provided that such Public Block Trades
shall otherwise be subject to the terms of this Amended Leak-Out Agreement and
shall be considered a sale by the Holder in any calculation of the Sale Limit or
Cumulative Unsold Amount.

 

For the purpose of this Amended Leak-Out Agreement, the following definitions
shall apply:

 

“Affiliate” means, with respect to any specified Person, (x) 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
partner, officer, director, member of such Person and any fund now or hereafter
existing that is controlled by or under common control with one or more general
partners or managing members of, or shares the same management company with,
such Person or (y) if such Person is a natural person, such Person’s spouse,
lineal descendant (including any adopted child or adopted grandchild) or other
family member, or a custodian or trustee of any trust, partnership or limited
liability company for the benefit of, in whole or in part, or the ownership
interests of which are, directly or indirectly, controlled by, such Person or
any other member or members of such Person’s family.

 

“Cumulative Unsold Amount” means, with respect to any date of determination, the
difference of (i) Six Hundred and Forty Thousand (640,000) Restricted Securities
(on an as converted to Common Stock basis and subject to adjustment for any
stock splits or combinations, stock dividends, recapitalizations or similar
events after the date hereof), less (ii) the aggregate number of Restricted
Securities sold by the Holder and its Affiliates, successors and assigns,
collectively (subject to adjustment for any stock splits or combinations, stock
dividends, recapitalizations or similar events), in the calendar month
immediately prior to the calendar month in which such date of determination
occurs (excluding any shares of Common Stock sold in Private Block Trades).

  

 
 

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“Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and any governmental or any department or agency thereof.

 

“Sale Limit” means, with respect to any date of determination, such number of
Restricted Securities equal to the greater of (i) Four Hundred Thousand
(400,000) Restricted Securities (on an as converted to Common Stock basis and
subject to adjustment for any stock splits or combinations, stock dividends,
recapitalizations or similar events after the date hereof) or (ii) the
Cumulative Unsold Amount as of such date of determination, in each case prorated
for the first partial month, if any, and the last partial month, if any, in such
period in which the date of determination occurs (in each case, excluding any
shares of Common Stock sold in Private Block Trades).

 

Notwithstanding anything herein to the contrary, on or after the date hereof,
the Holder may, directly or indirectly, sell or transfer all, or any part, of
the Restricted Securities (or any securities convertible or exercisable into
Restricted Securities, as applicable) to any Person (an “Assignee”) without
complying with (or otherwise limited by) the restrictions set forth in this
Amended Leak-Out Agreement; provided, that as a condition to any such sale or
transfer (other than with respect to any Private Block Trade) an authorized
signatory of the Company and such Assignee duly execute and deliver a leak-out
agreement in the form of this Amended Leak-Out Agreement with respect to such
transferred Restricted Securities (or such securities convertible or exercisable
into Restricted Securities, as applicable) (an “Assignee Agreement”) and sales
of the Holder and its Affiliates and all Assignees shall be aggregated for all
purposes of this Amended Leak-Out Agreement and all Assignee Agreements.

 

The Holder represents and warrants to the Company that neither the Holder, nor
any of its respective Affiliates, have purchased securities of the Company from
the Company other than the Restricted Securities.

  

 
 

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The Company further represents and warrants as of the date hereof and covenants
and agrees from and after the date hereof that none of the terms offered to any
Person entering into a leak-out agreement who is a Unit Purchaser under the SPA
(or in connection with any lockup or leak-out agreement entered in connection
with the Merger Agreement or the Merger) (collectively, “Other Agreement”) with
respect to any consent, release, amendment, settlement or waiver of the terms,
conditions or transactions herein or in such Other Agreement, is or will be more
favorable to such Person than those set forth in this Amended Leak-Out Agreement
or provided to any Person unless the provisions of this paragraph are complied
with. If, and whenever on or after the date hereof, the Company desires to
provide terms which might affect any of the actions prohibited in the
immediately preceding sentence, then (i) the Company shall provide the Holder
with notice thereof (x) at least two (2) business days prior to such date and
(y) upon the consummation thereof the terms and conditions of this Amended
Leak-Out Agreement shall be, without any further action by the Holder or the
Company, automatically amended and modified in an economically and legally
equivalent manner such that the Holder shall receive the benefit of the more
favorable terms and/or conditions (as the case may be), provided that upon
written notice to the Company at any time prior to the expiration of such two
(2) business day period the Holder may elect not to accept the benefit of any
such amended or modified term or condition, in which event the term or condition
contained in this Amended Leak-Out Agreement shall continue to apply to the
Holder as it was in effect immediately prior to such amendment or modification
as if such amendment or modification never occurred with respect to the Holder.
Notwithstanding anything herein to the contrary, no agreement with the
purchasers of the Company’s common stock issued pursuant to those certain
Subscription Agreements dated as of January 29, 2014 in the aggregate amount of
$250,000 (any such agreement, a “January PIPE Investor Agreement”) shall
constitute an Other Agreement requiring any notice or adjustment hereunder,
provided, however, that such January PIPE Investor Agreement is not amended,
modified or waived subsequent to its original date of effectiveness, in which
case, such January PIPE Investor Agreement shall thereafter constitute an Other
Agreement for purposes hereunder.

 

On or before 9:30 a.m., New York time, on the first (1st) business day after the
date of this Amended Leak-Out Agreement, unless the Company has already included
disclosure of the material terms of this Amended Leak-Out Agreement and attached
it as an exhibit to a periodic report filed pursuant to the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), the Company shall file a Current
Report on Form 8-K describing all the material terms of this Amended Leak-Out
Agreement in the form required by the Exchange Act, and attaching a copy of this
Amended Leak-Out Agreement. From and after such filing, the Company shall have
disclosed all material, non-public information (if any) to the Holder by the
Company or any of its subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions contemplated
by the Merger Agreement and this Amended Leak-Out Agreement.

 

Provided there have been no changes in applicable law, rule, or regulation or
interpretation by the Staff of the Securities and Exchange Commission following
the Execution Date, the Company agrees not to take any position contrary to that
of the holding period of the Restricted Securities tacking back to July 25,
2013, the original issue date of the Restricted Securities (or, as applicable,
such securities convertible or exercisable into Restricted Securities (assuming
for such purpose that any warrants to purchase Common Stock of the Company, if
any, are exercised on a cashless basis)). the Company shall use reasonable best
efforts to cause the Company’s transfer agent to timely obtain and process (at
the Company’s sole cost and expense) such opinions of counsel (the “Opinion
Firm”) as the Company’s transfer agent may require or request in connection with
the removal of any restrictive legend and the Company shall provide such
required undertakings, certificates, documentation and additional information as
such transfer agent and Opinion Firm shall require in connection with such
activities. As a condition to the issuance of each such opinion and transfer
agent actions, the Company and its counsel shall have the right to require that
Holder timely execute an attestation as to Holder not being an Affiliate of the
Company and that the Holder (and its Affiliates, successors and assigns) have
fully complied with the terms applicable to Holder under this Amended Leak-Out
Agreement and reasonable evidence of such compliance.

  

 
 

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Any notices, consents, waivers or other communications required or permitted to
be given under the terms of this Amended Leak-Out Agreement must be in writing.

 

This Amended Leak-Out Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, letters and understandings relating to the subject matter
hereof and are fully binding on the parties hereto. For the avoidance of doubt,
the parties hereto further acknowledge and agree that this Amended Leak-Out
Agreement supersedes any other similar agreement entered into by the Company and
any of the members of the Holder prior to the date hereof (collectively, the
“Other Leak-Out Agreements”), and the terms and conditions of such Other
Leak-Out Agreements shall not apply to the Holder.

 

This Amended Leak-Out Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one and the same instrument. This Amended Leak-Out
Agreement may be executed and accepted by facsimile or PDF signature and any
such signature shall be of the same force and effect as an original signature.

 

The terms of this Amended Leak-Out Agreement shall be binding upon and shall
inure to the benefit of each of the parties hereto and their respective
successors and assigns.

 

This Amended Leak-Out Agreement may not be amended or modified except in writing
signed by each of the parties hereto.

 

All questions concerning the construction, validity, enforcement and
interpretation of this letter agreement shall be governed by the internal laws
of the State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in The City of
New York, Borough of Manhattan, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper.

 

Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address for such notices to it under this letter
agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Each party hereby irrevocably waives any
right it may have, and agrees not to request, a jury trial for the adjudication
of any dispute hereunder or in connection with or arising out of this letter
agreement or any transaction contemplated hereby. 

  

 
 

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Each party hereto acknowledges that, in view of the uniqueness of the
transactions contemplated by this Amended Leak-Out Agreement, the other parties
hereto would not have an adequate remedy at law for money damages in the event
that this Amended Leak-Out Agreement has not been performed in accordance with
its terms, and therefore agrees that such other parties shall be entitled to
specific enforcement of the terms hereof in addition to any other remedy to
which it may be entitled, at law or in equity

 

 

 

Very truly yours,

 

 

 

Bio Vaccines LP 

 

Exact Name of Securityholder

 

 

 

/s/ Yoav Roth 

 

Authorized Signature 

 

 

 

Authorized Signatory 

 

Title 

 

 

 

List of Restricted Securities: 

 

 

 

See Schedule I attached hereto 

 

 
 

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[SIGNATURE PAGE TO PLCC/HB/DKR LEAK-OUT]

 

 

Agreed to and Acknowledged:

 

VBI VACCINES INC.

 

 

By: 

 /s/ Jeff Baxter 

 

 

Name: Jeff Baxter 

 

 

Title: President and Chief Executive Officer  

 

 
 

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Schedule I

 

List of Restricted Securities

 

 

Common Stock: 1,907,418

 

Series 1 Convertible Preferred Stock: 2,711,880