Document:

EX-10.1

 Exhibit 10.1 

ALECTOR, INC. 
 2022
INDUCEMENT EQUITY INCENTIVE PLAN 
 1. Purpose of the Plan. The purpose of this Plan is to attract and retain the best available
personnel for positions of substantial responsibility by providing an inducement material to individuals’ entering into employment with the Company or any Parent or Subsidiary of the Company. 

The Plan permits the grant of Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance
Units and Performance Shares. Each Award under the Plan is intended to qualify as an employment inducement award under the Listing Rule 5635(c)(4) or to qualify under the exception relating to plans or arrangements relating to an acquisition or
merger under the Listing Rule 5635(c)(3). 
 2. Definitions. As used herein, the following definitions will apply: 

(a) “Administrator” means the Board or any of its Committees as will be administering the Plan, in accordance with
Section 4 of the Plan. 
 (b) “Applicable Laws” means the legal and regulatory requirements relating to the
administration of equity-based awards and the related issuance of Shares thereunder, including but not limited to U.S. federal and state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on
which the Common Stock is listed or quoted and the applicable laws of any non-U.S. country or jurisdiction where Awards are, or will be, granted under the Plan. 

(c) “Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, Performance Units or Performance Shares. 
 (d) “Award Agreement” means the written or
electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan. 

(e) “Board” means the Board of Directors of the Company. 

(f) “Change in Control” means the occurrence of any of the following events: 

(i) A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group
(“Person”), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company; provided, however,
that for purposes of this subsection, (A) the acquisition of additional stock by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of the stock of the Company will not be considered a Change
in Control, and (B) if the stockholders of the Company immediately before such change in ownership continue to retain immediately after the change in ownership, in 

 
substantially the same proportions as their ownership of shares of the Company’s voting stock immediately prior to the change in ownership, the direct or indirect beneficial ownership of
fifty percent (50%) or more of the total voting power of the stock of the Company or of the ultimate parent entity of the Company, such event will not be considered a Change in Control under this subsection (i). For this purpose, indirect beneficial
ownership will include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company, as the case may be, either directly or through one or more
subsidiary corporations or other business entities; or 
 (ii) A change in the effective control of the Company which occurs on the date
that a majority of members of the Board is replaced during any twelve (12)-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For
purposes of this subsection (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or 

(iii) A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or
has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal
to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following
will not constitute a change in the ownership of a substantial portion of the Company’s assets: (A) a transfer to an entity that is controlled by the Company’s stockholders immediately after the transfer, or (B) a transfer of
assets by the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock, (2) an entity, fifty percent (50%) or more of the total value or
voting power of which is owned, directly or indirectly, by the Company, (3) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company, or
(4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in subsection (iii)(B)(3). For purposes of this subsection (iii), gross fair market value means
the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. 

For purposes of this definition, persons will be considered to be acting as a group if they are owners of a corporation that enters into a
merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company. 
 Notwithstanding the
foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Section 409A. 

Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to change the
state of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such
transaction. 

  
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 (g) “Code” means the Internal Revenue Code of 1986, as amended. Reference
to a specific section of the Code or regulation thereunder will include such section or regulation, any valid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or
superseding such section or regulation. 
 (h) “Committee” means a committee of Directors or of other individuals
satisfying Applicable Laws appointed by the Board, or a duly authorized committee of the Board, in accordance with Section 4 hereof. 

(i) “Common Stock” means the Common Stock of the Company. 

(j) “Company” means Alector, Inc., a Delaware corporation, or any successor thereto. 

(k) “Consultant” means any natural person, including an advisor, engaged by the Company or a Parent or Subsidiary to render
bona fide services to such entity, provided the services (i) are not in connection with the offer or sale of securities in a capital-raising transaction, and (ii) do not directly promote or maintain
a market for the Company’s securities, in each case, within the meaning of Form S-8 promulgated under the Securities Act, and provided, further, that a Consultant will include only those persons to whom
the issuance of Shares may be registered under Form S-8 promulgated under the Securities Act. 
 (l)
“Director” means a member of the Board. 
 (m) “Disability” means total and permanent disability as
defined in Section 22(e)(3) of the Code, provided that the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and
non-discriminatory standards adopted by the Administrator from time to time. 
 (n)
“Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient
to constitute “employment” by the Company. However, for the avoidance of doubt, a person who already is serving as a Director prior to becoming an Employee will not be eligible to be granted an Award under the Plan unless permitted under
the Listing Rule 5635(c)(4). The Company will determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or
termination of employment, as the case may be. For purposes of an individual’s rights, if any, under the Plan as of the time of the Company’s determination, all such determinations by the Company will be final, binding and conclusive,
notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination. 
 (o)
“Exchange Act” means the Securities Exchange Act of 1934, as amended. 
 (p) “Exchange Program” means a
program under which (i) outstanding Awards are surrendered or cancelled in exchange for awards of the same type (which may have higher or lower exercise prices and different terms), awards of a different type, and/or cash,
(ii) Participants would have the opportunity to transfer any outstanding Awards to a financial institution or other person or entity selected by the Administrator, and/or (iii) the exercise price of an outstanding Award is increased or
reduced. The Administrator may not implement an Exchange Program without prior approval from the Company’s stockholders. 

  
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 (q) “Fair Market Value” means, as of any date, the value of Common Stock
determined as follows: 
 (i) The Fair Market Value will be the closing sales price for Common Stock as quoted on any established stock
exchange or national market system (including without limitation the New York Stock Exchange, NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital Market of The NASDAQ Stock Market) on which the Common Stock is listed on the
date of determination (or the closing bid, if no sales were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable. If the determination date for the Fair Market Value occurs on a non-trading day (i.e., a weekend or holiday), the Fair Market Value will be such price on the immediately preceding trading day, unless otherwise determined by the Administrator. 

(ii) In the absence of an established market for the Common Stock, the Fair Market Value thereof will be determined in good faith by the
Administrator. 
 The determination of fair market value for purposes of tax withholding may be made in the Administrator’s discretion
subject to Applicable Laws and is not required to be consistent with the determination of Fair Market Value for other purposes. 
 (r)
“Fiscal Year” means the fiscal year of the Company. 
 (s) “Incentive Stock Option” means an Option
intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. 

(t) “Listing Rule” means the Listing Rules of The Nasdaq Stock Market LLC. Reference to any Listing Rule will include the
terms and conditions of the Listing Rule and any applicable Interpretive Material and other guidance issued under the Listing Rule. 
 (u)
“Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option. 

(v) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder. 
 (w) “Option” means a stock option granted pursuant to the Plan. All
Options granted under the Plan will constitute Nonstatutory Stock Options. 
 (x) “Parent” means a “parent
corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code. 
 (y)
“Participant” means the holder of an outstanding Award. 

  
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 (z) “Performance Share” means an Award denominated in Shares which may be
earned in whole or in part upon attainment of performance goals or other vesting criteria as the Administrator may determine pursuant to Section 10. 

(aa) “Performance Unit” means an Award which may be earned in whole or in part upon attainment of performance goals or other
vesting criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 10. 

(bb) “Period of Restriction” means the period during which the transfer of Shares of Restricted Stock are subject to
restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the
Administrator. 
 (cc) “Plan” means this 2022 Inducement Equity Incentive Plan. 

(dd) “Restricted Stock” means Shares issued pursuant to a Restricted Stock award under Section 7 of the Plan, or issued
pursuant to the early exercise of an Option. 
 (ee) “Restricted Stock Unit” means a bookkeeping entry representing an
amount equal to the Fair Market Value of one Share, granted pursuant to Section 8. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company. 

(ff) “Rule 16b-3” means Rule 16b-3 of the
Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. 

(gg) “Section 16(b)” means Section 16(b) of the Exchange Act. 

(hh) “Section 409A” means Code Section 409A, as it has been and may be amended from time to time, and
any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time. 

(ii) “Securities Act” means the Securities Act of 1933, as amended. 

(jj) “Service Provider” means an Employee, Director or Consultant. 

(kk) “Share” means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan. 

(ll) “Stock Appreciation Right” means an Award, granted alone or in connection with an Option, that pursuant to
Section 9 is designated as a Stock Appreciation Right. 
 (mm) “Subsidiary” means a “subsidiary
corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code. 

  
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 3.
Stock Subject to the Plan. 
 (a)
Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares that may be issued under the Plan is
1,630,000 Shares. In addition, Shares may become available for issuance pursuant to Section 3(b). The Shares may be authorized, but unissued, or reacquired Common Stock. 

(b) Lapsed Awards. If an Award expires or becomes unexercisable without having been exercised in full or, with respect to Restricted
Stock, Restricted Stock Units, Performance Units or Performance Shares, is forfeited to or repurchased by the Company due to failure to vest, the unpurchased Shares (or for Awards other than Options or Stock Appreciation Rights the forfeited or
repurchased Shares), which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). With respect to Stock Appreciation Rights, only Shares actually issued (i.e., the net Shares
issued) pursuant to a Stock Appreciation Right will cease to be available under the Plan; all remaining Shares under Stock Appreciation Rights will remain available for future grant or sale under the Plan (unless the Plan has terminated).
Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if Shares issued pursuant to Awards of Restricted
Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company, such Shares will become available for future grant under the Plan. Shares used to pay the exercise price of an
Award or to satisfy the tax withholding obligations related to an Award will become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in
reducing the number of Shares available for issuance under the Plan. 
 (c) Share Reserve. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan. 
 4.
Administration of the Plan. 
 (a) Procedure. 

(i) Multiple Administrative Bodies. Different Committees with respect to different groups of Employees or Participants may administer
the Plan. 
 (ii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as
exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3. 

(iii) Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee,
which committee will be constituted to satisfy Applicable Laws. 
 (iv) Approval. Awards granted under the Plan must be approved by
a majority of the Company’s “Independent Directors,” as defined in the Listing Rules, or the independent Compensation Committee of the Board, in each case acting as the Administrator. 

  
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 (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the
case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion: 

(i) to determine the Fair Market Value; 

(ii) to select the individuals to whom Awards may be granted hereunder, subject to Section 5 (which Awards will be intended as a
material inducement to the individual becoming an Employee or as otherwise permitted under Listing Rule 5635(c)(3)); 
 (iii) to determine
the number of Shares to be covered by each Award granted hereunder; 
 (iv) to approve forms of Award Agreements for use under the Plan;

 (v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator will determine; 

(vi) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan; 

(vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable non-U.S. laws or for qualifying for favorable tax treatment under applicable
non-U.S. laws; 
 (viii) to modify or amend each Award (subject to Section 18 of the Plan),
including but not limited to the discretionary authority to extend the post-termination exercisability period of Awards, provided that the Administrator may not institute an Exchange Program without prior approval from the Company’s
stockholders; 
 (ix) to allow Participants to satisfy tax withholding obligations in such manner as prescribed in Section 14 of the
Plan; 
 (x) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously
granted by the Administrator; 
 (xi) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant under an Award; and 
 (xii) to make all other determinations deemed necessary or advisable for
administering the Plan. 

  
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 (c) Effect of Administrator’s Decision. The
Administrator’s decisions, determinations and interpretations will be final and binding on all Participants and any other holders of Awards. 

5. Eligibility. Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares and
Performance Units may be granted to Employees so long as the following requirements are met: 
 (a) The Employee was not previously an
Employee or Director, or the Employee is to become employed by the Company or any of its Parent or Subsidiaries following a bona-fide period of non-employment (within the meaning of Listing Rule 5635(c)(4));
and 
 (b) The grant of the Award or Awards to the Employee is an inducement material to the Employee’s entering into employment with
the Company (or any of its Parent or Subsidiaries, as applicable) in accordance with the Listing Rule. 
 Notwithstanding the foregoing, an
Employee may be granted an Award in connection with an acquisition or merger to the extent permitted by Listing Rule 5635(c)(3). 
 6.
Stock Options. 
 (a) Grant of Options. Subject to the terms and conditions of the Plan, including without limitation the eligibility
requirements of Section 5, an Option may be granted to an Employee at any time and from time to time as will be determined by the Administrator, in its sole discretion. 

(b) Number of Shares. The Administrator will have complete discretion to determine the number of Shares subject to Options granted to
any Participant. 
 (c) Term of Option. The Administrator will determine the term of each Option in its sole discretion. The term of
each Option will be stated in the Award Agreement. 
 (d) Option Exercise Price and Consideration. 

(i) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option will be determined by
the Administrator but will be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant. 
 (ii)
Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix the period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised.

 (iii) Form of Consideration. The Administrator will determine the acceptable form of consideration for exercising an Option,
including the method of payment. Such consideration may consist entirely of: (1) cash; (2) check; (3) promissory note, to the extent permitted by Applicable Laws, (4) other Shares, provided that such Shares have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option will be exercised and provided that accepting such Shares will not result in any adverse accounting consequences to the Company, as the
Administrator determines in its sole discretion; (5) consideration 

  
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received by the Company under a broker-assisted (or other) cashless exercise program (whether through a broker or otherwise) implemented by the Company in connection with the Plan;
(6) by net exercise; (7) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or (8) any combination of the foregoing methods of payment. 

(e) Exercise of Option. 

(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according to the terms of the
Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. 

An Option will be deemed exercised when the Company receives: (i) a notice of exercise (in such form as the Administrator may specify
from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any
consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the
name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other
rights as a stockholder will exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment
will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 13 of the Plan. 

Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised. 
 (ii) Termination of Relationship as a Service Provider.
If a Participant ceases to be a Service Provider, other than upon the Participant’s termination as the result of the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is
specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the
Award Agreement, the Option will remain exercisable for three (3) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and
the Shares covered by such Option will revert to the Plan. 
 (iii) Disability of Participant. If a Participant ceases to be a
Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in
no event later than the expiration of the term of such Option as set forth in the 

  
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Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following the Participant’s termination. Unless
otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the
Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan. 

(iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised following the
Participant’s death within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the Option be exercised later than the expiration of the term of such Option
as set forth in the Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been
designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with
the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following Participant’s death. Unless otherwise provided by the Administrator, if at
the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option
will terminate, and the Shares covered by such Option will revert to the Plan. 
 (v) Tolling Expiration. A Participant’s Award
Agreement may also provide that: 
 (1) if the exercise of the Option following the termination of Participant’s status as a Service
Provider (other than upon the Participant’s death or Disability) would result in liability under Section 16(b), then the Option will terminate on the earlier of (A) the expiration of the term of the Option set forth in the Award
Agreement, or (B) the tenth (10th) day after the last date on which such exercise would result in liability under Section 16(b); or 

(2) if the exercise of the Option following the termination of the Participant’s status as a Service Provider (other than upon the
Participant’s death or Disability) would be prohibited at any time solely because the issuance of Shares would violate the registration requirements under the Securities Act, then the Option will terminate on the earlier of (A) the
expiration of the term of the Option or (B) the expiration of a period of thirty (30) days after the termination of the Participant’s status as a Service Provider during which the exercise of the Option would not be in violation of
such registration requirements. 
 7. Restricted Stock. 

(a) Grant of Restricted Stock. Subject to the terms and conditions of the Plan, including without limitation the eligibility
requirements of Section 5, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Employees in such amounts as the Administrator, in its sole discretion, will determine. 

  
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 (b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by
an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, the
Company as escrow agent will hold Shares of Restricted Stock until the restrictions on such Shares have lapsed. 
 (c)
Transferability. Except as provided in this Section 7 or the Award Agreement, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction. 
 (d) Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares of
Restricted Stock as it may deem advisable or appropriate. 
 (e) Removal of Restrictions. Except as otherwise provided in this
Section 7, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction or at such other time as the Administrator may
determine. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed. 
 (f)
Voting Rights. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise. 

(g) Dividends and Other Distributions. During the Period of Restriction, Participants holding Shares of Restricted Stock will be
entitled to receive all dividends and other distributions paid with respect to such Shares, unless the Administrator provides otherwise. If any such dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions
on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid. 
 (h) Return of Restricted
Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan. 

8. Restricted Stock Units. 

(a) Grant. Subject to the terms and conditions of the Plan, including without limitation the eligibility requirements of
Section 5, Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. After the Administrator determines that it will grant Restricted Stock Units under the Plan, it will advise the Participant
in an Award Agreement of the terms, conditions, and restrictions related to the grant, including the number of Restricted Stock Units. 

(b) Vesting Criteria and Other Terms. The Administrator will set vesting criteria in its discretion, which, depending on the extent to
which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. The Administrator may set vesting criteria based upon the achievement of Company-wide, divisional, business unit, or individual
goals (including, but not limited to, continued employment or service), applicable federal or state securities laws or any other basis determined by the Administrator in its discretion. 

  
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 (c) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the
Participant will be entitled to receive a payout as determined by the Administrator. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any vesting
criteria that must be met to receive a payout. 
 (d) Form and Timing of Payment. Payment of earned Restricted Stock Units will be
made as soon as practicable after the date(s) determined by the Administrator and set forth in the Award Agreement. The Administrator, in its sole discretion, may only settle earned Restricted Stock Units in cash, Shares, or a combination of
both. 
 (e) Cancellation. On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be forfeited to the
Company. 
 9. Stock Appreciation Rights. 

(a) Grant of Stock Appreciation Rights. Subject to the terms and conditions of the Plan, including without limitation the eligibility
requirements of Section 5, a Stock Appreciation Right may be granted to Employees at any time and from time to time as will be determined by the Administrator, in its sole discretion. 

(b) Number of Shares. The Administrator will have complete discretion to determine the number of Stock Appreciation Rights granted to
any Employee. 
 (c) Exercise Price and Other Terms. The per share exercise price for the Shares to be issued pursuant to exercise of
a Stock Appreciation Right will be determined by the Administrator and will be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant. Otherwise, the Administrator, subject to the provisions of the Plan, will
have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the Plan. 
 (d) Stock
Appreciation Right Agreement. Each Stock Appreciation Right grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and
conditions as the Administrator, in its sole discretion, will determine. 
 (e) Expiration of Stock Appreciation Rights. A Stock
Appreciation Right granted under the Plan will expire ten (10) years from the date of grant or such shorter term as may be provided in the Award Agreement, as determined by the Administrator, in its sole discretion. Notwithstanding the
foregoing, the rules of Section 6(e) relating to exercise also will apply to Stock Appreciation Rights. 
 (f) Payment of Stock
Appreciation Right Amount. Upon exercise of a Stock Appreciation Right, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying: 

  
 -12- 

 (i) The difference between the Fair Market Value of a Share on the date of exercise over
the exercise price; times 
 (ii) The number of Shares with respect to which the Stock Appreciation Right is exercised. 

At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares of equivalent value, or
in some combination thereof. 
 10. Performance Units and Performance Shares. 

(a) Grant of Performance Units/Shares. Subject to the terms and conditions of the Plan, including without limitation the eligibility
requirements of Section 5, Performance Units and Performance Shares may be granted to Employees at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete
discretion in determining the number of Performance Units and Performance Shares granted to each Participant. 
 (b) Value of Performance
Units/Shares. Each Performance Unit will have an initial value that is established by the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of
grant. 
 (c) Performance Objectives and Other Terms. The Administrator will set performance objectives or other vesting provisions
(including, without limitation, continued status as a Service Provider) in its discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units/Shares that will be paid out to the
Participants. The time period during which the performance objectives or other vesting provisions must be met will be called the “Performance Period.” Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will
specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine. The Administrator may set performance objectives based upon the achievement of Company-wide, divisional, business unit
or individual goals (including, but not limited to, continued employment or service), applicable federal or state securities laws, or any other basis determined by the Administrator in its discretion. 

(d) Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units/Shares will
be entitled to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting
provisions have been achieved. After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share. 

(e) Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares will be made as soon as
practicable after the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of
the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof. 

  
 -13- 

 (f) Cancellation of Performance Units/Shares. On the date set forth in the Award
Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan. 

11. Leaves of Absence/Transfer Between Locations. Unless the Administrator provides otherwise, vesting of Awards granted hereunder will
be suspended during any unpaid leave of absence. A Participant will not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its
Parent, or any Subsidiary. 
 12. Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator
makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate. 
 13.
Adjustments; Dissolution or Liquidation; Merger or Change in Control. 
 (a) Adjustments. In the event that any dividend or
other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to
prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares
covered by each outstanding Award, and the numerical Share limit in Section 3 of the Plan. 
 (b) Dissolution or Liquidation. In
the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised,
an Award will terminate immediately prior to the consummation of such proposed action. 
 (c) Change in Control. In the event of a
merger of the Company with or into another corporation or other entity or a Change in Control, each outstanding Award will be treated as the Administrator determines subject to the restriction in the following paragraph, including, without
limitation, that each Award be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. The Administrator will not be required to treat all Awards or Participants
similarly in the transaction. 
 In the event that the successor corporation does not assume or substitute for the Award, the Participant
will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock and
Restricted Stock Units will lapse, and, with respect to Awards with performance-based vesting, unless specifically provided otherwise under the applicable Award Agreement, a Company policy applicable to the Participant, or other written agreement
between the Participant and the Company, all performance goals or other vesting criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and 

  
 -14- 

 
conditions met. In addition, if an Option or Stock Appreciation Right is not assumed or substituted in the event of a Change in Control, the Administrator will notify the Participant in writing
or electronically that the Option or Stock Appreciation Right will be exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such
period. 
 For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award
confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) received in the Change in Control by holders of
Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the
exercise of an Option or Stock Appreciation Right or upon the payout of a Restricted Stock Unit, Performance Unit or Performance Share, for each Share subject to such Award, to be solely common stock of the successor corporation or its Parent equal
in fair market value to the per share consideration received by holders of Common Stock in the Change in Control. 
 Notwithstanding
anything in this Section 13(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more performance goals will not be considered assumed if the Company or its
successor modifies any of such performance goals without the Participant’s consent; provided, however, a modification to such performance goals only to reflect the successor corporation’s post-Change in Control corporate structure will not
be deemed to invalidate an otherwise valid Award assumption. 
 14. Tax. 

(a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof) or such
earlier time as any tax withholding obligations are due, the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy U.S. federal, state, or local taxes, non-U.S. taxes, or other taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof). 

(b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to
time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (i) paying cash, (ii) electing to have the Company withhold otherwise deliverable cash or Shares having a fair
market value not in excess of the maximum statutory amount required to be withheld, or (iii) delivering to the Company already-owned Shares having a fair market value not in excess of the maximum statutory amount required to be withheld. The
fair market value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld. 

  
 -15- 

 (c) Compliance With Section 409A. Awards will be designed and
operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Section 409A such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest
applicable under Section 409A, except as otherwise determined in the sole discretion of the Administrator. The Plan and each Award Agreement under the Plan is intended to meet the requirements of Section 409A and will be construed and
interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Section 409A the Award will be
granted, paid, settled or deferred in a manner that will meet the requirements of Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Section 409A. In no
event will the Company (or any Parent or Subsidiary of the Company, as applicable) reimburse a Participant for any taxes imposed or other costs incurred as a result of Section 409A. 

15. No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with respect to
continuing the Participant’s relationship as a Service Provider, nor will they interfere in any way with the Participant’s right or the right of the Company (or any Parent or Subsidiary of the Company) to terminate such relationship at any
time, with or without cause, to the extent permitted by Applicable Laws. 
 16. Date of Grant. The date of grant of an Award will be,
for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable
time after the date of such grant. 
 17. Term of Plan. The Plan will become effective upon its adoption by the Board or its
designated Committee (as applicable). It will continue in effect for a term of ten (10) years from the date adopted by the Board or its designated Committee (as applicable), unless terminated earlier under Section 18 of the Plan.

 18. Amendment and Termination of the Plan. 

(a) Amendment and Termination. The Administrator may at any time amend, alter, suspend or terminate the Plan. 

(b) Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent that the Administrator (in
its discretion) determines such approval is necessary and desirable to comply with Applicable Laws. 
 (c) Effect of Amendment or
Termination. No amendment, alteration, suspension or termination of the Plan will materially impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing
and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such
termination. 
 19. Conditions Upon Issuance of Shares. 

(a) Legal Compliance. Shares will not be issued pursuant to an Award unless the exercise of such Award and the issuance and delivery of
such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance. 

  
 -16- 

 (b) Investment Representations. As a condition to the exercise of an Award, the
Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required. 
 20. Inability to Obtain Authority. The inability of the
Company to obtain authority from any regulatory body having jurisdiction or to complete or comply with the requirements of any registration or other qualification of the Shares under any U.S. federal or state law, any
non-U.S. law, or the rules and regulations of the Securities and Exchange Commission, the stock exchange on which Shares of the same class are then listed, or any other governmental or regulatory body, which
authority, registration, qualification or rule compliance is deemed by the Company’s counsel to be necessary or advisable for the issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to
issue or sell such Shares as to which such requisite authority, registration, qualification or rule compliance will not have been obtained. 

21. Clawback. The Administrator may specify in an Award Agreement that the Participant’s rights, payments, and/or benefits with
respect to an Award will be subject to reduction, cancellation, forfeiture, and/or recoupment upon the occurrence of certain specified events, in addition to any applicable vesting, performance or other conditions and restrictions of an Award.
Notwithstanding any provisions to the contrary under this Plan, an Award granted under the Plan shall be subject to the Company’s clawback policy (if any) as may be established and/or amended from time to time. The Board may require a
Participant to forfeit or return to and/or reimburse the Company all or a portion of the Award and/or Shares issued under the Award, any amounts paid under the Award, and any payments or proceeds paid or provided upon disposition of the Shares
issued under the Award, pursuant to the terms of such Company policy or as necessary or appropriate to comply with Applicable Laws. 

  
 -17- 

 ALECTOR, INC. 

2022 INDUCEMENT EQUITY INCENTIVE PLAN 

STOCK OPTION AGREEMENT 

Unless otherwise defined herein, the terms defined in the Alector, Inc. 2022 Inducement Equity Incentive Plan (the “Plan”) will
have the same defined meanings in this Stock Option Agreement, which includes the Notice of Stock Option Grant (the “Notice of Grant”), the Terms and Conditions of Stock Option Grant attached hereto as Exhibit A, the Exercise Notice
attached hereto as Exhibit B, and all other exhibits and appendices attached hereto (all together, the “Option Agreement”). 
 NOTICE
OF STOCK OPTION GRANT 
 Participant: 

Address: 
 The
undersigned Participant has been granted an Option to purchase Common Stock of Alector, Inc. (the “Company”), subject to the terms and conditions of the Plan and this Option Agreement, as follows: 

 

			
	Grant Number:	  	  

		
	Date of Grant:	  	  

		
	Vesting Commencement Date:	  	  

		
	Number of Shares Granted:	  	  

		
	Exercise Price per Share (in U.S. Dollars):	  	 $

		
	Total Exercise Price (in U.S. Dollars):	  	 $

		
	Type of Option:	  	Nonstatutory Stock Option
		
	Term/Expiration Date:	  	  

		
	Vesting Schedule:	  	

 Subject to accelerated vesting as set forth below or in the Plan, this Option will be exercisable, in whole or
in part, in accordance with the following schedule: 
 [Twenty-five percent (25%) of the Shares subject to the Option shall vest on the one
(1) year anniversary of the Vesting Commencement Date, and one forty-eighth (1/48th) of the Shares subject to the Option shall vest each month thereafter on the same day of the month as the
Vesting Commencement Date (and if there is no corresponding day, on the last day of the month), subject to Participant continuing to be a Service Provider through each such date.]  

 Termination Period: 

This Option will be exercisable for [three (3) months] after Participant ceases to be a Service Provider, unless such termination is due
to Participant’s death or Disability, in which case this Option will be exercisable for [twelve (12) months] after Participant ceases to be a Service Provider. Notwithstanding the foregoing sentence, in no event may this Option be
exercised after the Term/Expiration Date as provided above and this Option may be subject to earlier termination as provided in Section 13 of the Plan. 

By Participant’s signature and the signature of the representative of the Company below, Participant and the Company agree that this
Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement, including the Terms and Conditions of Stock Option Grant, attached hereto as Exhibit A, all of which are made a part of this document.
Participant acknowledges receipt of a copy of the Plan. Participant has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement, and fully
understands all provisions of the Plan and this Option Agreement. Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and the Option
Agreement. Participant further agrees to notify the Company upon any change in the residence address indicated below. 
  

			
	PARTICIPANT	  	ALECTOR, INC.
	  
	  	  

	Signature	  	Signature
	  
	  	  

	Print Name	  	Print Name
		  	  

	 	  	Title
	Address:	  	
		
	  
	  	
		
	  
	  	

  
 - 2 - 

 EXHIBIT A 

TERMS AND CONDITIONS OF STOCK OPTION GRANT 

1. Grant of Option. The Company hereby grants to the individual (“Participant”) named in the Notice of Stock Option Grant of
this Option Agreement (the “Notice of Grant”) an option (the “Option”) to purchase the number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise
Price”), subject to all of the terms and conditions in this Option Agreement and the Plan, which is incorporated herein by this reference. Subject to Section 18(c) of the Plan, in the event of a conflict between the terms and conditions of
the Plan and the terms and conditions of this Option Agreement, the terms and conditions of the Plan will prevail. 
 2. Vesting
Schedule. Except as provided in Section 3, the Option awarded by this Option Agreement will vest in accordance with the vesting provisions set forth in the Notice of Grant. Shares subject to this Option that are scheduled to vest on a
certain date or upon the occurrence of a certain condition will not vest in accordance with any of the provisions of this Option Agreement, unless Participant will have been continuously a Service Provider from the Date of Grant until the date such
vesting occurs. 
 3. Administrator Discretion. The Administrator, in its discretion, may accelerate the vesting of the balance, or
some lesser portion of the balance, of the unvested Option at any time, subject to the terms of the Plan. If so accelerated, such Option will be considered as having vested as of the date specified by the Administrator. 

4. Exercise of Option. 

(a) Right to Exercise. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during
such term only in accordance with the Plan and the terms of this Option Agreement. 
 (b) Method of Exercise. This Option is
exercisable by delivery of an exercise notice (the “Exercise Notice”) in the form attached as Exhibit B to the Notice of Grant or in a manner and pursuant to such procedures as the Administrator may determine, which will state the
election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company pursuant to the provisions of
the Plan. The Exercise Notice will be completed by Participant and delivered to the Company. The Exercise Notice will be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares and of any Tax Obligations (as defined in
Section 6(a)). This Option will be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price. 

5. Method of Payment. Payment of the aggregate Exercise Price will be by any of the following, or a combination thereof, at the
election of Participant: 
 (a) cash in U.S. dollars; 

 (b) check designated in U.S. dollars; 

(c) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or 

(d) if Participant is a U.S. employee, surrender of other Shares which have a Fair Market Value on the date of surrender equal to the
aggregate Exercise Price of the Exercised Shares and that are owned free and clear of any liens, claims, encumbrances, or security interests, provided that accepting such Shares, in the sole discretion of the Administrator, will not result in any
adverse accounting consequences to the Company. 
 6. Tax Obligations. 

(a) Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company or, if different,
Participant’s employer (the “Employer”) or Parent or Subsidiary to which Participant is providing services (together, the Company, Employer and/or Parent or Subsidiary to which the Participant is providing services, the “Service
Recipient”), the ultimate liability for any tax and/or social insurance liability obligations and requirements in connection with the Option, including, without limitation, (i) all federal, state, and local taxes (including the
Participant’s Federal Insurance Contributions Act (FICA) obligation) that are required to be withheld by the Company or the Service Recipient or other payment of tax-related items related to
Participant’s participation in the Plan and legally applicable to Participant, (ii) the Participant’s and, to the extent required by the Company (or Service Recipient), the Company’s (or Service Recipient’s) fringe benefit
tax liability, if any, associated with the grant, vesting, or exercise of the Option or sale of Shares, and (iii) any other Company (or Service Recipient) taxes the responsibility for which the Participant has, or has agreed to bear, with
respect to the Option (or exercise thereof or issuance of Shares thereunder) (collectively, the “Tax Obligations”), is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Service
Recipient. Participant further acknowledges that the Company and/or the Service Recipient (A) make no representations or undertakings regarding the treatment of any Tax Obligations in connection with any aspect of the Option, including, but not
limited to, the grant, vesting or exercise of the Option, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends or other distributions, and (B) do not commit to and are under no obligation to
structure the terms of the grant or any aspect of the Option to reduce or eliminate Participant’s liability for Tax Obligations or achieve any particular tax result. Further, if Participant is subject to Tax Obligations in more than one
jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the Company and/or the Service Recipient (or former employer, as applicable) may be required to
withhold or account for Tax Obligations in more than one jurisdiction. If Participant fails to make satisfactory arrangements for the payment of any required Tax Obligations hereunder at the time of the applicable taxable event, Participant
acknowledges and agrees that the Company may refuse to issue or deliver the Shares. 
 (b) Tax Withholding. When the Option is
exercised, Participant generally will recognize immediate U.S. taxable income if Participant is a U.S. taxpayer. If Participant is a non-U.S. taxpayer, Participant will be subject to applicable taxes in his or
her jurisdiction. Pursuant to such procedures as the Administrator may specify from time to time, the Company and/or Service Recipient 

  
 - 2 - 

 
shall withhold the amount required to be withheld for the payment of Tax Obligations. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to
time, may permit Participant to satisfy such Tax Obligations, in whole or in part (without limitation), if permissible by applicable local law, by (i) paying cash, (ii) electing to have the Company withhold otherwise deliverable Shares
having a fair market value equal to the minimum amount that is necessary to meet the withholding requirement for such Tax Obligations (or such greater amount as Participant may elect if permitted by the Administrator, if such greater amount would
not result in adverse financial accounting consequences), (iii) withholding the amount of such Tax Obligations from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Service Recipient,
(iv) delivering to the Company already vested and owned Shares having a fair market value equal to such Tax Obligations, or (v) selling a sufficient number of such Shares otherwise deliverable to Participant through such means as the
Company may determine in its sole discretion (whether through a broker or otherwise) equal to the minimum amount that is necessary to meet the withholding requirement for such Tax Obligations (or such greater amount as Participant may elect if
permitted by the Administrator, if such greater amount would not result in adverse financial accounting consequences). To the extent determined appropriate by the Company in its discretion, it will have the right (but not the obligation) to satisfy
any Tax Obligations by reducing the number of Shares otherwise deliverable to Participant. Further, if Participant is subject to tax in more than one jurisdiction between the Date of Grant and a date of any relevant taxable or tax withholding event,
as applicable, Participant acknowledges and agrees that the Company and/or the Service Recipient (and/or former employer, as applicable) may be required to withhold or account for tax in more than one jurisdiction. If Participant fails to make
satisfactory arrangements for the payment of any required Tax Obligations hereunder at the time of the Option exercise, Participant acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the Shares if such
amounts are not delivered at the time of exercise. 
 (c) Code Section 409A. Under Code Section 409A, a stock
right (such as the Option) that vests after December 31, 2004 (or that vested on or prior to such date but which was materially modified after October 3, 2004) that was granted with a per share exercise price that is determined by the
Internal Revenue Service (the “IRS”) to be less than the fair market value of an underlying share on the date of grant (a “discount option”) may be considered “deferred compensation.” A stock right that is a
“discount option” may result in (i) income recognition by the recipient of the stock right prior to the exercise of the stock right, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and
interest charges. The “discount option” may also result in additional state income, penalty and interest tax to the recipient of the stock right. Participant acknowledges that the Company cannot and has not guaranteed that the IRS will
agree that the per Share exercise price of this Option equals or exceeds the fair market value of a Share on the date of grant in a later examination. Participant agrees that if the IRS determines that the Option was granted with a per Share
exercise price that was less than the fair market value of a Share on the date of grant, Participant shall be solely responsible for Participant’s costs related to such a determination. 

7. Rights as Stockholder. Neither Participant nor any person claiming under or through Participant will have any of the rights or
privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares (which may be in book entry form) will have been issued, recorded on the records of the Company or its
transfer agents or registrars, and delivered to Participant (including through electronic delivery to a brokerage account). After such issuance, recordation, and delivery, Participant will have all the rights of a stockholder of the Company with
respect to voting such Shares and receipt of dividends and distributions on such Shares. 

  
 - 3 - 

 8. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER, WHICH UNLESS PROVIDED OTHERWISE UNDER APPLICABLE LAW IS AT THE WILL OF THE COMPANY (OR THE SERVICE RECIPIENT) AND NOT THROUGH THE ACT OF
BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS OPTION AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN
EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE SERVICE RECIPIENT) TO
TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER, SUBJECT TO APPLICABLE LAW, WHICH TERMINATION, UNLESS PROVIDED OTHERWISE UNDER APPLICABLE LAW, MAY BE AT ANY TIME, WITH OR WITHOUT CAUSE. 

9. Nature of Grant. In accepting the Option, Participant acknowledges, understands and agrees that: 

(a) the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of
options, or benefits in lieu of options, even if options have been granted in the past; 
 (b) all decisions with respect to future option
or other grants, if any, will be at the sole discretion of the Company; 
 (c) Participant is voluntarily participating in the Plan; 

(d) the Option and any Shares acquired under the Plan are not intended to replace any pension rights or compensation; 

(e) the Option and Shares acquired under the Plan and the income and value of same, are not part of normal or expected compensation for
purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or
welfare benefits or similar payments; 
 (f) the future value of the Shares underlying the Option is unknown, indeterminable, and cannot be
predicted with certainty; 
 (g) if the underlying Shares do not increase in value, the Option will have no value; 

(h) if Participant exercises the Option and acquires Shares, the value of such Shares may increase or decrease in value, even below the
Exercise Price; 

  
 - 4 - 

 (i) for purposes of the Option, Participant’s engagement as a Service Provider will be
considered terminated as of the date Participant is no longer actively providing services to the Company or any Parent or Subsidiary (regardless of the reason for such termination and whether or not later found to be invalid or in breach of
employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if any), and unless otherwise expressly provided in this Option Agreement (including by reference in the
Notice of Grant to other arrangements or contracts) or determined by the Administrator, (i) Participant’s right to vest in the Option under the Plan, if any, will terminate as of such date and will not be extended by any notice period
(e.g., Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is a Service Provider
or Participant’s employment or service agreement, if any, unless Participant is providing bona fide services during such time); and (ii) the period (if any) during which Participant may exercise the Option after such termination of
Participant’s engagement as a Service Provider will commence on the date Participant ceases to actively provide services and will not be extended by any notice period mandated under employment laws in the jurisdiction where Participant is
employed or terms of Participant’s engagement agreement, if any; the Administrator shall have the exclusive discretion to determine when Participant is no longer actively providing services for purposes of his or her Option grant (including
whether Participant may still be considered to be providing services while on a leave of absence and consistent with local law);  

(j) unless otherwise provided in the Plan or by the Copmpany in its discretion, the Option and the benefits evidenced by this Option Agreement
do not create any entitlement to have the Option or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; and 

(k) the following provisions apply only if Participant is providing services outside the United States: 

(i) the Option and the Shares subject to the Option are not part of normal or expected compensation or salary for any purpose; 

(ii) Participant acknowledges and agrees that no Service Recipient shall be liable for any foreign exchange rate fluctuation between
Participant’s local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Participant pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise; and 

(iii) no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from the termination of
Participant’s engagement as a Service Provider (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s
employment or service agreement, if any), and in consideration of the grant of the Option to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against any Service Recipient, waives his or her
ability, if any, to bring any such claim, and releases each Service Recipient from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant
shall be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim. 

  
 - 5 - 

 10. No Advice Regarding Grant. The Company is not providing any tax, legal or
financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. Participant is hereby advised to consult with his or her own
personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan. 

11. Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in
electronic or other form, of Participant’s personal data as described in this Option Agreement and any other Option grant materials by and among, as applicable, the Employer or other Service Recipient, the Company and any Parent or Subsidiary
for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan. 

Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not
limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Options or
any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan. 

Participant understands that Data will be transferred to a stock plan service provider as may be selected by the Company in the future,
which is assisting the Company with the implementation, administration, and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipient’s country of
operation (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and
addresses of any potential recipients of the Data by contacting his or her local People representative. Participant authorizes the Company and any other possible recipients which may assist the Company (presently or in the future) with implementing,
administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purposes of implementing, administering and managing Participant’s participation in the Plan. Participant
understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands that if he or she resides outside the United States, he or she may, at any
time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local People
representative. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her engagement as a
Service Provider and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant Options or other equity
awards or administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of
Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local People representative. 

  
 - 6 - 

 12. Address for Notices. Any notice to be given to the Company under the terms of
this Option Agreement will be addressed to the Company at Alector, Inc., 131 Oyster Point Blvd., Suite 600, South San Francisco, CA 94080, or at such other address as the Company may hereafter designate in writing. 

13. Non-Transferability of Option. This Option may not be transferred in any manner otherwise
than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant. 
 14.
Successors and Assigns. The Company may assign any of its rights under this Option Agreement to single or multiple assignees, and this Option Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Option Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns. The rights and obligations of Participant under this Option Agreement may
only be assigned with the prior written consent of the Company. 
 15. Additional Conditions to Issuance of Stock. If at any time the
Company will determine, in its discretion, that the listing, registration, qualification or rule compliance of the Shares upon any securities exchange or under any state, federal or non-U.S. law, the tax code
and related regulations or under the rulings or regulations of the United States Securities and Exchange Commission or any other governmental regulatory body or the clearance, consent or approval of the United States Securities and Exchange
Commission or any other governmental regulatory authority is necessary or desirable as a condition to the purchase by, or issuance of Shares, to Participant (or his or her estate) hereunder, such purchase or issuance will not occur unless and until
such listing, registration, qualification, rule compliance, clearance, consent or approval will have been completed, effected or obtained free of any conditions not acceptable to the Company. Subject to the terms of the Option Agreement and the
Plan, the Company shall not be required to issue any certificate or certificates for Shares hereunder prior to the lapse of such reasonable period of time following the date of exercise of the Option as the Administrator may establish from time to
time for reasons of administrative convenience. 
 16. Language. If Participant has received this Option Agreement or any other
document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control. 

17. Interpretation. The Administrator will have the power to interpret the Plan and this Option Agreement and to adopt such rules for
the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Shares subject to the Option have vested).
All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. Neither the Administrator nor any person acting on behalf
of the Administrator will be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan or this Option Agreement. 

  
 - 7 - 

 18. Electronic Delivery and Acceptance. The Company may, in its sole discretion,
decide to deliver any documents related to the Option awarded under the Plan or future options that may be awarded under the Plan by electronic means or request Participant’s consent to participate in the Plan by electronic means. Participant
hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or a third party
designated by the Company. 
 19. Captions. Captions provided herein are for convenience only and are not to serve as a basis for
interpretation or construction of this Option Agreement. 
 20. Agreement Severable. In the event that any provision in this Option
Agreement will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Option Agreement. 

21. Amendment, Suspension or Termination of the Plan. By accepting this Option, Participant expressly warrants that he or she has
received an Option under the Plan, and has received, read, and understood a description of the Plan. Participant understands that the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time. 

22. Governing Law and Venue. This Option Agreement will be governed by the laws of California, without giving effect to the conflict of
law principles thereof. For purposes of litigating any dispute that arises under this Option or this Option Agreement, the parties hereby submit to and consent to the jurisdiction of the State of California, and agree that such litigation will be
conducted in the courts of San Mateo County, California, or the United States federal courts for the Northern District of California, and no other courts, where this Option is made and/or to be performed. 

23. Country Addendum. Notwithstanding any provisions in this Option Agreement, this Option shall be subject to any special terms and
conditions set forth in an appendix (if any) to this Option Agreement for any country whose laws are applicable to Participant and this Option (as determined by the Administrator in its sole discretion) (the “Country Addendum”). Moreover,
if Participant relocates to one of the countries included in the Country Addendum (if any), the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and
conditions is necessary or advisable for legal or administrative reasons. The Country Addendum (if any) constitutes a part of this Option Agreement. 

24. Modifications to the Agreement. This Option Agreement constitutes the entire understanding of the parties on the subjects covered.
Participant expressly warrants that he or she is not accepting this Option Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Option Agreement or the Plan can be made only
in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Option Agreement, the Company reserves the right to revise this Option Agreement as it deems necessary
or advisable, in its sole discretion and without the consent of Participant, to comply with Code Section 409A or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection with
the Option. 

  
 - 8 - 

 25. No Waiver. Either party’s failure to enforce any provision or provisions of
this Option Agreement shall not in any way be construed as a waiver of any such provision or provisions, nor prevent that party from thereafter enforcing each and every other provision of this Option Agreement. The rights granted both parties herein
are cumulative and shall not constitute a waiver of either party’s right to assert all other legal remedies available to it under the circumstances. 

26. Tax Consequences. Participant has reviewed with his or her own tax advisors the U.S. federal, state, local and non-U.S. tax consequences of this investment and the transactions contemplated by this Option Agreement. With respect to such matters, Participant relies solely on such advisors and not on any statements or
representations of the Company or any of its agents, written or oral. Participant understands that Participant (and not the Company) shall be responsible for Participant’s own tax liability that may arise as a result of this investment or the
transactions contemplated by this Option Agreement. 

  
 - 9 - 

 ALECTOR, INC. 

2022 INDUCEMENT EQUITY INCENTIVE PLAN 

STOCK OPTION AGREEMENT 

COUNTRY ADDENDUM 
 TERMS AND
CONDITIONS 
 This Country Addendum includes additional terms and conditions that govern the Option granted to Participant under the Plan if
Participant works in one of the countries listed below. If Participant is a citizen or resident of a country (or is considered as such for local law purposes) other than the one in which he or she is currently working or if Participant relocates to
another country after receiving the Option, the Company will, in its discretion, determine the extent to which the terms and conditions contained herein will be applicable to Participant. 

Certain capitalized terms used but not defined in this Country Addendum shall have the meanings set forth in the Plan, and/or the Stock Option Agreement to
which this Country Addendum is attached. 
 NOTIFICATIONS 

This Country Addendum also includes notifications relating to exchange control and other issues of which Participant should be aware with respect to his or her
participation in the Plan. The information is based on the exchange control, securities and other laws in effect in the countries listed in this Country Addendum, as of
                    . Such laws are often complex and change frequently. As a result, the Company strongly recommends that Participant not
rely on the notifications herein as the only source of information relating to the consequences of his or her participation in the Plan because the information may be outdated when Participant exercises the Option or sells Shares acquired under the
Plan. 
 In addition, the notifications are general in nature and may not apply to Participant’s particular situation, and the Company is not in a
position to assure Participant of any particular result. Accordingly, Participant is advised to seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to Participant’s situation. 

Finally, if Participant is a citizen or resident of a country other than the one in which Participant is currently working (or is considered as such for local
law purposes) or if Participant moves to another country after the Option is granted, the information contained herein may not be applicable to Participant. 

 EXHIBIT B 

ALECTOR, INC. 
 2022
INDUCEMENT EQUITY INCENTIVE PLAN 
 EXERCISE NOTICE 

Alector, Inc. 
 131 Oyster Point Blvd., Suite 600 

South San Francisco, CA 94080 
 Attention: Stock Administration

 1. Exercise of Option. Effective as of today, ________________, _____, the undersigned (“Purchaser”) hereby elects to
purchase ______________ shares (the “Shares”) of the Common Stock of Alector, Inc. (the “Company”) under and pursuant to the 2022 Inducement Equity Incentive Plan (the “Plan”) and the Stock Option Agreement, dated
________ and including the Notice of Grant, the Terms and Conditions of Stock Option Grant, and exhibits attached thereto (the “Option Agreement”). The purchase price for the Shares will be $_____________, as required by the Option
Agreement. 
 2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price of the Shares and any Tax
Obligations (as defined in Section 6(a) of the Option Agreement) to be paid in connection with the exercise of the Option. 
 3.
Representations of Purchaser. Purchaser acknowledges that Purchaser has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions. 

4. Rights as Stockholder. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the Shares, no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares subject to the Option, notwithstanding the exercise of the Option. The Shares so acquired
will be issued to Purchaser as soon as practicable after exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date of issuance, except as provided in Section 13 of the Plan.

 5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s
purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company
for any tax advice. 

 6. Entire Agreement; Governing Law. The Plan and Option Agreement are incorporated
herein by reference. This Exercise Notice, the Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the
Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to the Purchaser’s interest except by means of a writing signed by the Company and Purchaser. This Option Agreement is governed by the internal
substantive laws, but not the choice of law rules, of California. 
  

			
	Submitted by:	  	Accepted by:
		
	PURCHASER	  	ALECTOR, INC.
	  
	  	  

	Signature	  	Signature
	  
	  	  

	Print Name	  	Print Name
		
	Address:	  	  

		
	  
  
	  	Title
		
	  
	  	
		  	  

		  	Date Received

  
 - 2 - 

 ALECTOR, INC. 

2022 INDUCEMENT EQUITY INCENTIVE PLAN 

RESTRICTED STOCK UNIT AGREEMENT 

NOTICE OF RESTRICTED STOCK UNIT GRANT 

Unless otherwise defined herein, the terms defined in the Alector, Inc. 2022 Inducement Equity Incentive Plan (the “Plan”)
will have the same defined meanings in this Restricted Stock Unit Agreement, which includes the Notice of Restricted Stock Unit Grant (the “Notice of Grant”), the Terms and Conditions of Restricted Stock Unit Grant attached hereto as
Exhibit A, and all other exhibits and appendices attached hereto (all together, the “Award Agreement”). 
 Participant:

 Address: 
 The
undersigned Participant has been granted the right to receive an Award of Restricted Stock Units, subject to the terms and conditions of the Plan and this Award Agreement, as follows: 

 

			
	Grant Number:	 	  

		
	Date of Grant:	 	  

		
	Vesting Commencement Date:	 	  

		
	Number of Restricted Stock Units:	 	  

		
	Vesting Schedule:	 	

 Subject to any acceleration provisions contained in the Plan or set forth below, the Restricted Stock Units
will vest in accordance with the following schedule: 
 [Twenty-five percent (25%) of the Restricted Stock Units will vest on the first
Quarterly Vesting Date (as defined below) that occurs on or following the one (1)-year anniversary of the Vesting Commencement Date, and one-sixteenth
(1/16th) of the Restricted Stock Units will vest on each Quarterly Vesting Date thereafter, in each case subject to Participant continuing to be a Service Provider through the applicable Quarterly
Vesting Date. 
 “Quarterly Vesting Date” means each of March 1, June 1, September 1, and December 1.] 

In the event Participant ceases to be a Service Provider for any or no reason before Participant vests in the Restricted Stock Units, the
Restricted Stock Units and Participant’s right to acquire any Shares hereunder will immediately terminate. 
 By Participant’s
signature and the signature of the representative of Alector, Inc. (the “Company”) below, Participant and the Company agree that this Award of Restricted Stock Units is granted under and governed by the terms and conditions of the
Plan and this Award Agreement, including the Terms and Conditions of Restricted Stock Unit Grant, attached hereto as Exhibit A, all 

 
of which are made a part of this document. Participant acknowledges receipt of a copy of the Plan. Participant has reviewed the Plan and this Award Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Award Agreement, and fully understands all provisions of the Plan and this Award Agreement. Participant hereby agrees to accept as binding, conclusive, and final all decisions or
interpretations of the Administrator upon any questions relating to the Plan and the Award Agreement. Participant further agrees to notify the Company upon any change in the residence address indicated below. 

By accepting this Award Agreement, Participant expressly consents to the sale of Shares to cover the Tax Withholding Obligations (as
defined in the Terms and Conditions of Restricted Stock Unit Grant) arising from the Restricted Stock Units and any associated broker or other fees and agrees and acknowledges that Participant may not satisfy them by any means other than such sale
of Shares, unless required to do so by the Administrator or pursuant to the Administrator’s express written consent.
  

			
	PARTICIPANT:	  	ALECTOR, INC.
	  
	  	  

	Signature	  	Signature
	  
	  	  

	Print Name	  	Print Name
		  	  

		  	Title
		
	Address:	  	

  
 - 2 - 

 EXHIBIT A 

TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT GRANT 

1. Grant of Restricted Stock Units. The Company hereby grants to the individual (the “Participant”) named in the Notice of
Grant of Restricted Stock Units of this Award Agreement (the “Notice of Grant”) under the Plan an Award of Restricted Stock Units, subject to all of the terms and conditions in this Award Agreement and the Plan, which is incorporated
herein by reference. Subject to Section 18(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Award Agreement, the terms and conditions of the Plan shall prevail. 

2. Company’s Obligation to Pay. Each Restricted Stock Unit represents the right to receive a Share on the date it vests. Unless
and until the Restricted Stock Units will have vested in the manner set forth in Section 3 or 4, Participant will have no right to payment of any such Restricted Stock Units. Prior to actual payment of any vested Restricted Stock Units, such
Restricted Stock Unit will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company. 

3. Vesting Schedule. Except as provided in Section 4, and subject to Section 5, the Restricted Stock Units awarded by this
Award Agreement will vest in accordance with the vesting schedule set forth in the Notice of Grant, subject to Participant continuing to be a Service Provider through each applicable vesting date. 

4. Payment after Vesting. 

(a) General Rule. Subject to Section 8, any Restricted Stock Units that vest will be paid to Participant (or in the event of
Participant’s death, to his or her properly designated beneficiary or estate) in whole Shares. Subject to the provisions of Section 4(b), such vested Restricted Stock Units shall be paid in whole Shares as soon as practicable after
vesting, but in each such case within sixty (60) days following the vesting date. In no event will Participant be permitted, directly or indirectly, to specify the taxable year of payment of any Restricted Stock Units payable under this Award
Agreement. 
 (b) Acceleration. 

(i) Discretionary Acceleration. The Administrator, in its discretion, may accelerate the vesting of the balance, or some lesser
portion of the balance, of the unvested Restricted Stock Units at any time, subject to the terms of the Plan. If so accelerated, such Restricted Stock Units will be considered as having vested as of the date specified by the Administrator. If
Participant is a U.S. taxpayer, the payment of Shares vesting pursuant to this Section 4(b) shall in all cases be paid at a time or in a manner that is exempt from, or complies with, Section 409A. The prior sentence may be superseded in a
future agreement or amendment to this Award Agreement only by direct and specific reference to such sentence. 
 (ii) Notwithstanding
anything in the Plan or this Award Agreement or any other agreement (whether entered into before, on or after the Date of Grant), if the vesting of the balance, or some lesser portion of the balance, of the Restricted Stock Units is accelerated in
connection with Participant’s termination as a Service Provider (provided that such termination is a 

 
“separation from service” within the meaning of Section 409A, as determined by the Company), other than due to Participant’s death, and if (x) Participant is a U.S.
taxpayer and a “specified employee” within the meaning of Section 409A at the time of such termination as a Service Provider and (y) the payment of such accelerated Restricted Stock Units will result in the imposition of
additional tax under Section 409A if paid to Participant on or within the six (6) month period following Participant’s termination as a Service Provider, then the payment of such accelerated Restricted Stock Units will not be made
until the date six (6) months and one (1) day following the date of Participant’s termination as a Service Provider, unless Participant dies following his or her termination as a Service Provider, in which case, the Restricted Stock
Units will be paid in Shares to Participant’s estate as soon as practicable following his or her death. 
 (c)
Section 409A. It is the intent of this Award Agreement that it and all payments and benefits to U.S. taxpayers hereunder be exempt from, or comply with, the requirements of Section 409A so that none of the Restricted
Stock Units provided under this Award Agreement or Shares issuable thereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to be so exempt or so comply. Each payment payable
under this Award Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). However, in no event will the Company reimburse Participant, or be
otherwise responsible for, any taxes or costs that may be imposed on Participant as a result of Section 409A. For purposes of this Award Agreement, “Section 409A” means Section 409A of the Code, and any final Treasury
Regulations and Internal Revenue Service guidance thereunder, as each may be amended from time to time. 
 5. Forfeiture Upon Termination
as a Service Provider. Notwithstanding any contrary provision of this Award Agreement, if Participant ceases to be a Service Provider for any or no reason, the then-unvested Restricted Stock Units awarded by this Award Agreement will thereupon
be forfeited at no cost to the Company and Participant will have no further rights thereunder. 
 6. Tax Consequences. Participant
has reviewed with his or her own tax advisors the U.S. federal, state, local and non-U.S. tax consequences of this investment and the transactions contemplated by this Award Agreement. With respect to such
matters, Participant relies solely on such advisors and not on any statements or representations of the Company or any of its agents, written or oral. Participant understands that Participant (and not the Company) shall be responsible for
Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Award Agreement. 

7. Death of Participant. Any distribution or delivery to be made to Participant under this Award Agreement will, if Participant is then
deceased, be made to Participant’s designated beneficiary, or if no beneficiary survives Participant, the administrator or executor of Participant’s estate. Any such transferee must furnish the Company with (a) written notice of his
or her status as transferee, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer. 

  
 -2- 

 8. Tax Obligations 

(a) Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company or, if different,
Participant’s employer (the “Employer”) or Parent or Subsidiary to which Participant is providing services (together, the Company, Employer and/or Parent or Subsidiary to which the Participant is providing services, the “Service
Recipient”), the ultimate liability for any tax and/or social insurance liability obligations and requirements in connection with the Restricted Stock Units, including, without limitation, (i) all federal, state, and local taxes (including
the Participant’s Federal Insurance Contributions Act (FICA) obligation) that are required to be withheld by the Company or the Employer or other payment of tax-related items related to Participant’s
participation in the Plan and legally applicable to Participant, (ii) the Participant’s and, to the extent required by the Company (or Service Recipient), the Company’s (or Service Recipient’s) fringe benefit tax liability, if
any, associated with the grant, vesting, or settlement of the Restricted Stock Units or sale of Shares, and (iii) any other Company (or Service Recipient) taxes the responsibility for which the Participant has, or has agreed to bear, with
respect to the Restricted Stock Units (or settlement thereof or issuance of Shares thereunder) (collectively, the “Tax Obligations”), is and remains Participant’s responsibility and may exceed the amount actually withheld by the
Company or the Service Recipient. Participant further acknowledges that the Company and/or the Service Recipient (A) make no representations or undertakings regarding the treatment of any Tax Obligations in connection with any aspect of the
Restricted Stock Units, including, but not limited to, the grant, vesting or settlement of the Restricted Stock Units, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends or other distributions, and
(B) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Restricted Stock Units to reduce or eliminate Participant’s liability for Tax Obligations or achieve any particular tax result.
Further, if Participant is subject to Tax Obligations in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the Company and/or the Service
Recipient (or former employer, as applicable) may be required to withhold or account for Tax Obligations in more than one jurisdiction. If Participant fails to make satisfactory arrangements for the payment of any required Tax Obligations hereunder
at the time of the applicable taxable event, Participant acknowledges and agrees that the Company may refuse to issue or deliver the Shares. 

(b) Tax Withholding and Default Sell-to-Cover Method of Tax
Withholding. When Shares are issued as payment for vested Restricted Stock Units, Participant generally will recognize immediate U.S. taxable income if Participant is a U.S. taxpayer. If Participant is a
non-U.S. taxpayer, Participant will be subject to applicable taxes in his or her jurisdiction. Subject to Section 8(c), the minimum amount of Tax Obligations which the Company determines must be withheld
with respect to this Award (“Tax Withholding Obligation”) will be satisfied by Shares being sold on Participant’s behalf at the prevailing market price pursuant to such procedures as the Company may specify from time to time,
including through a broker-assisted arrangement (it being understood that the Shares to be sold must have vested pursuant to the terms of this Award Agreement and the Plan) (the
“Sell-to-Cover Method”). The proceeds from the Sell-to-Cover Method will be
used to satisfy Participant’s Tax Withholding Obligation arising with respect to this Award. In addition to Shares sold to satisfy the Tax Withholding Obligation, additional Shares will be sold to satisfy any associated broker or other fees.
Only whole Shares will be sold through the Sell-to-Cover Method to satisfy any Tax Withholding Obligation and any associated broker or other fees. Any proceeds from the
sale of Shares in excess of the Tax Withholding Obligation and any associated broker or other fees generated 

  
 -3- 

 
through the Sell-to-Cover Method will be paid to Participant in accordance with procedures the Company may specify
from time to time. By accepting this Award, Participant expressly consents to the sale of Shares to cover the Tax Withholding Obligation (and any associated broker or other fees) through the Sell-to-Cover Method and agrees and acknowledges that Participant may not satisfy them by any means other than such sale of Shares, unless required to do so by the Administrator or pursuant to the
Administrator’s express written consent. 
 (c) Administrator Discretion. Notwithstanding the foregoing Sections 8(a) and
8(b), if the Administrator determines it is in the best interests of the Company for Participant to satisfy Participant’s Tax Withholding Obligation by a method other than through the default Sell-to-Cover Method described in Section 8(b), it may permit or require Participant to satisfy Participant’s Tax Withholding Obligation, in whole or in part (without limitation), if permissible by
Applicable Laws, by (i) paying cash, (ii) withholding the amount of such Tax Withholding Obligation from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Service Recipient,
(iii) delivering to the Company Shares that Participant owns and that have vested with a fair market value equal to the amount required to be withheld (or such greater amount up to the maximum statutory rate applicable to the Participant if
permitted by the Administrator and provided such greater amount would not result in adverse financial accounting consequences to the Company as determined by the Administrator), (iv) by having the Company withhold otherwise deliverable Shares having
a fair market value equal to the amount required to be withheld (or such greater amount up to the maximum statutory rate applicable to the Participant if permitted by the Administrator and provided such greater amount would not result in adverse
financial accounting consequences to the Company as determined by the Administrator) or (v) such other means as the Administrator deems appropriate. 

(d) Company’s Obligation to Deliver Shares. For clarification purposes, in no event will the Company issue Participant any Shares
unless and until arrangements satisfactory to the Administrator have been made for the payment of Participant’s Tax Withholding Obligation. If Participant fails to make satisfactory arrangements for the payment of such Tax Withholding
Obligations hereunder at the time any applicable Restricted Stock Units otherwise are scheduled to vest pursuant to Sections 3 or 4 or Participant’s Tax Withholding Obligations otherwise become due, Participant will permanently forfeit such
Restricted Stock Units to which Participant’s Tax Withholding Obligation relates and any right to receive Shares thereunder and such Restricted Stock Units will be returned to the Company at no cost to the Company. Participant acknowledges and
agrees that the Company may refuse to issue or deliver the Shares if such Tax Obligations are not delivered at the time they are due. 
 9.
Rights as Stockholder. Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until
certificates representing such Shares (which may be in book entry form) will have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant (including through electronic delivery to a
brokerage account). After such issuance, recordation, and delivery, Participant will have all the rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares. 

  
 -4- 

 10. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE
VESTING OF THE RESTRICTED STOCK UNITS PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER, WHICH UNLESS PROVIDED OTHERWISE UNDER APPLICABLE LAW IS AT THE WILL OF THE COMPANY (OR THE SERVICE RECIPIENT) AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS RESTRICTED STOCK UNIT AWARD OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AWARD AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE
COMPANY (OR THE SERVICE RECIPIENT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER, SUBJECT TO APPLICABLE LAW, WHICH TERMINATION, UNLESS PROVIDED OTHERWISE UNDER APPLICABLE LAW, MAY BE AT ANY TIME, WITH OR WITHOUT CAUSE. 

11. Grant is Not Transferable. Except to the limited extent provided in Section 7, this grant and the rights and privileges
conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of this grant, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this grant and the rights and privileges conferred hereby immediately
will become null and void. 
 12. Nature of Grant. In accepting the grant, Participant acknowledges, understands, and agrees that:

 (a) the grant of the Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive
future grants of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units have been granted in the past; 

(b) all decisions with respect to future Restricted Stock Units or other grants, if any, will be at the sole discretion of the Company; 

(c) Participant is voluntarily participating in the Plan; 

(d) the Restricted Stock Units and the Shares subject to the Restricted Stock Units are not intended to replace any pension rights or
compensation; 
 (e) the Restricted Stock Units and the Shares subject to the Restricted Stock Units, and the income and value of same, are
not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses,
long-service awards, pension or retirement or welfare benefits or similar payments; 
 (f) the future value of the underlying Shares is
unknown, indeterminable and cannot be predicted; 

  
 -5- 

 (g) for purposes of the Restricted Stock Units, Participant’s status as a Service
Provider will be considered terminated as of the date Participant is no longer actively providing services to the Company or any Parent or Subsidiary (regardless of the reason for such termination and whether or not later to be found invalid or in
breach of employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if any), and unless otherwise expressly provided in this Award Agreement (including by
reference in the Notice of Grant to other arrangements or contracts) or determined by the Administrator, Participant’s right to vest in the Restricted Stock Units under the Plan, if any, will terminate as of such date and will not be extended
by any notice period (e.g., Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is a
Service Provider or the terms of Participant’s employment or service agreement, if any, unless Participant is providing bona fide services during such time); the Administrator shall have the exclusive discretion to determine when Participant is
no longer actively providing services for purposes of the Restricted Stock Units grant (including whether Participant may still be considered to be providing services while on a leave of absence and consistent with local law); 

(h) unless otherwise provided in the Plan or by the Company in its discretion, the Restricted Stock Units and the benefits evidenced by this
Award Agreement do not create any entitlement to have the Restricted Stock Units or any such benefits transferred to, or assumed by, another company nor be exchanged, cashed out or substituted for, in connection with any corporate transaction
affecting the Shares; and 
 (i) the following provisions apply only if Participant is providing services outside the United States: 

(ii) the Restricted Stock Units and the Shares subject to the Restricted Stock Units are not part of normal or expected compensation or
salary for any purpose; 
 (iii) Participant acknowledges and agrees that none of the Company, the Employer or any Parent or Subsidiary
shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the Restricted Stock Units or of any amounts due to Participant pursuant to the settlement
of the Restricted Stock Units or the subsequent sale of any Shares acquired upon settlement; and 
 (iv) no claim or entitlement to
compensation or damages shall arise from forfeiture of the Restricted Stock Units resulting from the termination of Participant’s status as a Service Provider (for any reason whatsoever whether or not later found to be invalid or in breach of
employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if any), and in consideration of the grant of the Restricted Stock Units to which Participant is
otherwise not entitled, Participant irrevocably agrees never to institute any claim against the Company, any Parent or Subsidiary or the Service Recipient, waives his or her ability, if any, to bring any such claim, and releases the Company,
any Parent or Subsidiary and the Service Recipient from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant shall be deemed irrevocably to
have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim. 

  
 -6- 

 13. No Advice Regarding Grant. The Company is not providing any tax, legal or
financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. Participant is hereby advised to consult with his or her own
personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan. 

14. Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in
electronic or other form, of Participant’s personal data as described in this Award Agreement and any other Restricted Stock Unit grant materials by and among, as applicable, the Employer or other Service Recipient, the Company and any Parent
or Subsidiary for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan. 

Participant understands that the Company and the Service Recipient may hold certain personal information about Participant, including,
but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all
Restricted Stock Units or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.

 Participant understands that Data will be transferred to a stock plan service provider as may be selected by the Company in
the future, which is assisting the Company with the implementation, administration, and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’
country of operation (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the
names and addresses of any potential recipients of the Data by contacting his or her local People representative. Participant authorizes the Company, any stock plan service provider selected by the Company and any other possible recipients which may
assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and
managing his or her participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands if he or she resides
outside the United States, he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost,
by contacting in writing his or her local People representative. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke
his or her consent, his or her status as a Service Provider and career with the Service Recipient will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company would not be
able to grant Participant Restricted Stock Units or other equity awards or administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in
the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local People representative. 

  
 -7- 

 15. Address for Notices. Any notice to be given to the Company under the terms of
this Award Agreement will be addressed to the Company at Alector, Inc., 131 Oyster Point Blvd., Suite 600, South San Francisco, CA 94080 or at such other address as the Company may hereafter designate in writing. 

16. Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to the
Restricted Stock Units awarded under the Plan or future Restricted Stock Units that may be awarded under the Plan by electronic means or request Participant’s consent to participate in the Plan by electronic means. Participant hereby consents
to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or a third party designated by the
Company. 
 17. No Waiver. Either party’s failure to enforce any provision or provisions of this Award Agreement shall not in
any way be construed as a waiver of any such provision or provisions, nor prevent that party from thereafter enforcing each and every other provision of this Award Agreement. The rights granted both parties herein are cumulative and shall not
constitute a waiver of either party’s right to assert all other legal remedies available to it under the circumstances. 
 18.
Successors and Assigns. The Company may assign any of its rights under this Award Agreement to single or multiple assignees, and this Award Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Award Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns. The rights and obligations of Participant under this Award Agreement may only
be assigned with the prior written consent of the Company. 
 19. Additional Conditions to Issuance of Stock. If at any time the
Company will determine, in its discretion, that the listing, registration, qualification or rule compliance of the Shares upon any securities exchange or under any state, federal or non-U.S. law, the tax code
and related regulations or under the rulings or regulations of the United States Securities and Exchange Commission or any other governmental regulatory body or the clearance, consent or approval of the United States Securities and Exchange
Commission or any other governmental regulatory authority is necessary or desirable as a condition to the issuance of Shares to Participant (or his or her estate) hereunder, such issuance will not occur unless and until such listing, registration,
qualification, rule compliance, clearance, consent or approval will have been completed, effected or obtained free of any conditions not acceptable to the Company. Subject to the terms of the Award Agreement and the Plan, the Company shall not be
required to issue any certificate or certificates for Shares hereunder prior to the lapse of such reasonable period of time following the date of vesting of the Restricted Stock Units as the Administrator may establish from time to time for reasons
of administrative convenience. 
 20. Language. If Participant has received this Award Agreement or any other document related to the
Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control. 

21. Interpretation. The Administrator will have the power to interpret the Plan and this Award Agreement and to adopt such rules for
the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Restricted Stock Units have vested). All
actions taken and 

  
 -8- 

 
all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. Neither the Administrator
nor any person acting on behalf of the Administrator will be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan or this Award Agreement. 

22. Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of
this Award Agreement. 
 23. Amendment, Suspension or Termination of the Plan. By accepting this Award, Participant expressly
warrants that he or she has received an Award of Restricted Stock Units under the Plan, and has received, read, and understood a description of the Plan. Participant understands that the Plan is discretionary in nature and may be amended, suspended
or terminated by the Company at any time. 
 24. Modifications to the Award Agreement. This Award Agreement constitutes the entire
understanding of the parties on the subjects covered. Participant expressly warrants that he or she is not accepting this Award Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications
to this Award Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Award Agreement, the Company reserves the right to
revise this Award Agreement as it deems necessary or advisable, in its sole discretion and without the consent of Participant, to comply with Section 409A or to otherwise avoid imposition of any additional tax or income recognition under
Section 409A in connection with this Award of Restricted Stock Units. 
 25. Governing Law; Venue; Severability. This Award
Agreement and the Restricted Stock Units are governed by the internal substantive laws, but not the choice of law rules, of California. For purposes of litigating any dispute that arises under these Restricted Stock Units or this Award Agreement,
the parties hereby submit to and consent to the jurisdiction of the State of California, and agree that such litigation will be conducted in the courts of San Mateo County, California, or the United States federal courts for the Northern District of
California, and no other courts, where this Award Agreement is made and/or to be performed. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Award Agreement
shall continue in full force and effect. 
 26. Entire Agreement. The Plan is incorporated herein by reference. The Plan and this
Award Agreement (including the appendices and exhibits referenced herein) constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company
and Participant with respect to the subject matter hereof, and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant. 

  
 -9- 

 27. Country Addendum. Notwithstanding any provisions in this Award Agreement, the
Restricted Stock Unit grant shall be subject to any special terms and conditions set forth in an appendix (if any) to this Award Agreement for any country whose laws are applicable to Participant and this Award of Restricted Stock Units (as
determined by the Administrator in its sole discretion) (the “Country Addendum”). Moreover, if Participant relocates to one of the countries included in the Country Addendum (if any), the special terms and conditions for such country will
apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Country Addendum constitutes part of this Award Agreement. 

  
 -10- 

 ALECTOR, INC. 

2022 INDUCEMENT EQUITY INCENTIVE PLAN 

RESTRICTED STOCK UNIT AGREEMENT 

COUNTRY ADDENDUM 
 TERMS AND
CONDITIONS 
 This Country Addendum includes additional terms and conditions that govern the Award of Restricted Stock Units granted to Participant
under the Plan if Participant works in one of the countries listed below. If Participant is a citizen or resident of a country (or is considered as such for local law purposes) other than the one in which he or she is currently working or if
Participant relocates to another country after receiving the Award of Restricted Stock Units, the Company will, in its discretion, determine the extent to which the terms and conditions contained herein will be applicable to Participant. 

Certain capitalized terms used but not defined in this Country Addendum shall have the meanings set forth in the Plan, and/or the Restricted Stock Unit
Agreement to which this Country Addendum is attached. 
 NOTIFICATIONS 

This Country Addendum also includes notifications relating to exchange control and other issues of which Participant should be aware with respect to his or her
participation in the Plan. The information is based on the exchange control, securities and other laws in effect in the countries listed in this Country Addendum, as of [DATE]. Such laws are often complex and change frequently. As a result, the
Company strongly recommends that Participant not rely on the notifications herein as the only source of information relating to the consequences of his or her participation in the Plan because the information may be outdated when Participant vests
in the Restricted Stock Units and acquires Shares, or when Participant subsequently sell Shares acquired under the Plan. 
 In addition, the notifications
are general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of any particular result. Accordingly, Participant is advised to seek appropriate professional advice as
to how the relevant laws in Participant’s country may apply to Participant’s situation. 
 Finally, if Participant is a citizen or resident of a
country other than the one in which Participant is currently working (or is considered as such for local law purposes) or if Participant moves to another country after receiving the Award of Restricted Stock Units, the information contained herein
may not be applicable to Participant.ex_320765.htm

Exhibit 10.1

 

Execution Version

 

 

 

 

 

 

ASSET PURCHASE AGREEMENT

 

BY AND BETWEEN

 

LIFE FITNESS, LLC

 

AND

 

INDIAN INDUSTRIES, INC.

D/B/A ESCALADE SPORTS

 

DECEMBER 30, 2021

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

Page

 

	
			ARTICLE 1

				
			DEFINITIONS

				
			1

			
	 	 	 
	
			Section 1.1.

				
			Certain Definitions

				
			1

			
	
			Section 1.2.

				
			Certain Other Definitions

				
			9

			
	 	 	 
	
			ARTICLE 2

				
			TRANSFER OF ASSETS

				
			10

			
	 	 	 
	
			Section 2.1.

				
			Transfer of Assets by Seller

				
			10

			
	
			Section 2.2.

				
			Excluded Assets

				
			11

			
	
			Section 2.3.

				
			Assumption of Liabilities

				
			12

			
	
			Section 2.4.

				
			Excluded Liabilities

				
			13

			
	
			Section 2.5.

				
			Assignment of Contracts and Rights.

				
			14

			
	
			Section 2.6.

				
			Closing

				
			14

			
	
			Section 2.7.

				
			Closing Deliveries

				
			14

			
	
			Section 2.8.

				
			Purchase Price.

				
			17

			
	
			Section 2.9.

				
			Purchase Price Adjustment.

				
			17

			
	
			Section 2.10.

				
			Purchase Price Allocation

				
			19

			
	 	 	 
	
			ARTICLE 3

				
			REPRESENTATIONS AND WARRANTIES OF SELLER

				
			20

			
	 	 	 
	
			Section 3.1.

				
			Organization and Qualification

				
			20

			
	
			Section 3.2.

				
			Authority

				
			20

			
	
			Section 3.3.

				
			Consents and Approvals; No Violations.

				
			21

			
	
			Section 3.4.

				
			Financial Information.

				
			21

			
	
			Section 3.5.

				
			Absence of Undisclosed Liabilities

				
			22

			
	
			Section 3.6.

				
			Assets.

				
			22

			
	
			Section 3.7.

				
			Accounts Receivable; Accounts Payable.

				
			22

			
	
			Section 3.8.

				
			Absence of Certain Changes or Events

				
			23

			
	
			Section 3.9.

				
			Litigation.

				
			23

			
	
			Section 3.10.

				
			Compliance with Laws

				
			23

			
	
			Section 3.11.

				
			Compliance with Permits

				
			23

			
	
			Section 3.12.

				
			Taxes.

				
			24

			
	
			Section 3.13.

				
			Intellectual Property.

				
			24

			
	
			Section 3.14.

				
			Brokers

				
			27

			
	
			Section 3.15.

				
			Material Contracts; No Defaults.

				
			27

			
	
			Section 3.16.

				
			Real Property.

				
			28

			
	
			Section 3.17.

				
			Environmental Matters.

				
			30

			
	
			Section 3.18.

				
			Labor Matters.

				
			30

			
	
			Section 3.19.

				
			Employee Benefit Plans.

				
			32

			
	
			Section 3.20.

				
			Affiliate Transactions

				
			33

			
	
			Section 3.21.

				
			Insurance.

				
			33

			
	
			Section 3.22.

				
			Compliance with Import/Export Laws

				
			33

			
	
			Section 3.23.

				
			Material Relationships.

				
			34

			
	
			Section 3.24.

				
			Exclusivity

				
			34

			

 

-i-

 

 

TABLE OF CONTENTS

(continued)

Page

 

	
			ARTICLE 4

				
			REPRESENTATIONS AND WARRANTIES OF BUYER

				
			35

			
	 	 	 
	
			Section 4.1.

				
			Organization and Qualification

				
			35

			
	
			Section 4.2.

				
			Authority

				
			35

			
	
			Section 4.3.

				
			Consents and Approvals; No Violations.

				
			35

			
	
			Section 4.4.

				
			Financing

				
			36

			
	
			Section 4.5.

				
			Litigation

				
			36

			
	
			Section 4.6.

				
			Brokers

				
			36

			
	
			Section 4.7.

				
			Solvency

				
			36

			
	 	 	 
	
			ARTICLE 5

				
			COVENANTS

				
			36

			
	 	 	 
	
			Section 5.1.

				
			Cooperation.

				
			36

			
	
			Section 5.2.

				
			Conduct of Business

				
			37

			
	
			Section 5.3.

				
			Access to Information

				
			38

			
	
			Section 5.4.

				
			Publicity.

				
			39

			
	
			Section 5.5.

				
			Further Assurances; Additional Agreements.

				
			39

			
	
			Section 5.6.

				
			Non-Competition; Non-Solicitation; Non-Disparagement.

				
			40

			
	
			Section 5.7.

				
			Confidentiality.

				
			41

			
	
			Section 5.8.

				
			Employment Matters.

				
			42

			
	
			Section 5.9.

				
			Cessation of Operations

				
			43

			
	
			Section 5.10.

				
			Mutual Commercial Cooperation

				
			43

			
	
			Section 5.11.

				
			Wrong Pockets

				
			43

			
	 	 	 
	
			ARTICLE 6

				
			CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER

				
			44

			
	 	 	 
	
			Section 6.1.

				
			Accuracy of Representations and Warranties

				
			44

			
	
			Section 6.2.

				
			Performance of Covenants

				
			44

			
	
			Section 6.3.

				
			No Order

				
			44

			
	
			Section 6.4.

				
			Seller’s Certification

				
			44

			
	
			Section 6.5.

				
			Closing Deliveries

				
			44

			
	 	 	 
	
			ARTICLE 7

				
			CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER

				
			45

			
	 	 	 
	
			Section 7.1.

				
			Accuracy of Representations and Warranties

				
			45

			
	
			Section 7.2.

				
			Performance of Covenants

				
			45

			
	
			Section 7.3.

				
			No Order

				
			45

			
	
			Section 7.4.

				
			Buyer’s Certification

				
			45

			
	
			Section 7.5.

				
			Closing Deliveries

				
			45

			
	 	 	 
	
			ARTICLE 8

				
			TERMINATION

				
			46

			
	 	 	 
	
			Section 8.1.

				
			Termination of Agreement

				
			46

			
	
			Section 8.2.

				
			Effects of Termination.

				
			46

			

 

-ii-

 

 

TABLE OF CONTENTS

(continued)

Page

 

	
			ARTICLE 9

				
			SURVIVAL AND INDEMNIFICATION

				
			47

			
	 	 	 
	
			Section 9.1.

				
			Survival of Representations and Covenants.

				
			47

			
	
			Section 9.2.

				
			Indemnification by Seller

				
			47

			
	
			Section 9.3.

				
			Indemnification by Buyer

				
			48

			
	
			Section 9.4.

				
			Limitations.

				
			48

			
	
			Section 9.5.

				
			Express Representations

				
			49

			
	
			Section 9.6.

				
			Indemnification Claim Procedure.

				
			50

			
	
			Section 9.7.

				
			Exclusive Remedy

				
			52

			
	
			Section 9.8.

				
			Manner of Payment

				
			52

			
	
			Section 9.9.

				
			Characterization of Indemnity Payments

				
			53

			
	
			Section 9.10.

				
			No Duplication

				
			53

			
	 	 	 
	
			ARTICLE 10

				
			TAX MATTERS

				
			53

			
	 	 	 
	
			Section 10.1.

				
			Transfer Taxes

				
			53

			
	
			Section 10.2.

				
			Cooperation

				
			53

			
	
			Section 10.3.

				
			Bulk Sales Laws

				
			54

			
	
			Section 10.4.

				
			Tax Refunds and Credits

				
			54

			
	
			Section 10.5.

				
			Nondisclosure

				
			54

			
	
			Section 10.6.

				
			Hired Employees

				
			54

			
	 	 	 
	
			ARTICLE 11

				
			MISCELLANEOUS

				
			54

			
	 	 	 
	
			Section 11.1.

				
			Amendment and Waiver

				
			54

			
	
			Section 11.2.

				
			Entire Agreement; Third Party Beneficiaries

				
			55

			
	
			Section 11.3.

				
			Assignment; Binding Effect; No Third-Party Rights

				
			55

			
	
			Section 11.4.

				
			Specific Performance and Other Remedies

				
			55

			
	
			Section 11.5.

				
			Severability

				
			55

			
	
			Section 11.6.

				
			Notices

				
			56

			
	
			Section 11.7.

				
			Governing Law

				
			57

			
	
			Section 11.8.

				
			Submission to Jurisdiction

				
			57

			
	
			Section 11.9.

				
			Construction

				
			58

			
	
			Section 11.10.

				
			Expenses

				
			59

			
	
			Section 11.11.

				
			Counterparts

				
			59

			
	
			Section 11.12.

				
			Waiver of Jury Trial

				
			59

			

 

-iii-

 

 

TABLE OF CONTENTS

(continued)

Page

 

	
			Exhibits

			
	
			Schedule A

				
			–

				
			Business Employee List

			
	
			Exhibit A

				
			–

				
			Form of Bill of Sale

			
	
			Exhibit B

				
			–

				
			Form of Assignment and Assumption Agreement

			
	
			Exhibit C

				
			–

				
			Form of IP Assignment Agreement

			
	
			Exhibit D

				
			–

				
			Preliminary Working Capital Statement and Illustrative NWC Calculation

			
	
			Exhibit E

				
			–

				
			Transition Services Agreement

			
	
			Exhibit F

				
			–

				
			Real Estate Purchase and Sale Agreement

			
	
			Exhibit G

				
			–

				
			Escrow Agreement

			
	
			Exhibit H

				
			–

				
			Signing Press Release

			

 

-iv-

 

 

ASSET PURCHASE AGREEMENT

 

This ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of December 30, 2021, is made and entered into by and between Life Fitness, LLC, a Delaware limited liability company (“Seller”), and Indian Industries, Inc. d/b/a Escalade Sports, an Indiana corporation (“Buyer”).

 

RECITALS

 

WHEREAS, Seller is engaged in the business of developing, designing, manufacturing, marketing, distributing and selling billiard tables, table tennis games, shuffleboard tables, foosball tables, air hockey tables, and putting greens, including related furniture and accessories (the “Business”);

 

WHEREAS, Seller desires to sell, or cause to be sold, to Buyer, and Buyer desires to purchase from Seller, all of Seller’s right, title and interest in and to the Transferred Assets (as hereinafter defined), and Buyer desires to assume from Seller, all of the Assumed Liabilities (as hereinafter defined), all upon the terms and subject to the conditions set forth herein; and

 

WHEREAS, each of Seller and Buyer desire to make certain representations, warranties, covenants and agreements in connection with the transactions contemplated by this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements set forth herein, Seller and Buyer, intending to be legally bound, hereby agree as follows:

 

ARTICLE 1

DEFINITIONS

 

Section 1.1.    Certain Definitions. As used in this Agreement, the following terms have the following meanings:

 

“Adjusted Purchase Price” means the Purchase Price as finally determined pursuant to Section 2.9.

 

“Affiliate” means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the first-mentioned Person. For purposes of this definition, “control” (including the terms “controls,” “controlled by” and “under common control with”), when used with respect to any specified Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise.

 

“Ancillary Agreements” means the Bill of Sale, the Assignment and Assumption Agreement, the IP Assignment Agreement, the Escrow Agreement, the Transition Services Agreement, the Real Estate Purchase and Sale Agreement, together with duly executed agreements, assignments, certificates and other instruments required in order to effectuate the transactions contemplated by this Agreement.

 

 

 

 

 

“Available Cash” means all cash and cash equivalents of Seller, including, without limitation, all marketable securities, short-term investments and checks received by any such Person but not yet deposited at the Effective Time.

 

“Base Cash Consideration” means Thirty-Two Million Dollars and 00/100 ($32,000,000.00).

 

“Books and Records” means books and records that are Related to the Business, including such books of account, ledgers and general, financial and accounting records, Assigned Contracts, customer lists, customer purchasing histories, price lists, quality control records and procedures, research and development files, sales material and records, material and research as are Related to the Business; provided that, “Books and Records” shall not include, for the avoidance of doubt, any income Tax Returns or filings of Seller.

 

“Bristol Facility” means the real property located in Bristol, County of Kenosha, State of Wisconsin located at 8663 196th Avenue, more particularly described in the Real Estate Purchase and Sale Agreement, containing approximately 7.34 acres, together with all improvements thereon (including an approximately 121,050 square foot building) and appurtenances thereto.

 

“Business Consultant” means each individual retained by Seller or any Affiliate of Seller as an independent contractor or consultant to the Business as of the date of this Agreement.

 

“Business Data” means the data and personal information accessed, processed, collected, stored or disseminated by Seller that is Related to the Business, including such underlying Personally Identifiable Information.

 

“Business Day” means any day other than Saturday, Sunday or any other day on which commercial banks in Chicago, Illinois are required or permitted to be closed.

 

“Business Employee” means each individual employed by Seller or any Affiliate of Seller as of the date of this Agreement and listed on Schedule A attached hereto.

 

“Buyer Indemnitees” means Buyer, its Affiliates and their respective successors and assigns.

 

“Buyer Specified Representations” means the representations and warranties of Buyer set forth in Section 4.1 (Organization and Qualification), Section 4.2 (Authority) and Section 4.6 (Brokers) of this Agreement.

 

“Closing Net Working Capital” means the Net Working Capital as of the Closing as finally determined for purposes of determining the Final Purchase Price pursuant to Section 2.9.

 

2

 

 

“Closing Purchase Price” means the Purchase Price, calculated in accordance with Section 2.8(a), using Seller’s good faith estimates of (a) the Closing Net Working Capital (such estimate, the “Estimated Closing Net Working Capital”), (b) the Indebtedness of the Business as of Closing and (c) Transaction Expense as of Closing, each as set forth in the Estimated Closing Statement (as such estimate may be adjusted by mutual agreement of the parties hereto).

 

“COBRA” means, collectively, Section 4980B of the Code and Sections 601 through 608 of ERISA.

 

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

 

“Confidentiality Agreement” means the confidentiality agreement dated as of November 21, 2019, by and between Seller and Buyer, as amended.

 

“Consent” means any approval, consent, ratification, permission, waiver, Order, Permit or authorization.

 

“Contract” means any contract, lease, license, deed, mortgage, indenture, sales order, accepted purchase order, note or other legally binding agreement.

 

“Current Assets” means the current assets of the Business as of the date of determination (other than cash), consisting of the line items set forth in the Preliminary Working Capital Statement, determined in accordance with the methodologies, practices, estimation techniques, assumptions and principles used in the preparation of the Preliminary Working Capital Statement.

 

“Current Liabilities” means the current liabilities of the Business as of the date of determination, consisting of the line items set forth in the Preliminary Working Capital Statement, including accounts payable and accrued liabilities, determined in accordance with the methodologies, practices, estimation techniques, assumptions and principles used in the preparation of the Preliminary Working Capital Statement.

 

“Damages” of a Person means the losses, damages, injuries, liabilities, awards, costs and expenses (including reasonable attorneys’ fees) actually suffered or incurred by such Person but, in each case, excluding any (a) punitive, special, consequential, exemplary or incidental damages except to the extent any such damages are actually awarded as a result of a Third-Party Claim or (b) diminution of value, lost opportunity or lost profits.

 

“Domain Name Registrar” means any entity that manages, registers or performs similar or related functions related to the use, reservation or ownership of domain names.

 

“Effective Time” means 12:01 a.m. Central time on the Closing Date.

 

“Employee Plan” means each: (a) “employee welfare benefit plan” as defined in Section 3(1) of ERISA; (b) “employee pension benefit plan” as defined in Section 3(2) of ERISA; (c) “employee benefit plan,” as defined in Section 3(3) of ERISA; and (d) all other pension, retirement, supplemental retirement, deferred compensation, excess benefit, profit sharing, bonus, incentive, stock purchase, stock ownership, stock option, stock appreciation right, phantom equity or other equity-based compensation, employment, severance, salary continuation, termination, change-of-control, health, life, disability, group insurance, vacation, holiday and fringe benefit plan, program, contract, or arrangement, in each case maintained, contributed to, or required to be contributed to, by Seller for the benefit of any Business Employee.

 

3

 

 

“Environment” means the indoor and outdoor natural environment and all media, including ambient air, surface water, groundwater, land surface or subsurface strata, and natural resources.

 

“Environmental Law” means any Law or other legal requirement pertaining to pollution, protection of health, safety or the Environment, or exposure of Persons to Hazardous Materials as enacted prior to the Closing Date.

 

“Environmental Permit” means any Permit required, issued, held or obtained pursuant to any Environmental Law or pertaining to any Hazardous Material.

 

“Environmental Release” means any spilling, leaking, pumping, emitting, emptying, discharging, injecting, escaping, leaching, migrating, dumping, or disposing of Hazardous Materials into the Environment.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” means any corporation or trade or business (whether or not incorporated) which is treated with Seller as a single employer within the meaning of Section 414 of the Code.

 

“Escrow Account” means the account into which the Escrow Amount is to be deposited with the Escrow Agent at the Closing pursuant to the Escrow Agreement.

 

“Escrow Agent” means Citibank, N.A.

 

“Escrow Amount” means Two Million Dollars and 00/100 ($2,000,000.00).

 

“Excluded Business” means any business of Seller or its Affiliates that is not Related to the Business or does not use the Transferred Assets for its operation.

 

“Foreign Export and Import Laws” means the laws and regulations of a foreign government regulating exports, imports or re-exports to or from the foreign country, including the export or re-export of any goods, services or technical data.

 

“GAAP” means generally accepted accounting principles in the United States as in effect from time to time, as consistently applied by Seller.

 

“Governmental Entity” means any federal, provincial, state, municipal, local or foreign court or tribunal, administrative or regulatory body, agency or commission, or any other governmental authority or instrumentality.

 

“Hazardous Material” means any substance, material, chemical, odor, heat, sound, vibration, radiation, or waste, or any combination of any of them that is regulated or defined by, or with respect to which Liability or standards of conduct are imposed under, any Environmental Law.

 

4

 

 

“Hired Employee” means any Business Employee that becomes an employee of Buyer or an Affiliate of Buyer as of the Closing Date.

 

“Indebtedness” of a Person means, without duplication (with respect to the Business, solely and exclusively with respect to the Business itself and not to the Seller as a whole): (a)  obligations for the repayment of money borrowed (together with all interest, charges and fees), evidenced by notes, bonds, debentures, credit facility or similar debt instruments, under conditional sale or other title retention agreements relating to tangible or intangible property purchased by such Person, under any letter of credit or similar facilities, under any capital lease obligations of such Person, or under interest rate cap, swap, collar or similar transaction or currency hedging transactions, and (b) any guarantees of such Person of any Indebtedness or obligations referred to in clauses (a) of any other Person; provided, however, that notwithstanding the foregoing, “Indebtedness” shall be deemed not to include any Assumed Liabilities under Section 2.3(a) or Current Liabilities accounted for under Section 2.9 or any indebtedness or Liabilities that Buyer causes the Business to incur at the Closing.

 

“Intellectual Property” means any and all of the following in any jurisdiction throughout the world: (a) patents and patent applications, including reissues, divisions, continuations, continuations-in-part, extensions, and reexaminations thereof; (b) works of authorship and copyrights, and registrations and applications for registration thereof; (c) trademarks, service marks, trade dress, logos, trade names and other source identifiers, and registrations and applications for registration thereof; (d) trade secrets, business, technical and know-how information, including formulations, inventions, whether patentable or unpatentable, and confidential information; (e) computer software and firmware, including source code, object code, files, documentation and other materials related thereto excluding all commercially available off-the-shelf software and programs; (f) proprietary databases and data compilations; (g) domain names and registrations and applications for registration thereof; and (h) copies and tangible embodiments of all of the foregoing, in whatever form or medium.

 

“Knowledge of Seller” or “Seller’s Knowledge” or any other similar knowledge qualification, means the actual knowledge after reasonable investigation by John Kazik, Brent Nichols and Roger Blank.

 

“Law” means an applicable law, statute, code, ordinance, rule, regulation, Order or charge of any Governmental Entity.

 

“Liabilities” means all obligations, Damages and liabilities.

 

“Licensed Intellectual Property” means the Intellectual Property licensed by the Seller that is Related to the Business.

 

“Lien” means a lien, pledge, mortgage, deed of trust, encumbrance, charge, claim or security interest, hypothecation, right of way, encroachment, easement, servitude, restriction on transfer, restriction on voting, preferential arrangement or preemptive right, right of first refusal or similar restriction.

 

5

 

 

“Material Adverse Effect” means any change, effect, event, occurrence, development, matter, state of facts, series of events, or circumstance that, individually or in the aggregate, has, or would reasonably be expected to have or result in a material adverse effect on the assets, properties, liabilities, business, condition (financial or otherwise), operations, results of operations or cash flows of the Business, taken as a whole, or the ability of the Seller or Buyer to consummate the transactions contemplated by this Agreement; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic, governmental, health or political conditions, or capital, credit, securities or financial markets generally including (A) changes in interest or exchange rates and (B) any suspension of trading in securities (provided that such adverse effect does not affect the Business in a disproportionate manner as compared to other businesses being operated in the same industry in which the Business is being operated); (ii) conditions generally affecting the economy or the industry in which the Business operates (including the effects of COVID-19 or other epidemics or pandemics); (iii) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (iv) any action or inaction required or permitted by this Agreement and any adverse effect proximately caused thereby; (v) any changes in applicable Laws, Orders or accounting rules, including GAAP; (vi) any failure by the Business to meet internal or published projections, forecasts or revenue or earnings predictions; provided, that the underlying cause of any such failure may be taken into consideration in making such determination; or (vii) the announcement, pendency or completion of the transactions contemplated by this Agreement, and any related losses or threatened losses of employees, customers, suppliers, distributors or others having relationships with the Seller and the Business.

 

“Net Working Capital” means an amount (which may be a negative or positive number) in U.S. dollars equal to (a) the Current Assets minus (b) the Current Liabilities and which will be prepared consistent with calculation set forth in the Preliminary Working Capital Statement.

 

“Order” means any order, writ, injunction, declaration, stipulation, judgment, ruling, assessment, arbitration award, plan or decree.

 

“Ordinary Course of Business” means the ordinary course of business of Seller with respect to the Business, consistent with past custom and practice, taken as a whole.

 

“Owned Intellectual Property” means the Intellectual Property in which Seller has an ownership interest of any nature (whether exclusively, jointly with another Person or otherwise) that is Related to the Business.

 

“Permits” means all authorizations, licenses, variances, exemptions, orders, permits and approvals granted by or obtained from any Governmental Entity.

 

“Permitted Exceptions” shall have the meaning assigned to such terms in the Real Estate Purchase and Sale Agreement attached as Exhibit F.

 

“Permitted Liens” means: (a) Liens of carriers, warehousemen, mechanics, materialmen, and similar Liens arising or incurred in the Ordinary Course of Business and related to amounts that are not yet due and payable; (b) Liens for Taxes or other governmental charges not yet due and payable; (c) pledges or deposits made in the Ordinary Course of Business to secure obligations under workers’ compensation, unemployment insurance, social security or similar programs mandated by applicable legislation; (d)  the rights and interests of any landlords under any Real Property Lease; and with respect to the Leased Real Property, mortgages or deeds of trust incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner of the Leased Real Property; (e) with respect to the Owned Real Properties, the Permitted Exceptions; and (f) any restriction on transfer arising under applicable securities Laws.

 

6

 

 

“Person” shall be construed as broadly as possible and shall include an individual or natural person, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization, any other business entity and any Governmental Entity.

 

“Personal Property Lease” means any Contract for Tangible Personal Property leased, subleased, licensed or otherwise conveyed to or by Seller.

 

“Personally Identifiable Information” means any specific and unique information relating to an identified or identifiable natural person.

 

“Preliminary Working Capital Statement” means the calculation of Net Working Capital attached hereto as Exhibit D, including the illustrative calculation of Net Working Capital as of October 31, 2021 included therein (the “Illustrative NWC Calculation”).

 

“Proceeding” means any action, charge, claim, complaint, demand, grievance, arbitration, audit, assessment, hearing, investigation, inquiry, legal proceeding, administrative enforcement proceeding, litigation, suit or other proceeding commenced or brought by any Person, or conducted or heard by or before, or otherwise involving, any court or other Governmental Entity.

 

“Purchase Price Decrease” means the amount, if any, by which the Closing Purchase Price exceeds the Adjusted Purchase Price.

 

“Purchase Price Increase” means the amount, if any, by which the Adjusted Purchase Price exceeds the Closing Purchase Price.

 

“Real Property” means, collectively, the Owned Real Properties and the Leased Real Property.

 

“Registered Intellectual Property” means all Intellectual Property that is registered, filed or issued under the authority of, with or by any Governmental Entity or Domain Name Registrar.

 

“Related to the Business” or “Relating to the Business” means the assets and rights of the Seller as of Closing reasonably necessary to permit Buyer to continue the day-to-day operations of the Business from and after the Closing in substantially the same fashion as the Business was conducted by the Seller in the Ordinary Course of Business during the period from January 1, 2021 though the Closing; provided the foregoing shall not include the services under the Transition Services Agreement or the Excluded Assets.

 

“Representatives” means, when used with respect to any Person, such Person’s officers, directors, managers, employees, agents, advisors and other representatives (including any investment banker, financial advisor, attorney or accountant retained by or on behalf of such Person or any of the foregoing in connection with the transactions contemplated by this Agreement).

 

7

 

 

“Seller Indemnitees” means Seller and its Affiliates and its and their respective equity holders, Representatives, successors and assigns.

 

“Seller Environmental Representations” means the representations and warranties of Seller set forth in Section 3.17 (Environmental Matters) of this Agreement.

 

“Seller Specified Representations” means the representations and warranties of Seller set forth in Section 3.1 (Organization and Qualification), Section 3.2 (Authority), Section 3.3(b)(i), (ii) and (iv) (Consents and Approvals; No Violations), and Section 3.6(b) (Assets) of this Agreement.

 

“Tangible Personal Property” means the tangible machinery, fixtures, equipment, tools, spare parts, furniture, office equipment, hardware, supplies, materials, vehicles and other items of tangible personal property that are Related to the Business.

 

“Target Net Working Capital” means $5,808,000.

 

“Tax Return” means any report, return, information return, form, declaration or other document or information filed or required to be filed with any Taxing Authority in connection with Taxes (including any attachment thereto or amendment thereof).

 

“Taxes” means: (a) any and all taxes, charges, fees, assessments, levies, unclaimed property and escheat obligations or other assessments, including all net income, gross income, gross receipts, premium, sales, use, ad valorem, goods and services, net receipts, harmonized sales, value added, transfer, documentary, franchise, profits, license, withholding, payroll, employment, health, social security, excise, estimated, severance, stamp, occupation, property or other taxes, of any kind whatsoever, whether computed on a separate or consolidated, unitary or combined basis, or in any other manner; and (b) any interest, fine, assessment, penalty (including penalties for failure to file in accordance with applicable information reporting requirements), or addition to the amounts set forth in clause (a) assessed or levied by any authority, whether federal, provincial, state, local, domestic or foreign (whether disputed or not).

 

“Taxing Authority” means, with respect to any Tax, the Governmental Entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision, including any Governmental Entity that imposes, or is charged with collecting, social security or similar charges or premiums.

 

“TLA” means the Trademark License Agreement dated June 27, 2019, by and between Brunswick Corporation and Lumos International Holdings, B.V. (“Lumos”).

 

“Transaction Expenses” means the fees, costs, expenses and other similar obligations of Seller that have not been paid in full prior to the Closing, in each case in connection with the preparation, negotiation, execution or performance of this Agreement, the Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby, including: (a) the fees and disbursements of, or other similar amounts charged by, counsel retained by Seller; (b) the fees and expenses of, or other similar amounts charged by, any accountants, agents, financial advisors, consultants and experts retained by Seller; (c) any investment banking, brokerage or finder’s fees and related expenses of Seller; (d) the other out-of-pocket expenses, if any, of Seller and (e) fifty percent (50%) of the costs of the Escrow Account.

 

8

 

 

“Undeveloped Property” means the undeveloped real property located on the Bristol Facility, together with all appurtenances and improvements thereto.

 

“U.S. Export and Import Laws” means the Arms Export Control Act (22 U.S.C. 2778), the International Traffic in Arms Regulations (ITAR) (22 CFR 120-130), the Export Administration Act of 1979, as amended (50 U.S.C. 2401-2420), the Export Administration Regulations (EAR) (15 CFR 730-774), the Foreign Assets Control Regulations (31 CFR Parts 500-598), the laws and regulations administered by Customs and Border Protection (19 CFR Parts 1-199) and all other U.S. laws and regulations regulating exports, imports or re-exports to or from the United States, including the export or re-export of goods, services or technical data from the United States of America.

 

“WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988, as amended, or any similar state or local plant closing or mass layoff Law.

 

Section 1.2.    Certain Other Definitions. The following terms are defined in the respective Sections of this Agreement indicated:

 

	
			Accounting Firm

				
			Section 2.9(c)(ii)

			
	
			Accounts Receivable

				
			Section 2.1(b)

			
	
			Affiliate Agreements

				
			Section 3.20

			
	
			Agreement

				
			Preamble

			
	
			Assignment and Assumption Agreement

				
			Section 2.7(a)(ii)

			
	
			Assigned Contracts

				
			Section 2.1(a)

			
	
			Assumed Liabilities

				
			Section 2.3

			
	
			Bill of Sale

				
			Section 2.7(a)(i)

			
	
			Business

				
			Recitals

			
	
			Buyer

				
			Preamble

			
	
			Buyer Confidential Information

				
			Section 5.7(a)

			
	
			Buyer Employee Benefit Plan

				
			Section 5.8(b)

			
	
			Closing

				
			Section 2.6

			
	
			Closing Date

				
			Section 2.6

			
	
			Competing Business

				
			Section 5.5(a)

			
	
			Deductible

				
			Section 9.4(a)(i)

			
	
			Direct Claim

				
			Section 9.6(c)

			
	
			Disclosure Schedule

				
			Article 3

			
	
			Election to Defend

				
			Section 9.6(a)

			
	
			Escrow Agreement

				
			Section 2.7(a)(xi)

			
	
			Estimated Closing Statement

				
			Section 2.9(a)

			
	
			Excluded Assets

				
			Section 2.2

			
	
			Excluded Liabilities

				
			Section 2.4

			

 

9

 

 

	
			Final Determination

				
			Section 9.8(a)

			
	
			Final Purchase Price

				
			Section 2.9(c)(ii)

			
	
			Financial Statements

				
			Section 3.4(a)

			
	
			General Survival Date

				
			Section 9.1(a)

			
	
			Illustrative NWC Calculation

				
			Section 1.1

			
	
			Indemnified Party

				
			Section 9.6(a)

			
	
			Indemnitor

				
			Section 9.6(a)

			
	
			Insurance Policies

				
			Section 3.21(a)

			
	
			International Trade Laws and Regulations

				
			Section 3.22

			
	
			IP Assignment Agreement

				
			Section 2.7(a)(iii)

			
	
			Leased Real Property

				
			Section 3.16(b)

			
	
			Material Contract

				
			Section 3.15(a)

			
	
			Material Customer

				
			Section 3.23(a)

			
	
			Material Provider

				
			Section 3.23(b)

			
	
			Objection Notice

				
			Section 2.9(c)(i)

			
	
			Owned Real Properties

				
			Section 3.16(a)

			
	
			Purchase Price

				
			Section 2.8(a)

			
	
			Purchased Inventory

				
			Section 2.1(g)

			
	
			Real Property Lease

				
			Section 3.16(b)

			
	
			Response Period

				
			Section 2.9(c)(i)

			
	
			Seller

				
			Preamble

			
	
			Seller Confidential Information

				
			Section 5.7(a)

			
	
			Standard Form IP Agreement

				
			Section 3.13(b)

			
	
			Third-Party Claim

				
			Section 9.6(a)

			
	
			Third-Party Claim Notice

				
			Section 9.6(a)

			
	
			Title Materials

				
			Section 3.16(a)

			
	
			Trade Authorizations

				
			Section 3.22(a)

			
	
			Transfer Taxes

				
			Section 10.1

			
	
			Transferred Assets

				
			Section 2.1

			
	
			Transition Services Agreement

				
			Section 2.7(a)(iv)

			
	
			Welfare Benefits

				
			Section 5.8(d)

			
	
			Closing Statement

				
			Section 2.9(b)

			

 

ARTICLE 2

TRANSFER OF ASSETS

 

Section 2.1.    Transfer of Assets by Seller. Upon the terms and subject to the conditions of this Agreement and in reliance upon the representations, warranties, covenants and agreements herein set forth, at the Closing, Buyer shall purchase from Seller, and Seller shall sell, assign, transfer, convey and deliver to Buyer, free and clear of all Liens (other than Permitted Liens), all of Seller’s right, title and interest in, to and under all of the properties, rights and assets, which, collectively, constitute all properties, assets and rights Related to the Business (collectively, the “Transferred Assets”), including the following:

 

(a)    the Contracts of Seller that are listed on Schedule 2.1(a)of the Disclosure Schedule and, in addition, all purchase orders of the Business entered in the Ordinary Course of Business and outstanding as of the time of Closing (the “Assigned Contracts”);

 

10

 

 

(b)    all Tangible Personal Property that is Related to the Business as of the Closing Date, including the items which are listed on Schedule 2.1(b) of the Disclosure Schedule;

 

(c)    all of the Intangible Property that is Related to the Business, whether owned or licensed to the Seller, including: (i) all Owned Intellectual Property listed on Schedule 2.1(c) of the Disclosure Schedule, (ii) all of Seller’s rights under all Contracts relating to the Licensed Intellectual Property listed on Schedule 2.1(c)(i) of the Disclosure Schedule, (iii) the Intellectual Property subject to Section 5.5(c) and (iv) all goodwill of or pertaining to the Business and/or the Transferred Assets;

 

(d)    to the extent their transfer is permitted by Law, all Permits, including Environmental Permits, that are Related to the Business, including those which are listed on Schedule 2.1(d) of the Disclosure Schedule;

 

(e)    all Real Property;

 

(f)    to the extent included in the calculation of Final Purchase Price, all accounts receivable, notes receivable and other receivables that are Related to the Business (the “Accounts Receivable”);

 

(g)    to the extent included in the calculation of Final Purchase Price, all raw materials, supplies, work in process and finished goods that are Related to the Business (the “Purchased Inventory”);

 

(h)    all Seller telephone numbers, websites, UPCs, SKUs, URLs and e-mail addresses (other than Seller domain email addresses) whether owned or licensed to the Seller that is Related to the Business, including those that are listed on Schedule 2.1(h) of the Disclosure Schedule;

 

(i)    to the extent included in the calculation of Final Purchase Price, the deposits, prepaid expenses, advance payments and charges paid by Seller or any of its Affiliates prior to the Closing Date to the extent Related to the Business and as set forth on Schedule 2.1(i); and

 

(j)    the Books and Records Related to the Business that are in the possession, custody or control of Seller or any Affiliate of Seller.

 

Section 2.2.    Excluded Assets. Notwithstanding anything herein to the contrary, Seller will retain and will not transfer, convey, assign or deliver to Buyer, and Buyer will not acquire any right, title or interest in the Excluded Business, including any of the following (collectively, the “Excluded Assets”):

 

(a)    all Available Cash and all bank accounts of Seller or any of its subsidiaries or Affiliates;

 

11

 

 

(b)    all Contracts that are not Assigned Contracts;

 

(c)    all Employee Plans and assets attributable thereto;

 

(d)    Seller’s organizational and governing documents, minute books, transfer books, and other documents relating solely to the organization, maintenance and existence of Seller as a limited liability company, and other documents related solely to any Excluded Assets or Excluded Liabilities;

 

(e)    except with respect to amounts included as a Current Asset in the determination Final Purchase Price, all of Seller’s (or any Affiliate’s) rights to any Tax refunds or Tax credits (including net operating loss carryforwards or other Tax assets (whether current or deferred)), including interest on any of the foregoing;

 

(f)    subject to Buyer’s rights under this Agreement to be named and treated as an additional insured under the Insurance Policies, any insurance policies relating to the operation of the Business by Seller (including the Insurance Policies);

 

(g)    any rights (including indemnification and warranties) and claims and recoveries under any Proceeding of Seller against third parties pending as of the Closing Date or otherwise to the extent relating to any one or more (i) Excluded Assets or (ii) Excluded Liabilities;

 

(h)    copies of any Books and Records that Seller is required by Law to retain in its possession (with copies of any such records being provided to Buyer at Closing);

 

(i)    the Tax Returns of Seller (and its Affiliates), and any supporting workpapers;

 

(j)    the consideration to be received by Seller, and Seller’s other rights, under this Agreement and the Ancillary Agreements;

 

(k)    other assets which are not Related to the Business; and

 

(l)    those assets listed in Schedule 2.2(l)of the Disclosure Schedule used by the Business.

 

Section 2.3.    Assumption of Liabilities. From and after the Closing Date, Buyer hereby assumes and agrees to fully pay, discharge, satisfy and perform the following Liabilities (collectively, the “Assumed Liabilities”):

 

(a)    to the extent included in the calculation of Final Purchase Price, all Current Liabilities, including all accounts payable, accrued liabilities and any other Current Liabilities set forth in Closing Net Working Capital;

 

(b)    all Liabilities arising after the Closing under the Assigned Contracts, other than Liabilities resulting from or relating to a breach by Seller with respect to such Assigned Contracts;

 

12

 

 

(c)    Liabilities for warranty claims associated with products sold by the Business before the Closing Date to the extent of the dollar amount of the accrued product warranty reserve included in the Closing Net Working Capital (but excluding, for the avoidance of doubt, any product liability claims);

 

(d)    all Liabilities Relating to the Business or the Transferred Assets, but only to the extent arising out of the Ordinary Course of Business and are the result of events occurring after the Closing; and

 

(e)    all Liabilities relating to (i) the portion of any Transfer Taxes for which Buyer is liable under Section 10.1 hereof, and (ii) Taxes with respect to the Business or the Transferred Assets attributable to a taxable period (or portion thereof) beginning after the Closing Date.

 

Notwithstanding the foregoing, or anything in this Agreement to the contrary, that the term “Assumed Liabilities” shall not waive Damages resulting from a breach of a (i) representation or warranty set forth in Article 3 or (ii) post-Closing covenant herein of Seller.

 

Section 2.4.    Excluded Liabilities. Notwithstanding the provisions of Section 2.3, Buyer does not agree to assume, perform or discharge, indemnify Seller against, or otherwise have any responsibility for, any Liabilities of Seller other than the Assumed Liabilities, whether arising prior to, on or after the Closing (which Liabilities shall be collectively referred to herein as the “Excluded Liabilities”). Without limiting the generality of the foregoing, Excluded Liabilities shall include:

 

(a)    any Liability relating to or arising out of any Excluded Asset;

 

(b)    unless constituting an Assumed Liability, any Liabilities related to, based upon, or in connection with any current or former officers, directors, employees, consultants or independent contractors of Seller or any Affiliate of Seller;

 

(c)    any Employee Plan and any Liability arising under or resulting from any Employee Plan;

 

(d)    any Indebtedness of Seller or any Affiliate of Seller;

 

(e)    except as provided for in Section 2.3 or Section 10.1 hereof, any Liability for: (i) Taxes of Seller, (ii) Taxes of any Affiliate of Seller; and (iii) Taxes with respect to the Business or the Transferred Assets attributable to a taxable period (or portion thereof) ending on or prior to the Closing Date (including Taxes attributable to Seller pursuant to Exhibit F);

 

(f)    Any Liability of Lumos relating to or arising out of the TLA (Seller makes this representation with respect to the TLA on behalf of Lumos); and

 

(g)    any Transaction Expenses.

 

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Section 2.5.    Assignment of Contracts and Rights.

 

(a)    Nothing in this Agreement shall be construed as an attempt to assign any Contract or Permit constituting a Transferred Asset that by Law is nonassignable, or that by its terms is nonassignable without the Consent of the other party or parties thereto to if such party or parties assert or has the right to assert that such assignment is a breach of such Contract or Permit, or the absence of such Consent could materially diminish Buyer’s ability to succeed to substantially all rights and benefits that Seller held under such Contract or Permit prior to the Closing Date.

 

(b)    If such Consent is not obtained for a Contract or Permit Related to the Business prior to the Closing Date, and the Buyer nonetheless elect to proceed with the Closing, Seller, at its sole expense, shall use commercially reasonable efforts for a period of up to one-hundred eighty (180) days after the Closing Date to assist Buyer to obtain any required Consent(s) as promptly as possible. If any such Consent is not obtained or if any attempted assignment would be ineffective, would materially impair Buyer’s rights and benefits under such Contract of Permit, or would subject Buyer to any cost or expense for the rights and benefits associated with such Contract or Permit in excess of that would be imposed on Seller absent an assignment of the Contract or Permit in question, Seller, at its sole expense, shall take commercially reasonable actions: (i) to seek that the claims, rights and benefits with respect to such Transferred Asset are preserved for Buyer or for the benefit of Buyer (including by entering into a subcontracting or subleasing arrangement with Buyer, if permitted); and (ii) to facilitate receipt of, and promptly pay to, Buyer all monies received by Seller under any such Contract, Permit or other Transferred Asset or any claim, right or benefit arising thereunder not transferred to Buyer pursuant to this Section 2.5.

 

Section 2.6.    Closing. Unless this Agreement shall have been terminated pursuant to Article 8 hereof, the consummation of the transactions contemplated hereby (the “Closing”) shall take place at the offices of Vedder Price P.C., 222 North LaSalle Street, Chicago, Illinois, as soon as reasonably practicable, on the last to occur of January 21, 2022, or two (2) Business Days, following the satisfaction or, to the extent permitted by applicable Law, waiver of all of the conditions to the obligations of the parties set forth in Article 6 and Article 7 hereof. Parties hereto agree that the Closing may take place through an exchange of consideration and documents using wire transfers, overnight courier service, and email transmissions, and that the closing with respect to the Owned Real Properties shall occur through escrow at the title company identified on Exhibit F. The date on which the Closing occurs is referred to in this Agreement as the “Closing Date.” The Closing shall be deemed effective as of the Effective Time.

 

Section 2.7.    Closing Deliveries. At the Closing:

 

(a)    Seller shall deliver, or cause to be delivered, to Buyer or any other Person designated by Buyer (unless the delivery is waived in writing by Buyer), the following documents, in each case duly executed or otherwise in proper form, and the other items listed below:

 

(i)    Bill of Sale. A bill of sale in the form attached hereto as Exhibit A, duly executed by Seller (the “Bill of Sale”);

 

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(ii)    Assignment and Assumption Agreement. An assignment and assumption agreement in the form attached hereto as Exhibit B, duly executed by Seller (the “Assignment and Assumption Agreement”);

 

(iii)    IP Assignment Agreement. An intellectual property assignment agreement in the form attached hereto as Exhibit C, duly executed by Seller (the “IP Assignment Agreement”);

 

(iv)    Transition Services Agreement. A transition services agreement, by and between Buyer and Seller, in the form attached as Exhibit E, duly executed by Seller (the “Transition Services Agreement”);

 

(v)    Real Estate Purchase and Sale Agreement. A real estate purchase and sale agreement in the form attached as Exhibit F, duly executed by the Seller (the “Real Estate Purchase and Sale Agreement”) and delivery of all documents required under the Real Estate Purchase and Sale Agreement;

 

(vi)    Lien Releases. Releases, in form and substance reasonably satisfactory to Buyer, with respect to the Liens on the Transferred Assets identified in Schedule 2.7(a)(vi) of the Disclosure Schedule;

 

(vii)    Consents & Estoppel Certificates. Duly executed Consents and executed estoppel certificates, each in form and substance reasonably satisfactory to Buyer, with respect to the Contracts, Permits, leases and licenses set forth Schedule 2.7(a)(vii) of the Disclosure Schedule;

 

(viii)    Brunswick Consent.  A consent agreement signed by Brunswick and Indian Industries, in the form agreed upon by the parties, consenting to the assignment of the TLA from Lumos to Indian Industries Assignment and Assumption Agreement;

 

(ix)    TLA. The Assignment and Assumption Agreement, signed by Lumos and Indian Industries, in the form agreed upon by the parties, assigning the TLA from Lumos to Indian Industries of Lease for Lease Real Estate;

 

(x)    Assignment of Warehouse Lease. An assignment in the form agreed to by the parties of the Lease Agreement by and between Dean Chudy and Brunswick Billiards, a Division of Brunswick Corporation, dated as of October 1, 2014, as amended by that certain Amendment One to Warehouse Building Lease Agreement, dated as of May 11, 2015;

 

(xi)    Ancillary Agreements and Other Documents. The parties shall deliver and exchange at or before Closing duly executed copies in a form agreed upon by the parties of the documents identified on Schedule 2.7(a)(xi), and shall deliver and exchange within a commercially reasonable period following Closing duly executed copies in a form agreed upon by the parties of other documents identified on Schedule 2.7(a)(xi);

 

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(xii)    Secretary’s Certificate. Seller shall deliver a certificate of Seller’s company secretary or other authorized Person dated as of the Closing Date in form and substance reasonably satisfactory to the Buyer, as to (A) the resolutions of the Seller’s board of managers (or other authorizing body) authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby; (B) the incumbency and signatures of any officers of the Seller (or other authorized person) executing this Agreement and the other agreements, certificates, deeds or other instruments contemplated hereby; (C) the certificate of formation of the Seller and all amendments thereto all as in effect on the Closing Date; and (D) the Seller’s operating agreement as in effect on the Closing Date;

 

(xiii)    Good Standing Certificate. A good standing certificate of Seller issued by the Secretary of State of the State of Delaware, dated as of a date not more than five (5) Business Days prior to the Closing Date;

 

(xiv)    FIRPTA Certificate. An affidavit prepared in accordance with Treasury Regulations Section 1.1445-2 and dated as of the Closing Date that Seller (or, in the event Seller is a disregarded entity for U.S. federal income tax purposes, its sole regarded owner) is not a foreign person (which shall be in addition to any documents provided connection with the transactions described in Real Estate Purchase and Sale Agreement);

 

(xv)    Escrow Agreement. An Escrow Agreement, in the form attached hereto as Exhibit G (the “Escrow Agreement”), duly executed by Seller and Escrow Agent; and

 

(xvi)    Bringdown Certificate. A certificate of the Seller to the effect set forth in Section 6.4, dated the Closing Date and signed on behalf of the Seller by a duly authorized person.

 

(b)    Buyer shall pay, or cause to be paid, the Closing Purchase Price as provided in Section 2.8 and shall deliver, or cause to be delivered, to Seller or any other Person designated by Seller (unless the delivery is waived in writing by Seller), the following documents, in each case duly executed or otherwise in proper form, and the other items listed below:

 

(i)    Ancillary Agreements. The Ancillary Agreements to which Buyer is a party, duly executed by Buyer;

 

(ii)    Good Standing Certificate. A good standing certificate with respect to Buyer issued by the Secretary of State of the State of Delaware, dated as of a date no more than five (5) Business Days prior to the Closing Date; and

 

(iii)    Bringdown Certificate. A certificate of the Buyer to the effect set forth in Section 7.4, dated the Closing Date and signed on behalf of the Buyer by a duly authorized person.

 

For the avoidance of doubt, the closing under the Real Estate Purchase and Sale Agreement shall occur concurrently with the deliveries required by this Section 2.7 and shall be a condition to Seller’s obligations hereunder, and shall be a condition to Buyer’s obligation to pay the Closing Purchase Price (provided, however, that the portion of the Closing Purchase Price attributable to the Owned Real Estate shall be paid as provided in Real Estate Purchase and Sale Agreement).

 

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Section 2.8.    Purchase Price.

 

(a)    In addition to the Buyer’s assumption of the Assumed Liabilities, the total purchase price to be paid by Buyer to Seller (the “Purchase Price”) for the Transferred Assets shall be:

 

(i)    The Base Cash Consideration, plus

 

(ii)    an amount (which may be negative) equal to the Closing Net Working Capital minus the Target Net Working Capital, minus

 

(iii)    the amount required at the Closing to payoff the Indebtedness of the Business, minus

 

(iv)    the amount required at the Closing to payoff the unpaid Transaction Expenses.

 

(b)    At the Closing:

 

(i)    Buyer shall pay, or cause to be paid: (A) the Closing Purchase Price less the Escrow Amount to Seller by wire transfer of immediately available funds to an account or accounts designated pursuant to Section 2.9(a)(i) below (provided, however, the portion of the Closing Purchase Price attributable to the Owned Real Estate shall be paid as provided in Real Estate Purchase and Sale Agreement), and (B) the Escrow Amount to the Escrow Account for deposit with the Escrow Agent pursuant to the Escrow Agreement; and

 

(ii)    Buyer shall assume the Assumed Liabilities.

 

Section 2.9.    Purchase Price Adjustment.

 

(a)    Estimated Closing Statement. At least three (3) Business Days prior to the Closing Date, Seller delivered to Buyer a statement (the “Estimated Closing Statement”), setting forth a good faith calculation, together with reasonably detailed supporting documentation, of (i) each component of, and the resulting calculation of, the Closing Purchase Price and (ii) account information for payment of the Closing Purchase Price. The Estimated Closing Statement shall be prepared and calculated by Seller in good faith and consistent with the calculations set forth in the Preliminary Working Capital Statement, including the Illustrative NWC Calculation.

 

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(b)    Closing Statement. Within the sixty (60) day period after the Closing Date, Buyer shall deliver, or cause to be delivered, to Seller a statement (the “Closing Statement”) setting forth Buyer’s calculation, together with reasonably detailed supporting documentation, of: (i) the Adjusted Purchase Price and the components thereof and (ii) the Purchase Price Increase or the Purchase Price Decrease, as the case may be. The Closing Statement and the calculations thereunder shall be prepared and calculated by Buyer in good faith and consistent with the calculations set forth in the Preliminary Working Capital Statement, including the Illustrative NWC Calculation, and the Estimated Closing Statement, including the same line items included in the Preliminary Working Capital Statement, including the Illustrative NWC Calculation, and the Estimated Closing Statement. The parties agree that the purpose of the adjustment contemplated by this Section 2.9 with respect to Purchase Price is to measure the amount of changes in Purchase Price using the same accounting methods, policies, practices and procedures, with consistent classifications, judgments and estimation methodology, as were used in the preparation of the Preliminary Working Capital Statement, including the Illustrative NWC Calculation, and the Estimated Closing Statement, and such adjustment is not intended to permit the introduction of different judgments, accounting methods, policies, principles, practices, procedures, classifications or estimation methodologies for the purposes of determining Purchase Price. Following the Closing, Buyer shall provide Seller and its Representatives reasonable access to the records, properties, personnel and (subject to the execution of customary work paper access letters if requested) auditors of Buyer, in each case to the extent utilized in the preparation of the Closing Statement and shall cause the personnel of Buyer utilized in the preparation of the Closing Statement to reasonably cooperate with Seller and its Representative in connection with its review of the Closing Statement.

 

(c)    Disputes.

 

(i)    If Seller objects to Buyer’s calculation of the Adjusted Purchase Price or the Purchase Price Increase or the Purchase Price Decrease as set forth in the Closing Statement, then, within thirty (30) days after the delivery to Seller of the Closing Statement (the “Response Period”), Seller shall deliver to Buyer a written notice (an “Objection Notice”) describing in reasonable detail Seller’s objections to Buyer’s calculation of the amounts set forth in such Closing Statement and containing a statement setting forth the calculation of the Adjusted Purchase Price and the Purchase Price Increase or Purchase Price Decrease determined by Seller to be correct. If Seller does not deliver an Objection Notice to Buyer during the Response Period, then Buyer’s calculation of the amounts set forth in the Closing Statement shall be binding and conclusive on the parties hereto.

 

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(ii)    If Seller delivers an Objection Notice, and if Seller and Buyer are unable to agree upon the calculation of the amounts set forth in the Closing Statement within fifteen (15) days after such Objection Notice is delivered to Buyer, the dispute shall be finally settled by an impartial nationally or regionally recognized firm of independent certified public accountants appointed by mutual agreement of Seller and Buyer (the “Accounting Firm”). Within ten (10) days after the Accounting Firm is appointed, Buyer shall forward a copy of the Closing Statement to the Accounting Firm, and Seller shall forward a copy of the Objection Notice to the Accounting Firm, together with, in each case, all relevant supporting documentation. The Accounting Firm’s role shall be limited to resolving such objections and determining the correct calculations to be used on only the disputed portions of the Closing Statement, and the Accounting Firm shall not make any other determination, including any determination as to whether any other items on the Closing Statement are correct or whether the Target Net Working Capital is correct. The Accounting Firm shall not assign a value to any item greater than the greatest value for such item claimed by Seller or Buyer or less than the smallest value for such item claimed by Seller or Buyer and shall be limited to the selection of either Seller’s or Buyer’s position on a disputed item (or a position in between the positions of Seller or Buyer) based solely on presentations and supporting material provided by the parties and not pursuant to any independent review. In resolving such objections, the Accounting Firm shall apply the provisions of this Agreement concerning determination of the amounts set forth in the Closing Statement. The Accounting Firm shall deliver to Seller and Buyer a written determination (such determination to include a work sheet setting forth all material calculations used in arriving at such determination and to be based solely on information provided to the Accounting Firm by Seller and Buyer) of the disputed items submitted to the Accounting Firm within thirty (30) calendar days of receipt of such disputed items. The determination by the Accounting Firm of the disputed amounts and the Purchase Price Increase or Purchase Price Decrease shall be conclusive and binding on the parties hereto, absent manifest error or fraud or willful misconduct as determined by a non-appealable and binding decision by a court of law having jurisdiction over the parties. The fees and costs of the Accounting Firm, if one is required, shall be payable by Buyer, on the one hand, and Seller, on the other hand, based upon the percentage which the portion of the disputed amount not awarded to the applicable party bears to the amount actually contested by such party, as determined by the Accounting Firm. The parties agree that the procedure set forth in this Section 2.9 for resolving disputes with respect to the Adjusted Purchase Price shall be the sole and exclusive remedy for resolving such disputes; provided, however, that the parties agree that judgment may be entered upon the determination of the Accounting Firm in any court having jurisdiction over the party against which such determination is to be enforced. The Adjusted Purchase Price, as finally determined pursuant to this Section 2.9, shall be referred to herein as the “Final Purchase Price”.

 

(d)    Payment of Purchase Price Adjustment.

 

(i)    If there is a Purchase Price Increase, as finally determined in accordance with this Section 2.9, Buyer shall promptly pay, or cause to be paid, the Purchase Price Increase to Seller.

 

(ii)    If there is a Purchase Price Decrease, as finally determined in accordance with this Section 2.9, Seller shall promptly pay, or cause to be paid, the Purchase Price Decrease to Buyer.

 

(e)    Timing of Payments. Any payment required to be made pursuant to Section 2.9(d) shall be made within five (5) Business Days of the determination of the Final Purchase Price pursuant to the provisions of this Section 2.9 by wire transfer of immediately available funds to such account or accounts as may be designated in writing by Seller or Buyer, as applicable, at least two (2) Business Days prior to such payment date.

 

(f)    Tax Treatment. Each of Seller and Buyer shall treat any payments that Buyer and Seller receive pursuant to this Section 2.9 as an adjustment to the Purchase Price for Tax purposes.

 

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Section 2.10.    Purchase Price Allocation. The Purchase Price (including the Assumed Liabilities and all other relevant items for income Tax purposes) shall be allocated among the Transferred Assets acquired by Buyer pursuant to the allocation methodology set forth in Schedule 2.10 of the Disclosure Schedule (the “Allocation Methodology”). The Allocation Methodology is intended to comply with the requirements of Section 1060 of the Code. Within thirty (30) days after the final determination of the Final Purchase Price pursuant to Section 2.9, Seller will prepare and deliver to Buyer an allocation schedule reflecting the allocation of the Purchase Price (and other relevant items) in a matter consistent with the Allocation Methodology. Seller and Buyer shall file Internal Revenue Service Form 8594 with their respective Tax Returns consistent with such allocation. The parties shall treat and report the transactions contemplated by this Agreement in all respects consistently for purposes of any federal, state or local Tax, including the calculation of gain, loss and basis with reference to the Purchase Price allocation made pursuant to this Section 2.10. The parties hereto shall not take any action or position inconsistent with the obligations set forth in this Section 2.10, except as may otherwise be required by applicable Law. Buyer and Seller agree that the form of the transactions, the consideration provided for in this Agreement and the allocation of the Purchase Price were arrived at on the basis of arm’s-length negotiation between the Buyer and Seller. Any subsequent adjustments to the Purchase Price shall be allocated in a manner consistent Section 1060 of the Code and the Allocation Methodology.

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrants to Buyer that the statements contained in this Article 3 are true and correct as of the date hereof and as of the Closing Date, except as set forth in the disclosure schedules delivered by Seller to Buyer simultaneously with the execution and delivery of this Agreement (the “Disclosure Schedules”). The Disclosure Schedules will be arranged in Sections corresponding to the numbered and lettered sections contained in this Article 3.

 

Section 3.1.    Organization and Qualification. Seller is an entity duly organized, validly existing and in good standing under the Laws of the state of its formation and has the requisite power and authority to own, operate or lease all of the properties and assets that it purports to own, operate or lease and to carry on the Business as it is now being conducted and as currently proposed to be conducted. Seller is duly licensed or qualified to do business and is in good standing (with respect to jurisdictions that recognize such concept) in each jurisdiction in which the nature of the Business or the character or location of the Transferred Assets makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect.

 

Section 3.2.    Authority. Seller has all necessary power and authority to execute and deliver this Agreement, and has all necessary power and authority to execute and deliver the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Seller of this Agreement, and the execution and delivery by Seller of the Ancillary Agreements to which it is a party, the performance by Seller of its obligations hereunder and thereunder, and the consummation by Seller of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary action on the part of Seller, and no other or further action or proceeding on the part of Seller (or its equity holders) is necessary to authorize the execution and delivery by Seller of this Agreement and the Ancillary Agreements to which it is a party, the performance by Seller of its obligations hereunder and thereunder, and the consummation by Seller of the transactions contemplated hereby or thereby. This Agreement and the Ancillary Agreements to which Seller is a party have been duly executed and delivered by Seller and, assuming the due and valid authorization, execution and delivery of this Agreement and such Ancillary Agreements by each other party thereto, constitute a valid and binding obligation of Seller, enforceable against it in accordance with their terms, except that such enforceability: (i) may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar Laws of general application affecting or relating to the enforcement of creditors’ rights generally; and (ii) is subject to general principles of equity.

 

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Section 3.3.    Consents and Approvals; No Violations.

 

(a)    Except for the Consents, filings, declarations, registrations and notices set forth in Schedule 3.3(a) of the Disclosure Schedule, no Consent of, or filing, declaration or registration with, or notice to any Governmental Entity or any other Person, which has not been received or made, is required to be obtained or made by Seller for the execution and delivery by Seller of this Agreement and the Ancillary Agreements to which it is a party or the consummation by Seller of the transactions contemplated hereby or thereby.

 

(b)    The execution and delivery by Seller of this Agreement and the Ancillary Agreements to which it is a party, the performance by Seller of its obligations hereunder and thereunder, and the consummation by Seller of the transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of Seller’s organizational or governing documents; (ii) conflict with or result in a violation or breach of any Law applicable to Seller, the Business or any of the Transferred Assets; (iii) conflict with, result in a violation or breach of, result in the termination, modification or cancellation of or a right of termination, modification or cancellation under, or accelerate the performance required under, any Material Contract or Permit to which Seller is a party, by which Seller or the Business is bound, or to which any of the Transferred Assets is subject; or (iv) result in the creation of any Lien (other than a Permitted Lien or any Liens created by created by Buyer) upon any of the Transferred Assets.

 

Section 3.4.    Financial Information.

 

(a)    Delivery of Financial Statements. Complete copies of the unaudited financial statements consisting of the balance sheet of the Business as of December 31, 2020 and December 31, 2019 and income statements of the Business for the year ended December 31, 2020 and December 31, 2019 (collectively, the “Financial Statements”) are included as Schedule 3.4(a).

 

(b)    Fair Presentation. The Financial Statements have been based upon the information contained in Seller’s Books and Records, have been prepared on a consistent basis throughout the periods involved and are based upon accounts of the Seller which were prepared in accordance with GAAP. Each of the Financial Statements (including any related notes and schedules thereto) fairly presents in all material respects the results of operations of the Business for the periods specified in such statement. The Financial Statements are qualified by the fact that the Business has not operated as a separate “stand alone” entity and such Financial Statements do not present the results of operations that would have occurred if the Business had been operated as a “stand alone” entity. The Seller maintains a standard system of accounting for the Business.

 

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(c)    Except as set forth on Schedule 3.4(c), since December 31, 2020, there has not been any Material Adverse Change with respect to the Seller or the Business. Without limiting the generality of the foregoing, since that date, neither Seller nor the Business has engaged in any practice, taken any action or entered into any transaction outside of the Ordinary Course of Business.

 

Section 3.5.    Absence of Undisclosed Liabilities. Seller does not have any Liabilities with respect to the Business or the Transferred Assets except for: (a) Liabilities adequately reflected or reserved against in the Financial Statements; (b) Current Liabilities that have been incurred in the Ordinary Course of Business since the date of the Financial Statements and that are included in the calculation of the Estimated Closing Net Working Capital and/or Net Working Capital as reflected in the Final Purchase Price; (c) Liabilities under this Agreement and the Ancillary Agreements; (d)  Liabilities that are not required by GAAP to be reflected on the face of, or described in notes to, a balance sheet of the Business; and (e) Excluded Liabilities.

 

Section 3.6.    Assets.

 

(a)    Disregarding the effect of Section 2.5 of this Agreement, except as set forth in Schedule 3.6 of the Disclosure Schedule, the Transferred Assets constitute all of the rights, properties and assets, tangible and intangible, of any nature whatsoever, Related to the Business.

 

(b)    Seller has good, valid and marketable title to, or a valid leasehold interest in, all of the Transferred Assets, free and clear of all Liens (other than Permitted Liens).

 

(c)    All of the Transferred Assets are in normal operating condition and repair, subject to normal wear and maintenance, are usable in the Ordinary Course of Business and conform in all material respects to applicable Laws and all Permits issued to Seller by any Governmental Entity relating to their construction, use and operation.

 

(d)    The inventory included in the Transferred Assets is merchantable, fit for the purpose for which in was procured or manufactured, and none of which is obsolete, damaged or defective, subject to the reserves for inventory included in Closing Net Working Capital).

 

Section 3.7.    Accounts Receivable; Accounts Payable.

 

(a)    All Accounts Receivable: (A) represent amounts receivable for products actually delivered or services actually provided (or, in the case of non-trade accounts or notes represent amounts receivable in respect of other bona-fide business transactions), in each case in the Ordinary Course of Business; and (B) constitute only valid, undisputed claims of Seller and, to the Knowledge of Seller, are not subject to claims of set-off or other defenses or counterclaims other than normal cash discounts accrued in the Ordinary Course of Business. Since the date of the Financial Statements, Seller has collected all Accounts Receivable in the Ordinary Course of Business and have not accelerated any such collections; provided this Section 3.7(a) is subject to the receivables reserves included in the Closing Net Working Capital.

 

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(b)    All accounts payable of Seller with respect to the Business arose in the Ordinary Course of Business consistent with past practice, and no such accounts payable is past due or otherwise in default in its payment. Since the date of the Financial Statements, Seller has paid its accounts payable with respect to the Business in the Ordinary Course of Business, except for those accounts payable Seller is contesting in good faith.

 

Section 3.8.    Absence of Certain Changes or Events. Since December 31, 2020, other than the effects of and measures taken in response to COVID-19: (a)  Seller has conducted the Business in the Ordinary Course of Business (including the collection of receivables, the payment of payables and the making of capital expenditures); and (b) there have not occurred any events, series of events, occurrences or conditions, and there has not been any lack of occurrences, facts, conditions, changes, developments or effects, in each case that, individually or in the aggregate, have had or would reasonably be expected to have or result in a Material Adverse Effect.

 

Section 3.9.    Litigation.

 

(a)    Except as set forth in Schedule 3.9(a)of the Disclosure Schedule, there is no Proceeding pending or, to the Knowledge of Seller, threatened against or by Seller: (i) relating to or affecting the Business, the Transferred Assets or the Assumed Liabilities; or (ii) that challenges or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. To the Knowledge of Seller, no event has occurred or circumstance exists that is reasonably likely to result in the commencement of any such Proceeding.

 

(b)    Except as set forth in Schedule 3.9(b)of the Disclosure Schedule, there is: (i) no outstanding Order of, or settlement agreement with or subject to, any Governmental Entity; and (ii) no unsatisfied judgment, penalty or award, in each case against, relating to or affecting the Business.

 

(c)    Neither the Seller nor the Business has any Liability, and there is no basis for the assertion of any claim or the institution of any Proceeding, arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product manufactured, sold, leased or delivered by the Seller or the Business, or their predecessors in interest.

 

Section 3.10.    Compliance with Laws. Seller is in compliance in all material respects with all Laws applicable to the Business or the Transferred Assets, and no Proceeding has been filed or commenced and is continuing against Seller, and Seller has not received any written notice or, to the Knowledge of Seller, other communication, alleging that Seller is not in compliance with any such Law. Except as set forth in Schedule 3.10 of the Disclosure Schedules, no event has occurred since December 31, 2020, and, to the Knowledge of Seller, no circumstance exists, in each case that (with or without notice or lapse of time), would reasonably be expected to constitute or result in a violation by Seller of, or a failure on the part of Seller to comply with, any Law applicable to the Business or the Transferred Assets, except where such violation or failure would not have a Material Adverse Effect.

 

Section 3.11.    Compliance with Permits. (a)  Seller holds all material Permits required for the lawful conduct of the Business as currently conducted or for the ownership or use of the Transferred Assets; (b) such Permits are valid, unimpaired and in full force and effect; (c) Seller is not in material default under or in material violation of any such Permit; and (d) except as set forth in Schedule 3.11(d) of the Disclosure Schedules, no Proceeding that seeks the revocation, cancellation, suspension, limitation, termination or nonrenewal of any such Permit is pending before any Governmental Entity or, to the Knowledge of Seller, threatened.

 

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Section 3.12.    Taxes.

 

(a)    All income and other material Tax Returns (in each case) required to be filed by Seller in respect of the Business or the Transferred Assets have been duly filed on a timely basis or within valid and appropriate extensions of time, and all such Tax Returns were correct and complete in all material respects. All Taxes shown on such Tax Returns owed by Seller Relating to the Business or the Transferred Assets have been timely paid. There are no Liens with respect to Taxes imposed on the Business or any of the Transferred Assets, other than Permitted Liens.

 

(b)    Seller has complied in all material respects with all Laws applicable to the Business and the Transferred Assets relating to the payment and withholding of Taxes, and has duly and timely withheld and paid over to the appropriate Taxing Authority all material amounts required to be so withheld and paid under all such Laws. Seller has not waived or requested to waive any statute of limitations in respect of Taxes associated with the Business or the Transferred Assets which waiver is currently in effect and would be binding on Buyer.

 

(c)    There is no Proceeding pending or, to the Knowledge of Seller, threatened in writing against Seller in respect of the Business or the Transferred Assets by any Taxing Authority, including for the assessment or collection of Taxes.

 

(d)    Seller has collected all applicable sales, use, value-added, and similar Taxes in respect of the Business or the Transferred Assets required to be collected, and has remitted, or will remit, on a timely basis such amounts to the appropriate Taxing Authority.

 

(e)    Notwithstanding anything to the contrary in this Agreement, other than the representations and warranties contained in Section 3.19 and those required by Exhibit F, the representations and warranties of this Section 3.12 shall be considered the only representations and warranties with respect to Taxes, Tax Returns and compliance with Tax-related Laws.

 

Section 3.13.    Intellectual Property.

 

(a)    Registered Intellectual Property. Schedule 3.13(a) of the Disclosure Schedule accurately identifies: (i) each item of Registered Intellectual Property which is also Owned Intellectual Property; (ii) the jurisdiction in which each such item of Registered Intellectual Property has been registered or filed and the applicable registration or serial number; (iii) for each such item of Registered Intellectual Property that is a domain name, information about the Domain Name Registrar with which such domain name has been registered or filed; (iv) to Seller’s Knowledge and subject to Section 5.5(c), each action, filing, and payment that must be taken or made on or before the date that is ninety (90) days after the date of this Agreement in order to maintain each such item of Registered Intellectual Property in full force and effect; and (v) any other Person that has an ownership interest in any such item of Registered Intellectual Property and the nature of such ownership interest. Subject to Section 5.5(c), Seller has delivered to Buyer complete and accurate copies of all applications, material correspondence with any Governmental Entity and other material documents related to each such item of Registered Intellectual Property.

 

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(b)    Standard Form IP Agreements. Seller has delivered to Buyer a complete and accurate copy of each standard form of: (i) agreement with any Business Employee containing any assignment or license of Owned Intellectual Property or any confidentiality provision; (ii) agreement with any Business Consultant containing any assignment or license of Owned Intellectual Property or any confidentiality provision related to Owned Intellectual Property; and (iii) confidentiality or nondisclosure agreement intended to protect the Owned Intellectual Property (each such form, a “Standard Form IP Agreement”).

 

(c)    Ownership and Maintenance or Establishment of Ownership. Seller exclusively owns all right, title and interest to and in the Owned Intellectual Property and such ownership is free and clear of any Liens other than Permitted Liens. To Seller’s Knowledge, all documents and instruments necessary to establish, perfect and maintain the rights of Seller in all Owned Intellectual Property have been filed in a timely manner with the appropriate Governmental Entity. Each Business Employee and each current or former employee of Seller or any Affiliate of Seller who is or was involved in the creation or development of any Owned Intellectual Property has signed a valid and enforceable agreement containing an irrevocable assignment of Intellectual Property pertaining to such Owned Intellectual Property to Seller and confidentiality provisions protecting the Owned Intellectual Property. The Owned Intellectual Property is free from (i) any Liens (except for Permitted Liens) and (ii) any requirement of any past, present or future royalty payments, license fees, charges or other payments. Seller has taken commercially reasonable efforts to maintain the confidentiality of and otherwise protect and enforce its rights in all proprietary information and trade secrets that are also Owned Intellectual Property.

 

(d)    Sufficiency of Intellectual Property. The Owned Intellectual Property and the Licensed Intellectual Property include all Intellectual Property necessary to operate the Business as currently conducted.

 

(e)    Validity and Enforceability. To the Knowledge of Seller, all Owned Intellectual Property that is Registered Intellectual Property is valid, subsisting and enforceable. To the Knowledge of Seller, no trademark or trade name owned, used or applied for by Seller that is also Owned Intellectual Property conflicts or interferes with any trademark or trade name owned or used by any other Person. For all trademarks that are also Owned Intellectual Property, Seller has taken commercially reasonable efforts to maintain the validity and enforceability of such trademarks. No interference, opposition, reissue, reexamination or other Proceeding is pending or, to Seller’s Knowledge, threatened, in which the ownership, scope, validity or enforceability of any Owned Intellectual Property is being, or would reasonably be expected to be contested or challenged.

 

(f)    Effects of Transaction. None of the execution, delivery or performance of this Agreement or any Ancillary Agreement will, with or without notice or lapse of time, result in, or give any other Person the right or option to cause or declare: (i) a loss of, or Lien on, any Owned Intellectual Property; (ii) the release, disclosure or delivery of any Owned Intellectual Property by or to any escrow agent or other Person; or (iii) the grant, assignment or transfer to any other Person of any license or other right or interest under, to or in any of the Owned Intellectual Property.

 

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(g)    No Third Party Infringement of Owned Intellectual Property. To Seller’s Knowledge, no Person has materially infringed, misappropriated or otherwise violated, and no Person is currently materially infringing, misappropriating or otherwise violating, any Owned Intellectual Property. Schedule 3.13(g) of the Disclosure Schedule accurately identifies (and Seller has delivered to Buyer a complete and accurate copy of) each letter or other written or electronic communication or correspondence that has been sent by or to Seller or any Representative of Seller regarding any actual, alleged or suspected infringement or misappropriation of any Owned Intellectual Property. Each of the three items of correspondence identified in Schedule 3.13(g) have been fully resolved at no cost to, and with no concession of any kind by, the Seller.

 

(h)    No Infringement of Third Party IP Rights. The operation of the Business as conducted since January 1, 2021 has not infringed (directly, contributorily, by inducement or otherwise), diluted, misappropriated or otherwise violated or made unlawful use of any Intellectual Property of any Person. The operation of the Business as currently conducted and the use of Owned Intellectual Property in connection therewith do not conflict with, infringe, dilute, misappropriate or otherwise violate the Intellectual Property of any Person. No infringement, misappropriation or similar claim or Proceeding is pending or, to Seller’s Knowledge, threatened against Seller in connection with the past or current conduct of the Business or the past or current ownership or use of the Transferred Assets or, to Seller’s Knowledge, against any other Person who is or may be entitled to be indemnified, defended, held harmless or reimbursed by Seller with respect to such claim or Proceeding. Seller has not received any notice or other communication (in writing) relating to any actual, alleged or suspected infringement, misappropriation or violation by Seller or any current or former employee or agent of Seller, in each case in connection with the past or current conduct of the Business or the past or current ownership or use of the Transferred Assets, of any Intellectual Property of any Person, including any letter or other communication suggesting or offering that Seller obtain a license to any Intellectual Property of any Person. Seller is not bound by and to Seller’s Knowledge has not been threatened or alleged to be bound by any Contract in connection with the past or current conduct of the Business or the past or current ownership or use of the Transferred Assets to indemnify, defend, hold harmless or reimburse any other Person with respect to, or otherwise assumed or agreed to discharge or otherwise take responsibility for, any existing intellectual property infringement, misappropriation or similar claim.

 

(i)    Data Privacy. The operation of the Business as currently conducted and the use or handling of Business Data in connection therewith does not materially violate any applicable Laws. Seller has not received any notice or other communication (in writing) that the operation of the Business is or may be in violation of any data privacy or data security related Laws. Seller has not distributed or displayed any Business Data in breach of any Contract. In connection with the operation of the Business, Seller has not entered into any Contract to provide Personally Identifiable Information to any Person. To the Knowledge of Seller, none of Seller’s Business Data or Seller’s websites or web-based services used or offered in connection with the conduct of the Business have been the target of any successful unauthorized access attempts, denial-of-service assaults, or other attack by hackers.

 

(j)    TLA. Lumos has not assigned, transferred or encumbered its interest under the TLA or any intellectual property licensed thereby. Seller makes this representation with respect to the TLA on behalf of Lumos.

 

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Section 3.14.    Brokers. Except as set forth in Schedule 3.14of the Disclosure Schedule, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Seller or any of its Affiliates or any of their respective officers or directors.

 

Section 3.15.    Material Contracts; No Defaults.

 

(a)    Schedule 3.15(a) of the Disclosure Schedule contains an accurate and complete list of each of the following Contracts (x) which are Related to the Business; or (y) by which any of the Transferred Assets are bound or affected, but excluding purchase orders of the Business entered into in the Ordinary Course of Business (each a “Material Contract”):

 

(i)    any Contract pursuant to which Seller received aggregate payments in excess of $50,000 in any annual period;

 

(ii)    any Contract pursuant to which Seller made aggregate payments in excess of $50,000 in any annual period;

 

(iii)    any Contract (A) for the sale of any of the Transferred Assets other than in the Ordinary Course of Business or (B) granting to any Person an option, right of first refusal, right of first offer or similar preferential right to purchase any of the Transferred Assets;

 

(iv)    any Contract that requires Seller to purchase or sell a stated portion of the requirements or outputs of the Business or that contains “take or pay” provisions;

 

(v)    any Contract limiting, restricting or prohibiting Seller from: (A) conducting any business activities; (B) engaging in any line of business anywhere in the United States or elsewhere in the world; or (C) conducting any business activities with any Person;

 

(vi)    any (A) joint venture, strategic alliance, partnership, franchise, manufacturer, development, distribution, sales agent or supply agreement or (B) other Contract that involves a sharing of revenues, profits, losses, costs or Liabilities by Seller with any other Person;

 

(vii)    any Contract providing for capital expenditures or leasehold improvements in excess of $15,000 individually, or in excess of $50,000 in the aggregate;

 

(viii)    any Contract relating to (A) the acquisition (by merger, consolidation, purchase of stock or assets, or otherwise) by Seller of any Person, a material portion of the assets of any Person, or any business, division or product line or (B) the divestiture or disposition by Seller of a material portion of its properties or assets, or any of its equity interests, in each case of clauses (A) and (B) pursuant to which Seller has any remaining obligations or Liabilities;

 

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(ix)    any Contract providing for (A) Change of Control Payments or (B) the creation, acceleration or vesting of any right or interest for the benefit of any current or former Business Employee or Business Consultant which becomes payable as a result of or in connection with the consummation of the transactions;

 

(x)    to the extent related to any current or former Business Employee, any (A) collective bargaining agreement or (B) Contract with any union, labor organization, works council or other employee representative of a group of employees;

 

(xi)    any Personal Property Lease;

 

(xii)    any Real Property Lease;

 

(xiii)    any Contract (excluding Permits) with any Governmental Entity;

 

(xiv)    any power of attorney or similar grant of agency executed by Seller; and

 

(xv)    any Contract which commits Seller to enter into any of the foregoing.

 

(b)    With respect to each Material Contract: (i) such Material Contract is in full force and effect, constitutes a legal, valid and binding obligation of Seller and, to the Knowledge of Seller, each other party thereto, and is enforceable against each of them in accordance with its terms; (ii) neither Seller nor, to the Knowledge of Seller, any other party to such Material Contract is in material breach of or default under such Material Contract; and (iii) except as set forth on Schedule 3.15(b)(iii) of the Disclosure Schedule, no event has occurred or circumstance exists which (with or without notice or lapse of time or both) would constitute a material breach of or default under, would cause or permit the termination or cancellation of, would cause any loss of benefit under, or would give rise to any right to accelerate the maturity or performance of any obligation under, such Material Contract. Seller has delivered to Buyer true, correct and complete copies of all Material Contracts (including all amendments thereto), in each case in effect as of the date of this Agreement. Seller makes the representations in this Section 3.15(b) with respect to the TLA on behalf of Lumos.

 

Section 3.16.    Real Property.

 

(a)    Schedule 3.16(a) of the Disclosure Schedules sets forth each parcel of real property owned by Seller and exclusively used in or necessary for the conduct of the Business as currently conducted, including the Bristol Facility and Undeveloped Property (together with all buildings, fixtures, structures and improvements situated thereon and all easements, rights-of-way and other rights and privileges appurtenant thereto, collectively, the “Owned Real Properties”), including with respect to each property, the address location and use. Seller has delivered to Buyer copies of the deeds and other instruments (as recorded) by which Seller acquired such parcel of Owned Real Properties, to the extent in Seller’s possession, as well as copies of all title insurance policies, opinions, abstracts and surveys in the possession of Seller with respect to such parcel of Owned Real Properties, and any and all additional information required by Exhibit F (together, the “Title Materials”). Without limiting the generality of the foregoing, with respect to each parcel of Owned Real Properties:

 

(i)    Seller has good and insurable fee simple title, free and clear of all Liens, except Permitted Liens;

 

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(ii)    Seller has not leased or otherwise granted to any Person the right to use or occupy such Owned Real Properties or any portion thereof; and

 

(iii)    there are no unrecorded outstanding options, rights of first offer or rights of first refusal or any other such rights to purchase such Owned Real Properties or any portion thereof or interest therein granted by Seller in favor of any third party.

 

(b)    Schedule 3.16(b) of the Disclosure Schedule contains a complete and accurate list of: (i) all real property leased, subleased, licensed or otherwise used, operated or occupied by Seller (whether as tenant, subtenant or pursuant to other occupancy arrangements) and primarily used in the operation of the Business as currently conducted (collectively, the “Leased Real Property”), including the street address of each Leased Real Property; and (ii) each Contract pursuant to which Seller holds any Leased Real Property as landlord, sublandlord, tenant, subtenant, occupant or otherwise (each, a “Real Property Lease”), including all currently effective amendments and modifications thereto. With respect to each Leased Real Property:

 

(i)    Seller holds a valid leasehold or subleasehold interest in (or a valid right to use and occupy), and enjoys peaceful and undisturbed possession of, each Leased Real Property (except in the case where Seller holds an interest in the Leased Real Property as landlord or sublandlord; in which case such Seller’s possession of the Leased Real Property is subject to the terms of the respective Real Property Lease), in each case free and clear of all Liens other than Permitted Liens.

 

(ii)    All rent (including base rent and additional rent) due and payable under each Real Property Lease has been paid to date. No security deposit, if any, or portion thereof deposited with respect to any Real Property Lease has been applied in respect of a breach or default under such Real Property Lease which has not been redeposited in full; and

 

(iii)    Seller has not mortgaged, deeded in trust or otherwise encumbered its leasehold interest in any Real Property Lease.

 

(c)    All of the Real Property is adequately served by proper utilities and other building services necessary for its current use, and all of the buildings and structures located at the Real Property are structurally sound with no material defects and are in ordinary operating condition.

 

(d)    Seller has not received any written notice of (i) violations of building codes and/or zoning ordinances or other governmental or regulatory Laws affecting the Real Property, or (ii) existing, pending or threatened zoning, building code or other moratorium Proceedings, that could reasonably be expected to adversely affect the ability to operate the Real Property as currently operated. Since acquisition of the Real Property by Seller, neither the whole nor any material portion of the Real Property has been damaged or destroyed by fire or other casualty. No condemnation, eminent domain or taking proceeding is pending or, to the Knowledge of Seller, threatened that affects any Real Property.

 

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Section 3.17.    Environmental Matters.

 

(a)    There is no Proceeding pending or, to the Knowledge of Seller, threatened against Seller, the Business or any of the Transferred Assets under or pursuant to any Environmental Law applicable to the Business or the Transferred Assets.

 

(b)    To the Knowledge of Seller, Seller: (i) is in compliance in all material respects with all Environmental Laws applicable to the Business; (ii) holds all Environmental Permits as are required for the conduct of the Business as currently conducted; and (iii) is in compliance in all material respects with such Environmental Permits. Schedule 3.17(b) of the Disclosure Schedule contains an accurate and complete list of all Environmental Permits held by Seller or to which Seller is a party or by which it is bound, in each case in connection with the Business or the Transferred Assets, or to which any of the Transferred Assets are subject.

 

(c)    No event has occurred, and no circumstance exists, at any location or in connection with the Business or the Transferred Assets that (with or without notice or lapse of time) would reasonably be expected to: (i) materially prevent, hinder or limit continued compliance with Environmental Laws in connection with operation of the Business as it is currently conducted; (ii) give rise to any investigatory, monitoring, remedial or corrective action obligations pursuant to Environmental Laws to the Knowledge of Seller; (iii) require a material expenditure to comply with Environmental Laws or meet applicable standards thereunder; (iv) require a material change to the operation of the Business in order to comply with Environmental Laws; or (v) result in the imposition of any material Liability pursuant to any Environmental Law.

 

Section 3.18.    Labor Matters.

 

(a)    Schedule 3.18(a) of the Disclosure Schedule sets forth a list of all Business Employees and Business Consultants as of the date hereof and, with respect to each, sets forth the following information, to the extent applicable: (i) name; (ii) title or position; (iii) the entity or entities by which such individual is employed; (iv) hire date; (v) current annual or hourly base compensation rate; (vi) commission, bonus, incentive compensation, or other similar compensation paid for calendar year 2020; (vii)  accrued but unused vacation or paid time off; (viii) active or inactive status and, if applicable, the reason for inactive status; (ix) full-time or part-time status; (x) exempt or non-exempt status; and (xi) employment location. The Business Employees and Business Consultants comprise all of the personnel that is necessary for the management and operation of the Business as currently conducted.

 

(b)    Seller is not, and has not been, party to or bound by a collective bargaining agreement or agreement with any labor union or other employee representative of a group of employees Relating to the Business, and no Business Employee is or has been represented by any labor organization with respect to their employment by Seller or any Affiliate of Seller. To the Knowledge of Seller, there are no current labor union organizing activities in progress with respect to any Business Employees. There are and have been no actual or, to the Knowledge of Seller, threatened labor disputes, strikes, lockouts or work stoppages against or affecting the Business Employees.

 

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(c)    There is no: (i) unfair labor practice charge; (ii) grievance; (iii) arbitration; (iv) charge; (v) lawsuit; (vi) investigation; or (vii) complaint against Seller pending or, to the Knowledge of Seller, threatened before a Governmental Entity, in each case with respect to any of the Business Employees. All Business Employees and Business Consultants are authorized to work in the jurisdiction in which they are habitually employed by the Business and, for the purposes of all Business Employees who are habitually employed in the United States, a Form I-9 has been completed properly and retained with respect to each Business Employee.

 

(d)    Seller is in compliance in all material respects with all, and has at all times been in compliance in all material respects with all, and Seller has not received any written notice or, to the Knowledge of Seller, other communication of any claim filed with or by any Governmental Entity alleging that Seller has violated any Laws or applicable contractual arrangements pertaining to employment and employment practices to the extent they relate to the Business Employees or Business Consultants and, to the Knowledge of Seller, no such claim is threatened.

 

(e)    In all material respects, to the Knowledge of Seller, Seller has properly classified all Business Employees and Business Consultants as employees, independent contractors or leased employees and as exempt or non-exempt for all purposes and has made all appropriate filings in connection with services provided by, and compensation paid to, such Business Employees and Business Consultants. All compensation, including wages, commissions and bonuses, payable to all Business Employees and Business Consultants for services performed on or prior to the Closing Date have been paid in full, other than as set forth on Schedule 3.18(e) of the Disclosure Schedule, which amounts shall be paid by Seller (x) when and as due or (y) via payroll by Seller in connection with Closing. Seller is not aware of any issues relating to improper payment of wages under the Fair Labor Standards Act, as amended (31 U.S.C. Section 201, et seq.) or under comparable provisions of Applicable Law.

 

(f)     Except as forth on Schedule 3.18(f) of the Disclosure Schedule, no employee layoff, facility closure or shutdown, reduction-in-force, furlough, temporary layoff, material work schedule change or reduction in hours, or reduction in salary or wages, or other workforce changes affecting employees or individual independent contractors materially involved in the Business has occurred since December 31, 2019 or is currently contemplated, planned or announced, including as a result of COVID-19 or any Law, directive, guideline or recommendation by any Governmental Entity in connection with or in response to COVID-19.  The Seller has not otherwise experienced any material employment-related liability with respect to COVID-19 that is Related to the Business.  No current or former employee of the Seller materially involved in the Business has filed or, to the Company’s knowledge, has threatened, any Actions against the Seller related to COVID-19.

 

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Section 3.19.    Employee Benefit Plans.

 

(a)    Set forth on Schedule 3.19 of the Disclosure Schedule is a true and complete list of each Employee Plan. As applicable with respect to each Employee Plan, Seller has delivered to Buyer true and complete copies of each active Employee Plan, including all amendments thereto, or their related summary plan descriptions, and in the case of an unwritten Employee Plan, a written description thereof.

 

(b)    None of the Employee Plans are: (i) a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA); (ii) a plan subject to Part 3, Subtitle B of Title I of ERISA, Section 412 of the Code or Title IV of ERISA, (iii) a “multiple employer plan” (as defined in Section 4063 or 4064 of ERISA); or (iv) a plan that provides benefits, including death or medical benefits, beyond termination of service or retirement other than (A) coverage mandated by Law or (B) death or retirement benefits under an Employee Plan qualified under Section 401(a) of the Code.

 

(c)    No Transferred Asset is subject to any Lien under Section 430(k) of the Code or ERISA, and neither Seller nor any ERISA Affiliate has incurred any liability which could subject Buyer or any Transferred Asset to liability under Sections 4062, 4063 or 4064 of ERISA.

 

(d)    All Employee Plans (and related trusts and insurance contracts) comply in form and in operation in all material respects with the applicable requirements of ERISA, the Code, the Family and Medical Leave Act and other applicable Laws and comply in operation in all material respects with their respective terms and conditions, except for such instances of noncompliance in form or operation that would not reasonably be expected to result in a Material Adverse Effect. With respect to all Employee Plans, (i) all necessary Tax Returns have been timely filed, (ii) any notice required to be provided to any Person has been timely given; and (iii) all premiums, contributions and other Liabilities, whether or not due, for prior plan years and the current plan year for the period ending on the Closing Date have been timely paid or, if not yet due, accrued on Seller’s Books and Records, except as would not reasonably be expected to result in a Material Adverse Effect.

 

(e)    Each Employee Plan that is subject to Section 409A of the Code has been maintained, in form and operation, in compliance in all material respects with Section 409A of the Code. Seller has no any obligation to gross up, indemnify or otherwise reimburse any Business Employee for any Taxes (or potential Taxes) imposed (or potentially imposed) pursuant to Section 409A of the Code.

 

(f)    Neither Seller nor any ERISA Affiliate is a party to any Contract covering any Business Employee or Business Consultant that, individually or collectively, could give rise to (or already has resulted in) the payment of any amount or provision of any benefit (including accelerated vesting) that could constitute an “excess parachute payment” within the meaning of Section 280G of the Code or subject to an excise tax under Section 4999 of the Code in connection with the consummation of the transactions contemplated by this Agreement. Seller has no obligation to gross up, indemnify or otherwise reimburse any Business Employee for any Taxes (or potential Taxes) imposed (or potentially imposed) pursuant to Section 4999 of the Code.

 

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Section 3.20.    Affiliate Transactions. Except as set forth on Schedule 3.20 of the Disclosure Schedule and except for (A) standard offer letters that are on substantially the same terms as the form of offer letter delivered to Buyer and (B) Standard Form IP Agreements (collectively, the “Affiliate Agreements”), neither any Affiliate of Seller, nor any current or former member, stockholder, officer, director, manager or employee of Seller or any Affiliate of Seller, nor any immediate family member of any of the foregoing: (i) is a party to any Contract or ongoing transaction or business relationship with, or has any claim or right against, Seller relating to any of the Business, the Transferred Assets or the Assumed Liabilities; or (ii) has any ownership interest in any of the Transferred Assets.

 

Section 3.21.    Insurance.

 

(a)    Schedule 3.21(a) of the Disclosure Schedule sets forth, as of the date of this Agreement, a complete and accurate list of all policies or binders of fire, liability, product liability, umbrella liability, real and personal property, workers’ compensation, vehicular, fiduciary liability and other forms of insurance maintained by or on behalf of Seller and relating to the Business, the Transferred Assets or the Assumed Liabilities (collectively, the “Insurance Policies”), setting forth, in respect of each such Insurance Policy: (i) the policy number; (ii) the insurer, (iii) policy limits and deductibles; (iv) the dates of premiums or payments due thereunder; and (v) the expiration date.

 

(b)    Schedule 3.21(b) of the Disclosure Schedule sets forth, as of the date of this Agreement, (i) a list of all pending claims (including any workers’ compensation claim) under any Insurance Policy; and (ii) the claims history for Seller since January 1, 2018 to the extent involving claims in excess of $25,000. All claims, incidents, wrongful acts or occurrences for which Seller reasonably expects to obtain coverage under any Insurance Policy have been reported to the applicable underwriter in accordance with the requirements of the applicable Insurance Policy. There is no claim pending under any Insurance Policy as to which coverage has been denied or disputed or in respect of which there is an outstanding reservation of rights.

 

Section 3.22.    Compliance with Import/Export Laws. During the last two (2) years, the Business is and has been in material compliance with all applicable Foreign Export and Import Laws and U.S. Export and Import Laws (together, “International Trade Laws and Regulations”). Without limiting the foregoing:

 

(a)    To the Knowledge of Seller, the Business has obtained all import and export licenses or other authorizations and invoked all license exceptions related to any activity governed by any International Trade Laws and Regulations and including authorizations (whether licenses, approvals, license exceptions or license exemptions) (collectively, “Trade Authorizations”), required for the (i) import, export, or re-export of products, services, software, and technologies; (ii) releases of technologies and software to non-U.S. nationals whether located in the United States or abroad; and (iii) transactions with foreign persons;

 

(b)    The Business has not received written notice of any pending or threatened actions against or investigations or inquiries by any Governmental Entity with respect to International Trade Laws and Regulations;

 

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(c)    To the Knowledge of Seller, there are no existing actions, conditions, or circumstances pertaining to the Business that may give rise to any future claims with respect to International Trade Laws and Regulations.

 

Section 3.23.    Material Relationships.

 

(a)    Schedule 3.23(a) sets forth a list of the top twenty (20) customers of the Business by dollar amount of revenue generated from such customers during the fiscal year ended December 31, 2020 and the ten (10)-month period ended October 31, 2021 (collectively, the “Material Customers”).

 

(b)    Schedule 3.23(b) sets forth a list of the top twenty (20) vendors of the Business by dollar amount of total payments by the Company and its Subsidiaries during the fiscal year ended December 31, 2020 and the ten (10)-month period ended October 31, 2021 (collectively, the “Material Providers”). 

 

(c)    Other than the effects of and measures taken in response to COVID-19, no such Material Customer or Material Provider has either (i) cancelled, terminated or otherwise adversely altered (including reductions in the rate or amount of sales, change in credit, supply, payment or pricing terms) such relationship or (ii) to the Knowledge of Seller intends to (1) cancel, terminate or otherwise materially alter such relationship or commence any action against the Seller or (2) stop, interrupt, suspend or materially alter (including any decrease in the rate or amount of, or material change in the credit, supply, purchase, payment or price terms with respect to) purchasing or supplying products or services from or to the Business or otherwise stop, interrupt, suspend or materially alter its relationship with the Business, in each case as of the date hereof and on the Closing Date.

 

Section 3.24.    Exclusivity. THE REPRESENTATIONS AND WARRANTIES MADE BY SELLER IN THIS Article 3, THE ANCILLARY AGREEMENTS, AND ANY OTHER DOCUMENT DELIVERED BY SELLER IN CONNECTION WITH THE CLOSING ARE IN LIEU OF AND ARE EXCLUSIVE OF ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS OR ADEQUACY FOR ANY PARTICULAR PURPOSE OR USE. SELLER HEREBY EXCLUDES AND DISCLAIMS ANY SUCH OTHER OR IMPLIED REPRESENTATIONS OR WARRANTIES, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO BUYER OR ITS OFFICERS, DIRECTORS, EMPLOYEES, STOCKHOLDERS, AGENTS, ADVISORS OR REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION, IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Without limiting the generality of the foregoing, Seller makes no representation or warranty to Buyer with respect to: (a) any projections, estimates or budgets delivered to Buyer or its Representatives before or after the date of this Agreement; or (b) without in any way amending, modifying or waiving the express representations and warranties contained in this Article 3, any confidential information presentation, management presentation, or other information or documents (financial or otherwise) delivered to Buyer or its Representatives.

 

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ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer hereby represents and warrants to Seller that the statements contain in this Article 4 are true and correct as of the date hereof and as of the Closing Date.

 

Section 4.1.    Organization and Qualification. Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the State of Indiana and has the requisite power and authority to own, operate or lease all of the properties and assets that it purports to own, operate or lease and to carry on its business as it is now being conducted. Buyer is duly licensed or qualified to do business and is in good standing (with respect to jurisdictions that recognize such concept) in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, operated or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified or in good standing would not have, when aggregated with all other such failures, materially and adversely affect Buyer’s ability to perform its obligations under this Agreement or any Ancillary Agreement to which it is a party or prevent the consummation of the transactions contemplated hereby and thereby.

 

Section 4.2.    Authority. Buyer has all necessary power and authority to execute and deliver this Agreement and has all necessary power and authority to execute and deliver the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Buyer of this Agreement and the execution and delivery by Buyer of the Ancillary Agreements to which it is a party, the performance by Buyer of its obligations hereunder and thereunder, and the consummation by Buyer of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary action on the part of Buyer, and no other or further action or proceeding on the part of Buyer (or its equity holders) is necessary to authorize the execution and delivery by Buyer of this Agreement and the Ancillary Agreements to which it is a party, the performance by Buyer of its obligations hereunder and thereunder, and the consummation by Buyer of the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements to which Buyer is a party have been duly executed and delivered by Buyer and, assuming the due and valid authorization, execution and delivery of this Agreement and such Ancillary Agreements by each other party thereto, constitute a valid and binding obligation of Buyer, enforceable against it in accordance with their terms, except that such enforceability: (a) may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar Laws affecting or relating to the enforcement of creditors’ rights generally; and (b) is subject to general principles of equity.

 

Section 4.3.    Consents and Approvals; No Violations.

 

(a)    No Consent of, or filing, declaration or registration with, or notice to any Governmental Entity or any other Person, which has not been received or made, is required to be obtained or made by Buyer for the execution and delivery by Buyer of this Agreement, the execution and delivery by Buyer of the Ancillary Agreements to which it is a party or the consummation Buyer of the transactions contemplated hereby or thereby.

 

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(b)    The execution and delivery by Buyer of this Agreement and the Ancillary Agreements to which it is a party, the performance by Buyer of its obligations hereunder and thereunder, and the consummation by Buyer of the transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the organizational or governing documents of Buyer; (ii) conflict with or result in a violation or breach of any Law applicable Buyer or any of its properties or assets; or (iii) conflict with, result in a violation or breach of, result in the loss of any material benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination, modification or cancellation of or a right of termination, modification or cancellation under, or accelerate the performance required under, any Contract to which Buyer is a party, or by which Buyer or any of its properties or assets is bound.

 

Section 4.4.    Financing. Buyer has the financial capability under its existing credit facility with JP Morgan/Chase to consummate the transactions contemplated by this Agreement, including the payment of the Purchase Price, any other amounts required to be paid by the Buyer or its Affiliates under this Agreement or in connection with the consummation of the transactions contemplated hereby and the payment of related fees and expenses. The Buyer acknowledges that it is not a condition to the Closing or any of its obligations under this Agreement that the Buyer obtain any separate financing with respect to any of the transactions contemplated hereby.

 

Section 4.5.    Litigation. There are no actions, suits, proceedings, Orders or investigations pending or, to the Buyer’s knowledge, threatened against the Buyer, at law or in equity, or before or by any Governmental Entity, which would materially and adversely affect the Buyer’s performance under this Agreement or the consummation of the transactions contemplated hereby.

 

Section 4.6.    Brokers. Neither Buyer nor any of its Affiliates, nor any of their respective officers or directors on behalf of Buyer or any of their respective Affiliates, has employed any financial advisor, broker or finder in a manner that would result in any liability for Seller for any broker’s fees, commissions or finder’s fees in connection with any of the transactions contemplated by this Agreement.

 

Section 4.7.    Solvency. Immediately after giving effect to the transactions contemplated hereby, Buyer shall be solvent and shall: (a) be able to pay its debts as they become due; (b) own property that has a fair saleable value greater than the amounts required to pay its debts (including a reasonable estimate of the amount of all contingent liabilities); and (c) have adequate capital to carry on its business. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated hereby with the intent to hinder, delay or defraud either present or future creditors of Buyer. In connection with the transactions contemplated hereby, Buyer has not incurred, nor plans to incur, debts beyond its ability to pay as they become absolute and matured.

 

ARTICLE 5

COVENANTS

 

Section 5.1.    Cooperation.

 

(a)    Each Seller and Buyer shall use reasonable best efforts to cause the Closing to occur on or prior to January 21, 2022.

 

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(b)    From the date hereof until the Closing Date, upon the terms and subject to the conditions of this Agreement, each Buyer and Seller shall use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done and cooperate with each other in order to do, all things necessary, proper or advisable (including the satisfaction, but not the waiver, of any of the conditions set forth in Article 6 and Article 7, and subject to any applicable Laws) to consummate and make effective the sale, conveyance, assignment, transfer and delivery of the Transferred Assets and the other transactions contemplated in this Agreement. Without limiting the generality of the foregoing:

 

(i)    each of the Parties will (and Seller will cause each of its Affiliates to) give any notices to, make any filings with, and use its reasonable best efforts to obtain any authorizations, consents, and approvals of any third party required for Closing at least two (2) Business Days before the Closing Date;

 

(ii)    Seller and its Affiliates shall use reasonable best efforts to assist Buyer in obtaining the title commitments and title policies in form and substance as set forth in Exhibit F of this Agreement, within the time periods set forth therein, including removing from title any Liens that are not Permitted Liens, and shall provide the title company with any affidavits, memoranda or other assurances reasonably requested by the title company to issue the title policies;

 

(iii)    Representatives of Seller shall use reasonable commercial efforts to (1) prepare the applicable Business data for transfer to Buyer as part of the Services (as defined in the Transition Services Agreement), including through the creation of an “Oracle entity” or an “Oracle location” to so facilitate such transfer of data to Buyer after Closing and (2) otherwise prepare for the provision of Services by Seller under the Transition Services Agreement; and

 

(iv)    to the extent the Seller or the Buyer or any of their respective Affiliates receives a request for information or documentary material from any Governmental Entity with respect to this Agreement or any of the transactions contemplated hereby, such party shall endeavor in good faith to make, or cause to be made, as soon as reasonably practicable and, to the extent permitted by applicable Law, after consultation with the other parties, an appropriate response in compliance with such request.

 

(c)     Each Party will give prompt written notice to the other Party of any material adverse development causing a breach of any of its own representations and warranties in Article 3 and Article 4 above. No disclosure by any Party pursuant to this Section 5.1(c), however, shall be deemed to amend or supplement the Disclosure Schedule or to prevent or cure any misrepresentation, breach of warranty, or breach of covenant.

 

Section 5.2.    Conduct of Business. From the date hereof until the Closing Date, Seller shall use its customary, commercially reasonably efforts to operate the Business in the Ordinary Course of Business, including with respect to its operations, physical facilities, working conditions, insurance policies, and relationships with lessors, licensors, suppliers, customers, and employees, and Seller shall not take any action, or enter into any transaction with respect to the Business that is outside the Ordinary Course of Business that could reasonably be anticipated as having an adverse impact to the Business. Without limiting the generality of the foregoing, the Seller shall, unless the Buyer shall otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned or delayed) or except as described in Schedule 5.2 of the Disclosure Schedule, or as otherwise specifically contemplated by this Agreement:

 

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(a)    operate the Business only in the Ordinary Course of Business (including with respect to the collection of receivables, the payment of payables and the making of capital expenditures);

 

(b)    maintain its books, accounts and records in the usual, regular and ordinary manner, on a basis consistent with prior years, and not make any material change to any of its accounting principles, except as required by GAAP;

 

(c)    maintain its properties, equipment and other assets operated or used in the Business in the same condition as they were on the date of this Agreement, subject to reasonable wear and tear;

 

(d)    pay its debts, Taxes and other obligations in the Ordinary Course of Business;

 

(e)    not transfer any material assets used in the Business (other than sales of inventory in the Ordinary Course of Business); and

 

(f)    not agree to take any action or actions prohibited by any of the foregoing clauses (a) through (e);

 

provided, however, that this Section 5.2 shall not be construed to prohibit (i) any payments to Affiliates or third parties in the Ordinary Course of Business or (ii) performance of or actions taken in respect of the Excluded Liabilities or Excluded Assets.

 

Section 5.3.    Access to Information. From and after the date hereof until the Closing Date, the Seller shall, (i) subject to and in compliance with any obligations of confidentiality, access or non-disclosure provided by applicable Law or contained in any Contracts to which the Seller or its Affiliates is a party or by which the Seller or its Affiliates is bound, provide the Buyer and its accountants, employees, attorneys and other representatives reasonable access to, and permit such Persons to review, during normal business hours and upon reasonable prior written request, the books, Contracts, accounts, records and files with respect to the Business, and (ii) provide such other information to the Buyer and its representatives as they may reasonably request, in each case, which (a) is reasonably necessary to assist the Buyer with integration and transition planning in connection with the transactions contemplated hereby, (b) relates primarily to the Transferred Assets and Assumed Liabilities and (c) is not inconsistent with applicable Law. Notwithstanding the foregoing, the Buyer acknowledges that neither the Seller nor any of its Affiliates shall be obligated to provide to the Buyer any documents or information that are protected by the attorney-client privilege or work product doctrines as determined in the Seller’s reasonable discretion. All requests for information (including discussions with any third party, including Seller’s customers) shall be arranged through Seller’s investment banker, Robert W. Baird & Co.

 

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Section 5.4.    Publicity.

 

(a)    Subject to Section 5.7(c), so long as this Agreement is in effect, none of Buyer, Seller or any of their respective Affiliates shall issue or cause the publication of any press release or other public or industry announcement, statement or acknowledgment with respect to this Agreement, any Ancillary Agreement or any of the transactions contemplated hereby or thereby, except (i) pursuant to Section 5.7(c) or (ii) as may be required by any applicable Law or any applicable rules and regulations of any national securities exchange, stock market or Governmental Entity, in which case the party required to make the announcement, statement or acknowledgment shall allow the other party reasonable time to comment on such announcement, statement or acknowledgment in advance of such issuance.

 

(b)    Seller and Buyer shall, and shall cause their respective Affiliates to, and each shall instruct its and their respective Representatives to, hold in confidence the existence of this Agreement, the Ancillary Agreements, and the terms hereof and thereof, and each such Person shall not disclose any such information to any other Person; provided, however, that each such Person may disclose any such information: (i) that as of the date of this Agreement is, or after the date of this Agreement becomes, generally available to the public other than through a breach by such Person, any of its Affiliates or any of its or their respective Representatives of their respective obligations under this Section 5.4(b); (ii) to its tax, accounting or legal Representatives who have a need to know such information and are informed of the confidential nature of such information; (iii) as required by applicable Law, by any Governmental Entity or under any subpoena, civil investigative demand or other similar process by a court of competent jurisdiction having jurisdiction over such Person; or (iv) with Seller’s and Buyer’s prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned

 

Section 5.5.    Further Assurances; Additional Agreements.

 

(a)    From time to time after the Closing, as and when requested by any party hereto, the other party hereto shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions, and shall provide, or cause to be provided, all such further or other cooperation, in each case as the requesting party may reasonably deem necessary to evidence and effectuate the transactions contemplated by this Agreement, including, as required, to transfer or obtain Permits or provide regulatory notices or such further assurances of Lumos with respect to the TLA. Each party shall bear its own costs and expenses in compliance with this Section 5.5(a) (without waiving rights to indemnification under Article 9 below).

 

(b)    After the Closing, Seller shall promptly transfer or deliver to Buyer cash, checks (which shall be properly endorsed) or other property (including material correspondence) that Seller may receive in respect of any Accounts Receivable, deposits, prepaid expenses, bill for services or other item that constitutes part of the Transferred Assets or relates to the Assumed Liabilities. After the Closing, Buyer shall promptly transfer or deliver to Seller cash, checks (which shall be properly endorsed) or other property (including material correspondence) that Buyer may receive in respect of any deposit, prepaid expense, bill for services or other item that constitutes part of the Excluded Assets or relates to the Excluded Liabilities.

 

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(c)    To the extent not completed by Closing, Seller shall use commercially reasonable efforts after Closing to record with the intellectual property office in each corresponding country a suitable assignment reflecting the June 24, 2019 assignment from Brunswick Corporation to Seller of each item of the Owned Intellectual Property listed in Schedule 2.1(c)(i) to the extent not recorded in the name of Seller. Seller shall deliver to Buyer a copy of each such recorded assignment and evidence of its successful recordation with the intellectual property office in each country. Seller shall bear its own costs and expenses in completing this Section 5.5(c).

 

(d)    Promptly after Closing, (i) Seller and any Affiliate of Seller’s right to use the name “Brunswick Billiards” or derivations thereof as an assumed name or otherwise shall cease and each shall file a termination of such assumed name with the applicable Governmental Entity in a form reasonably acceptable to Buyer; and (ii) Seller shall cooperate with Buyer in Buyer’s efforts to make assumed name filing with respect to the trade name “Brunswick Billiards” and in connection with the assignment of vehicle titles included as a Transferred Asset.

 

Section 5.6.    Non-Competition; Non-Solicitation; Non-Disparagement.

 

(a)    Seller agrees that, commencing on the Closing Date and ending on the three (3) year anniversary of the Closing Date, Seller shall not own, manage, operate or otherwise engage in any business that actually and directly competes with the Business as currently conducted anywhere in the world (together, a “Competing Business”); provided, however that nothing in this Section 5.6(a) shall preclude Seller from owning up to three percent (3%) of any publicly traded Person engaged in a Competing Business.

 

(b)    For a period commencing on the Closing Date and ending on the three (3) year anniversary of the Closing Date, Seller shall not solicit or hire any Hired Employee or any other employee of Buyer and its Affiliates with whom Seller has come into contact during the negotiation and consummation of the transactions contemplated herein, or encourage any Hired Employee or any other employee of Buyer and its Affiliates to leave such employment or hire any Hired Employee or any other employee of Buyer and its Affiliates who has left such employment; provided, however, that nothing in this Section 5.6(b) shall prevent Seller from hiring any employee whose employment has been terminated by Buyer or any of its Affiliates for a period of at least sixty (60) days prior to such solicitation or hiring or who responds to a general mass solicitation of employment not specifically directed to the Hired Employees or any other employees of Buyer and its Affiliates.

 

(c)    Each of Seller and Buyer agrees that it will not, and will cause its Affiliates not to, make or publish, verbally or in writing, any statements concerning the other party or any of its Affiliates or any of their respective Representatives which statements are or reasonably may be construed as being injurious or inimical to the best interests of the other party or any of its Affiliates or any of their respective Representatives, including statements alleging that the other party or any of its Affiliates or any of their respective Representatives have acted improperly, illegally or unethically or have engaged in business practices which are improper, illegal or unethical; provided, however, that such restrictions shall not apply to any confidential communications with any Governmental Entity (including communications made in the course of any governmental investigation) or in the event of any Proceeding under this Agreement. For the avoidance of doubt, the requirements of this Section 5.6(c) shall only apply to employees of Seller, Buyer, and their respective Affiliates, while such employees remain employed by Seller, Buyer or any applicable Affiliate of either of them, and only while any such employee is acting in his or her official capacity.

 

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(d)    Each of Seller and Buyer acknowledges that the restrictions contained in this Section 5.6 (i) are reasonable and necessary to protect the legitimate interests of the other party and (ii) constitute a material inducement to each party to enter into this Agreement and consummate the transactions contemplated hereby. The covenants contained in this Section 5.6 and each provision hereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction.

 

Section 5.7.    Confidentiality.

 

(a)    From and after the date hereof: (i) Seller shall, and shall cause its Affiliates to, and shall instruct its and their respective Representatives to, hold in confidence any and all confidential, proprietary and non-public information and materials, whether in written, verbal, graphic or other form, concerning Buyer, any of its Affiliates, the Business or the Transferred Assets (collectively, “Buyer Confidential Information”), except that Seller shall not have any obligation under this Section 5.7 with respect to any Buyer Confidential Information that (A) as of the date of this Agreement is, or after the date of this Agreement becomes, generally available to the public other than through a breach by Seller, any of its Affiliates or any of its or their respective Representatives of their respective obligations under this Section 5.7, or (B) is provided to Seller or any of its Affiliates by a third party that was not known to the receiving party to be bound by any duty of confidentiality to Buyer or any of its Affiliates; and (ii) Buyer shall, and shall cause its Affiliates to, and shall instruct its and their respective Representatives to, hold in confidence any and all confidential proprietary and non-public information and materials, whether in written, verbal, graphic or other form, concerning Seller, any of its Affiliates, the Excluded Business or any other business of Seller (collectively, “Seller Confidential Information”), except that Buyer shall not have any obligation under this Section 5.7 with respect to any Seller Confidential Information that (A) as of the date of this Agreement is, or after the date of this Agreement becomes, generally available to the public other than through a breach by Buyer, any of its Affiliates or any of its or their respective Representatives of their respective obligations under this Section 5.7, or (B) is provided to Buyer or any of its Affiliates by a third party that was not known to the receiving party to be bound by any duty of confidentiality to Seller or any of its Affiliates.

 

(b)    Notwithstanding the foregoing, no party shall be in breach of this Section 5.7 as a result of any disclosure of Buyer Confidential Information or Seller Confidential Information, as applicable, that is required by applicable Law or that is required by any Governmental Entity or under any subpoena, civil investigative demand or other similar process by a court of competent jurisdiction having jurisdiction over such party; provided, however, that such party shall give advance notice of such compelled disclosure to the other party, and shall cooperate with the other party in connection with any efforts to prevent or limit the scope of such disclosure; and provided further, that such party shall disclose only that portion of such Buyer Confidential Information or Seller Confidential Information, as applicable, which such party is advised by its counsel is legally required to be disclosed.

 

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(c)    For the avoidance of doubt, the Seller acknowledges that, under applicable securities Laws and regulations, the signing of this Agreement will require Buyer to file a Form 8-K under Item 1.01 thereof (and Seller agrees not to publicly disclose the transactions hereunder until Buyer has filed such Form 8-K), and the closing of the transactions contemplated hereby will require that Buyer file a Form 8-K under Item 2.01 thereof. Seller also acknowledges that Buyer will issue a press release with respect to both the signing of this Agreement (in the form attached hereto as Exhibit H) and the Closing (which Closing press release shall be shared with Seller prior to its release for Seller’s reasonable review and comment), each on the date of such event or within a few days thereafter. Except as provided in the immediately preceding sentences, neither Buyer nor Seller may issue any press release or public announcement regarding the transactions contemplated hereunder without the prior written consent of the other party hereto, such consent not to be unreasonably conditioned, withheld or delayed.

 

Section 5.8.    Employment Matters.

 

(a)    Before the Closing, Buyer offered employment to all Business Employees in the United States, commencing immediately after the Closing (other than the Business Employees set forth on Schedule 5.8(a) of the Disclosure Schedule) on terms (which terms include annual salary, bonus, benefits and other compensation) that are substantially similar in the aggregate to those in place with respect to such Hired Employees immediately prior to the Closing. Buyer covenants that, for a period of one (1) year post-Closing, Buyer shall not materially change the terms of employment for any Hired Employee in a manner that adversely effects such Hired Employee.

 

(b)    Buyer will provide the Hired Employees the right to participate in employee benefit plans, programs and arrangements as maintained by Buyer or any Affiliate of Buyer from time to time (the “Buyer Employee Benefit Plans”) on the same basis and upon the same terms, conditions and limitations as employees of Buyer similarly situated, including recognition of such Hired Employees’ status as new hires, subject to any necessary transition period and subject to any applicable plan provisions, contractual requirements or requirements of applicable Law. All matters of eligibility for coverage or benefits under any Buyer Employee Benefit Plan shall be determined in accordance with the provisions of such Buyer Employee Benefit Plan.

 

(c)    For notices and payments related to events occurring prior to or on the Closing, Seller shall be responsible for any notices required to be given to Business Employees pursuant to any applicable Laws, including the WARN Act, COBRA, ERISA, the Affordable Care Act and/or Section 402(f) of the Code, and for any payments or benefits required pursuant to such Laws or on account of violation of any requirement of such Laws. For notices and payments related to events occurring after the Closing, Buyer shall be responsible for any notices required to be given to any Hired Employees pursuant to any applicable Laws, including the WARN Act, COBRA, ERISA, the Affordable Care Act and/or Section 402(f) of the Code, and for any payments or benefits required pursuant to such Laws or on account of violation of any requirement of such Laws.

 

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(d)    Any claims of Business Employees and their eligible beneficiaries and dependents for medical, dental, prescription drug, life insurance, disability benefits or other welfare benefits (“Welfare Benefits”) that are incurred on or prior to the Closing Date will be the responsibility of Seller and the applicable Employee Plan, and the resulting Liabilities will constitute Excluded Liabilities. Any claims of Hired Employees and their eligible beneficiaries and dependents for Welfare Benefits that are incurred after the Closing Date will be the responsibility of Buyer to the extent provided under the provisions of the applicable Buyer Employee Benefit Plan. Notwithstanding Section 5.8(b), to the extent that any Hired Employee participates in any Buyer Employee Benefit Plan that is health or other group welfare benefit plan following the Closing Date, Buyer shall use reasonable commercial efforts (i) to cause any pre-existing conditions or limitations, eligibility waiting periods or required physical examinations under any such Buyer Employee Benefit Plan to be waived with respect to the Hired Employees and their eligible dependents, to the extent waived under the corresponding plan in which the Hired Employee participated immediately prior to the Closing Date; and (ii) to cause any deductibles and co-pays paid by any such Hired Employee under any Employee Plan in the plan year in which the Closing Date occurs shall be credited towards deductibles and co-pays under the corresponding Buyer Employee Benefit Plan.

 

(e)    After the Closing, Buyer shall be solely responsible for all claims, costs, charges, Liabilities, and termination and severance benefits (if any), of any nature incurred with respect to the employment or termination of any Hired Employee where the events or conditions underlying such claims, costs, charges, Liabilities and benefits occur after the Closing, provided, however, that in no event shall Buyer or any of its Affiliates be responsible for any Excluded Liabilities.

 

Section 5.9.    Cessation of Operations. Seller shall cease operations of the Business at the Bristol Facility at 12:00 AM Central Time on the Closing Date.

 

Section 5.10.    Mutual Commercial Cooperation. From and following the Closing and for a period of three (3) years thereafter, each of Seller and Buyer shall use their commercially reasonable efforts to promote, encourage and facilitate the sale of the other party’s products to its customers (including the Business’s customer Costco Wholesale Corporation with respect to the Seller’s non-Business fitness equipment and the Seller’s fitness customers (including the U.S. military) with respect to the products of the Business).

 

Section 5.11.    Wrong Pockets. From and after the Closing, if (a) the Seller or any of its Affiliates receives or collects any funds relating to any Accounts Receivable or any of the other Transferred Asset, the Seller or its Affiliates shall within five (5) Business Days remit such funds to Buyer, or (b) Buyer or any of its Affiliates receives or collects any funds relating to an Excluded Asset, Buyer or its Affiliates shall within five (5) Business Days remit such funds to the Seller.

 

Section 5.12.    Employee Leasing. If mutually determined prudent prior to Closing (including in order to prevent a delay to Closing due to any employee on-boarding issues), Buyer and Seller shall enter into a commercially reasonable employee leasing agreement, which agreement shall lease a select number of Seller employees to Buyer for a reasonable period.

 

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Section 5.13.    Integration Calls. From January 4, 2022, until the earlier of (i) the Closing or (ii) the valid termination of this Agreement in accordance with Article 8, each of Buyer and Seller shall cause its appropriate business personnel and counsel (if appropriate) to participate in no less than one (1) telephone call each Business Day during normal business hours to facilitate Buyer’s integration process and the timely fulfillment of Closing conditions.

 

ARTICLE 6

CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER

 

The obligation of the Buyer to consummate the transactions contemplated hereby on the Closing Date is subject to the satisfaction (or waiver in writing by the Buyer) of the following conditions at or prior to the Closing:

 

Section 6.1.    Accuracy of Representations and Warranties. Other than the Seller Specified Representations (which shall be true and correct in all respects), each of the representations and warranties of the Seller contained in Article 3 shall be true and correct, subject to immaterial breaches which do not affect the ordinary operations of the Business, on and as of the Closing Date, in each case as if made on and as of the Closing Date (except for the representations and warranties that address matters only as of a particular date or only with respect to a specific period of time, which need only be true and correct as of such date or with respect to such period).

 

Section 6.2.    Performance of Covenants. The Seller shall have performed and complied in all material respects with the covenants and obligations contained in this Agreement required to be performed or complied with by it at or prior to the Closing.

 

Section 6.3.    No Order. On the Closing Date, no Proceeding against Buyer shall be pending before any court or quasi-judicial or administrative agency of any federal, state, local, or non-U.S. jurisdiction where an injunction, judgment, order, decree or ruling is sought by the complaining party which seeks to prevent consummation of any of the transactions contemplated by this Agreement or could reasonably cause any of the transactions contemplated by this Agreement to be rescinded following consummation, and no such injunction, judgment, order, decree or ruling shall be actually in effect as of Closing.

 

Section 6.4.    Seller’s Certification. Seller shall have delivered to Buyer a certificate to the effect that each of the conditions specified above in Sections 6.1 through 6.3 have been satisfied in all respects and that, to Knowledge of the Buyer, since the date of this Agreement, there shall not have occurred any Material Adverse Effect.

 

Section 6.5.    Closing Deliveries. The Buyer shall have received the items to be delivered by the Seller pursuant to Section 2.7(a).

 

Notwithstanding the foregoing, the Buyer may not rely on the failure of any condition set forth in this Article 6 to be satisfied if such failure (i) resulted from an action or inaction on the part of the Seller or its Affiliates requested or consented to by the Buyer or (ii) was caused by the failure of the Buyer to act in good faith or comply with its obligations under this Agreement.

 

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ARTICLE 7

CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER

 

The obligation of the Seller to consummate the transactions contemplated hereby on the Closing Date is subject to the satisfaction (or waiver in writing by the Seller) of the following conditions at or prior to the Closing:

 

Section 7.1.    Accuracy of Representations and Warranties. Other than the Buyer Specified Representations (which shall be true and correct in all respects), each of the representations and warranties of the Buyer contained in Article 4 shall be true and correct, subject to immaterial breaches which do not affect Buyer’s ability to consummate the transactions contemplated hereunder, on and as of the Closing Date, in each case as if made on and as of the Closing Date (except for the representations and warranties that address matters only as of a particular date or only with respect to a specific period of time, which need only be true and correct as of such date or with respect to such period).

 

Section 7.2.    Performance of Covenants. The Buyer shall have performed and complied in all material respects with the covenants and obligations contained in this Agreement required to be performed or complied with by it at or prior to the Closing.

 

Section 7.3.    No Order. On the Closing Date, no Proceeding against Seller shall be pending before any court or quasi-judicial or administrative agency of any federal, state, local, or non-U.S. jurisdiction where an injunction, judgment, order, decree or ruling is sought by the complaining party which seeks to prevent consummation of any of the transactions contemplated by this Agreement or could reasonably cause any of the transactions contemplated by this Agreement to be rescinded following consummation, and no such injunction, judgment, order, decree or ruling shall be actually in effect as of Closing.

 

Section 7.4.    Buyer’s Certification. Buyer shall have delivered to Seller a certificate to the effect that each of the conditions specified above in Sections 7.1 through 7.3 have been satisfied in all respects and that, to Knowledge of the Buyer, since the date of this Agreement, there shall not have occurred any Material Adverse Effect.

 

Section 7.5.    Closing Deliveries. The Seller shall have received all of the items to be delivered by the Buyer pursuant to Section 2.7(b).

 

Notwithstanding the foregoing, the Seller may not rely on the failure of any condition set forth in this Article 7 to be satisfied if such failure (i) resulted from an action or inaction on the part of the Buyer or its Affiliates requested or consented to by the Seller or (ii) was caused by the failure of the Seller to act in good faith or comply with its obligations under this Agreement.

 

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ARTICLE 8

TERMINATION

 

Section 8.1.    Termination of Agreement. Notwithstanding anything to the contrary contained herein, this Agreement may be terminated at any time before the Closing only as follows:

 

(a)    Mutual Consent. By mutual written consent of the Seller and the Buyer;

 

(b)    Material Breach. By written notice from either the Seller or the Buyer, as the case may be, to the other party if the non-terminating party is in breach of any representation, warranty or covenant of such non-terminating party in this Agreement such that the conditions of such non-terminating party set forth in Article 6 or 7, as applicable, would not be satisfied, and such breach has continued until the earlier to occur of (x) five (5) days after delivery of written notice by the terminating party to such non-terminating party specifying such breach or (y) one (1) Business Day prior to the date set forth in Section 8.1(d); provided, however, that the terminating party is not then in breach of this Agreement such that its conditions set forth in Article 6 or 7, as applicable, cannot be satisfied;

 

(c)    Insolvency. By written notice from either the Seller or the Buyer, as the case may be, to the other party if, at any time prior to the Closing, the non-terminating party makes an assignment for the benefit of creditors, has any part of its properties or assets subjected to seizure, attachment or foreclosure, files a voluntary petition in bankruptcy or has an involuntary bankruptcy petition filed against it;

 

(d)    Failure to Close. By the Seller or the Buyer, if at any time after the expiration of two (2) Business Days from the scheduled date of the Closing fixed in accordance with Section 2.6 the conditions to the obligations of the other party to consummate the transactions contemplated hereby (other than any conditions to be satisfied through the making of payments or the delivery of documents at the Closing) shall have been satisfied, but the other party shall have failed or refused to consummate such transactions;

 

(e)    Expiration Date. By written notice from either the Seller or the Buyer to the other party if the Closing shall not have occurred prior to the 5:00 p.m. Chicago, Illinois time on February 22, 2022 (which date may be extended by the mutual written agreement of the Seller and the Buyer); provided, however, that a party may not terminate this Agreement pursuant to this Section 8.1(e) if the failure of the Closing to occur on or before such date is attributable in whole or in any substantial part to the breach by such party of any covenant or obligation of such party contained in this Agreement; and provided further, that in the case of termination by the Buyer, evidence satisfactory to the Seller shall have been delivered that the Buyer would have been able to make delivery and payment of the Closing Purchase Price had the Seller satisfied all of the conditions set forth in Article 6 and had the Closing occurred on or prior to such date; or

 

(f)    Consummation Prohibited. By written notice from either the Seller or the Buyer to the other party if consummation of the transactions contemplated hereby would violate any non-appealable final Order of a Governmental Entity having competent jurisdiction.

 

Section 8.2.    Effects of Termination.

 

(a)    If this Agreement is terminated pursuant to Section 8.1, all further obligations of the parties to this Agreement shall terminate without further liability of any party to another, except that this Section 8.2, Section 5.7 and Article 11 shall survive any termination; provided, however, that nothing herein shall relieve a breaching or defaulting party for liability arising from any breach or default by it that take place prior to the date of termination of this Agreement.

 

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(b)    If this Agreement is terminated for any reason, each party shall return or cause to be returned to the other party all Buyer Confidential Information and Seller Confidential Information, as applicable, and all other documents, materials and records (including records in electronic form) obtained from such other party or such other party’s Affiliates or any other Person acting on such other party’s behalf in connection with the transactions contemplated hereby and will continue to keep confidential and not use or disclose any information not returned because it is not included or reflected in any documents, materials or records.

 

ARTICLE 9

SURVIVAL AND INDEMNIFICATION

 

Section 9.1.    Survival of Representations and Covenants.

 

(a)    Subject to Section 9.1(b), Section 9.1(c), Section 9.1(d), and Section 9.1(e), the representations and warranties made by Seller and Buyer in this Agreement shall survive the Closing until the date that is eighteen (18) months from the Closing Date (the “General Survival Date”).

 

(b)    Subject to Section 9.1(e) and notwithstanding anything to the contrary contained in Section 9.1(a), the Seller Specified Representations shall survive for the sixty (60) month period from the Closing Date.

 

(c)    Subject to Section 9.1(e) and notwithstanding anything to the contrary contained in Section 9.1(a), the Buyer Specified Representations shall survive for the sixty (60) month period from the Closing Date.

 

(d)    Subject to Section 9.1(e) and notwithstanding anything to the contrary contained in Section 9.1(a), the Seller Environmental Representations shall survive for the thirty-six (36) month period from the Closing Date.

 

(e)    All covenants and agreements of the parties hereto contained herein which require action or inaction after the Closing shall survive the Closing for the period of limitations provided for under applicable Law for a breach of contract.

 

(f)    The limitations set forth in Section 9.1(a), Section 9.1(b), Section 9.1(c) and Section 9.1(d) shall not apply in the event of fraud.

 

Section 9.2.    Indemnification by Seller. From and after the Closing (but subject to the limitations set forth in this Article 9), Seller shall hold harmless and indemnify each of the Buyer Indemnitees from and against any Damages which are suffered or incurred by any of the Buyer Indemnitees which result from:

 

(a)    a breach of any representation or warranty made by Seller in this Agreement;

 

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(b)    a breach of any covenant or other obligation of or to be performed by Seller in this Agreement; and

 

(c)    any Excluded Liability.

 

Section 9.3.    Indemnification by Buyer. From and after the Closing (but subject to the limitations set forth in this Article 9), Buyer shall hold harmless and indemnify each of the Seller Indemnitees from and against any Damages which are suffered or incurred by any of the Seller Indemnitees which result from:

 

(a)    any breach of any representation or warranty made by Buyer in this Agreement;

 

(b)    any breach of any covenant or other obligation of or to be performed by Buyer in this Agreement; and

 

(c)    any Assumed Liability.

 

Section 9.4.    Limitations.

 

(a)    Basket.

 

(i)    Seller shall not be required to make any indemnification payment pursuant to Section 9.2(a) until such time as the total amount of all Damages that have been directly or indirectly suffered or incurred by any one or more of the Buyer Indemnitees, or to which any one or more of the Buyer Indemnitees has or have otherwise directly or indirectly become subject, exceeds One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00) (the “Deductible”) in the aggregate. Once the total amount of such Damages exceeds the Deductible, then the Buyer Indemnitees shall be entitled to be indemnified and held harmless against Damages in excess of the Deductible, subject to the other limitations set forth herein.

 

(ii)    The limitation set forth in Section 9.4(a)(i) shall not apply (and shall not limit the indemnification or other obligations of Seller) in the event of fraud, or with respect to any claim to the extent covered by the title insurance policy to be provided pursuant to Exhibit F with respect to the Owned Real Properties.

 

(b)    Liability Cap for Breaches of Representations and Warranties. (i) under Section 9.2(a) with respect to inaccuracies in or breaches of the representations and warranties (other than Seller Specified Representations or the Seller Environmental Representation) shall be limited to an aggregate amount equal to Escrow Amount (the “General Cap”); or (ii) under Section 9.2(a) with respect to inaccuracies in or breaches of Seller Specified Representations and the Seller Environmental Representation shall be limited to an aggregate amount equal to Six Million Four Hundred Thousand Dollars and 00/100 ($6,400,000.00) (the “Ultimate Cap”).

 

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(c)    Insurance. If any Damages sustained by an Indemnified Party are covered by an insurance policy or an indemnification, contribution or similar obligation of another Person, such Indemnified Party shall use reasonable efforts to collect such insurance proceeds or indemnity, contribution or similar payments. If any Indemnified Party receives such insurance proceeds or indemnity, contribution or similar payments prior to being indemnified with respect to such Damages under this Article 9, the payment under this Article 9 with respect to such Damages shall be reduced by the amount of such insurance proceeds or indemnity, contribution or similar payments, less reasonable out-of-pocket expenses incurred in connection with such recovery. If any Indemnified Party receives such insurance proceeds or indemnity, contribution or similar payments after being indemnified with respect to some or all of such Damages and such process or indemnity, contribution or similar payment would constitute duplicative recovery, such Indemnified Party shall pay to the applicable Indemnitor the amount of such insurance proceeds or indemnity, contribution or similar payment, less reasonable out-of-pocket expenses incurred in connection with such recovery, up to the aggregate amount paid by the Indemnitor to the applicable Indemnified Party with respect to such Damages.

 

(d)    Qualifications. For purposes of Section 9.2 and Section 9.3, with respect to each representation and warranty contained in this Agreement that is subject to a “materiality,” “material,” “in all material respects” or similar qualification, any such qualification shall be disregarded for purposes of determining (i) whether a breach of, or inaccuracy in, such representation or warranty has occurred and (ii) the amount of any Damages that is subject to indemnification hereunder.

 

Section 9.5.    Express Representations. Each party agrees that an Indemnified Party’s rights to indemnification contained in this Article 9 relating to the representations, warranties, covenants and obligations of a party are part of the basis of the bargain contemplated by this Agreement; and such representations, warranties, covenants and obligations, and the rights and remedies that may be exercised by the Indemnified Party with respect thereto, shall not be waived, limited or otherwise affected by or as a result of (and the Indemnified Party shall be deemed to have relied upon such representations, warranties, covenants or obligations notwithstanding) any knowledge on the part of any Indemnified Party or any of its Representatives, regardless of whether obtained through any investigation by any Indemnified Party or any Representative of any Indemnified Party or through disclosure by the Indemnitor or any other Person (other than by specific inclusion in the Disclosure Schedule), and regardless of whether such knowledge was obtained before or after the execution and delivery of this Agreement. The Indemnified Party understands, acknowledges and agrees that (i) it has not relied on the omission or absence of any information in its evaluation of the transactions contemplated hereby, (ii) it has relied solely and exclusively on the representations and warranties of the Indemnitor expressly and specifically set forth in Article 3 or Article 4 of this Agreement, as applicable, (iii) such representations and warranties by the Indemnitor specifically set forth in Article 3 or Article 4 of this Agreement, as applicable, constitute the sole and exclusive representations and warranties of the Indemnitor to the Indemnified Party in connection with this Agreement and the transactions contemplated by this Agreement and the Indemnitor has not made and is not making any representations or warranties whatsoever, express or implied, except as provided in Article 3 or Article 4 of this Agreement, as applicable and (iv) all other representations and warranties of any kind or nature, whether express or implied, oral or written, except to the extent and as expressly and specifically covered by a representation and warranty made by the Indemnitor set forth in Article 3 or Article 4 of this Agreement, as applicable, are not and have not been relied upon by the Indemnified Party and are expressly and specifically disclaimed and shall not form the basis of any claim by the Indemnified Party for breach of representation or warranty, an extra-contractual claim or otherwise, and none of the Indemnitor, or any of the Indemnitor’s Affiliates or any other Person will have or be subject to any liability to the Indemnified Party or any other Person with respect thereto.

 

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Section 9.6.    Indemnification Claim Procedure.

 

(a)    Third-Party Claims. The party making a claim under this Article 9 is referred to as the “Indemnified Party” and the party against whom such claims are asserted under this Article 9 is referred to as the “Indemnitor”. If any Indemnified Party receives notice of the assertion or commencement of any Proceeding made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement (a “Third-Party Claim”) against such Indemnified Party with respect to which the Indemnitor is obligated to provide indemnification under this Agreement, the Indemnified Party shall give the Indemnitor prompt written notice thereof. The failure to give such prompt written notice shall not, however, relieve the Indemnitor of its indemnification obligations, except and only to the extent that the Indemnitor is actually and materially prejudiced by reason of such failure. Such notice by the Indemnified Party (the “Third-Party Claim Notice”) shall describe the Third-Party Claim in reasonable detail, shall include copies of all written evidence thereof and all correspondence from or to such third party (or its Representatives) related to the matter giving rise to such Third-Party Claim (provided, that any confidential or privileged materials shall not be required to be disclosed by the Indemnified Party other than as needed for the defense of the Third-Party Claim, and the Indemnitor agrees to enter into a commercially reasonable confidentiality and non-use agreement with the Indemnified Party with respect to such information) and shall indicate the estimated amount, if reasonably practicable, of the Damages that has been sustained by the Indemnified Party. The Indemnitor shall have the right to participate in or, by giving written notice (the “Election to Defend”) to the Indemnified Party within twenty (20) Business Days after Indemnitor’s receipt of the Third-Party Claim Notice in which the Indemnitor shall acknowledge its indemnification obligations with respect to the Third-Party Claim subject to the terms and conditions of this Article 9 to the extent such Third-Party Claim is proved to be valid, to assume and control the defense of any Third-Party Claim at the Indemnitor’s expense and by the Indemnitor’s own counsel, which shall be reasonably acceptable to the Indemnified Party, and the Indemnified Party shall cooperate in good faith in such defense; provided, however, that the Indemnitor shall not be permitted to assume the defense of a Third-Party Claim if the matter that is the subject of the Third-Party Claim seeks as the primary cause of action the imposition of an equitable or injunctive remedy against the Indemnified Party or any of its Affiliates. In the event that the Indemnitor assumes the defense of any Third-Party Claim, subject to Section 9.6(b): (i) it shall have the right to take such action as, in its reasonable and good faith business judgment, it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third-Party Claim in the name and on behalf of the Indemnified Party; and (ii) the Indemnified Party shall have the right, at its own cost and expense, to participate in the defense of any Third-Party Claim with counsel selected by it subject to the Indemnitor’s right to control the defense thereof. If the Indemnitor chooses not to defend any Third-Party Claim by failure to deliver on a timely basis the Election to Defend or is otherwise not entitled to defend any Third-Party Claim, the Indemnified Party may defend against such Third-Party Claim and, subject to Section 9.6(b), consent to the entry of any judgment or enter into any settlement with respect to the Third-Party Claim in any manner it may deem appropriate, and thereafter seek indemnification pursuant to this Article 9 for Damages resulting from such Third-Party Claim. In addition, if the Indemnitor has assumed defense of the Third-Party Claim and if a potential or actual conflict of interest shall exist, then the Indemnified Party shall be entitled to retain one separate legal counsel, and to be reimbursed for the reasonable fees and expenses of such counsel. Seller and Buyer shall cooperate with each other in all reasonable respects in connection with the defense of any Third-Party Claim, including reasonable access, upon reasonable advance written notice and on a mutually convenient basis during normal business hours, to personnel and the right to examine and copy any accounts, documents or records, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, as may be reasonably requested for the defense and preparation of the defense of such Third-Party Claim (provided, that any confidential or privileged materials shall not be required to be disclosed by the Indemnified Party other than as needed for the defense of the Third-Party Claim, and the Indemnitor agrees to enter into a commercially reasonable confidentiality and non-use agreement with the Indemnified Party with respect to such information).

 

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(b)    Settlement of Third-Party Claims. Notwithstanding any other provision of this Agreement, neither the Indemnitor nor the Indemnified Party shall enter into settlement of, or consent to the entry of any judgment with respect to, any Third-Party Claim without the prior written consent of the other (which consent shall not be unreasonably withheld, conditioned or delayed), except as otherwise provided in this Section 9.6(b). If the Indemnitor and the applicable third party wish to settle, or consent to the entry of any judgment with respect to, a Third-Party Claim and the proposed settlement or judgment (i) does not include any monetary damages payable by or impose any injunctive or other equitable relief against the Indemnified Party or any restriction on the operations of the Indemnified Party, (ii) does not involve a finding or admission of any violation of any Law, and (iii) also provides, in a form reasonably acceptable to the Indemnified Party, for the unconditional release of the Indemnified Party from all liabilities in connection with such Third-Party Claim, without prejudice, the Indemnitor shall give written notice to that effect to the Indemnified Party. If the Indemnified Party fails to consent to such proposed settlement or judgment within ten (10) days after its receipt of such notice, the Indemnified Party may continue to contest or defend such Third-Party Claim and in such event, the maximum liability of the Indemnitor as to such Third-Party Claim shall not exceed that which would have been payable by Indemnitor hereunder had such proposed settlement or judgment been effected. If the Indemnified Party fails to consent to such proposed settlement or judgment and also fails to continue to contest or defend such Third-Party Claim, the Indemnitor may settle or consent to the entry of any judgment with respect to the Third-Party Claim upon the terms set forth in such proposed settlement or judgment.

 

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(c)    Direct Claims. Any claim by an Indemnified Party on account of any Damages which does not result from a Third-Party Claim (a “Direct Claim”) shall be asserted by the Indemnified Party giving the Indemnitor prompt written notice thereof. The failure to give such prompt written notice shall not, however, relieve the Indemnitor of its indemnification obligations, except and only to the extent that the Indemnitor is actually and materially prejudiced by reason of such failure. Such notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all written evidence thereof (provided, that any confidential or privileged materials shall not be required to be disclosed by the Indemnified Party other than as needed for the defense of the Third-Party Claim, and the Indemnitor agrees to enter into a commercially reasonable confidentiality and non-use agreement with the Indemnified Party with respect to such information) and shall indicate the estimated amount, if reasonably practicable, of the Damages that has been sustained by the Indemnified Party. The Indemnitor shall have thirty (30) days after its receipt of such notice to respond in writing to such Direct Claim. During such thirty (30)-day period, the Indemnified Party shall allow the Indemnitor and its professional advisors to investigate the matter or circumstance alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and the Indemnified Party shall assist the Indemnitor’s investigation by giving such information and assistance (including reasonable access, upon reasonable advance written notice and on a mutually convenient basis during normal business hours, to personnel and the right to examine and copy any accounts, documents or records) as the Indemnitor or any of its professional advisors may reasonably request (provided, that any confidential or privileged materials shall not be required to be disclosed by the Indemnified Party other than as needed for the defense of the Third-Party Claim, and the Indemnitor agrees to enter into a commercially reasonable confidentiality and non-use agreement with the Indemnified Party with respect to such information). If the Indemnitor does not so respond within such thirty (30)-day period, the Indemnitor shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.

 

Section 9.7.    Exclusive Remedy. Except: (a) for equitable relief, to which any party hereto may be entitled pursuant to this Agreement and (b) for Damages resulting from fraud, after the Closing the indemnification provided in this Article 9 shall be the sole and exclusive remedy of the parties for any breach of this Agreement or otherwise relating to the subject matter of this Agreement and the transactions contemplated herein. Anything herein to the contrary notwithstanding, no breach of any representation, warranty or covenant contained herein shall give rise to any right on the part of any party, after the consummation of the transactions contemplated hereby, to rescind this Agreement or any of the transactions contemplated hereby.

 

Section 9.8.    Manner of Payment.

 

(a)    Upon a final determination of an indemnification claim made by the Indemnified Party, whether such final determination is by reason of (i) the mutual agreement of the Indemnifying Party and the Indemnitor or (ii) a final judgment of a court of competent jurisdiction which is either not subject to any further appeals or the time for giving notice to take such appeals has lapsed and no such notice was filed (each a “Final Determination”), then the amount of the Damages stated in such claim or otherwise agreed upon or awarded, and due and payable by the Indemnitor, shall be paid by the Indemnitor within ten (10) Business Days after the date of such Final Determination.

 

(b)    Any amounts owing to the Buyer Indemnitees pursuant to Section 9.2(a) shall be recoverable in the following order of priority: (i) first, from the Escrow Account to the extent available; then (ii) second, from Seller.

 

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(c)    Within five (5) Business Days after the General Survival Date, the Seller and the Buyer shall deliver to the Escrow Agent joint written instructions instructing the Escrow Agent to pay by wire transfer of immediately available funds to the Seller the then remaining balance of the Escrow Account minus the aggregate amount of all Damages under each unresolved claim made in accordance with Section 9.6 of this Agreement that remains outstanding and unresolved as of the General Survival Date.

 

Section 9.9.    Characterization of Indemnity Payments. Except as otherwise required by applicable Law, any payment made pursuant to this Article 9 shall be treated, for Tax purposes, as an adjustment to the Purchase Price.

 

Section 9.10.    No Duplication. Any Damages for which any Person is entitled to indemnification under this Article 9 shall be determined without duplication of recovery by reason of the state of facts giving rise to such Damages constituting a breach of more than one representation, warranty or covenant. No Person shall be entitled to indemnification under this Agreement for any Damages arising from a breach of any representation, warranty or covenant set forth herein (and the amount of any Damages incurred in respect of such breach shall not be included in the calculation of any limitations on indemnification set forth herein) if such Damages would constitute a duplicative payment of any amount that is included as a Current Liability in the Closing Net Working Capital as provided in Article 2.

 

ARTICLE 10

TAX MATTERS

 

Section 10.1.    Transfer Taxes. Except as provided in Exhibit F (with respect to the Owned Real Properties): (a) all transfer, documentary, value added sales, use, stamp, registration and other such Taxes and all conveyance fees, recording charges, and other fees and charges (including any penalties and interest) resulting from the transactions contemplated by this Agreement (collectively, the “Transfer Taxes”) shall be borne fifty percent (50%) by the Seller and the remaining fifty percent (50%) by Buyer, (b)  Seller shall (at its own expense) file any required Transfer Tax filings, provided that (i) Buyer shall have the right to review any material Transfer Tax filings and no such material Transfer Tax filings shall be filed without the consent of Buyer, such consent not to be unreasonably withheld, conditioned or delayed, and (ii) Buyer shall join in any such filing if required by applicable Law. Each of Buyer and Seller shall also provide the other with any exemption certificate or its equivalent to support any reasonable exemption from sales taxes claimed in respect of the Transferred Assets. For the avoidance of doubt, in the event of a conflict between this Section 10.1 and the provisions of Exhibit F, the provisions of Exhibit F shall control.

 

Section 10.2.    Cooperation. Buyer and Seller shall reasonably cooperate, and shall cause their respective Affiliates, and their Affiliates’ respective officers, employees, agents, auditors and representatives reasonably to cooperate, in preparing and filing all returns, reports and forms relating to Taxes, including maintaining and making available to each other all records reasonably necessary in connection with the required payment of Taxes imposed on or attributable to the Business or any Transferred Asset and in resolving all disputes and audits with respect to all taxable periods relating to Taxes Relating to the Business or a Transferred Asset. Each of Buyer and Seller recognize that the other may need access, from time to time, after the Closing Date, to certain accounting and Tax records and information held by it, to the extent such records and information pertain to events occurring prior to the Closing Date; therefore, Buyer and Seller each agree to allow the other party and its respective agents, auditors and representatives, at times and dates mutually acceptable to the parties hereto, to inspect, review and make copies of such records as such party or its agents, auditors or representatives may deem reasonably necessary or appropriate from time to time, such activities to be conducted during normal business hours and at the expense of the requesting party.

 

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Section 10.3.    Bulk Sales Laws. Notwithstanding anything to the contrary herein (including any provision that is intended to override any conflicting provisions), the parties hereby waive compliance with the provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Transferred Assets to Buyer; it being understood that any Liabilities arising out of the requirements and provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction which would not otherwise constitute Excluded Liabilities shall be treated as Excluded Liabilities.

 

Section 10.4.    Tax Refunds and Credits. All refunds and credits of Taxes which are Excluded Assets or Excluded Liabilities or which otherwise relate to a taxable period or portion thereof ending on or prior to the Closing Date shall be for the benefit of Seller, and Buyer shall (and shall cause its Affiliates to) promptly (but no later than five (5) days after receipt or availability thereof) pay to Seller the amount of any such refund or credit (net of any reasonable costs or expenses directly attributable thereof) that is received by Buyer (or any of its Affiliates), in immediately available funds.

 

Section 10.5.    Nondisclosure. Notwithstanding anything to the contrary in this Agreement, neither Seller nor any of its Affiliates shall be required to disclose or otherwise make available to any Person any income Tax Returns of Seller or any such Affiliate, including any income Tax Return relating to any affiliated or similar group of which Seller or such Affiliate is or was a member.

 

Section 10.6.    Hired Employees. As and to the extent applicable, the parties hereto shall follow the “standard” procedure of Internal Revenue Service Revenue Procedure 2004-53 (2004-2 C.B. 320) in respect of any Hired Employees.

 

ARTICLE 11

MISCELLANEOUS

 

Section 11.1.    Amendment and Waiver. Any provision in this Agreement to the contrary notwithstanding, changes in or additions to this Agreement may be made, and compliance with any covenant or provision set forth herein may be omitted or waived only by a written instrument signed by the parties hereto. Any waiver or consent may be given subject to satisfaction of conditions stated therein and any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure or delay on the part of any party in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder.

 

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Section 11.2.    Entire Agreement; Third Party Beneficiaries. This Agreement (including the Disclosure Schedule and the other documents and instruments referred to herein) and the Ancillary Agreements: (a) constitute the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof and thereof; provided, however, that the Confidentiality Agreement is hereby amended to automatically terminate in its entirety, effective as of the Closing; and (b) except as expressly provided herein, are not intended to confer upon any Person other than the parties hereto and their respective successors and permitted assigns any rights, benefits or remedies whatsoever. In the event of any inconsistency between the statements in the body of this Agreement and those in the Disclosure Schedule and the other documents and instruments referred to herein (other than an exception set forth as such in the Disclosure Schedule with respect to a representation or warranty), the statements in the body of this Agreement will control.

 

Section 11.3.    Assignment; Binding Effect; No Third-Party Rights. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by any party hereto, in whole or in part (whether by operation of law or otherwise), without the prior written consent of the other party hereto; provided, however, that without such prior written consent Buyer may assign any or all its rights and/or delegate any or all of its obligations under this Agreement or any Ancillary Agreement to any Affiliate of Buyer so long as Buyer is not relieved of any liability or obligations hereunder; provided, further, that without such prior written consent, but subject to at least five (5) Business Days advance written notice, Seller may assign any or all of its rights and/or delegate any or all of its obligations under this Agreement or any Ancillary Agreement to any direct or indirect acquirer (or any Affiliate thereof) of substantially all or all of the assets of the or a majority of the equity of Seller or its parent companies, regardless of the form of the transaction.

 

Section 11.4.    Specific Performance and Other Remedies. The parties hereto agree that if any of the provisions of this Agreement were not to be performed as required by their specific terms or were to be otherwise breached, irreparable damage will occur to the other party, no adequate remedy at law would exist and damages would be difficult to determine. Accordingly, the parties hereto acknowledge that the parties hereto shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches of this Agreement by the other party or to specific performance of the terms hereof, without posting any bond and without proving that monetary damages would be inadequate, in addition to any other remedy at law or equity.

 

Section 11.5.    Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall nevertheless remain in full force and effect and shall in no way be affected, impaired or invalidated. Upon such determination that any term, provision, covenant or restriction is invalid, illegal, void, unenforceable or against regulatory policy, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties hereto as closely as possible in an acceptable manner in order that the transactions contemplated by this Agreement are consummated as originally contemplated to the greatest extent possible.

 

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Section 11.6.    Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed to have been duly given and effective: (a) on the date of transmission, if such notice or communication is sent via facsimile or electronic mail and receipt is confirmed, at the facsimile number or email address specified in this Section 11.6, prior to 5:00 p.m., Central Time, on a Business Day; (b) on the first Business Day after the date of transmission, if such notice or communication is sent via facsimile at the facsimile number specified in this Section 11.6 (i) at or after 5:00 p.m., Central Time, on a Business Day or (ii) on a day that is not a Business Day; (c) when received, if sent by nationally recognized overnight courier service; or (d) upon actual receipt by the party to whom such notice is required or permitted to be given. The address for such notices and communications (unless changed by the applicable party by like notice) shall be as follows:

 

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(A)         if to Seller, to:                      Life Fitness, LLC

10601 Belmont Avenue

Franklin Park, IL 60131

Attention:          Kelly M. Kaiser

Facsimile:          (847) 288-3709

Email:                  Kelly.Kaiser@lifefitness.com

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

Vedder Price P.C.

222 N. LaSalle St., Suite 2400

Chicago, IL 60601

Attention:         Joseph Kye

Facsimile:         (312) 609-5005

Email:         jkye@vedderprice.com

 

(B)         if to Buyer, to:                    Indian Industries, Inc.

817 Maxwell Avenue

Evansville, Indiana 47711

Attention:         Stephen Wawrin

Telephone:         (812) 467-4414

Facsimile:         (812) 467-1300

Email: swawrin@escaladesports.com

 

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

Burke, Warren, MacKay & Serritella, PC

330 N. Wabash Ave. – Suite 2100

Chicago, IL 60611

Attention:         Francis Emmons

Telephone:         (312) 840-7047

Facsimile:         (312) 840-7900

Email:         femmons@burkelaw.com

 

Section 11.7.    Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware (including in respect of the statute of limitations or other limitations period applicable to any state Law claim, controversy or dispute) that apply to agreements made and performed entirely within the State of Delaware, without regard to the conflicts of law provisions thereof or of any other jurisdiction. Each party hereto agrees and acknowledges that the application of the Laws of the State of Delaware is reasonable and appropriate based upon the parties’ respective interests and contacts with the State of Delaware.

 

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Section 11.8.    Submission to Jurisdiction. Each party hereto, for itself and its successors and assigns, irrevocably agrees that any Proceeding arising out of or relating to this Agreement or any of the transactions contemplated hereby shall be brought and determined in the Circuit Court of Cook County, Illinois (or, if subject matter jurisdiction in that court is not available, in any appropriate state or federal courts in Cook County in the State of Illinois), that each such party shall not bring any Proceeding arising out of or relating to this Agreement or any of the transactions contemplated hereby in any court other than the aforesaid courts, and each party hereto, for itself and its successors and assigns and in respect to its property, hereby irrevocably submits with regard to any such Proceeding, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each party, for itself and its successors and assigns, hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any such Proceeding: (a) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason other than the failure to lawfully serve process; (b) that it or its property is exempt or immune from jurisdiction of such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise); and (c) that (i) such Proceeding in any such court is brought in an inconvenient forum; (ii) the venue of such Proceeding is improper; and (iii) this Agreement, any of the transactions contemplated hereby or the subject matter hereof or thereof, may not be enforced in or by such courts.

 

Section 11.9.    Construction. The parties hereto have jointly participated in the negotiation and drafting of this Agreement. In the event of an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumptions or burdens of proof shall arise favoring any party hereto by virtue of the authorship of any of the provisions of this Agreement. Each defined term used in this Agreement has a comparable meaning when used in its plural or singular form. Each gender-specific term used herein has a comparable meaning whether used in a masculine, feminine or gender-neutral form. As used in this Agreement, the word “including” and its derivatives means “without limitation” and its derivatives, the word “or” is not exclusive and the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. The section headings contained in this Agreement are inserted for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. Reference in this Agreement to any legal term for any Law, action, remedy, method of judicial proceeding, legal document, legal status, court, official or any other legal concept or thing shall in respect of any jurisdiction other than the United States be deemed to include that legal concept or thing in that other jurisdiction which most nearly approximates that United States legal term (in addition to any other analogous legal concept or term specified). Any capitalized terms used in any schedule (including the Disclosure Schedule) or exhibit attached hereto and not otherwise defined therein shall have the meanings set forth in this Agreement (or, in the absence of any ascribed meaning, the meaning customarily ascribed to any such term in Seller’s industry or in general commercial usage). Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such Person. All references to dollars (or the symbol “$”) contained herein shall be deemed to refer to United States dollars. Time is of the essence in the performance of the parties’ respective obligations under this Agreement. The Disclosure Schedules are qualified in their entirety by reference to specific provisions of this Agreement and do not constitute, and shall not be deemed as constituting, representations, warranties or covenants of Seller. Nothing in the Disclosure Schedules shall be deemed adequate to disclose an exception to another representation or warranty herein unless the applicability of such exception is reasonably apparent on the face of such Disclosure Schedule. Without limiting the generality of the foregoing, the mere listing (or inclusion) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other items itself). The parties intend that each representation, warranty or covenant contained herein shall have independent significance. The mere inclusion of an item in the Disclosure Schedules as an exception to a representation or warranty shall not be deemed an admission or representation that such item represents an exception or a material fact, event or circumstance or an admission of any liability or obligation to any Person or that such item has or would reasonably be expected to have a Material Adverse Effect. The information set forth in the Disclosure Schedules is disclosed solely for the purposes of this Agreement, and no information set forth in the Disclosure Schedules shall be deemed to be an admission by any party hereto to any third party of any matter whatsoever, including of any violation of Law or any breach of any Contract. If any party has breached any representation, warranty or covenant contained herein any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) that the party has breached will not detract from or mitigate the fact that the parties in breach of the first representation, warranty or covenant. Any document or item will be deemed “delivered,” “provided” or “made available” by the Seller, within the meaning of this Agreement if such document or item is included in the virtual dataroom hosted by Intralinks (Project Shark // ID 11810485) and accessible by Buyer by 9:00 a.m. Eastern Time on the third (3rd) Business Day immediately preceding the date of this Agreement, subject to Buyer’s due diligence requests made during such three (3)-Business Day period.

 

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Section 11.10.    Expenses. Except as otherwise explicitly provided for herein, each of the parties hereto will bear all legal, accounting, and other fees and expenses incurred by it or on its behalf in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Notwithstanding anything otherwise contained herein, Buyer and Seller shall each be responsible for fifty percent (50%) of the costs of the Escrow Account.

 

Section 11.11.    Counterparts. This Agreement may be executed in any number of counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed an original, but all of which shall be considered one and the same agreement, and shall become effective when each party has received counterparts signed by each of the other parties, it being understood and agreed that delivery of a signed counterpart signature page to this Agreement by facsimile transmission, by electronic mail in portable document format (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document shall constitute valid and sufficient delivery thereof.

 

Section 11.12.    Waiver of Jury Trial. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS. EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT: (I) NO REPRESENTATIVE OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF ANY SUCH PROCEEDING; (II) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (III) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY; AND (IV) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.12.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be executed on the date first set forth above.

 

	
			 

				
			SELLER:

			 

			Life Fitness, LLC

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				
			/s/ KELLY KAISER 

				
			 

			
	
			 

				
			 

				
			Name: Kelly Kaiser

			Title:   Vice President, General Counsel and Secretary

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	 	 	 	 
	 	
			BUYER:

			 

			Indian Industries, Inc. d/b/a Escalade Sports

				 
	 	 	 	 
	 	By:	/s/ STEPHEN R. WAWRIN	 
	 	 	Name:  Stephen Wawrin

			Title:    Chief Financial Officer	 

 

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