Document:

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4)

and 230.406

 

 

	EXECUTION VERSION
	Dated 24 March 2015
	
         

         

         

         

        TELEFONICA S.A. 

        

        (the Vendor)

         

        and

         

        HUTCHISON 3G UK INVESTMENTS LIMITED

        

        (the Purchaser)

         

        and

         

        HUTCHISON 3G UK HOLDINGS (CI) LIMITED

        

        (MergeCo)

         

	
         

         

         

        AGREEMENT

         

        for the sale and purchase of the entire
        issued share capital of

        

        TELEFONICA EUROPE PLC

         

	 	 

 

 

    

     

    

 

 

 

Table of Contents

 

ContentsPage

 

	1   DEFINITIONS AND INTERPRETATION	1
	2   SALE AND PURCHASE OF SHARES	21
	3   CONDITIONS TO COMPLETION AND COMPLETION	22
	4   VENDOR’S WARRANTIES AND FURTHER OBLIGATIONS	41
	5   PURCHASER AND MERGECO WARRANTIES AND FURTHER OBLIGATIONS	44
	6   UPSIDE INTEREST SHARING	64
	7   MISCELLANEOUS PROVISIONS	64
	SCHEDULE 1  THE COMPANY	73
	SCHEDULE 2A  SUBSIDIARIES	74
	SCHEDULE 2B  JV COMPANIES	86
	SCHEDULE 2C NEW PERIMETER COMPANIES	90
	SCHEDULE 3 WARRANTIES	93
	SCHEDULE 4 COMPLETION OBLIGATIONS	111
	SCHEDULE 5 LIMITATIONS	114
	SCHEDULE 6 LIST OF INDIVIDUALS WITH KNOWLEDGE	120
	SCHEDULE 7  UPSIDE SHARING	122
	SCHEDULE 8 NET DEBT WORKING CAPITAL ADJUSTMENT	126
	SCHEDULE 9 NET DEBT REFERENCE SCHEDULE	136
	SCHEDULE 10 PROFORMA FINANCIAL INFORMATION	137
	SCHEDULE 11 EBITDA DEFINITION	138
	SCHEDULE 12 WORKING CAPITAL REFERENCE SCHEDULE	139
	SCHEDULE 13 AGREED FORM DOCUMENTS	140
	SCHEDULE 14 DATA ROOM INDEX	141
	SCHEDULE 15 PROPERTIES	142
	SCHEDULE 16 REGISTERED OWNED IPR	143
	SCHEDULE 17 KEY CONTRACTS	144
	SCHEDULE 18 CAPITAL EXPENDITURE REFERENCE SCHEDULE	145
	SCHEDULE 19 BALANCE SHEET MAPPING	146

 

    

    

    

 

 

THIS AGREEMENT is dated 24 March
2015 and made between:

 

		(1)	TELEFONICA S.A., a company incorporated in Spain having its registered office at Gran Via
número 28, 28013 Madrid, Spain (the “Vendor”);

 

		(2)	HUTCHISON 3G UK INVESTMENTS LIMITED, a company incorporated in England and Wales having
its registered office at Hutchison House, 5 Hester Road, Battersea, London, SW11 4AN (the “Purchaser”); and

 

		(3)	HUTCHISON 3G UK HOLDINGS (CI) LIMITED, a company incorporated in the Cayman Islands having
its registered office at Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1 -1104, Cayman Islands (“MergeCo”).

 

RECITALS

 

		1.	The Vendor is the legal and beneficial owner of the entire issued share capital of the Company,
but for one share in the Company which is held by Telefonica Capital S.A.

 

		2.	The Vendor has agreed to sell or procure the sale of and the Purchaser has agreed to purchase and
pay for the Shares on the terms and conditions contained in this Agreement.

 

		3.	The Purchaser is wholly indirectly owned by Hutchison Whampoa Limited. MergeCo is at the date hereof
wholly indirectly owned by Hutchison Whampoa Limited.

 

		4.	Hutchison Whampoa Limited has agreed to guarantee the obligations of the Purchaser and MergeCo
under this Agreement in accordance with the Purchaser Guarantee.

 

IT IS AGREED as follows:

 

		1	DEFINITIONS AND INTERPRETATION

 

		1.1	In this Agreement, unless the context otherwise requires:

 

Affiliate means, in respect
of a company, any subsidiary or holding company from time to time of that company, any subsidiary from time to time of any such
holding company or subsidiary and any entity in which such a subsidiary or holding company has any controlling or jointly controlling
equity interest;

 

Agreed Pensions Amount means
an amount agreed between the Vendor and the Purchaser;

 

Approved Bank means a financial
institution which is a bank or a subsidiary of a bank or a financial institution and which itself has (or the bank or the financial
institution which is its holding company has) a rating for its long term unsecured and non credit-enhanced debt obligations of
BBB or higher by Standard & Poor’s Rating Services or Baa2 or higher by Moody’s Investors Service Limited or a
comparable rating from an internationally recognized credit rating agency;

 

Assigned IPR means the Intellectual
Property Rights registered in the name of O2 Holdings Limited or Telefonica UK (excluding any Registered Owned IPR), and all unregistered
Intellectual Property Rights owned by the Group (i) subsisting in any materials to which such registered Intellectual Property
Rights have been applied prior to the date of the Brand Carve Out; and (ii) subsisting in such registered Intellectual Property
Rights, together with the goodwill associated with such Intellectual Property Rights;

 

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Auctions Rules means the
rules laid down by the Secretary of State for the Home Department to which Telefonica UK is subject in relation to its bid for
one or more Emergency Services contracts to be procured under the Emergency Services Mobile Communications Programme;

 

Beacon Agreements means
the network sharing agreements entered into between Telefonica UK (or any Group Companies or Excluded Companies, where applicable),
and/or Vodafone (or members of the Vodafone Group) or CTIL including the Framework Agreement, the Managed Network Services Agreement,
the Master Services Agreements, the Contribution Agreements, the Shareholders’ Agreement(s), the Committed Loan Facility
and the Unilateral Demand Loan Facility;

 

Bonus Scheme Statement has
the meaning given to it in clause 5.3.6(C)(1);

 

Bonus Scheme means the retention
bonus offered to certain employees of Group Companies in connection with the transaction contemplated by this Agreement;

 

Brand Carve Out means the
transfer of the Assigned IPR to the Vendor or a member of the Retained Group, including termination, on or before Completion, of
the Telefonica Group Cost Sharing Agreement and the UK Group Trade Mark Licence as described in clause 3.8, in accordance with
the Reorganisation Steps Paper under assignments and transfers in the agreed form;

 

Breach, in relation to a
Warranty, means any instance of the Warranty, when made or given, being untrue or inaccurate in any respect;

 

Business Day means any day
on which banks are open generally for business in Hong Kong, London and Madrid, excluding Saturdays and Sundays;

 

Business IPR means all Intellectual
Property Rights which have been used in the 12 months prior to Completion, or at Completion are used, in relation to the business
of any Group Company;

 

CAPEX means such capital
expenditure as is incurred on the acquisition of either fixed assets (tangible and intangible) or in respect of the upgrading of
fixed assets with a useful life extending beyond any relevant taxable year and includes advance payments to fixed asset suppliers
and investments in fixed assets;

 

[***];

 

Carphone Warehouse Agreement
means the Carphone Warehouse trading agreement entered into between Telefonica UK and The Carphone Warehouse Limited on 1 March
2012;

 

Cash means, as of the relevant
date, with respect to the Company, on a consolidated basis and without duplication, the cash and cash equivalents (in any event,
as defined under IFRS) and marketable securities (only if they can be readily converted into cash in a maximum of 30 days) as derived
from the underlying books and records of the Company, less Trapped Cash;

 

Ceasing Pensions Employers
means Telefonica Global Technology S.A., Telefonica Digital Limited and O2 Online Limited;

 

[***];

 

Company means Telefonica
Europe plc, details of which are set out in Schedule 1;

 

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Companies Act means the
Companies Act 2006;

 

Competing Business means
the provision of retail or wholesale (either as a network operator, mobile virtual network operator or reseller) communications
services, including mobile telephony services, fixed telephony services, mobile broadband services and/or fixed broadband services
in all or part of the United Kingdom;

 

Competition Authority means
the UK Competition and Markets Authority and/or UK Secretary of State;

 

Completion means completion
of the sale and purchase of the Shares in accordance with this Agreement;

 

Completion Accounts shall
mean the Purchaser Completion Schedules to be prepared and adjusted in accordance with Schedule 8;

 

Completion Accounts Date
means the last day of the month in which the Conditions are fulfilled or waived (as the case may be);

 

Completion Date means the
date of completion of the sale and purchase of the Shares in accordance with this Agreement;

 

Completion Net Debt means
the calculation of the Net Debt at the Completion Accounts Date as determined in accordance with Schedule 8;

 

Conditions means the conditions
set out in clause 3.1 and referred to in clause 3.2;

 

Confidential Information
means the Group Confidential Information and the Retained Group Confidential Information;

 

Consumer Credit Companies
means each of giffgaff Limited, [***] and Telefonica UK;

 

Corporation Tax means UK
corporation Tax and any other Tax levied on the income, profits or gains of a company;

 

CTIL means Cornerstone Telecommunications
Infrastructure Limited, a company incorporated in England and Wales with registered number 08087551;

 

Debt means, as of the relevant
date of determination with respect to the Company, on a consolidated basis and without duplication:

 

		(a)	the outstanding principal of and premium and/or penalties (if any) and all accrued and unpaid interest
in respect of indebtedness for borrowed money;

 

		(b)	any obligations that are required to be classified and accounted for as a finance lease for financial
reporting purposes in accordance with IFRS, and the amount of indebtedness represented by such obligations will be the capitalised
amount of such obligation at the time any determination thereof is to be made as determined in accordance with IFRS including,
for the avoidance of doubt, liabilities related to the Macquarie Agreements;

 

		(c)	all Debt of other persons secured by a lien, mortgage, pledge, encumbrance or charge of any kind
on any asset of the Group, whether or not such Debt is assumed;

 

		(d)	the Pensions Related Amount;

 

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		(e)	financial obligations evidenced by notes, bonds, debentures, loan stock or similar instruments
whether convertible or not, including those incurred in connection with the acquisition of property, assets or businesses;

 

		(f)	to the extent not otherwise included in this definition, the mark to market effect (positive or
negative) of all financing related interest rate, foreign exchange and other derivative instruments to which a party is participant
(or with respect to which a party has rights and/or obligations), as if they are to be terminated on Completion, and any costs
and fees related to the termination of such instruments;

 

		(g)	obligations in respect of dividends declared or other income distributions or capital distributions
payable to shareholders of a Group Company;

 

		(h)	unpaid fees with respect to carve out costs and group rationalisation costs, and the transaction
contemplated by this Agreement, including for the avoidance of doubt the Pre-Completion Reorganisation;

 

		(i)	the Debt of any other entity (including any partnership in which such person is a general partner)
to the extent a Group Company is liable therefor as a result of such Group Company’s ownership interest in or other relationship
with such entity, except to the extent the terms of such Debt provide that such Group Company is not liable therefor;

 

		(j)	any amounts due or payable to or receivable from any member of the Retained Group in respect of
any surrender of losses or other Group Tax Relief or any Group Tax Arrangement, (which shall be a positive number if in aggregate
there is a net payable balance and a negative number if in aggregate there is a net receivable balance);

 

		(k)	obligations under sale and leaseback transactions;

 

		(l)	payables to suppliers (i) with invoices aged more than 90 days from the invoice date; (ii) with
invoices aged more than 60 days and up to and including 90 days from the invoice date, unless such payables are to suppliers with
payment terms of 90 days or fewer and included in the List of 90-Day Suppliers in the agreed form; or (iii) with invoices that
are overdue except to the extent of any amount of the payables that is subject to a good faith dispute that has been notified to
the supplier and to the Purchaser;

 

		(m)	obligations under any other working capital management arrangements executed for the purposes of
obtaining financing excluding payment terms agreed with suppliers without explicit financial cost and excluding any sale of receivables
that would be permitted under clause 3.22.2;

 

		(n)	the outstanding principal amount in respect of receivables sold or discounted to the extent that
there is recourse to any Group Company;

 

		(o)	liabilities relating to Factoring Payables;

 

		(p)	provisions for decommissioning and asset retirement obligations and other onerous lease provisions;

 

		(q)	the Excess Lloyds Debt, provided that no other amounts payable or repayable on the Lloyds Notes
or Lloyds Subordinated Notes shall constitute Debt;

 

		(r)	any obligation related to O2 delisting; and

 

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		(s)	any management fees, brand fees, fees for services provided by Telefonica Global Roaming GmbH under
the roaming service agreement dated on 5 December 2009 (as amended from time to time) and any other similar fees or recharges imposed
by the Retained Group with respect to matters that are not related to the operations of the Group,

 

excluding any Repayment Debt;

 

Debt Repayment Amount means
the sum required to repay the Repayment Debt in accordance with clause 5.3.9(4) and paragraph 3 of Schedule 4;

 

Digital Mobile means Digital
Mobile Spectrum Limited a company incorporated in England and Wales with registered number 08247385;

 

Digital Products means digital
products or solutions that are currently commercialised by the Group or are intended to be commercialised by any Group Company
at Completion, excluding TUGo (being (i) Smart Steps, (ii) Risk Management (aka JetSetMe), (iii) Security Hub (aka Consumer Hub
or O2 Protect), (iv) International Favourites, International Extras and Calling Card, (v) World Chat, (vi) Cloud Service Broker,
and (vii) any additional digital products or solutions as notified by the Vendor to the Purchaser);

 

Digital Products Costs means
the costs associated with the relevant Digital Products, including headcount costs, headcount related costs (including travel and
expenses, mobile costs, vehicles), contractors, supplier, hosting, operation and maintenance costs as well as traffic costs. Development
costs incurred before the Digital Products Transition Period will not be included in the calculation of Digital Products Costs.
However, if, following Completion irrecoverable cost (whether in the form of development costs, commitments to third parties, capital
expenditure, operating expenditure or otherwise) (“Irrecoverable Cost”) is incurred, with the Company’s
prior written consent after Completion, in order to continue providing the Digital Products during the Digital Products Transition
Period, such Irrecoverable Cost will be fully included in the rechargeable costs;

 

Digital Products Transition
Period means the twelve (12) month period following Completion;

 

Directors means those listed
as such in Schedule 1, Schedule 2A, Schedule 2B and/or Schedule 2C (as replaced from time to time);

 

Disclosed means fairly disclosed
in the Disclosure Letter, the Virtual Data Room or the Physical Data Room in a manner and in such detail as to enable the Purchaser
to make an informed and proper assessment of the nature and scope of the matter disclosed;

 

Disclosure Letter means
the letter dated the same date as this Agreement from the Vendor to the Purchaser disclosing exceptions to the Warranties together
with all documents and information attached to it;

 

Dispute means any suit,
action, proceedings and/or any dispute or difference which may arise out of or in connection with or which may relate in any way
to any of the Transaction Documents (including any suit, action, proceedings, dispute or difference relating to the formation,
interpretation or performance of any of the Transaction Documents) and Disputes shall be construed accordingly;

 

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Documentation means all
readable or computer or other machine readable data, specifications, input and output formats, algorithms, file structures, architecture
diagrams, process flows, source code (where owned by the Retained Group), object code and technical and operational documentation;

 

EBT means the O2 Share Ownership
Trust (formerly the mmO2 Share Ownership Trust) established by a trust deed dated 14 November 2001 and made between mmO2 plc and
Computershare Trustees (C.I.) Limited and subsequently amended by a Deed of Amendment dated 21 July 2005, incorporating the Third
Generation Sub Fund which was established by a Deed dated 2 March 2005 and made between mmO2 plc and Hill Samuel Offshore Trust
Company Limited and subsequently amended by a Deed of Amendment dated 2 August 2011;

 

Employee Journeys Document
means the Employee Journey document contained at document reference 4.10.5.4 of the Virtual Data Room;

 

Employer Debt Regulations
means The Occupational Pension Schemes (Employer Debt) Regulations 2005;

 

Encumbrance means any mortgage,
charge, pledge, lien, assignment, hypothecation, security interest, title retention or other security agreement or right of third
parties or an agreement or obligation to create any of the foregoing;

 

England RFU Agreement means
the partnering agreement entered into between Rugby Football Union and Telefonica UK dated 29 March 2012;

 

[***];

 

[***];

 

[***];

 

Excess Lloyds Debt means
(i) if between the date of this Agreement and 31 December 2015 one of Standard & Poor’s, Moody’s or Fitch Group
indicates to the Purchaser that the Lloyds Notes and Lloyds Subordinated Notes would be treated as debt, the excess of (A) the
aggregate of the outstanding principal and any accrued interest on the Lloyds Notes and the Lloyds Subordinated Notes on the Completion
Accounts Date over (B) £250,000,000 or (ii) if no such indication is given to the Purchaser, zero;

 

Excluded Activities means
the activities that are, or have been at any time prior to Completion, conducted by the Excluded Companies or by the Group in utilising
the Excluded Assets;

 

Excluded Assets means the
assets that are envisaged to be carved out of the Group prior to Completion, in accordance with the Reorganisation Steps Plan,
together with any New Spectrum;

 

Excluded Companies means
the companies that are envisaged to be transferred out of the Pre-Sale Group prior to Completion, in order to effect the creation
of the Group in accordance with the Reorganisation Steps Plan, together with Wayra;

 

Excluded Documents means
the following documents in the Virtual Data Room:

 

		(a)	4.6.6.2.16.1 (Amendment 2 TUK-TIWS IP Transit);

 

		(b)	4.6.6.2.16.2 (Amendment 1 TUK-TIWS IP Transit);

 

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		(c)	4.6.6.2.16.3 (TUK TIWS IP Transit Signature Page);

 

		(d)	4.6.6.2.16.4 (TUK TIWS IP Transit);

 

		(e)	4.6.6.2.15.1 (1st Amendment Telefonica UK);

 

		(f)	4.6.6.2.15.2 (2nd Amendment Telefonica UK);

 

		(g)	4.6.6.2.15.3 (3rd Amendment_TUK Signed Only);

 

		(h)	4.6.6.2.15.4 (4th Amendment_TGR-Telefonica UK);

 

		(i)	4.6.6.2.15.5 (5th Amendment TEF UK);

 

		(j)	4.6.6.2.15.6 (Service Agreement TEF UK);

 

		(k)	4.6.6.2.13 (TSA19_M2M and Jasper Platform);

 

		(l)	6.4.4 (Schedule 6 TGR Roaming Financial Settlement);

 

		(m)	6.6.3 (TGT Charges); and

 

		(n)	6.6.4 (Summary of applications of TSA30);

 

Excluded Liability means
(i) any liability (other than a liability to Tax) of any Group Company to the extent incurred or suffered (a) in the course of
conducting the Excluded Activities; or (b) in relation to the Excluded Assets; and (ii) any liabilities of TGT to the extent not
TGT Liabilities;

 

Existing Services Agreement
has the meaning given to it in the TSA;

 

Expiring Property means
(i) any leasehold Property where the lease expires, comes up for renewal or a break clause becomes exercisable at any time after
1 April 2016; and (ii) the Properties notified by the Purchaser to the Vendor, in writing, prior to the date of this Agreement
but excluding seven properties where a break clause has been exercised before the date hereof (and in relation to which the Vendor
shall consult with the Purchaser before extending or renewing the relevant lease);

 

Factoring Payables means
any payables or other liabilities in respect of factoring or other supply chain financing arrangements either owed by a Group Company
to any member of the Retained Group (including Telefonica Factoring S.A.) or pursuant to a focus factoring arrangement under which
there is an explicit financial cost to the relevant Group Company;

 

FCA means the Financial
Conduct Authority and any successor body or bodies to any part thereof;

 

Final Completion Net Debt
means:

 

		(a)	the Purchaser Completion Net Debt, if no notice of disagreement with respect thereto is duly delivered
pursuant to paragraph 3 of Part B of Schedule 8; or

 

		(b)	if such a notice of disagreement is delivered, as agreed by Purchaser and Vendor pursuant to paragraph
4 of Part B of Schedule 8; or

 

		(c)	in the absence of such agreement, as shown in the Independent Accountant’s calculation delivered
pursuant to paragraph 8 of Part B of Schedule 8,

 

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provided that the Final Completion
Net Debt shall be an amount between the Purchaser Completion Net Debt and the Vendor Completion Net Debt;

 

Final Group Structure means
the Group as constituted on page 7 of the Reorganisation Steps Plan;

 

Financial Assets means,
as of the relevant date of determination with respect to the Company on a consolidated basis, and without duplication the handset
leasing receivable with respect to the Macquarie Agreements;

 

Financial Debt means any
obligation (whether present or future, secured or unsecured, as principal or surety or otherwise) for the payment or repayment
of money for or in respect of money borrowed or raised, by whatever means (including acceptances, bills of exchange, securities
and deposits), including any outstanding costs and fees related thereto;

 

FSMA means the Financial
Services and Markets Act 2000;

 

Group means the Company,
the Subsidiaries and the JV Companies provided that for the purposes of the definitions of Cash, Debt, Factoring Payables, Financial
Assets and Trapped Cash, clauses 3.6.7 and 3.6.8 and Warranty 7.3, Group shall exclude Weve and [***];

 

Group Company means the
Company, any of the Subsidiaries and the JV Companies, as the case may be provided that for the purposes of the definitions of
Cash, Debt, Factoring Payables, Financial Assets and Trapped Cash, clauses 3.6.7 and 3.6.8 and Warranty 7.3, Group Company shall
exclude Weve and [***];

 

Group Confidential Information
means any and all information:

 

		(a)	which is used in or otherwise relates to the business, customer, financial or other affairs of
the Group; or

 

		(b)	in respect of which any Group Company is bound by an obligation of confidence to a third party;
or

 

		(c)	which is received or obtained as a result of a party entering into or performing, or which is supplied
by or on behalf of a party in the negotiations leading to, this Agreement;

 

HK Listing Rules means the
Rules Governing the Listing of Securities on the Hong Kong Stock Exchange;

 

HMRC means Her Majesty’s
Revenue and Customs;

 

Hong Kong means the Special
Administrative Region of the People’s Republic of China;

 

Hong Kong Stock Exchange
means The Stock Exchange of Hong Kong Limited;

 

ICTA Affiliate means, in
relation to any party, at any time, any other person which directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, that first party, where “control” has the meaning ascribed to
it in section 840 of the Income and Corporation Taxes Act 1988;

 

IFRS means International
Financial Reporting Standards as adopted by the European Union;

 

Incentive Plans means all
outstanding share incentive, share option, profit sharing, bonus or other incentive arrangements, including employee benefit trusts,
relating to any

 

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employees or other workers or former employees or other former workers of the Group Companies (excluding the JV
Companies);

 

Indemnities means the covenants
to pay referred to in clauses 3.9.5, 4.9.2, 5.3.6(B), 5.4 and 5.11;

 

Indemnity Claim means a
claim under any one or more of the Indemnities;

 

Independent Accountant means
the independent chartered accountant appointed in accordance with paragraph 5 of Part B of Schedule 8, to resolve any dispute arising
in relation to the calculation of the Final Completion Net Debt and/or the Final Completion Working Capital;

 

Initial Purchase Price means
the amount referred to in clause 2.3(1) of this Agreement, which for the avoidance of doubt, shall be subject to adjustment and
the cap referred to in clause 2.3(1) of this Agreement;

 

Intellectual Property Rights
means patents, trade marks, service marks, logos, get-up, trade names, internet domain names, rights in designs, copyright (including
rights in computer software) and moral rights, database rights, rights in know-how and other intellectual property rights, in each
case whether registered or unregistered and including applications for registration, and all rights or forms of protection having
equivalent or similar effect anywhere in the world;

 

Intra Group Agreement means
any binding contract, agreement, licence or commitment between or among any Group Company on the one hand and a member of the Retained
Group on the other hand;

 

Irish MSA means the agreement
for the operation of a mobile virtual network enabler system in the Republic of Ireland between giffgaff Limited and Telefonica
Ireland Limited dated 21 June 2013;

 

Irish TSA means the transitional
services agreement between the Vendor and Telefonica Ireland Limited dated 15 July 2014;

 

JV Companies means the companies
listed in Schedule 2B;

 

Key Contracts means the
contracts listed in Schedule 17;

 

Key Employee means each
of the participants in the “critical, includes UK Board” retention category of the Bonus Scheme;

 

[***];

 

Leakage means the aggregate
amounts resulting from the matters referred to in clause 3.14 but excluding any Permitted Leakage;

 

Lloyds Agreement means the
receivables purchase agreement between, amongst others, Telefonica UK, Device Finance Collections Limited and Lloyds Bank plc dated
12 November 2013;

 

Lloyds Notes means the notes
issued from time to time under the Lloyds Notes Purchase Agreement;

 

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Lloyds Notes Purchase Agreement
means the notes purchase agreement between the Company, Device Collection Limited, Lloyds Bank plc and others dated 13 November
2013;

 

Lloyds Receivables Financing
Agreements means the Lloyds Agreement; the Subordinated Note Issuance Agreement; the deed of amendment and restatement relating
to the master framework agreement and note purchase agreement between the Company (as seller, service agent and collection account
trustee), Lloyds Bank plc (as arranger and facility agent) and others dated 18 November 2014; and all other agreements entered
into by the Company or any other Group Company in connection with the receivables financing arrangements;

 

Lloyds Subordinated Note Issuance
Agreement means the subordinated note issuance agreement between the Company, Device Collection Limited, Lloyds Bank plc and
others dated 12 November 2013;

 

Lloyds Subordinated Notes
means the subordinated notes issued from time to time under the Lloyds Subordinated Note Issuance Agreement;

 

Locked Box Claim means a
claim resulting from the matters referred to in clause 3.14;

 

Long Stop Date means 30
June 2016, provided that where the Condition in clause 3.1.1 has been satisfied but Completion can only occur following compliance
with the terms of a Commitment or Commitments offered and accepted by the Purchaser, a rolling one month extension shall automatically
be granted at the end of each calendar month until the earlier of fulfilment of such Commitment(s) and 30 September 2016;

 

Long Term Incentive Plans
means the Telefonica Performance and Investment Plan, the Telefonica Talent for the Future Share Plan, the Telefonica Global Employee
Share Plan and, save for the Telefonica Restricted Share Plan, any other long term incentive plans operated by the Retained Group;

 

LTIP Amount means the aggregate
of (i) all amounts payable to employees of any Group Company under the Long Term Incentive Plans as a result of the vesting of
awards under them inclusive of any taxation and employee social security (or similar) contributions and (ii) any employer social
security contributions arising in connection with the vesting of such awards under the Long Term Incentive Plans;

 

Macquarie Agreements means
the master rental agreement and a master purchase agreement, in each case, between Macquarie Equipment Finance Limited and Telefonica
UK dated 29 November 2011;

 

Masts means telecommunication
masts consisting of all civil works, leases, passive components and active equipment and documentation as currently operated on
behalf of the Group;

 

Material means, unless otherwise
expressed, material in the context of the business, assets, liabilities or financial condition of the Group taken as a whole and
Materially will be construed accordingly;

 

Material Contract means:

 

		(A)	any current contract, agreement or arrangement to which a Group Company (other than Digital Mobile
or Weve) is party to or bound by:

 

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		(a)	with a revenue or expenditure commitment exceeding £10 million per annum; or

 

		(b)	made otherwise than in the ordinary and usual course of its business or which (whether or not,
it is in the ordinary and the usual course of its business) is unusual or onerous in the context of the business of the Group or
which was entered into other than on arm’s length terms (other than Intra Group Agreements); or

 

		(c)	which confers on the counterparty a right to terminate or has other material adverse consequences
as a result of any change in the control, management or shareholders of such Group Company, except, in the case of termination,
where the relevant goods or services can be immediately replaced without material additional cost and without incurring material
penalties; or

 

		(d)	which has as its object or effect the prevention, restriction or distortion in competition of trade
in any goods or services in any market or territory in breach of applicable competition law; or

 

		(e)	which establishes any guarantee, indemnity, suretyship, assumption of debt, form of comfort or
support (whether or not legally binding) given by a Group Company in respect of the obligations or solvency of any party other
than a Group Company; or

 

		(f)	with an unexpired term of four years or more (including the term of any extension exercisable by
the counterparty without mutual consent) and with a revenue or expenditure commitment exceeding £10 million per annum over
the unexpired term; or

 

		(g)	which contains non-compete, customer or supplier non-solicit or exclusivity restrictions which
have any adverse consequences for any Group Company or any Affiliate of a Group Company; or

 

		(h)	which establishes any joint venture, consortium, legal partnership or profit (or loss) sharing
(outside the ordinary course of business) agreement or arrangement, and

 

		(B)	any current contract, agreement or arrangement to which either Weve or Digital Mobile is party
to or bound by with a revenue or expenditure commitment exceeding £10 million per annum;

 

Material Licences means:

 

		(a)	the Spectrum Access 2100MHz Licence, number 0268310, granted to Telefonica UK on 12 July 2013 by
Ofcom;

 

		(b)	the Spectrum Access 800MHz Licence, number 0943537/1, granted to Telefonica UK on 1 March 2013
by Ofcom; and

 

		(c)	the Public Wireless Network Licence, number 0249663, granted to Telefonica UK on 30 January 2015
by Ofcom;

 

MBNL means Mobile Broadband
Network Limited a company incorporated in England and Wales with registered number 06375220;

 

Net Debt means, without
duplication with respect to the Company, the consolidated Debt less the consolidated Cash less the consolidated Financial Assets;

 

New Perimeter Companies
means the companies listed in Schedule 2C;

 

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New Spectrum means any rights
to use additional spectrum acquired in the period between the date of this Agreement and Completion by any Group Company or any
member of the Retained Group;

 

O2 Brand means O2 Trade
Marks and O2 Brand Elements;

 

O2 Brand Elements has the
meaning given to it in the Transitional Branding Agreement;

 

O2 Trade Marks has the meaning
given to it in the Transitional Branding Agreement;

 

Ofcom means the UK Office
of Communications;

 

Other Irish TSA Services
means the provision of (i) Multimedia Messaging Services; (ii) Email Messaging Service – Telefonica UK; (iii) SOA Access
Gateway; (iv) Email Spam Filtering; (v) Business Products – Purchases from Telefonica UK; (vi) Community Forum SoW; (vii)
Data Storage SoW; and (viii) Amaris;

 

Owned Retained IPR means
Business IPR which is owned by any Group Company, excluding any Assigned IPR;

 

Part 4A FSMA Permission
means a permission given by the FCA under Part 4A of the FSMA;

 

Pension Plan Contribution Amount
means an amount equal to the Agreed Pensions Amount less:

 

		(a)	any deficit contributions paid between the date of this Agreement and Completion in accordance
with the schedule of contributions (as defined in section 227 of the Pensions Act 2004) from time to time in force in respect of
the Telefonica UK Pension Plan; and

 

		(b)	any Section 75 Debts which have been paid between the date of this Agreement and Completion to
the Telefonica UK Pension Plan;

 

Pension Schemes has the
meaning given to it in paragraph 10.1 of Schedule 3;

 

Pensions Related Amount
means the amount which would be payable by Ozone Unify Limited if it were to cease to participate in the Omnibus Section of the
Railways Pension Scheme at Completion, calculated by an actuary appointed to the Railways Pension Scheme failing which an actuary
appointed by the Purchaser, such appointment as agreed by the Vendor;

 

Pensions Trustee means Telefonica
UK Pension Trustee Limited, acting as trustee of the Telefonica UK Pension Plan;

 

Permitted Activity means:

 

		(a)	services to corporate customers with a presence in the United Kingdom and in one or more territories
in which the Telefonica Group operates from time to time, as part of a multi-territory contract with (i) a member of the Telefonica
Group or (ii) a company with whom a member of the Telefonica Group has a multi-territory agreement for the provision of multi-territory
telecommunications services provided that to the extent that a Group Company provides such services to that company as at Completion
pursuant to a binding contract or arrangement the Retained Group shall be restricted from providing such services to that company
until the expiry or termination, if earlier of their agreement or arrangement;

 

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		(b)	data and/or application hosting services where such services and/or applications are hosted outside
the United Kingdom;

 

		(c)	international calling card or equivalent services, provided that such calling card or equivalent
services shall not be sold directly in the United Kingdom by the Vendor or any member of the Telefonica Group;

 

		(d)	IP-telephony services (provided they are not proactively marketed specifically targeting the United
Kingdom market);

 

		(e)	any web-based services (provided they are not proactively marketed specifically targeting to the
United Kingdom market);

 

		(f)	services that are sold by the Telefonica Group outside the United Kingdom to customers of the Telefonica
Group who are not resident in the United Kingdom and who wish to use any of those services they can normally use in another territory;
and

 

		(g)	TokBox and TokBox related activities;

 

Permitted Encumbrance means:

 

		(a)	any Encumbrance which arises in connection with any cash management, netting or set-off arrangement
(or any arrangement for the operation of accounts entered into using a bank’s or financial institution’s standard terms
and conditions for such arrangement) entered into by any Group Company in the ordinary course of business;

 

		(b)	any Encumbrance arising by way of retention of title of goods supplied in the ordinary course of
trade;

 

		(c)	any Encumbrance over cash deposits not exceeding £10,000,000 in aggregate outstanding at
any one time and required by any real property lessor from any Group Company as a deposit for the lease obligations of that Group
Company;

 

		(d)	any Encumbrance constituted by the right of a counterparty under a derivative instrument entered
into by a Group Company to set off or net amounts owed under that derivative instrument;

 

		(e)	any Encumbrance securing taxes and other governmental levies and arising by statute, but only if
the taxes and levies are not overdue; and

 

		(f)	any Encumbrance arising under the terms of a finance lease which constitutes Debt;

 

Permitted Leakage means:

 

		(a)	any matter expressly provided for in the Completion Accounts;

 

		(b)	any matter undertaken at the written request of the Purchaser or with the Purchaser’s written
consent;

 

		(c)	any payments by any Group Company to any Related Party to the extent made in the ordinary course
of business, on arm’s length terms and provided that such sums do not exceed £1,000,000 per day in aggregate; and

 

		(d)	payment of any fees, salaries and bonuses paid to any of the Vendor’s representatives on
the board of each Group Company in accordance with 

 

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the terms of their respective service agreements to the extent that such service
agreement has been Disclosed and that such payments are in the ordinary course of business and provided that such sums do not exceed
£100,000 in aggregate;

 

Phase 2 CMA Reference means
a reference by the United Kingdom Competition and Markets Authority to its chair for the constitution of a group under Schedule
4 to the Enterprise and Regulatory Reform Act 2013;

 

Physical Data Room means
the physical data room managed by the Vendor and its advisers as at midday (UK time) on 20 March 2015, the index to which is set
out in Part B of Schedule 14 and a copy of which is delivered to the Purchaser’s Solicitors on or immediately following the
date hereof;

 

Post-Termination Provisions
means the provisions in clause 7.1 (Announcements), clause 7.2 (Confidentiality), clause 7.4 (Costs and Expenses), clause 7.6 (Whole
Agreement), clause 7.8 (Remedies Cumulative), clause 7.12 (Notices), clause 7.17 (Governing Law) and clause 7.18 (Jurisdiction);

 

Pre-Completion Reorganisation
means the reorganisation pursuant to which the Vendor shall effect the creation of the Group for delivery to the Purchaser at Completion
as set forth in the Reorganisation Steps Plan, including the Brand Carve Out, the TUGo Transfer and the delivery of the TGT Carve
In;

 

Pre-Contractual Matters
will have the meaning ascribed to such term in clause 7.6.2 of this Agreement;

 

Pre-Sale Group means the
Company, the Subsidiaries and the JV Companies and any entity in which the Company has a controlling interest at the date hereof;

 

Properties means the properties
of the Group, certain particulars of which are set out in Schedule 15 and Property means each or any of them;

 

Proportionate Share means
in respect of any of the JV Companies, the proportion that the number of equity shares of such JV Company held by any Group Company
or, as the case may be, any Excluded Company bears to the total number of equity shares of that JV Company in issue as at the date
of this Agreement;

 

Purchase Price Locked Box Fee
means the amount calculated in accordance with clause 3.18;

 

Purchaser Completion Net Debt
means the Purchaser’s calculation of the Net Debt;

 

Purchaser Completion Net Debt
Schedule means a schedule setting forth the Purchaser Completion Net Debt;

 

Purchaser Confidential Information
means any and all information:

 

		(a)	which is used in or otherwise relates to the business, customer, financial or other affairs of
the Purchaser’s Group; or

 

		(b)	in respect of which any member of the Purchaser’s Group is bound by an obligation of confidence
to a third party; or

 

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		(c)	which is received or obtained as a result of a party entering into or performing, or which is supplied
by or on behalf of a party in the negotiations leading to, this Agreement;

 

Purchaser’s Group
means the Purchaser and any of its Affiliates;

 

Purchaser Guarantee means
the guarantee entered into by Hutchison Whampoa Limited on the date hereof in favour of the Vendor;

 

Purchaser’s Solicitors
means Linklaters LLP of One Silk Street, London EC2Y 8HQ;

 

Quartet Services means the
services provided by giffgaff Limited to Telefonica Ireland Limited in relation to the Quartet Mobile Enabler Platform (as referred
to in the Irish TSA);

 

Registered Owned IPR has
the meaning given to it in Warranty 11.2;

 

Related Party means any
member of the Telefonica Group (excluding the Group) or any employee, officer or director of any of the foregoing;

 

Relevant Employees means
together the Relevant Group Company Employees and the Relevant Retained Group Employees (and any person employed or engaged by
a Group Company in the period between the date of this Agreement and Completion in compliance with clause 3.6) and Relevant Employee
is any one of them;

 

Relevant Group Company Employees
means all of those employees employed by a Group Company as at the date of this Agreement who have consistently been wholly or
mainly engaged in providing services to the Group in the 12 months prior to the date of this Agreement;

 

Relevant Retained Group Employees
means all of those employees employed within the Retained Group by the Telefonica Group or Telefonica Digital Limited as at the
date of this Agreement who have consistently been wholly or mainly engaged in providing services to the Group in the 12 months
prior to the date of this Agreement;

 

Reorganisation Steps Plan
means the agreed form steps plan in respect of the Pre-Completion Reorganisation;

 

Repayment Debt means the
amount of Financial Debt owed by the Company to a member of the Retained Group or to a financial institution immediately prior
to Completion, such amount not to exceed £6,000,000,000 in aggregate;

 

Restricted Area means the
United Kingdom;

 

Restricted Period means
the period of 24 months from the date of Completion;

 

Retained Group means the
Vendor and any of its Affiliates;

 

Retained Group Confidential
Information means any and all information:

 

		(a)	which is used in or otherwise relates to the business, customer, financial or other affairs of
the Retained Group; or

 

		(b)	in respect of which any member of the Retained Group was, prior to the date of this Agreement and
remains at the relevant time, bound by an obligation of confidence to a third party; or

 

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		(c)	which relates to the Retained Group and is received or obtained as a result of a party entering
into or performing, or which is supplied by or on behalf of a party in the negotiations leading to, this Agreement;

 

Scheme Employer means an
employer as defined in the Employer Debt Regulations of the Telefonica UK Pension Plan;

 

Section 75 Debt means a
debt arising in respect of the Telefonica UK Pension Plan under section 75 or 75A of the Pensions Act 1995;

 

Senior Leadership Team means
the members of senior management discharging the roles set out in document 4.10.1.10.3.9.4 of the Virtual Data Room;

 

Shareholder Resolution has
the meaning given in clause 3.1.5;

 

Shares means the entire
issued share capital of the Company;

 

[***];

 

[***];

 

[***] Modules means the
[***] related software modules, as described below:

 

		(a)	the Core software module: (Sm2m Managed Connectivity Core). Its principal functions are SIM provisioning,
SIM life cycle management and correlation between data consumption measured in the network and the sum up of DSP data (metering
application level) and DMM;

 

		(b)	the DEM software module: (Sm2m DMM). Its principal functions are Communications Hubs provisioning,
Communications Hubs life cycle management, diagnostic and firmware distribution;

 

		(c)	the Portal software module (Sm2m Web Portal). Its principal function is to expose the functionality
provided by Managed Connectivity and DMM;

 

Sourcing Services Contract
means the contract relating to the Sourcing Services Agreement between Telefonica Global Services GmbH and various third parties;

 

Subsidiaries means the companies
listed in Schedule 2A and Schedule 2C;

 

Tax or taxation has
the meaning given to it in the Tax Deed;

 

Tax Authority means any
tax, revenue or fiscal authority (including HMRC) and any other statutory, governmental, state, provincial or local governmental
authority, body, court, tribunal or official whatsoever (whether of the United Kingdom or elsewhere in the world) competent to
impose, administer or collect any Tax or make any decision or ruling on any matter relating to Tax;

 

Tax Claim means (i) any
claim pursuant to the Tax Deed or (ii) any Tax Warranty Claim;

 

Tax Deed means a deed of
tax covenant to be entered into between the Vendor and the Purchaser in the agreed form;

 

Tax Warranty means any warranty
set out in paragraph 8 of Schedule 3;

 

Tax Warranty Claim means
a claim for a Breach of any one or more of the Tax Warranties;

 

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Telefonica Europe Services
has the meaning given to it in the TSA;

 

Telefonica Group means the
Vendor and its subsidiaries from time to time and Telefonica Group Company shall be construed accordingly;

 

Telefonica Group Cost Sharing
Agreement means the agreement titled “Group Cost Sharing Agreement relating to the O2 Brand” dated 15 October 2007,
between Telefonica UK, O2 Holdings Limited and Affiliates of O2 Holdings Limited;

 

Telefonica Group Services
has the meaning given to it in the TSA;

 

Telefonica Transitional Licence
means the amendment agreement in the agreed form to be entered into on Completion between the Vendor and Telefonica UK that amends
the Trademarks User Licence Agreement dated 1 July 2014 between the Vendor and Telefonica UK;

 

Telefonica UK means Telefonica
UK Limited;

 

Telefonica UK Pension Plan
means The Telefonica UK Pension Plan, which is governed by a trust deed and rules dated 28 February 2013;

 

[***];

 

[***] means [***]
Limited, a company incorporated in England and Wales with registered number [***];

 

[***];

 

TGT means the UK branch
of Telefonica Global Technology S.A.;

 

TGT Carve In means the transfer
of the assets of TGT and the TGT Liabilities to the Group prior to Completion;

 

TGT Liabilities means the
liabilities of TGT to the extent incurred or suffered (a) in the ordinary course of conducting TGT’s business or (b) in relation
to TGT’s assets;

 

The O2 Agreement means the
naming rights agreement entered into between Ansco Arena Limited, The Waterfront Limited Partnership, Anschutz Entertainment Group
Inc as Guarantor for Ansco Arena Limited and Telefonica UK dated 14 April 2005;

 

Three UK means Hutchison
3G UK Limited;

 

Tokbox means Tokbox, the
WebRTC communications standard platform as a service providing person-to-person and group-based video services across multiple
access points;

 

Total Purchase Price means
the total purchase price for the Shares as set out in clause 2.3 of this Agreement, and, for the avoidance of doubt the Total Purchase
Price shall be the Initial Purchase Price which shall be subject to adjustment in accordance with Schedule 8 and the Upside Share
less any Leakage payable in accordance with clause 3.16 plus the Purchase Price Locked Box Fee;

 

Transaction Bonus Amount
means the aggregate of (i) all amounts payable to employees of any Group Company under the Bonus Scheme (whether at or following
Completion), inclusive of any taxation and employee social security (or similar) contributions and (ii) any employer social security
contributions arising in connection with payments under the Bonus Scheme;

 

Transaction Documents means:

 

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		(a)	this Agreement;

 

		(b)	the Disclosure Letter;

 

		(c)	the Tax Deed;

 

		(d)	the Transitional Services Agreement;

 

		(e)	the Transitional Branding Agreement;

 

		(f)	the Telefonica Transitional Licence;

 

		(g)	the Purchaser Guarantee; and

 

		(h)	all documents or agreements, connected with or ancillary to any of the documents or agreements
referred to at paragraphs (a) to (g) above, which are in the agreed form;

 

Transitional Branding Agreement
means the transitional trade mark licence agreement to be entered into upon Completion between the relevant member of the Retained
Group and Telefonica UK, in the agreed form;

 

Transitional Services Agreement
or TSA means the transitional services agreement to be entered into upon Completion between the Vendor and the Company,
in the agreed form at the date of this Agreement and to be further amended in accordance with clause 5.3.4;

 

Trapped Cash means as at
the relevant date, with respect to the Company, on a consolidated basis and without duplication (i) any cash and cash equivalents,
which are not capable of being lawfully spent, distributed, loaned or received by the relevant Group Company within 30 days, or
if capable of being so lawfully spent, distributed, loaned or received only after a withholding, deduction, or incurrence of a
cost, then the amount of such withholding, deduction or cost; (ii) any cash received from customers with respect to receivables
that were subject to factoring, assignment or securitisation; and (iii) litigation deposits;

 

TUGo Application means the
application used by the Group which extends mobile phone services to any device everywhere through the medium of an internet connection;

 

TUGo IPR means any Intellectual
Property Rights owned by any Group Company subsisting in the TUGo Application;

 

TUGo Transfer means the
assignment of the TUGo IPR from relevant members of the Group to a member of the Retained Group as part of the Pre-Completion Reorganisation;

 

UK Group Trade Mark Licence
means the agreement titled “Group Trade Mark Licence” dated 15 October 2007, between Telefonica UK and O2 Holdings
Limited;

 

Upside Share means an amount
which will become payable or procured to be paid by MergeCo to the Vendor subject to and in accordance with the provisions of Schedule
7;

 

VAT means value-added tax;

 

Vendor Completion Net Debt
means the Vendor’s calculation of the Net Debt;

 

Vendor’s Solicitors
means Herbert Smith Freehills LLP of Exchange House, Primrose Street, London EC2A 2EG;

 

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Virtual Data Room means
the Intralinks virtual data room managed by the Vendor and its advisers as at midday (UK time) on 20 March 2015, the index to which
is set out in Part A of Schedule 14 and a CD-ROM containing the contents of which is delivered by the Vendor to the Purchaser on
the date hereof;

 

Vodafone means Vodafone
Limited;

 

Vodafone Group means Vodafone,
any subsidiary or holding company from time to time of Vodafone, any subsidiary from time to time of any such holding company or
subsidiary and any entity in which such a subsidiary or holding company has any controlling or jointly controlling interest;

 

Warranties mean the warranties
in clause 4 and Schedule 3;

 

Warranty Claim means a claim
for a Breach of any one or more of the Warranties (other than the Tax Warranties);

 

Wayra mean Wayra UK Limited
a company incorporated in England and Wales with registered number 08083534;

 

Wayra Reorganisation means
the disposal by Telefonica UK of its shares in Wayra to Wayra Investigacion y Desarrollo SLU on 19 December 2014;

 

Weve means Weve Limited
a company incorporated in England and Wales with registered number 08178832; and

 

Working Document means the
document entitled “Transitional Services Agreement – Non-Agreed Service Schedules”,

 

and cognate terms will be construed
accordingly.

 

		1.2	The Schedules referred to in this Agreement form an integral part of this Agreement and references
to this Agreement include reference to them.

 

		1.3	Headings are inserted for convenience only and do not affect the construction of this Agreement.

 

		1.4	Unless expressly stated in this Agreement or the context otherwise requires, in this Agreement:

 

		1.4.1	references to persons are deemed to include references to natural persons, firms, partnerships,
companies, corporations, associations, bodies corporate, trusts, investment funds, governments, states or agencies (in each case
whether or not having a separate legal personality) wheresoever incorporated or resident, but references to individuals are deemed
to be references to natural persons only;

 

		1.4.2	the singular includes the plural and vice versa, the masculine includes the feminine and vice versa,
and he or she, his or hers, him or her, where the context so admits, includes it
or its, as the case may be, and vice versa;

 

		1.4.3	subject to clause 7.12.3, reference to writing or similar expressions includes transmission by
facsimile or electronic means;

 

		1.4.4	the words “holding company” and “subsidiary” shall have the same meaning
in this Agreement as their respective definitions in the Companies Act;

 

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		1.4.5	references to Acts, statutory instruments and other legislation are to legislation operative in
the United Kingdom and to such legislation, modified, consolidated, amended, supplemented or re-enacted as at the date of this
Agreement and any subordinate legislation made under that legislation;

 

		1.4.6	save where expressly provided otherwise, a reference to this Agreement, to any other document or
to any specified provision of this Agreement or any other document is a reference to this Agreement, to such other document or
to such provision as in force for the time being and as amended, novated or supplemented from time to time;

 

		1.4.7	the terms “including” or “includes” will be interpreted so as not to limit
the meaning of any words preceding such terms;

 

		1.4.8	where any Warranty or confirmation is given on terms that it is given so far as the Vendor is aware
or to the best of the knowledge and belief of the Vendor (or any other words equivalent or similar to this or having equivalent
or similar effect), the Vendor will (subject to clause 4.1.4) be deemed to have knowledge only of anything which is actually known
to any of the persons listed in Schedule 6 but, in respect of each of the individuals so named, only in relation to those of the
Warranties which are specified against his name in such Schedule and will (subject to clause 4.1.4) not be deemed to have knowledge
of anything known by any other persons or to have made enquiries of any other persons;

 

		1.4.9	payments under the Indemnities or other compensatory obligation under this Agreement (each a “Payment”)
are to be calculated on an after Tax basis, meaning that the amount of the Payment shall be calculated in such a manner as will
ensure that, after taking into account:

 

		(1)	the timing of and amount by which any liability to Tax of the recipient of that Payment (or any
Affiliate of or person with an interest in such recipient) is actually increased as a result of the receipt of that Payment (or
would have been increased but for the use or set-off of a Tax relief that does not result from the matter giving rise to that Payment);

 

		(2)	the timing and amount of any Tax benefit or relief resulting from the matter giving rise to that
Payment or the receipt of that Payment that is capable of being utilised by the recipient of that Payment (or any Affiliate of
or person with an interest in such recipient); and

 

		(3)	any Tax required to be deducted or withheld from the Payment and any additional amounts required
to be paid by the payer of the Payment in consequence of such withholding,

 

the recipient of the Payment
(or Affiliate of or person with an interest in the recipient of the Payment, as appropriate) is in no better and no worse after-Tax
position as that in which it would have been if the matter giving rise to the indemnity or other compensatory obligation had not
occurred;

 

		1.4.10	if any action or duty to be taken or performed under any of the provisions of this Agreement would
fall to be taken or performed on a day which is not a Business Day, such action or duty will be taken or performed on the Business
Day next following such day;

 

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		1.4.11	all references to recitals, sections, clauses, paragraphs, schedules and annexures are to recitals
in, sections, clauses and paragraphs of and schedules and annexures to this Agreement;

 

		1.4.12	all references to time are references to English time;

 

		1.4.13	any reference to a person includes his or its successors, personal representatives and permitted
assigns;

 

		1.4.14	words such as “hereby”, “hereunder”, “hereto”, “hereof”
and “herein” and other words commencing with “here” will, unless the context clearly indicates to the contrary,
refer to the whole of this Agreement and not to any particular section, clause or paragraph hereof;

 

		1.4.15	any reference to a party or the parties is a reference to a party or the parties to this Agreement
unless the context otherwise admits or requires;

 

		1.4.16	save where expressly provided otherwise, any reference to “ordinary course of business”,
“ordinary and usual course of business” or any other similar expression means the ordinary and usual course of trading
conducted in a manner consistent with historical past practice over the last 24 months;

 

		1.4.17	any reference to a matter, event or loss that “could not reasonably have been avoided or
prevented” means that it could not reasonably have been avoided or prevented by a reasonable and prudent operator conducting
the business of the Group; and

 

		1.4.18	where the context requires, MergeCo and the Purchaser shall be treated as the same party for the
purposes of any reference to “either party” or “the parties”.

 

		1.5	A document is in the agreed form if it is in the form of the relevant document agreed by
the parties and initialled by or on behalf of the parties hereto (or such of the parties as are party to it), and all such agreed
form documents are listed in Schedule 13.

 

		1.6	It is acknowledged and agreed by the parties that the provisions of this Agreement have been negotiated,
drafted and settled jointly by and on behalf of the parties and accordingly if any question arises at any time as to the meaning,
intent or interpretation of any provision or provisions of this Agreement, no presumption or burden of proof will arise in favour
of or against either party solely as a result of the authorship of any of the provisions of this Agreement.

 

		1.7	It is acknowledged and agreed by the parties that any obligation of MergeCo under this Agreement
is without recourse to the Purchaser.

 

		2	SALE AND PURCHASE OF SHARES

 

		2.1	Sale and Purchase: The Vendor will sell as legal and beneficial owner and procure the sale
by Telefonica Capital S.A. of and the Purchaser will purchase or will procure that a member of the Purchaser’s Group which
is wholly owned directly or indirectly by MergeCo nominated by it by notice in writing to the Vendor will purchase with effect
from Completion (such nominated person to be deemed to be the Purchaser for the purposes of each of the Transaction Documents),
free from 

 

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all Encumbrances and together with all rights attaching now or in the future, the Shares.

 

		2.2	Simultaneous Completion: The Purchaser will not be obliged to complete the purchase of any
Shares unless the purchase of all of the Shares is completed simultaneously.

 

		2.3	Consideration:

 

The total purchase price for
the Shares shall be:

 

		(1)	the initial purchase price for the Shares of £9,250,000,000 (nine billion two hundred and
fifty million British Pounds) which shall be subject to adjustment in accordance with Schedule 8 and paragraph 3 of Schedule 4,
provided that there shall be no net upward adjustment in accordance with Schedule 8; plus

 

		(2)	the Upside Share which shall in addition be payable in accordance with Schedule 7 as consideration
for the Shares; less

 

		(3)	any Leakage payable in accordance with clause 3.16; plus, if any

 

		(4)	the Purchase Price Locked Box Fee.

 

		2.4	Purchaser’s Waiver of Right of Set-off: All amounts due and payable by the Purchaser
and MergeCo under this Agreement will be paid in full without deduction or withholding other than as required by law and each of
the Purchaser and MergeCo waives and relinquishes any right of set-off, counterclaim, credit, deduction or retention which it might
otherwise have and will not be entitled to assert any such set-off, counterclaim, credit, deduction or retention against the Vendor
in order to justify withholding payment of any such amount in whole or in part subject to Schedule 8.

 

		3	CONDITIONS TO COMPLETION AND COMPLETION

 

		3.1	Conditions: Completion will be subject to, and conditional upon, the following Conditions
being fulfilled as soon as possible following the execution of this Agreement:

 

		3.1.1	the Purchaser, having notified the Agreement to the European Commission under Council Regulation
(EC) No 139/2004 where the Regulation applies, as soon as possible after the Agreement is executed, and:

 

		(1)	the European Commission having confirmed that the Agreement is compatible with the internal market
pursuant to Article 6(1)(b) of the Regulation either unconditionally or subject to conditions or obligations; or

 

		(2)	following a decision under Article 6(1)(c) of the Regulation to initiate proceedings, the European
Commission having confirmed that the Agreement is compatible with the internal market pursuant to Article 8(1) or 8(2) (subject
to conditions or obligations) of the Regulation; or

 

		(3)	there has been a deemed declaration in respect of the Agreement under Article 10(6) of the Regulation;
or

 

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		(4)	if the transaction contemplated by this Agreement, or any part thereof, is referred to the competent
authorities of the United Kingdom under Article 4(4) or Article 9 of the Regulation, confirmation having been received in writing
from the United Kingdom Competition and Markets Authority (the CMA) or, as the case may be, the Secretary of State either
(i) that the CMA or, as the case may be, the Secretary of State does not intend to refer any matters arising from the Agreement
for a Phase 2 CMA Reference or (ii) following a Phase 2 CMA Reference, confirmation having been received from the CMA or, as the
case may be, the Secretary of State that the transaction may proceed without any undertakings, conditions or orders, or may proceed
subject to the giving of such undertakings by, or the imposition of such conditions or orders on, the Purchaser as have been offered
by the Purchaser in accordance with clause 3.2 below;

 

		3.1.2	in the event that the Secretary of State has issued either a public interest intervention notice
pursuant to section 42 of the Enterprise Act 2002 or a European Intervention Notice pursuant to section 67 of the Enterprise Act
2002 in respect of any matters arising from the transaction contemplated by this Agreement, confirmation having been received from
the Secretary of State that the transaction may proceed without any undertakings, conditions or orders, or may proceed subject
to the giving of such undertakings by, or the imposition of such conditions or orders on, the Purchaser as have been offered by
the Purchaser in accordance with clause 3.2 below;

 

		3.1.3	the Vendor having completed the Pre-Completion Reorganisation;

 

		3.1.4	in respect of any Consumer Credit Company which has received Part 4A FSMA Permission or receives
Part 4A FSMA Permission in the period between the date of this Agreement and Completion, the FCA:

 

		(1)	having notified in writing its approval (in terms satisfactory to the Purchaser (acting reasonably))
for the purposes of section 189(4) of the FSMA to the Purchaser of; or

 

		(2)	being treated, by virtue of section 189(6) FSMA as having been unconditionally approved,

 

the change in control of each
of the Consumer Credit Companies;

 

		3.1.5	the execution of a written shareholders’ approval pursuant to Rule 14.44 of the HK Listing
Rules of the transaction contemplated by this Agreement (the “Shareholder Resolution”);

 

		3.1.6	amendment, or waiver of the exclusivity and restrictive covenant provisions of the Beacon Agreements
on terms reasonably acceptable to the parties;

 

		3.1.7	subject to clause 3.5 and save as Disclosed, no Breach of any of Warranty 1, 2, 3, 4, 18.2, 18.3
(other than where a Breach of Warranty 18.3 is caused by a Commitment offered or accepted by the Purchaser) or Warranty 22 in respect
of the Company or Telefonica UK having occurred or no matter having arisen which is likely with the giving of notice or the lapse
of time to be a Breach of any of such Warranties in respect of the Company or Telefonica UK; and

 

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		3.1.8	subject to clause 3.5, no order has been made by a court of competent jurisdiction which would
prevent Completion occurring.

 

		3.2	Co-operation regarding Conditions:

 

		3.2.1	The Purchaser agrees that it will endeavour, in a timely manner, to secure the satisfaction of
the Conditions set out in clauses 3.1.1, 3.1.2, 3.1.4 and 3.1.5 and the Vendor shall co-operate and assist the Purchaser in that
task. The satisfaction of the Conditions set out in clauses 3.1.3 and 3.1.7 shall be the sole responsibility of the Vendor. The
Vendor and Purchaser shall monitor the Condition set out in clause 3.1.8. The provisions of clause 3.2.15 shall apply to the Condition
set out in clause 3.1.6.

 

		3.2.2	If it becomes reasonably apparent that the European Commission or the Competition Authority will
only adopt a decision or grant approval for the sale and purchase of the Shares subject to remedies (each a “Commitment”),
the Purchaser shall only be obliged to offer reasonable Commitments in respect of clauses 3.1.1 and 3.1.2. The Purchaser and Vendor
shall consult each other in advance on any remedy to be offered by the Purchaser to secure approval.

 

		3.2.3	The Purchaser shall, where reasonable and practicable to do so, provide to the Vendor in draft
form, in a timely manner so as to allow the Vendor to review and comment thereon, copies (including a copy redacted as necessary
to remove any Purchaser Confidential Information) of all notifications and submissions proposed to be made to the European Commission,
any Competition Authority and/or Ofcom or any other government, governmental, national, supranational, competition or antitrust
body or other authority in any jurisdiction promptly after being sent or received (as the case may be). The Purchaser shall where
reasonable and practicable to do so, take the Vendor’s comments duly into account.

 

		3.2.4	The Vendor (and/or its representatives) shall be informed promptly of any proposed meeting with
the European Commission, any Competition Authority and/or Ofcom and where reasonable to do so, afforded the opportunity to attend
and may attend at its discretion.

 

		3.2.5	The Purchaser shall not make any request for the referral of the assessment of the transaction
from the European Commission to the competition authority of any member state, or vice-versa, without the prior written consent
of the Vendor.

 

		3.2.6	Subject to clause 3.2.2, the Purchaser shall keep the Vendor informed, in a timely and effective
manner, as to the progress towards the satisfaction of the Conditions and any issue which is likely to arise in regard to obtaining
such approvals. The Purchaser and Vendor shall co-operate fully in endeavouring to secure expeditious and satisfactory approval
of the transaction and the satisfaction of the Conditions.

 

		3.2.7	Subject to clause 3.2.2, the Purchaser will use reasonable endeavours to secure all necessary approvals
of the transaction including taking all actions necessary or desirable to procure the fulfilment of the Conditions as soon as possible
following the execution of this Agreement and for them to remain fulfilled up to and including Completion but the Purchaser or
Vendor shall not be obliged to do, or undertake, anything unreasonable. The Vendor shall reasonably assist the Purchaser in securing
such approvals.

 

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		3.2.8	The Vendor shall procure that the Pre-Completion Reorganisation is completed prior to satisfaction
of the Condition in clause 3.1.1 subject to clause 3.9.

 

		3.2.9	The Condition in clause 3.1.3 will only be deemed to be satisfied once evidence of completion of
the Pre-Completion Reorganisation (including delivery of the implementation documents, duly executed where applicable) has been
provided to the Purchaser, in a form satisfactory to the Purchaser (acting reasonably).

 

		3.2.10	The Vendor shall procure, to the extent within its power to do so, that each Consumer Credit Company
(to the extent it has not already done as at the date of this Agreement) applies to the FCA for authorisation to conduct credit-related
regulated activities (each an “FCA Application”) within the time period specified by the FCA and on the basis
that will permit each Consumer Credit Company to conduct business as it does as at the date of this Agreement.

 

		3.2.11	Prior to the submission of any FCA Application (and save in relation to giffgaff Limited provided
the FCA Application is made before 31 March 2015), the Vendor and the Purchaser shall engage with the FCA to ascertain how the
timing for approval of any FCA Application will correspond with the timeframe for approval of a change in control of each Consumer
Credit Company.

 

		3.2.12	The Vendor shall, to the extent within its power to do so (save to the extent that such action
would result in a breach of applicable anti-trust or merger control laws and provided that nothing in this clause 3.2.12 shall
require the Vendor to provide any Group Confidential Information (beyond what is set out in (1) – (3) below) to the Purchaser
prior to Completion):

 

		(1)	provide the Purchaser reasonable advance notice of the date of submission of each FCA Application
together with confirmation of the permissions being sought and any material issues relating to the relevant FCA Application;

 

		(2)	notify the Purchaser within five days of each such company submitting its application to the FCA
for authorisation on a full or limited basis as applicable; and

 

		(3)	notify the Purchaser within five days of any comments or questions raised by the FCA in respect
of any FCA Application.

 

The Vendor shall use its reasonable
endeavours to procure that each Consumer Credit Company provides the Purchaser with such information regarding the applications
for authorisation as is reasonably necessary to allow the Purchaser to submit an application for approval for a change in control
in respect of each Consumer Credit Company on a timely basis.

 

		3.2.13	The Purchaser agrees that the Vendor may inform the FCA that the Purchaser has agreed to purchase
the Group, including the Consumer Credit Companies, subject to various conditions including the Conditions and FCA approval. The
Vendor shall notify the Purchaser within five days of each Consumer Credit Company being granted limited or full permission from
the FCA following their FCA Application.

 

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		3.2.14	In respect of any Consumer Credit Company which has received Part 4A FSMA Permission or receives
Part 4A FSMA Permission in the period between the date of this Agreement and Completion, the Purchaser shall use reasonable endeavours
to procure that it and each member of the Purchaser’s Group as appropriate obtains consent as a shareholder controller from
the FCA in respect of each Consumer Credit Company as soon as practicable and no later than the Long Stop Date and shall notify
the Vendor within five days of receiving the relevant consents from the FCA.

 

		3.2.15	The Vendor and the Purchaser shall act in good faith and work together to obtain the amendment
or waiver referred to in clause 3.1.6 above, subject to compliance with applicable competition law.

 

		3.3	Obligation to Inform and Consult: If, at any time, either party becomes aware of a fact
or circumstance that would or might reasonably prevent any of the Conditions being fulfilled, it will promptly give notice to,
and consult with, the other party to this Agreement giving full details of the relevant facts or circumstances with a view to resolving
such difficulties and obtaining approval.

 

		3.4	Conditions Not Fulfilled:

 

		3.4.1	If any of the Conditions have not been fulfilled (or, subject to the provisions of clause 3.4.3,
waived by the Purchaser) or, in the case of clause 3.1.1, the terms of any Commitment offered and accepted by the Purchaser which
are required to be implemented before Completion not being fulfilled such that Completion has not occurred by the Long Stop Date,
this Agreement shall automatically terminate unless the parties agree otherwise in writing. The Condition set out in clause 3.1.1
cannot be waived.

 

		3.4.2	If the Condition referred to in clause 3.1.6 of the Agreement above has not been fulfilled (or
waived as provided in clause 3.4.3) by the date on which the Condition in clause 3.1.1 has been fulfilled, the parties shall negotiate
in good faith to agree contractual arrangements that form a basis on which the parties are willing to proceed to Completion notwithstanding
that the Condition set out in clause 3.1.6 has not been fulfilled.

 

		3.4.3	The Condition in clause 3.1.6 may be waived by both parties acting jointly.

 

		3.4.4	Without prejudice to any rights or obligations of the parties under this Agreement, the Vendor
and the Purchaser acknowledge that this Agreement has not been entered into for the purpose of breaching the Beacon Agreements.

 

		3.4.5	In the event of any termination pursuant to clause 3.4.1:

 

		(1)	any rights or obligations accrued by a party up to the time of termination will not be affected
by the termination;

 

		(2)	the Post-Termination Provisions will continue to apply; and

 

		(3)	subject to clauses 3.4.5(1) and 3.4.5(2), each party’s further rights and obligations under
this Agreement will cease immediately on termination.

 

		3.5	Opportunity to Cure: The Purchaser agrees and undertakes with the Vendor that:

 

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		3.5.1	the Vendor shall be afforded by notice in writing from the Purchaser to the Vendor either 60 days
or up until the Long Stop Date (whichever is the later) to remedy the matter giving rise to any Warranty Breach which would otherwise
entitle the Purchaser to terminate this Agreement by virtue of clause 3.1.5; and

 

		3.5.2	the Vendor shall be afforded by notice in writing from the Purchaser to the Vendor either 60 days
or up until the Long Stop Date (whichever is the later) to lift or rescind any order made which would otherwise entitle the Purchaser
to terminate this Agreement by virtue of clause 3.1.8.

 

		3.6	Conduct of Business: Save to the extent that it would result in a breach of applicable antitrust
and merger control laws or a Material Licence (in which case the Vendor will consult with the Purchaser regarding the relevant
matter), for the period up to and including the date of Completion as regards each Group Company (other than the JV Companies),
the Vendor will procure that, and in respect of the JV Companies the Vendor will procure, so far as lies within its power of procurement,
that:

 

		3.6.1	each Group Company carries on business in the ordinary course, save as otherwise agreed with the
Purchaser, provided that nothing in this clause 3.6.1 will prevent the Vendor or management of the relevant Group Company from
taking actions to react reasonably to market conditions or changes in the market in order to preserve the business of the relevant
Group Company;

 

		3.6.2	no Group Company issues or agrees to issue any shares, loan stock, debentures, bonds or other securities
(including any options over or right to subscribe for any share or loan capital or other security) except for shares issued to
another Group Company or to the Vendor or any of its Affiliates which are transferred to the Purchaser at Completion for no additional
consideration;

 

		3.6.3	no Group Company passes any resolution of members (whether in general meeting or by means of a
written resolution of the members) other than any resolutions that may be necessary to give effect to the terms of this Agreement
or in connection with its annual general meeting or where obliged to do so by law or to maintain its board of directors or auditors;

 

		3.6.4	each Group Company maintains in force policies of insurance with limits of indemnity at least equal
to, and otherwise on terms in all material respects no less favourable than, those policies of insurance maintained by them as
at the date of the Agreement;

 

		3.6.5	in respect of insured employee benefits, including the Private Medical Insurance scheme and any
death in service benefits, each Group Company shall use all reasonable endeavours to maintain in force policies of insurance with
limits of indemnity at least equal to, and otherwise on terms in all material respects no less favourable than, those policies
of insurance maintained by them as at the date of the Agreement;

 

		3.6.6	the Group does not sell, transfer or otherwise dispose of the whole or a substantial part of the
undertaking or assets (including any Owned Retained IPR) of the Group or any material asset of the Group (save as required by law
or judicial decision or order and provided that nothing herein shall prevent or limit the ability of the Group 

 

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to sell, transfer
or otherwise dispose of receivables or similar rights on a non-recourse basis in accordance with past practice);

 

		3.6.7	other than pursuant to clause 3.22, no Group Company sells, discounts or otherwise disposes of
any receivables or other working capital items other than to customers;

 

		3.6.8	the Group does not agree to any extension to its supplier payment terms under any existing supply
contract. For the avoidance of doubt, the Group can agree to any reduction of its supplier payment terms;

 

		3.6.9	the Group Companies (or Excluded Companies, as the case may be) that are a party to the Key Contracts
shall first consult with the Purchaser before taking any action (or conversely failing to take any action) to extend, renew, vary
or terminate such contracts or to exercise any such right of extension, renewal, variation or termination to which it becomes entitled;

 

		3.6.10	the Group Companies shall first consult with the Purchaser before taking any action (or conversely
failing to take any action) to extend, renew or terminate, or to exercise any right of extension, renewal or termination to which
it becomes entitled, under The O2 Agreement and the England RFU Agreement;

 

		3.6.11	none of the Material Licences are amended or terminated by it;

 

		3.6.12	no Group Company enters into a sale and leaseback arrangement in respect of an asset with a value
in excess of £10,000,000;

 

		3.6.13	no Group Company enters into any guarantee or indemnity, or creates or agrees to create, any Encumbrances
(other than buying assets subject to retention of title clauses in the ordinary course of business) over any of its assets (including
any Owned Retained IPR or any Group Company’s rights in any Business IPR (excluding the Assigned IPR)), except for Permitted
Encumbrances, guarantees or indemnities in the ordinary course of business or to replace existing guarantees or similar instruments
in place as at the date of this Agreement;

 

		3.6.14	no Group Company enters into any contract, arrangement or commitment which is out of the ordinary
course of that company’s business;

 

		3.6.15	if any Group Company extends, renews or enters into any contract (excluding The O2 Agreement and
the England RFU Agreement) pursuant to which any rights are granted to the counterparty to use the Assigned IPR in the United Kingdom
for a term exceeding 12 (twelve) months from Completion, such contract shall expressly provide for the relevant Group Company to
have the option of replacing the licensed Assigned IPR with alternative Intellectual Property Rights after the expiry of such 12
(twelve) month period;

 

		3.6.16	other than an extension or renewal of the term of any lease of any Expiring Property such that
the extended or renewed lease expires before 31 December 2016, no Group Company shall take any action to extend, or agree to extend,
the term of the lease in respect of any Expiring Property and shall first consult with the Purchaser before taking any decision
or action whether or not to exercise any break clauses or termination rights in respect of any Expiring Property, provided that
where the lease of any Expiring Property is not extended or renewed or a break clause or termination right is exercised in respect
of any Expiring Property in 

 

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accordance with this clause 3.6.16, the Purchaser shall not (and shall procure that the members of
the Purchaser’s Group shall not) enter into a lease in respect of such Expiring Property;

 

		3.6.17	no Group Company employs or engages persons who will not be wholly or mainly assigned to providing
services to the Group or employs or engages any person having a role of substantially equivalent status to a Key Employee or a
member of the Senior Leadership Team save where an equivalent position is being replaced, or employs or engages multiple persons
where to do so would increase the number of employees employed within the Group by more than 5 per cent.;

 

		3.6.18	no Group Company will terminate the employment or engagement of a Key Employee (save in circumstances
in which summary dismissal is justified);

 

		3.6.19	save in accordance with the Employee Journeys Document, no Key Employee or any member of the Senior
Leadership Team who is, or has been, wholly or mainly engaged in providing services to the Group in the period commencing from
12 months prior to the date of this Agreement shall be transferred to any member of the Retained Group;

 

		3.6.20	no Group Company shall increase the remuneration or other benefits of any Relevant Employee, nor,
save as otherwise permitted under this Agreement, make any material amendment to any Relevant Employee’s terms and conditions
or the benefits offered to them, save in the ordinary course of business and for this purpose any increase in connection with an
annual pay review or retention policy in each case consistent with past practice and unrelated to the transaction contemplated
by this Agreement will be deemed to be ordinary course;

 

		3.6.21	no Group Company shall:

 

		(1)	discontinue any Pensions Schemes or commence to wind them up or terminate them or cause them to
cease to admit new members, or where they do not currently accept new members, to cause them to start to admit new members;

 

		(2)	amend any Pension Scheme in a manner which could reasonably be expected to materially increase
the Group Companies’ liabilities under or in respect of such Pension Scheme or materially change the form of the benefits;

 

		(3)	communicate to its employees generally (or a group of its employees) any material plan or intention
to discontinue, wind up, amend (in a material way) or terminate any Pension Scheme or to introduce or provide any new arrangements
for the provision of pension, retirement or death benefits; and

 

		(4)	pay any material amount of benefits under any of the Pension Schemes otherwise than in accordance
with the terms of the documents governing such arrangements (and not exercise any discretion to augment benefits in a way which
could have a material impact on the amount of benefits paid), save to the extent that any payments are made in accordance with
the documents Disclosed in the Virtual Data Room;

 

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		3.6.22	the Group Companies shall first consult with the Purchaser and provide to the Purchaser all reasonable
information requested by the Purchaser in advance of all material discussions with, and material communications to, the Pensions
Trustee relating to the actuarial valuation (as defined in Part 3 of the Pensions Act 2004) of the Telefonica UK Pension Plan due
as at 30 September 2014 and shall keep the Purchaser informed of all material developments in those discussions and communications;

 

		3.6.23	no Group Company shall agree any funding or other financial support arrangements, including the
actuarial valuation of the Telefonica UK Pension Plan as at 30 September 2014 (in accordance with Part 3 of the Pensions Act 2004)
(the “Valuation”), with the Pensions Trustee which would or would reasonably be expected to have a materially
adverse effect, directly or indirectly, on the Purchaser by reference to (i) the amount of the deficit (if any) in the Telefonica
UK Pension Plan, (ii) the timing and amount of any obligations to contribute or provide any other form of financial support to
the Telefonica UK Pension Plan, in each case either actual or contingent, or (iii) a target of any other measure of funding other
than that used for the purposes of the Valuation, but taking into account the obligations of the Vendor under clause 4.8 to pay
the Pension Plan Contribution Amount;

 

		3.6.24	no Scheme Employer shall agree to any apportionment of any of its liabilities, or any specified
amount in respect of its liabilities, in relation to the Telefonica UK Pension Plan under any mechanism provided for in the Employer
Debt Regulations on or before Completion where such apportionment would, or would reasonably be expected to, have a material adverse
effect, directly or indirectly, on the Purchaser;

 

		3.6.25	save as required to facilitate the due termination of any Intra Group Agreements in accordance
with the Transaction Documents, no Group Company amends or abandons its line of business;

 

		3.6.26	all transactions entered into between a Group Company and any member of the Retained Group shall
take place on an arm’s length basis;

 

		3.6.27	neither of [***] nor Weve shall incur any additional Financial Debt where incurred solely
for the purpose of distributing cash to shareholders of such entity;

 

		3.6.28	each Group Company undertakes any implementation of the existing network sharing agreement in accordance
with prudent budgetary management practices of the Group and prudent network management practices of the Group consistent with
past practice existing at the date of this Agreement;

 

		3.6.29	no Group Company shall initiate any material legal proceedings or arbitral proceedings save in
the ordinary course of business;

 

		3.6.30	no Group Company shall acquire or agree to acquire any shares or other interest in any company,
partnership or other venture or consolidate with a corporate body or any other person, enter into any demerger transaction or participate
in any other type of corporate reconstruction;

 

		3.6.31	applications shall be made to HMRC pursuant to section 43B of the Value Added Tax Act 1994 for
each member of the Retained Group which is a member of the UK VAT Group (as that term is defined in the Tax Deed) to be excluded
from that VAT 

 

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group registration and for the exclusion to take effect no later than the date of Completion;

 

		3.6.32	insofar as any member of the Retained Group is included in such arrangements, applications shall
be made to HMRC for each member of the Retained Group to be excluded from the GPA (as that term is defined in the Tax Deed) and
for such exclusion to take effect no later than the date of Completion;

 

		3.6.33	other than in the ordinary course of business or as budgeted, no Group Company shall acquire any
asset at a cost in excess of £100,000 or enter into or amend any agreement or incur any commitment to do so;

 

		3.6.34	each Consumer Credit Company carries on business in compliance with its interim permissions, Part
4A FSMA Permissions and applicable legal and regulatory requirements and will not seek to vary, cancel or impose conditions or
restrictions on its interim permissions or Part 4A FSMA Permissions, without notice to the Purchaser;

 

		3.6.35	save for the matters provided for in clause 3.7, no Group Company or member of the Retained Group
shall sell or purchase or dispose of any interest in any share or loan capital or other security of any Group Company;

 

		3.6.36	each Group Company continues to be managed in accordance with prudent budgetary management practices
of the Group and prudent network management practices of the Group with the intention of maintaining the profitability of the business;

 

		3.6.37	the Group manages its material projects and capital expenditure in accordance with prudent network
management practices of the Group with the intention of managing the business as a going concern and with a view to promoting the
success of the business, including maintaining appropriate levels of investment;

 

		3.6.38	the Group manages its business with the intention of maintaining the level and quality of customer
service consistent with past practice over the last 12 months and with the standards of a reasonable and prudent operator, and
maintains and manages the Group’s network infrastructure and IT systems in a manner consistent with maintaining such level
and quality of customer services;

 

		3.6.39	the Group manages its business (including through the operation, maintenance, upgrade and expansion
of the Group’s network and IT assets) so as to provide service levels consistent with demand from all existing and new customers
and so that (except to the extent that it could not reasonably have been avoided or prevented) there is no material increase in
network related complaints or network related churn over and above normal levels; and

 

		3.6.40	no Group Company attempts or agrees, conditionally or otherwise, to do or permit (whether by decision
or omission or otherwise) to be done any of the foregoing in clauses 3.6.1 to 3.6.36 (unless the context otherwise requires),

 

provided that the Vendor and
any Group Company will be entitled to do any of the things restricted by this clause 3.6 (or not take a particular action, if the
context so requires) with the prior written consent of the Purchaser, which consent will not be unreasonably withheld or delayed
and provided that 

 

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clauses 3.6.4. 3.6.13, 3.6.14, 3.6.21 to 3.6.24 (inclusive), 3.6.26, 3.6.29, 3.6.30 and 3.6.33 shall not apply
to the Pensions Trustee acting in its capacity as trustee of the Telefonica UK Pension Plan.

 

		3.7	Approved Actions:

 

The parties acknowledge that
the actions set out in this clause 3.7 shall not constitute a breach of the Vendor’s obligations set out in clause 3.6 above
and the Purchaser agrees and acknowledges that each such action may be undertaken:

 

		3.7.1	provided that it is undertaken solely for the purposes of effecting the Pre-Completion Reorganisation
and for no other purpose;

 

		3.7.2	fulfilling any obligation pursuant to this Agreement or any Transaction Document;

 

		3.7.3	repayment of loans owed by the Group to the Retained Group;

 

		3.7.4	any payment of dividends or any other kind of cash distributions in any form by any Group Company,
provided that such payment is not funded by Debt of any Group Company other than Repayment Debt;

 

		3.7.5	the transfer of employees in accordance with the Employee Journeys Document;

 

		3.7.6	the Vendor may also make or agree that any Group Company may make certain bonus payments to key
individuals with the Group Company in connection with the consummation of the transaction contemplated by this Agreement to the
extent that such payments shall be included in amounts subject to the provisions relating to the Bonus Scheme; and

 

		3.7.7	any action taken in connection with New Spectrum.

 

		3.8	Telefonica Group Cost Sharing Agreement: The Vendor shall undertake the Brand Carve Out,
including the termination, on or before Completion, of the Telefonica Group Cost Sharing Agreement and the UK Group Trade Mark
Licence. The Vendor shall procure that upon the termination of the Telefonica Group Cost Sharing Agreement and the UK Group Trade
Mark Licence there shall be no on-going obligations upon Telefonica UK or any other member of the Group, and (i) the Purchaser
waives, and shall procure that Telefonica UK shall waive, any possible rights of claim or action or entitlements to compensation
under the Telefonica Group Cost Sharing Agreement or the UK Group Trade Mark Licence; and (ii) the Vendor waives, and shall procure
that any relevant member of the Retained Group shall waive, any possible rights of claim or action or entitlements against Telefonica
UK or O2 Holdings Limited arising out of, or in respect of, the Telefonica Group Cost Sharing Agreement or the UK Group Trade Mark
Licence. To the extent that the UK Group Trade Mark Licence is terminated before Completion, the Vendor acknowledges that the Group
shall be entitled to continue using the rights licensed under the UK Group Trade Mark Licence until Completion.

 

		3.9	Pre-Completion Reorganisation:

 

		3.9.1	Subject to clause 3.9.4, the Vendor undertakes to procure that:

 

		(1)	the Pre-Completion Reorganisation is implemented prior to satisfaction of the Condition in clause
3.1.1 so as to deliver the Final Group Structure;

 

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		(2)	the Pre-Completion Reorganisation is implemented in all material respects in compliance with all
applicable law; and

 

		(3)	each member of the Telefonica Group shall take all such steps to duly execute all instruments,
documents and agreements and do all such acts and things as may be reasonably necessary in connection therewith.

 

		3.9.2	It is agreed that:

 

		(1)	without prejudice to the obligation of the Vendor to deliver the Final Group Structure, the Vendor
shall inform the Purchaser of any material changes to the Pre-Completion Reorganisation (including any steps, procedures or implementation
of the Reorganisation Steps Plan) in a timely manner and to provide any reasonable information which the Purchaser may from time
to time request in respect thereof; and

 

		(2)	to the extent that any Tax clearance, consent, arrangements, agreements, special methods and/or
elections are sought by the Vendor or any Group Company in connection with the Pre-Completion Reorganisation, the Vendor shall
provide the Purchaser with a draft submission (and any other correspondence with the Tax Authority related thereto), in a timely
manner so as to allow the Purchaser to review and comment thereon and the Vendor shall, where reasonable and practicable to do
so, take the Purchaser’s comments duly into consideration.

 

		3.9.3	The Vendor covenants that at Completion the New Perimeter Companies shall each have assets in excess
of the aggregate of their actual and contingent liabilities (including Tax liabilities). Any liabilities of a New Perimeter Company
to the extent arising under the Beacon Agreements as a result of Completion occurring shall be excluded from the calculation of
these entities’ actual and contingent liabilities for the purposes of the covenant set out in this clause 3.9.3.

 

		3.9.4	The Vendor shall not amend the Final Group Structure in any way without first obtaining the prior
written consent of the Purchaser, such consent not to be unreasonably withheld or delayed. It shall be unreasonable for the Purchaser
to withhold or delay consent in the event that the proposed change is immaterial in the context of the Group as a whole and provided
that the Purchaser is fully indemnified for any losses or liabilities arising out of such change.

 

		3.9.5	The Vendor covenants to pay to the Purchaser by way of adjustment to the purchase price for the
Shares an amount equal to (to the extent not provided for in the Completion Accounts) an amount of (a) any Excluded Liabilities
assumed, performed or discharged by a Group Company and any losses of the Purchaser or any Group Company arising from any Excluded
Liability; and (b) all liabilities (other than Tax liabilities (the regime in relation to which is provided for in the Tax Deed))
and losses of the Purchaser and any Group Company to the extent arising from the Pre-Completion Reorganisation or the Wayra Reorganisation
(including, for the avoidance of doubt any steps taken, or required to be taken, under clause 5.3.10), provided that (A) the fees
and disbursements of advisers reasonably incurred in connection with investigating, rectifying, defending or settling any litigation,
arbitration commenced or threatened as a result of such loss shall be liabilities for the purpose of this clause 3.9.5; and (B)
any liability to the extent due by any 

 

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Group Company to another Group Company or to the extent due by any Group Company to the
Purchaser or by the Purchaser to any Group Company, whether or not arising pursuant to the Pre-Completion Reorganisation or the
Wayra Reorganisation shall not be liabilities for the purpose of this clause 3.9.5.

 

		3.9.6	The Purchaser agrees and undertakes with the Vendor that before claiming under clause 3.9.5 the
Vendor shall be afforded by notice in writing from the Purchaser to the Vendor 60 days to remedy the matter giving rise to any
claim under clause 3.9.5.

 

		3.9.7	The parties agree that the TUGo Transfer shall be limited to an assignment of the TUGo IPR and
shall not include any warranties (express or implied), or impose any on-going obligations on any member of the Group.

 

		3.10	Co-operation regarding integration: To the extent: (i) permitted by applicable antitrust
and competition laws, and (ii) not unreasonably interfering with the operations of the business of the Group, the Vendor shall
use its reasonable endeavours to procure (and in respect of the JV Companies, so far as lies within its power of procurement) that
from the date of this Agreement and until Completion, the Group Companies:

 

		3.10.1	provide to the Purchaser upon the Purchaser’s written request all information reasonably
required by the Purchaser in order to plan and prepare the integration process of the business of the Group Companies with the
business of the Purchaser’s Group provided that such information shall only be disclosed to members of a suitable clean team
consisting of external advisors and properly separated employees of a member of the Purchaser’s Group, in each case being
bound by the clean team confidentiality obligations agreed between the parties;

 

		3.10.2	accept upon the Purchaser’s written request that at least 10 (but up to 20) employees of
the Group become members of a clean team that shall be bound by the clean team confidentiality obligations agreed between the parties
and assist the Purchaser in the planning and preparation of the integration process of the business of the Group Companies with
the business of the Purchaser’s Group; and

 

		3.10.3	provide the Purchaser (through the members of a super clean team) within 30 days of the date of
this Agreement a list of all of the locations on which the Group maintains the Masts, together with such other information regarding
the Masts as the Purchaser may reasonably request.

 

		3.11	Restrictions in certain Material Contracts: The Vendor shall use all reasonable endeavours
(and the Purchaser shall use reasonable endeavours to provide on a timely basis such information, cooperation and assistance to
the Vendor in this regard) in order to obtain from the counterparties to the following agreements:

 

		(1)	waiver of the change of control rights in the [***];

 

		(2)	waiver of the change of control provisions (including the put option and call option rights) in
the [***] and the consequential termination rights in the [***];

 

		(3)	waiver of the change of control rights in the [***]; and

 

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		(4)	waiver of the exclusivity restrictions in the [***],

 

including, in each case, so
that the Group may undertake or continue to undertake the business of the Group in a manner consistent in all material respects
with its operation in the 12 months prior to Completion. In the case of clause 3.11(3), the obligations of the Vendor and the Purchaser
shall continue until the earlier of: (i) the date that is four months following Completion; and (ii) the date of receipt of the
waiver.

 

		3.12	Co-operation regarding financing and shareholder circular: The Vendor shall provide, or
shall procure that each Group Company and the directors, officers, employees and advisers (including accounting advisers and/or
independent auditors) of the Vendor or, as applicable, each Group Company shall provide on a timely basis, such information, cooperation
and assistance to the Purchaser in connection with: (i) the preparation of a shareholder circular of Hutchison Whampoa Limited
to satisfy the requirements of the Hong Kong Stock Exchange (the “Shareholder Circular”); and (ii) any arrangement
of debt financing required (a “Proposed Financing”), in each case, in connection with the transaction contemplated
by this Agreement, as the Purchaser may reasonably request including the following:

 

		3.12.1	access: upon reasonable notice and during regular business hours, giving or procuring access
to senior management personnel of the Vendor to any member of the Purchaser’s Group, any advisers or accountants of such
members of the Purchaser’s Group, any person providing or proposing to provide any Proposed Financing and their respective
advisers (including access to any information relating to any Group Company (financial or otherwise) as may be customarily requested
by: (i) parties preparing a shareholder circular satisfying the requirements of the Hong Kong Stock Exchange; and (ii) financial
institutions acting as arrangers, underwriters, placing agents, facility agents, security agents, lenders under loan facilities
or purchasers of notes, bonds or other debt capital markets securities under any Proposed Financing (including any financial information
customarily required to be included in any offering documents to consummate the offering of notes, bonds or other debt capital
markets securities similar in nature to the Proposed Financing under all applicable law));

 

		3.12.2	management and advisers participation in meetings: upon reasonable notice procuring the
senior management of any Group Company and any relevant advisers of members of the Group (including independent auditors, where
relevant, but subject, in any event, to the auditor’s internal policies) to participate in a reasonable number of meetings
with and giving a reasonable number of presentations to prospective lenders or arrangers or investors, participate in a reasonable
number of rating agency meetings, in each case, in connection with the syndication or marketing of any Proposed Financing;

 

		3.12.3	preparation of information and closing documents: providing or procuring the assistance
of employees, officers or other senior management of any Group Company and their respective advisers (including accounting advisers
and/or independent auditors) to any member of the Purchaser’s Group and their respective advisers and accountants and any
financing sources of the Purchaser and their advisers in the preparation of: (i) any materials, valuations, reports, 

 

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accounts or
other information required to be or customarily included in the Shareholder Circular; and (ii) marketing materials, presentations
and any information memorandum containing information about any Group Company customarily required for the marketing of or syndication
of any Proposed Financing documents,

 

provided that, nothing in this
clause 3.12 shall require the Vendor to provide assistance or cooperation to the extent it would:

 

		(1)	not be permitted by applicable antitrust and competition laws;

 

		(2)	unreasonably interfere with the operations and the day-to-day management of the business of the
Group or otherwise be unduly burdensome on the Group on its own or in aggregate;

 

		(3)	require the Vendor or any Group Company to take any action that conflicts with or violates the
Vendor’s or such Group Company’s constitutional documents or any applicable law; or

 

		(4)	result in any member of the Telefonica Group or any of their directors, officers, employees, other
senior management or their respective advisers (a “Vendor Representative”) incurring any liability with respect
to any matters relating to: (i) the Shareholder Circular; or (ii) any debt financing required by the Purchaser in connection with
the transaction contemplated by this Agreement,

 

and provided further that, prior
to any information, cooperation or assistance being provided by any of the Vendor Representatives the Purchaser:

 

		(1)	shall undertake not to seek the liability of any of the Vendor Representatives in respect of any
information provided, reproduced or used pursuant to this clause 3.12; and

 

		(2)	save to the extent of the Vendor Representative’s gross negligence, fraud or wilful default,
covenants to pay to each of the Vendor Representatives an amount equal to any loss suffered by any Vendor Representative in respect
of any claim made by any third party in respect of the information provided, reproduced or used pursuant to this clause 3.12, including
without limitation for any damages, or any sums that any Vendor Representative may reasonably incur for the defence of their interests
in this respect.

 

		3.12.4	The Purchaser covenants to pay on demand by way of adjustment to the purchase price for the Shares
an amount equal to all reasonable and properly incurred costs and disbursements incurred by any member of the Telefonica Group
arising out of or in connection with any member of the Telefonica Group’s compliance with clause 3.12.

 

		3.12.5	The parties acknowledge that none of the Vendor Representatives shall be required to take any responsibility
for the contents of the Shareholder Circular under the HK Listing Rules or other applicable laws, including any forward looking
information.

 

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		3.12.6	No information in respect of the Telefonica Group shall be included by the Purchaser in the Shareholder
Circular and no amendment or supplement to any information provided by the Vendor for inclusion in the Shareholder Circular shall
be made without the prior written approval of the Vendor, such approval not to be unreasonably withheld or delayed.

 

		3.12.7	The Purchaser shall provide the Vendor with a reasonable opportunity to review and comment on the
each draft of the Shareholder Circular prior to filing of that draft with the Hong Kong Stock Exchange. To the extent that the
Shareholder Circular contains non-public information regarding the Telefonica Group or the Group then the Shareholder Circular
shall be subject to the prior approval of the Vendor (such approval not to be unreasonably withheld or delayed). In the event that
the Vendor unreasonably withholds or delays such approval, the Purchaser may include such information in the Shareholder Circular
as the HKSE has indicated is necessary to comply with the HK Listing Rules.

 

		3.12.8	The Purchaser shall ensure that each party to whom information is disclosed by any member of the
Telefonica Group or any of their respective officers, employees, advisers or representatives pursuant to this clause 3.12 is aware
of the Purchaser’s obligations under clause 7.2.1(1) and that any such party observes such obligations of confidence and
the Purchaser will be responsible for any breach of provisions of clause 7.2.1(1) by such parties or will procure that each such
person enters into confidentiality agreements with the Company in terms no less strict than those contained clause 7.2.1(1).

 

		3.12.9	The Purchaser and Vendor agree that if any public document is required to be issued in connection
with any debt financing by any member of the Purchaser’s Group in connection with the transaction contemplated by this Agreement
then the provisions of this clause 3.12 shall apply to that mutatis mutandis.

 

		3.12.10	A copy of the Shareholder Resolution shall be delivered by the Purchaser to the Vendor as soon
as practicable after satisfaction of the Condition in clause 3.1.5.

 

		3.13	Completion: Completion will take place at the offices of the Vendor’s Solicitors on
either:

 

		3.13.1	the first Business Day of the month immediately following the month in which the Conditions are
fulfilled or waived (as the case may be) in the event that the Conditions are fulfilled or waived (as the case may be) between
the first day of the month and 00:01 on the day which is 12 Business Days before the end of the month in which the Conditions are
fulfilled or waived (as the case may be); or

 

		3.13.2	the day that is 12 Business Days following the day on which the Conditions are fulfilled or waived
(as the case may be) in the event that the Conditions are fulfilled or waived after 00:01 on the day which is 12 Business Days
before the end of the month in which the Conditions are fulfilled or waived (as the case may be).

 

		3.14	Locked Box: In the event that Completion occurs in accordance with clause 3.13.2, the Vendor
covenants to the Purchaser that between the Completion Accounts Date and the Completion Date (inclusive) (save to the extent it 

 

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constitutes Permitted Leakage or save to the extent the relevant matter will be or has been taken into account in the Completion
Accounts):

 

		3.14.1	no dividend or other distribution of profits or assets (or any payments in lieu of any dividend
or other distribution of profits or assets) will be declared, paid or made by any Group Company or would be treated as having been
paid or made by a Group Company other than to another Group Company, whether in cash or in kind;

 

		3.14.2	no payments will be made by or on behalf of a Group Company to or for the benefit of a Related
Party;

 

		3.14.3	no share capital of a Group Company will be redeemed, repurchased, reduced, waived or repaid or
result in a payment or an agreement or obligation to make a payment to a member of any Related Party;

 

		3.14.4	no amounts owed to a Group Company by a Related Party will be reduced, waived or forgiven;

 

		3.14.5	no management, advisory, monitoring or other shareholder or director’s fees, charges or employee
or director bonuses (including transaction bonuses) or payments of a similar nature will be paid by or on behalf of a Group Company
to or for the benefit of a Related Party;

 

		3.14.6	no changes will be made to the terms of any borrowing between a Related Party and a Group Company;

 

		3.14.7	no indebtedness of any kind (including all accrued Interest thereon) due or owing to (or for the
benefit of) any Related Party by (or on behalf of) any Group Company will be created, incurred, increased, repaid, reduced or waived
save for balances arising from the ordinary course of business under agreements entered into on or before the date of this Agreement;

 

		3.14.8	no liability, obligation or indemnity will be assumed, indemnified or incurred by any Group Company
for the benefit of any Related Party;

 

		3.14.9	there will be no change in the terms of any indebtedness of any Group Company;

 

		3.14.10	no sale, transfer, surrender or other disposal (whether in whole or in part) or waiver of any assets,
rights or other benefits or value of a Group Company will be made to any Related Party;

 

		3.14.11	no professional fees, expenses or other costs in connection with the transaction contemplated by
the Transaction Documents will be paid by or on behalf of a Group Company or for the benefit of a Related Party;

 

		3.14.12	no agreements by any Group Company, conditionally or otherwise, to do or permit (whether by decision
or omission or otherwise) to be done any of the foregoing in this clause 3.14 will be entered into; and

 

		3.14.13	no Tax will become payable by any Group Company as a consequence of any of the foregoing in this
clause 3.14.

 

		3.15	The Vendor shall promptly notify the Purchaser in writing if it becomes aware of a payment, event
or transaction which constitutes a breach of clause 3.14.

 

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		3.16	The Vendor undertakes to pay, or procure to pay, to the Purchaser (or any Group Company as the
Purchaser directs) within 10 Business Days of written demand by the Purchaser to the Vendor (together with reasonable details which
evidence the Leakage), an amount in cash equal to the amount of the Leakage (as far as possible by way of repayment of the Initial
Purchase Price).

 

		3.17	For the period of six months following the Completion Date, the Vendor shall provide the Purchaser
(and its agents, accountants, solicitors and other professional advisers) with reasonable access to and the right to inspect and
make copies of such books, papers, records and accounting information of the Telefonica Group relating to each Group Company as
the Purchaser may reasonably require to enable them to establish whether there has been compliance with or a breach of any of the
provisions of clause 3.14 and with such other reasonable assistance (including, on the provision of reasonable notice, timely access
to and reasonable assistance from relevant employees of the Telefonica Group) and reasonable access to accounting information including
the right to make copies of such books, papers and accounting information as aforesaid as may be reasonably required for the aforesaid
purpose.

 

		3.18	Purchase Price Locked Box Fee: In the event that Completion takes place on the date set
out in clause 3.13.2, the Purchaser shall pay an additional amount calculated by adding a daily amount of £1,000,000 for
each day from and excluding the Completion Accounts Date to and including the Completion Date, provided that the maximum amount
payable pursuant to this clause shall be £40,000,000.

 

		3.19	Vendor’s Obligations at Completion: Upon Completion, the Vendor will carry out all
of the Vendor’s obligations set out in Schedule 4, Part 1.

 

		3.20	Purchaser’s Obligations at Completion:

 

		3.20.1	Upon Completion, the Purchaser will pay the consideration for the Shares as provided for in clause
2.3(1) to the Vendor and will carry out all of the Purchaser’s obligations set out in Schedule 4, Part 2.

 

		3.20.2	Payment will be made to the Vendor by way of immediately available electronic funds transfer to
a bank account nominated by the Vendor or in such other manner as may be agreed in writing between the Vendor and the Purchaser
and the receipt of the Vendor in accordance with the terms of this Agreement will be an absolute discharge to the Purchaser.

 

		3.21	Completion Obligations Not Satisfied:

 

		3.21.1	If all of the Conditions are fulfilled or waived (as the case may be) in accordance with the terms
of this clause 3 and Completion does not take place in accordance with clause 3.13 as a result of any act or omission on the part
of the Purchaser or, if the Purchaser is in breach of any of its obligations under clause 3.20, the Vendor may:

 

		(1)	defer Completion to a date not later than 28 days after the date specified in clause 3.13 (or after
any later date to which Completion was previously 

 

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deferred) selected by the Vendor, in which case the provisions of this clause
3.21.1 and 3.21.2 will apply to Completion as deferred; or

 

		(2)	by notice to the Purchaser terminate this Agreement.

 

		3.21.2	Without prejudice to any other rights and remedies (including the remedy of specific performance)
of the Vendor under or otherwise relating to this Agreement, if the Vendor elects to terminate this Agreement pursuant to clause
3.21.1:

 

		(1)	any rights or obligations accrued by a party up to the time of termination will not be affected
by the termination;

 

		(2)	the Post-Termination Provisions will continue to apply; and

 

		(3)	subject to clauses 3.21.2(1) and 3.21.2(2) each party’s further rights and obligations under
this Agreement will cease immediately on termination.

 

		3.21.3	If all of the Conditions are fulfilled in accordance with the terms of this clause 3 and Completion
does not take place in accordance with clause 3.13 as a result of any act or omission on the part of the Vendor or, if the Vendor
is in breach of any of its obligations under clause 3.19, the Purchaser may:

 

		(1)	defer Completion to a date not later than 28 days after the date specified in clause 3.13 (or after
any later date to which Completion was previously deferred) selected by the Purchaser, in which case the provisions of this clause
3.21.3 and 3.21.4 will apply to Completion as deferred; or

 

		(2)	by notice to the Vendor terminate this Agreement.

 

		3.21.4	Without prejudice to any other rights and remedies (including the remedy of specific performance)
of the Purchaser under or otherwise relating to this Agreement, if the Purchaser elects to terminate this Agreement pursuant to
clause 3.21.3:

 

		(1)	any rights or obligations accrued by a party up to the time of termination will not be affected
by the termination;

 

		(2)	the Post-Termination Provisions will continue to apply; and

 

		(3)	subject to clauses 3.21.4(1) and 3.21.4(2), each party’s further rights and obligations under
this Agreement will cease immediately on termination.

 

		3.22	Lloyds Arrangements:

 

		3.22.1	The Purchaser agrees that the Company shall be permitted to sell, discount or otherwise dispose
of handset receivables either:

 

		(1)	under the Lloyds Agreement; or

 

		(2)	to any person (including to a member of the Retained Group), and for the avoidance of doubt under
a potential restructuring of the Lloyds Agreement,

 

subject to
compliance with clauses 3.22.2, 3.22.3 and 3.22.4 (to the extent applicable).

 

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		3.22.2	Any sale, discounting or other disposal within clause 3.22.1(2) shall be structured so that:

 

		(1)	it shall be on a non-recourse basis;

 

		(2)	it shall be a valid and effective transfer of title;

 

		(3)	ownership risk transfers to the transferee of the receivable,

 

such that it would not be treated
as debt in accordance with IFRS or by any of Standard & Poor’s, Moody’s or Fitch Group.

 

As soon as reasonably practicable
following the date of this Agreement, the Purchaser will provide the Vendor with reasonable details of the structures it has in
place for non-recourse sale, discounting or disposal of handset receivables as at the date of this Agreement.

 

The Vendor shall notify the
Purchaser in advance of the reasonable details of the structure to be used for sale, discounting or other disposal of the handsets
receivables.

 

		3.22.3	Any sale, discounting or other disposal within clause 3.22.1(2) shall be made from time to time
on the basis of sales of cohorts and on the basis that the most recent handset receivables are required to be sold first, subject
to the eligibility criteria that the facility uses for sale, discounting or other disposal within clause 3.22.1(2) could require.

 

		3.22.4	Any handset receivables subject to sale, discounting or other disposal within clause 3.22.1(1)
and (2) shall be at a price reflecting the value of the relevant device with no allocation of other costs.

 

		3.22.5	The Purchaser shall, as from Completion, procure that the Company will continue to perform the
role of service agent for servicing any receivables sold, discounted or otherwise disposed of within clause 3.22.1(2), on substantially
the same commercial terms, and with substantially the same service standards, as it currently performs the role of service agent
under the Lloyds Receivable Financing Agreements.

 

		4	VENDOR’S WARRANTIES AND FURTHER OBLIGATIONS

 

		4.1	Warranties:

 

		4.1.1	The Vendor warrants to the Purchaser that each of the Warranties set out in Schedule 3 is true
and accurate and not misleading subject only to any exceptions Disclosed.

 

		4.1.2	The Warranties are made as at the date of this Agreement and are deemed to be repeated at Completion
by reference to the circumstances subsisting at such time subject to the provisions of paragraph 12 of Schedule 5 and provided
that Warranties 5.6, 7, 8.16 and 18.2 are given solely as at the date of this Agreement and Warranties 18.3, 8.17 and 21.2 are
given solely at Completion.

 

		4.1.3	No right to compensation for losses shall arise in favour of the Purchaser under this clause or
under the Warranties as a consequence of an event occurring or matter arising after the signing of this Agreement and before Completion
which 

 

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result in any of the Warranties (save as hereinafter provided) being untrue or inaccurate where: (i) the relevant matter,
event or loss could not reasonably have been avoided or prevented by the Vendor or any Group Company or by their respective directors
or employees (save with respect to Warranty 18.3 where a Breach of Warranty 18.3 is caused by a Commitment offered or accepted
by the Purchaser) or (ii) the relevant matter, event or loss is a matter, event or loss which arose in the ordinary course of business
of the Group) (save with respect to Warranties 1, 2, 3, 4, 18.3, 21 and 22).

 

		4.1.4	The Warranties made at the date of this Agreement and repeated at Completion shall, insofar as
they are given in respect of the JV Companies, be given on terms that they are given so far as the Vendor is aware, provided that
with respect to CTIL, the Vendor shall be deemed to have knowledge of such matters as it would have discovered, had it made due
and reasonable enquiries of its representatives on the CTIL board of directors, save that the following warranties shall not be
so qualified:

 

Warranties 1, 2, 3 (save as
to (b)), 4 and 22.

 

		4.2	Limitations: The provisions, limitations and restrictions set out in Schedule 5 will apply
to any Warranty Claim (other than any claim pursuant to the Tax Warranties or as excluded in Schedule 5) and subject to clause
3 of the Tax Deed to any Tax Claim to the extent that any provision, limitation or restriction in Schedule 5 is expressed to be
applicable to such Tax Claim.

 

		4.3	Co-operation:

 

		4.3.1	The Purchaser will allow, and will cause each Group Company to allow, the Vendor and its professional
advisers to investigate any matter or circumstance alleged to give rise to (or increase or extend liability under) any Warranty
Claim, Indemnity Claim, Tax Warranty Claim, or any claim under the Tax Deed.

 

		4.3.2	For the purposes of clause 4.3.1, the Purchaser will give and will cause each Group Company and
each of their respective advisers to give reasonable assistance requested on reasonable notice by the Vendor including reasonable
access to relevant documents or information (subject to any confidentiality restriction) in the possession of the Purchaser or
the relevant Group Company.

 

		4.3.3	The provision of co-operation, the request for co-operation or the failure to so co-operate will
not be taken as prejudicing the rights of either party with regard to the validity or extent of any Warranty Claim, Indemnity Claim,
Tax Warranty Claim, or any claim under the Tax Deed.

 

		4.4	Treatment of Payments: If any payment is made by the Vendor to the Purchaser under or in
respect of any breach of this Agreement including the Warranties and Indemnities or under the Tax Deed or any claim for misrepresentation,
the payment will in so far as is possible be treated as a reduction in the value of the consideration payable in respect of the
transfer of Shares pursuant to clause 2 of this Agreement.

 

		4.5	Obligation to Notify: The Vendor undertakes to notify the Purchaser up to and until the
Completion Date in writing promptly if it becomes aware of any circumstances arising after the date of this Agreement which would
cause any 

 

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Warranty (if the Warranties were repeated with reference to the facts and circumstances then existing) to become untrue
or inaccurate or misleading in any material respect provided however that any liability of the Vendor pursuant to this clause 4.5
shall be subject to the limitations on liability contained in Schedule 5 as though it were a Warranty Claim or a Tax Warranty Claim
(as appropriate) and the Purchaser shall not be entitled to recover more than once in respect of a claim under this clause and
the related Breach of Warranty.

 

		4.6	Warranties Independent: Each Warranty shall be separate and independent and no Warranty
shall be limited by reference to any other Warranty.

 

		4.7	No-claims against Employees:

 

		4.7.1	The Vendor agrees and undertakes to the Purchaser (for the Purchaser itself and as agent for each
individual and entity referred to in this clause 4.7) that, except in the case of fraud, it has no rights against and shall not
make any claim against any present or former employee, director, agent or officer of any Group Company or any member of the Purchaser’s
Group on whom it may have relied before agreeing any term of or before entering into this Agreement or any other Transaction Document
(including in relation to any information supplied or omitted to be supplied by any such person in connection with the Warranties,
this Agreement or any other Transaction Document).

 

		4.7.2	The Purchaser agrees and undertakes to the Vendor that, except in the case of fraud, it has no
rights against and shall not make and shall procure that no Group Company shall make, any claim against any present or former employee,
director, agent or officer of any Group Company on whom it may have relied before agreeing any term of or before entering into
this Agreement or any other Transaction Document (including in relation to any information supplied or omitted to be supplied by
any such person in connection with the Warranties, this Agreement or any other Transaction Document).

 

4.8        
Payment to the Telefonica UK Pension Plan

 

		4.8.1	Subject to clause 4.8.3, the Vendor shall on or before Completion pay or procure the payment to
the Telefonica UK Pension Plan of an amount equal to the Pension Plan Contribution Amount.

 

		4.8.2	The Vendor shall procure that to the extent that a Section 75 Debt has not been triggered in respect
of each Ceasing Pensions Employer on or before Completion, such Section 75 Debt shall be triggered promptly at or following Completion
and shall in respect of any Section 75 Debt of any Ceasing Pensions Employer use its reasonable endeavours to procure that the
actuary of the Telefonica UK Pension Plan certifies the amount of such debt promptly.

 

		4.8.3	In the event that as at Completion a Section 75 Debt has not been triggered or not been discharged
(or both) for one or more of the Ceasing Pensions Employers:

 

		(i)	no amount shall be payable under clause 4.8.1;

 

		(ii)	the Vendor shall on or before Completion pay or procure the payment of an amount equal to the Pension
Plan Contribution Amount into an escrow account for the benefit of the Pensions Trustee on customary escrow terms 

 

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as agreed between
the Vendor and the Purchaser, such agreement not to be unreasonably withheld or delayed, but which shall include terms that:

 

		(a)	the Section 75 Debts in respect of each of the Ceasing Pensions Employers are, to the extent not
already paid at or prior to Completion, paid to the Pensions Trustee for and on behalf of the relevant Ceasing Pensions Employer
in satisfaction of the relevant debt promptly upon certification of each such debt by the actuary to the Telefonica UK Pension
Plan and notification to the Vendor thereof;

 

		(b)	promptly following payment of the final amount under (a) above, any amount standing to the credit
of the escrow account is paid to the Pensions Trustee; and

 

		(c)	no monies be paid out of the escrow account otherwise than to the Pensions Trustee.

 

		4.9	Pensions obligations

 

		4.9.1	The Vendor shall use reasonable endeavours to procure that a Section 75 Debt in respect of the
Telefonica UK Pension Plan is triggered and paid by Telefonica Global Technology S.A. before Completion.

 

		4.9.2	The Vendor covenants to pay to the Purchaser by way of adjustment to the purchase price for the
Shares an amount equal to any payment made or other loss suffered or liability incurred after Completion by the Purchaser or any
Group Company that is not provided for in the Completion Accounts to the extent arising from:

 

		(1)	any exercise by the Pensions Regulator of its powers under sections 38 to 51 of the Pensions Act
2004 in relation to the Telefonica UK Pension Plan against any Group Company that is not as at Completion a Scheme Employer, in
respect of any acts or failures to act by any such Group Company which occurred before Completion or in respect of any circumstances
in respect of any such Group Company that exist before Completion; and

 

		(2)	any amount payable after Completion by Telefonica UK Limited in accordance with a deed of indemnity
between Telefonica UK Limited, Telefonica Global Technology S.A. and the Company dated 28 September 2011.

 

		4.9.3	If at any time the Purchaser or any Group Company becomes aware of any exercise (whether actual
or threatened) by the Pensions Regulator of his powers under sections 38 to 51 of the Pensions Act 2004 in a manner to which the
provisions of clause 4.9.2(1) may reasonably be expected to apply, the Purchaser shall (and shall procure that the relevant Group
Company shall):

 

		(1)	notify the Vendor in writing of the details of such exercise by the Pensions Regulator as soon
as reasonably practicable and provide such information and access to such information and access to personnel, premises, chattels,
documents and records to the Vendor and its professional 

 

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advisers as they may reasonably require relating to the applicable act,
failure to act or circumstances;

 

		(2)	co-operate and consult in good faith with the Vendor in connection with any investigation undertaken
by the Pensions Regulator and any engagement with the Pensions Regulator in connection with such exercise; and

 

		(3)	not make (and will procure that its officers and employees will not make) any admission of liability,
agreement, settlement or compromise with the Pensions Regulator in relation to any such exercise of the Pensions Regulator's powers
without the prior written consent of the Vendor (such consent not to be unreasonably withheld or delayed).

 

		5	PURCHASER AND MERGECO WARRANTIES AND FURTHER OBLIGATIONS

 

		5.1	Warranties

 

		(A)	Purchaser Warranties: The Purchaser warrants to the Vendor that at the date of this Agreement
(other than clause 5.1.12) and at Completion (other than clause 5.1.11):

 

		5.1.1	it is duly incorporated and validly existing under the laws of its jurisdiction of incorporation;

 

		5.1.2	it is solvent and the payment to the Vendor of the consideration payable by it pursuant to clause
2 of this Agreement in respect of the Shares will not render it insolvent and unable to pay its debts as they fall due;

 

		5.1.3	it has power to enter into this Agreement and each of the Transaction Documents to which it is
party and to perform the obligations expressed in any such document to be assumed by it and such obligations constitute legal obligations
which are valid and binding on it in accordance with the terms of such document and it has taken all necessary corporate action
to authorise the execution, sealing (where required), delivery and performance of this Agreement and each of the Transaction Documents
to which it is party;

 

		5.1.4	this Agreement has been duly and properly executed by it and duly delivered as required by law;

 

		5.1.5	none of the execution, delivery or performance of the terms of this Agreement infringes any provisions
of:

 

		(1)	any law or regulation or any order or decree of any authority, agency or court binding on it;

 

		(2)	its memorandum and articles of association and other constitutional documents; or

 

		(3)	any loan stock, bond, debenture or other deed, mortgage, contract, agreement, arrangement or other
undertaking or instrument to which it is party or by which it is bound;

 

		5.1.6	save as set out in this Agreement, the entering into or performance of its obligations under the
Transaction Documents requires no consent, approval, order or authorisation of, or registration, declaration or filing with, or
notice to, any governmental entity and no announcements, consultations, notices, reports or 

 

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filings are required to be made in
connection with the transactions contemplated by the Transaction Documents;

 

		5.1.7	in acquiring the Shares, the Purchaser is acting as principal and not as agent, broker or nominee
for any other person;

 

		5.1.8	it is not contemplating or in the process of formulating any Warranty Claim or Tax Warranty Claim;
and

 

		5.1.9	as at the date of this Agreement, no government or governmental, quasi-governmental, supranational
or state agency or regulatory body or trade union or court, tribunal or arbitrator, or any other person in any jurisdiction has:

 

		(1)	instituted or threatened any action, suit or investigation to restrain, prohibit or otherwise challenge
or interfere with the transaction proposed under this Agreement or any part thereof;

 

		(2)	threatened to take any action as a result or in anticipation of the implementation of such transaction
or any part thereof; or

 

		(3)	enacted any statute or regulation or rule or given any ruling or judgement which would prohibit,
materially restrict or materially delay implementation of such transaction,

 

nor, so far as the Purchaser
is aware, is there any other fact, reason or circumstance which would prevent the Purchaser from consummating the transaction contemplated
in this Agreement;

 

		5.1.10	the Purchaser will, at Completion, have available to it sufficient cash resources to enable it
to pay the Initial Purchase Price for the Shares as set out in clause 2.3(1) of this Agreement; and

 

		5.1.11	so far as the Purchaser is aware, it is not subject to any requirement of law to withhold or deduct
any amount from the consideration for the Shares paid pursuant to clause 2 of this Agreement (but, for the avoidance of doubt,
not in respect of any Purchase Price Locked Box Fee payable under clause 3.18 or any payment which is treated as an adjustment
to the consideration) for or on account of Tax;

 

		5.1.12	the Purchaser is resident for corporate income tax purposes solely in the United Kingdom; and

 

		5.1.13	MBNL is not an ICTA Affiliate of Three UK.

 

		(B)	MergeCo Warranties and Covenants: At the date of this Agreement and at Completion, MergeCo
warrants to the Vendor in the terms set out in clauses 5.1.1, 5.1.3 to 5.1.6 (inclusive), 5.1.9 and 5.1.11, save that any references
to “Purchaser” shall be deemed to be references to MergeCo. MergeCo further warrants as at the date of this Agreement
that: (a) it is wholly indirectly legally and beneficially owned by Hutchison Whampoa Limited; and (b) it is not resident for corporate
income tax purposes in any jurisdiction other than Hong Kong. MergeCo further undertakes to the Vendor that, from the date hereof
until Completion, it will (i) not issue any new equity or permit the transfer of any equity interests in MergeCo or otherwise introduce
any equity investors into MergeCo in such a way as would be likely to materially prejudice, or delay beyond the Long Stop Date,
the 

 

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satisfaction of the Condition in clause 3.1.1; (ii) ensure that the Purchaser remains a subsidiary of Hutchison Whampoa Limited;
(iii) ensure that the Purchaser is at Completion a wholly owned subsidiary of MergeCo, whether directly or indirectly; and (iv)
ensure that MBNL is not an ICTA Affiliate of Three UK.

 

		5.2	Purchaser’s Knowledge: The Purchaser hereby covenants with and undertakes to the Vendor
that it will not bring any claim against the Vendor under this Agreement including the Warranties or Tax Warranties or any claim
for misrepresentation where, on or before the date of this Agreement, information concerning such claim or the circumstances which
give, or would or might give, rise to (or increase or extend liability under) such claim had been Disclosed. For the avoidance
of doubt, this clause 5.2 does not apply to any claims under the Tax Deed or the Indemnities.

 

		5.3	Restrictive covenants

 

		5.3.1	Restrictions on the Vendor: In further consideration of the Purchaser entering into this
Agreement, the Vendor covenants with and undertakes to the Purchaser that it will not (and will procure that no member of the Telefonica
Group will) without the prior written consent of the Purchaser:

 

		(1)	Carry on Business in Competition: at any time during the Restricted Period, carry on or be engaged,
employed, concerned or interested in carrying on or assisting in any Competing Business within the Restricted Area, either on its
own behalf or in conjunction with or on behalf of any other person;

 

		(2)	Brand: at any time from Completion up to the tenth anniversary of Completion, use or allow the
use of the O2 Brand (or any similar brand) in the Restricted Area, except pursuant to the Transitional Branding Agreement or where
incidental to other marketing or branding by the Telefonica Group, or licensees of the Telefonica Group, targeting markets other
than the United Kingdom market; and

 

		(3)	Employees: at any time from Completion until the end of the Restricted Period, canvass, solicit,
approach or entice away from the Group any officer, employee or consultant (who was in such a position at the date of this Agreement)
whether or not that person would commit a breach of his contract of employment or consultancy by reason of leaving service (although
any officer or employee will be entitled to respond to a public advertisement of employment without the Vendor being in breach
of this clause).

 

		5.3.2	Exceptions: The restrictions in clauses 5.3.1(1) and (3) will not operate to prohibit the
Vendor from:

 

		(1)	acquiring all or any part of any Competing Business if the acquisition of such Competing Business
is part of a larger transaction and is ancillary to such acquisition (and for this purpose it will be considered as ancillary if
it represents less than 20% of revenues) provided however that the Vendor shall procure the divestment of the Competing Business
within 12 months 

 

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of completion of the relevant acquisition and will continue to operate the Competing Business separately from
the Telefonica Group;

 

		(2)	holding a stake in a listed or unlisted company that develops the Competing Business in the Restricted
Area provided such stake does not exceed 5% in the case of a listed company or 15% in the case of an unlisted company to the extent
such stake does not grant directly or indirectly, representation at the board, management functions or any material influence in
such company to the Vendor;

 

		(3)	fulfilling any obligation pursuant to this Agreement or any Transaction Document including for
these purposes the Employee Journeys Document;

 

		(4)	carrying on or being engaged or economically interested in a Permitted Activity;

 

		(5)	making any general solicitation, directly or through an employment agency, not specifically targeted
at any such employee, director, or officer or from hiring any individual who contacts the Vendor as a result of such general solicitation;

 

		(6)	hiring any employee, director, or officer of the Group whose employment was terminated or who has
not been an employee, officer or director of the Group for at least six months prior to the date of hiring;

 

		(7)	where an employee approaches the Telefonica Group seeking a transfer within the Telefonica Group;
or

 

		(8)	exploiting (whether by leasing, concurrent use or otherwise), transferring or otherwise disposing
of New Spectrum, provided that this provision shall not qualify the restriction in clause 5.3.1(1).

 

		5.3.3	Modification: Whilst the restrictions in clause 5.3.1 above are considered by the parties
to be reasonable and indispensable in all of the circumstances as at the date of this Agreement, it is acknowledged that restrictions
of that nature may be void because of changed circumstances or other unforeseen reasons; therefore, if any restrictions are held
to be or are reasonably likely to be held (in the opinion of Purchaser acting reasonably) to be void by any court or regulatory
authority but would be valid if part of the wording were amended or the relevant period or scope reduced, those restrictions will
apply with the modifications necessary to make them valid and effective and those modifications will not affect the validity of
any other restrictions in this Agreement.

 

		5.3.4	Obligations with respect to the Transaction Documents:

 

		(A)	TSA

 

		(1)	Prior to Completion:

 

		(a)	the Telefonica Group Services and the Telefonica Europe Services, shall be amended via the process
described in clause 5.3.4(A)(3) where either or both of the following apply:

 

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		(i)	Vendor and Purchaser required amendments: such addition or modification required by the
Vendor or the Purchaser, as is necessary to:

 

		a.	reflect a change in scope of an existing service;

 

		b.	reflect the addition of a new service which is now being provided by the Retained Group to the
Group or by the Group to the Retained Group (as applicable) from the period which commences after the date of this Agreement;

 

		c.	agree the final form of the following TSAs and RTSAs as set out in section 2 of the Working Document:
TSA 1, TSA 29, TSA 40, RTSA 29 and RTSA 30; or

 

		d.	agree the final form of the following TSAs and RTSAs of schedule 1 of the TSA: RTSA 25, RTSA 26
and RTSA 27 (only regarding provision of the services on all reasonable or reasonable endeavours (as applicable)). For the sake
of clarity, the rest of the terms on the aforementioned RTSAs shall remain in full force and effect unless amended via the process
described in clause 5.3.4(A)(3).

 

In respect of clause 5.3.4(A)(1)(a)(i)(d)
above, to the extent that no amendments have been requested by the Vendor or the Purchaser, the terms applicable to the provision
of RTSA 25, 26 and 27, following Completion, shall be the terms set out in schedule 1 of the TSA.

 

		(ii)	Purchaser required amendments: in respect of the Telefonica Group Services identified in
TSAs 16, 17, 18, 19, 26, 27, 28, and 30 of schedule 1 of the TSA such addition or modification required by the Purchaser, as is
necessary to reflect any new fact or information that has arisen from the Purchaser’s further consideration of documentation
added to the Virtual Data Room after the 2 March 2015 (other than in respect of the Excluded Documents).

 

		(b)	in accordance with the process described in clause 5.3.4(A)(3), the Purchaser may make reasonable
enquiries of the Vendor, subject to any confidentiality restrictions the Vendor is bound by, in order to verify the accuracy of
the charges set out in schedule 1 of the TSA in accordance with the Charging Principle, as updated by agreement between the parties
from time to time.

 

		(2)	Before the date which is two (2) months from the date of this Agreement:

 

		(a)	the Vendor and the Purchaser shall each nominate three (3) individuals who together will comprise
the “Transitional Service Committee”; and

 

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		(b)	the Vendor and the Purchaser shall discuss in good faith with a view to agreeing the governance
structure to apply during the term of the Transitional Services Agreement, as set out in schedule 3 of the TSA.

 

		(3)	The Transitional Service Committee shall meet no less than once every two (2) months, to discuss
the Telefonica Group Services and the Telefonica Europe Services (“Transitional Service Committee Meetings”).
In the Transitional Service Committee Meetings:

 

		(a)	each of the Purchaser and the Vendor shall notify the other party of any requested amendments to
schedule 1 of the TSA or new services, in accordance with the principles set out in clause 5.3.4(A)(1)(a);

 

		(b)	the Purchaser may make enquiries of the Vendor in accordance with clause 5.3.4(A)(1)(b);

 

		(c)	the Vendor shall provide the Purchaser with regular updates on its progress in obtaining the third
party consents referred to in clause 5.3.4(A)(8), and inform the Purchaser when each such third party consent has been obtained;

 

		(d)	the Vendor shall inform the Purchaser of:

 

		(i)	any changes (including as to scope, volume or nature) that have occurred to the services which
were provided by the Retained Group to the Group, or by the Group to the Retained Group prior to the date of this Agreement, where
such changes are relevant to the Transitional Services Agreement;

 

		(ii)	any services provided by the Retained Group to the Group, or by the Group to the Retained Group,
that were not being provided prior to the date of this Agreement; and

 

		(iii)	any material discrepancies between the Telefonica Group Services and the Telefonica Europe Services
set out in schedule 1 of the TSA and the manner in which such services are currently being provided between the Group and the Retained
Group where such discrepancies are relevant to the Transitional Services Agreement.

 

		(e)	each of the Purchaser and the Vendor may make reasonable requests to the other party to the extent
that such requests are relevant to and necessary to understand the Telefonica Group Services and Telefonica Europe Services, and
each party shall, subject to any confidentiality restrictions which it is bound by, use all reasonable endeavours to provide the
other party (and its nominated representatives) with such information as requested by the other party.

 

The members of the Transitional
Service Committee shall:

 

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		(f)	discuss the proposed amendments pursuant to clause 5.3.4(A)(3)(a) in good faith, having regard
to the Charging Principles or other principle as is agreed by the parties, with a view to determining whether any changes should
be made to such applicable service schedule (TSA/RTSA) set out in schedule 1 of the TSA or whether any new service schedules (TSAs/RTSAs)
are required, or whether the list of Existing Services Agreements set out in schedule 4 of the TSA needs to be amended; and

 

		(g)	acting reasonably and in good faith, document any changes to schedule 1 of the TSA which are agreed
pursuant to clause 5.3.4(A)(3)(f).

 

In the event that the Vendor
and the Purchaser, within fifteen (15) Business Days, or as otherwise agreed by the parties, of each Transitional Service Committee
Meeting, are unable to reach agreement on the changes and new services described in clause 5.3.4(A)(3)(f) either party may refer
the matter for resolution by expert determination in accordance with the provisions of schedule 3 of the TSA.

 

		(4)	Following each Transitional Service Committee Meeting, schedule 1 of the TSA shall be updated to
reflect all additions or modifications that have been agreed since the previous version of schedule 1 of the TSA.

 

		(5)	Within ten (10) Business Days before Completion:

 

		(a)	the parties shall compile the updates to the TSA in accordance with clause 5.3.4(A)(4) and this
shall constitute the final form of schedule 1 of the Transitional Services Agreement to be delivered on Completion (the “Final
TSA”). The parties acknowledge that the services to be provided by the parties shall be those set out in the Final TSA;
and

 

		(b)	the parties shall discuss in good faith with a view to agreeing details which are required to (i)
complete the contacts schedule set out in Annex A and Annex B of schedule 1 of the TSA and; (ii) update the Existing Services Agreements
list set out in schedule 4 of the TSA.

 

		(6)	For the sake of clarity, those Telefonica Group Services and Telefonica Europe Services set out
in schedule 1 of the TSA which are not updated or modified by the Transitional Service Committee shall remain as set out in schedule
1 of the TSA

 

		(7)	Nothing in this clause shall prevent normal conduct of business in accordance with clause 3.6,
or restrict any operations of the Retained Group.

 

		(8)	In the event that the consent of a third party will be required for the provision of a Telefonica
Group Service or a Telefonica Europe Service, the Vendor will use reasonable endeavours to procure such third party consent prior
to Completion.

 

		(9)	This clause 5.3.4(A) shall not apply to the Digital Products.

 

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		(10)	The charges payable in relation to the services provided under the TSA shall be calculated in accordance
with one of the following charging principles (“Charging Principles”):

 

		(a)	Category 1 (TSAs 2, 3, 5, 12, 13 and 23 of schedule 1 of the TSA): Digital Product Costs;

 

		(b)	Category 2 (TSAs 1, 4, 14, 15, 16, 17, 18, 19) of schedule 1 of the TSA): the charges as set out
in the Existing Services Agreement;

 

		(c)	Category 3 (RTSA 25): the charges set out in the existing sublease arrangements;

 

		(d)	Category 4 (TSA 11): as specified in TSA 11; and

 

		(e)	Category 5 (applies to all services other than those referred to in (a), (b), (c) or (d), including
but not limited to TSAs 26, 27, 28, 30 and 32): Costs plus five percent (5%) where “Costs” shall mean the costs incurred
by the Retained Group or the Group to provide the service including, without limitation, costs of infrastructure usage and operation,
external and internal expenses associated with the delivery of applicable services, in the case of Telefonica Group Services; to
the Group, and in the case of the Telefonica Europe Services; to the Retained Group, or such investments made or to be made to
ensure service stability, in the case of Telefonica Group Services; to the Group, and in the case of the Telefonica Europe Services;
to the Retained Group, having regard to the service term and required service level as defined in the applicable service schedule
of the TSA,

 

Irish TSA

 

		(11)	Notwithstanding the termination notice dated 19 August 2014 served by giffgaff Limited on Telefonica
Ireland Limited which would terminate the Irish MSA on 21 February 2016, in the event Completion does not take place until 21 February
2016, or later, the Vendor will procure that from the date of this Agreement until Completion, giffgaff Limited shall continue
to provide Telefonica Ireland Limited with the Quartet Services in accordance with the terms of the Irish TSA and the Irish MSA.

 

		(12)	In respect of the Other Irish TSA Services, the Purchaser and the Vendor shall discuss, in good
faith, and attempt to agree to the potential procurement of the extension of the provision of the Other Irish TSA Services (which
are currently provided to Telefonica Ireland Limited) until Completion.

 

		(B)	Digital Products

 

In respect of each of the Digital
Products:

 

		(1)	where the Purchaser wishes the Retained Group to provide such Digital Product to a member of the
Group following Completion, no later than fifteen (15) Business Days following the date of this Agreement and throughout the six
(6) months following the date of this Agreement, the Vendor and the Purchaser shall negotiate, acting reasonably and in good faith,
the terms (including but not limited to the 

 

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charges) upon which a member of the Retained Group will provide each Digital Product
to the Group following Completion having regard to, but without being in any way bound by, the provisions of section 1 of the Working
Document that applies to each Digital Product; and

 

(2)in the event that:

 

		a.	on the date which is six (6) months following the date of this Agreement, the Parties have not
agreed the terms upon which a member of the Retained Group will provide a particular Digital Product to the Group following Completion;
and

 

		b.	immediately prior to Completion, a member of the Retained Group is providing that Digital Product
to a member of the Group or a member of the Group is providing that Digital Product to its customers,

 

the following shall apply, in
respect of that Digital Product (as applicable):

 

		c.	the Vendor will procure that a member of the Retained Group provides such Digital Product to the
relevant member(s) of the Group receiving such digital product or service, for the Digital Products Transition Period as a Telefonica
Group Service and subject to the terms of the Transitional Service Agreement;

 

		d.	the Purchaser will procure the payment, to the relevant member of the Retained Group, of the charges
for such Digital Product which will be the Digital Products Costs plus five per cent. (5%), to be invoiced on a quarterly basis;
and

 

		e.	if the Company’s consent is withheld or delayed in respect of an Irrecoverable Cost, the
Vendor shall not be liable for a failure of the Retained Group to provide the affected Digital Product in accordance with the Transitional
Services Agreement, to the extent that such failure is a result of not incurring the Irrecoverable Cost.

 

		(3)	Nothing in this clause 5.3.4(B) shall prevent normal conduct of business in accordance with clause
3.6, or restrict any operations of the Retained Group.

 

		5.3.5	Maintenance of benefits: Save as required by law or regulation for a period of eighteen
(18) months following Completion, the Purchaser shall, and shall procure that the Company shall:

 

		(a)	not make any materially adverse change to any of the employees’ benefits, payments made and
benefits provided in the event of redundancy or other payments made or benefits provided on involuntary termination of employment
for which all employees (or any of them) are eligible or entitled at the date of this Agreement (to the extent permissible by law),
unless the relevant benefits are specific to the Telefonica Group and it is not possible for the Purchaser to replicate such benefits
without incurring material cost and except for any amendment to the trust deed and rules of the Telefonica UK Pension Plan dated
28 February 2013 to clarify that a member retiring or being made redundant on or after 28 February 2013 is not eligible for benefits
under rule 6(2) of the section rules 2, 2A, 3 and 3A of the Telefonica UK Pension Plan;

 

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		(b)	not make any materially adverse changes to any of the employees’ existing terms and conditions
of employment at the date of this Agreement, unless the relevant terms and conditions are specific to the Telefonica Group; and

 

		(c)	maintain the Telefonica UK Pension Plan.

 

		5.3.6	Payment of entitlements to employees

 

		(A)	The Purchaser undertakes to procure that the relevant Group Companies shall (a) pay to the employees
of any Group Companies the amounts notified to the Purchaser under clause 5.3.6(C)(3) to be made (i) in respect of the Bonus Scheme
and (ii) under the Long Term Incentive Plans (and shall in each case withhold from such payments and account to the relevant Tax
Authority for any taxation and employee social security (or similar) contributions which are subject to withholding requirements);
(b) account to the relevant Tax Authority for any employer social security (or similar) contributions payable in respect of any
payment under (a) above, in each case irrespective of whether any Group Company has any contractual liability to make any such
payments (and account for any taxation and social security (or similar) contributions as aforesaid); and (c) account to the relevant
Tax Authority for (1) any taxation and employee social security (or similar) contributions which are subject to withholding requirements
in relation to the receipt by employees of any Group Company of shares under the Telefonica Restricted Share Plan (as notified
to the Purchaser under clause 5.3.6(C)(3)); and (2) any employer social security (or similar) contributions payable in respect
of the receipt of shares referred to in (1) above, in each case irrespective of whether any Group Company has any liability to
account for any taxation and social security (or similar) contributions as aforesaid;

 

		(B)	The Vendor covenants to pay to the Purchaser an amount equal to any losses or liabilities (including
any direct or indirect consequential losses, loss of profit and loss of reputation, damages, claims, demands, proceedings, costs,
expenses, penalties, legal and other reasonable professional fees and costs) which may be suffered or incurred by the Purchaser
or any Group Company and which arise directly or indirectly in connection with any liability of, or claim against any of them,
under or in respect of the Bonus Scheme, the Telefonica Restricted Share Plan and the Long Term Incentive Plans save to the extent
that such loss is as a result of the Purchaser’s failure to procure the payments notified to the Purchaser under clause 5.3.6(C)(3)
due to employees under the Bonus Scheme and the Long Term Incentive Plans in which case, the Purchaser covenants to pay the Vendor
mutatis mutandis.

 

		(C)	The Vendor shall provide, or procure the provisions of, the following to the Purchaser:

 

		(1)	at least 20 days prior to Completion,
a statement of the aggregate amount of the estimated Transaction Bonus Amount, estimated LTIP Amount and estimated employer social
security (or similar) liability in relation to the receipt of shares by employees of any Group Company under the

 

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Telefonica Restricted Share Plan (the “Bonus Scheme Statement”)
which aggregate amount less the estimated value as at the Completion Date of the assets (whether in cash or otherwise) of the EBT
that the Vendor believes will be available to fund the relevant liability (which shall be notified to the Purchaser at the same
time as delivery of the Bonus Scheme Statement) will be included as an amount of Debt considered in the calculation of the Vendor
Estimated Completion Net Debt (but not included in the Vendor Estimated Completion Working Capital) thereby reducing the Initial
Purchase Price by such amount as may be determined in accordance with Schedule 8);

 

		(2)	on Completion, a list of the relevant employees of the Group Companies who are entitled to receive
an amount under the Bonus Scheme and/or the Long Term Incentive Plans and/or shares under the Telefonica Restricted Share Plan;

 

		(3)	within 20 Business Days following the Completion Date, an updated Bonus Scheme Statement which
shall include the final Transaction Bonus Amount and LTIP Amount and details of amounts payable to each relevant employee and the
final value of shares made available to employees of any Group Company under the Telefonica Restricted Share Plan and the associated
employer social security (or similar) liability. Any difference between (i) the final aggregate Bonus Amount and LTIP Amount and
employer social security (or similar) liability in connection with the Telefonica Restricted Share Plan and (ii) the amount provided
for in the Bonus Scheme Statement referred to in paragraph (1) above, together with any difference between (a) the estimated value
(whether in cash or otherwise) of the EBT assets that the Vendor believed would be available to fund the relevant liability and
(b) the actual amount of cash within the EBT at the Completion Date which was in fact made available to fund the relevant liability
(which shall be notified to the Purchaser at the same time as delivery of the updated Bonus Scheme Statement, shall be included
in the post-completion adjustment mechanisms and Purchaser Completion Schedules in accordance with Parts B and C of Schedule 8;
and

 

		(4)	payment of a cash amount equivalent in value to the taxation and social security (or similar) contributions
to be accounted for by the Group Companies to the relevant Tax Authority pursuant to clause 5.3.6(A)(c)(1) in connection with the
Telefonica Restricted Share Plan.

 

		5.3.7	Maintenance of Books and Records

 

The Purchaser shall procure
that:

 

		(1)	the Company shall preserve all books, records and documents of the Group Companies which are at
Completion in the possession or under the control of the Group Companies insofar as the same record matters occurring on or before
Completion in accordance with the Company’s document retention policy; and

 

		(2)	until the sixth anniversary of Completion (or in the event of any claim being made by the Purchaser
under the Warranties or the Tax Deed until such

 

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later time as the same is determined) the Vendor and its agents, accountants, solicitors
and other professional advisers shall be allowed the right to inspect and take copies of the books, records and documents referred
to in clause 5.3.7(1) for the sole purpose of complying with its tax, regulatory or audit obligations as required by law (but only
in relation to matters recorded therein which occurred on or before Completion) at all reasonable times upon the Vendor giving
reasonable notice of such requirement to the Company,

 

provided that clause 5.3.7(1)
shall not apply to any books, records or documents of the Pensions Trustee to the extent relating to its capacity as trustee of
the Telefonica UK Pension Plan.

 

		5.3.8	Change of Group Company names

 

The Purchaser shall procure
that as soon as practicable after Completion and in any event within three months of the date of Completion any Group Company bearing
the name Telefonica or O2 shall change its name to a name that does not incorporate Telefonica or O2 or anything confusingly similar
thereto, save that in respect of any Group Company name which is embedded into the information technology systems of the Group,
such change of name shall occur as soon as reasonably practicable after Completion and in any event within 12 months of the date
of Completion.

 

5.3.9    
Obligations regarding Release of Security, Encumbrances and Debt

 

		(1)	The Vendor undertakes with the Purchaser to use all reasonable endeavours to procure, upon, or
promptly following, Completion, the release of all security, guarantees and indemnities given by any Group Company in relation
to any obligation of any member of the Retained Group. After Completion, pending the release of all such security, guarantees and
indemnities, the Vendor shall indemnify and keep indemnified the Purchaser and the Purchaser’s Group against any and all
losses, liabilities, claims, costs, expenses and fees in connection with such security, guarantees or indemnities.

 

		(2)	The Purchaser undertakes with the Vendor to use all reasonable endeavours to procure, upon, or
promptly following, Completion, the release of all security, guarantees and indemnities given by any member or members of the Retained
Group in relation to any obligation of the Group following the disclosure of any such security, guarantees and indemnities to the
Purchaser. After Completion, pending the release of all such security, guarantees and indemnities, the Purchaser shall indemnify
and keep indemnified the Vendor and the Retained Group against any and all losses, liabilities, claims, costs, expenses and fees
in connection with such security, guarantees or indemnities.

 

		(3)	The Vendor undertakes with the Purchaser: (i) to procure the release of any registered charges
on the Shares; and (ii) to remove any Encumbrances over any assets of any Group Company other than Permitted Encumbrances, in each
case, prior to Completion. In respect of (ii) in 

 

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connection with the JV Companies, the obligations of the Vendor shall be limited
to so far as lies within the Vendor’s power of procurement.

 

		(4)	The Vendor undertakes with the Purchaser that: (i) at Completion the balance of Factoring Payables
shall be zero; (ii) save for the Repayment Debt and save for any contingent liabilities in respect of the Pension Schemes, at Completion
no Group Company shall owe any Financial Debt to any person, other than another Group Company; (iii) the Repayment Debt shall be
owed by the Company (and not any other Group Company); (iv) it shall procure that the payment of the Debt Repayment Amount in accordance
with paragraph 3 of Schedule 4 shall be in full and final settlement of the Repayment Debt; and (v) to the extent that at Completion,
any amounts are owed by any Group Company to any member or members of the Retained Group, aside from the Repayment Debt and other
trade payables in the ordinary course, all such amounts shall be unconditionally waived at Completion.

 

		(5)	The Vendor undertakes with the Purchaser that on or before Completion, any amounts owed by any
member of the Retained Group to any Group Company shall be repaid, other than any trade payables incurred in the ordinary course
(which shall be paid in accordance with the payment terms in the relevant contract or, if there are no such payment terms, within
a reasonable period).

 

		5.3.10	Wrong Pockets

 

		(1)	If at any time following Completion, either party becomes aware that (a) any Group Company owns
any asset (other than real property) or right (including Intellectual Property Rights) which in the 12 months prior to the date
of this Agreement has been used predominantly in the business of the Retained Group; (b) any employee who is not a Relevant Employee
is employed by a Group Company; (c) any Group Company owns any asset or right which is to be transferred to, owned by or vested
in a member of the Retained Group in accordance with the Reorganisation Steps Plan or any New Spectrum, then that party shall notify
the other party of that fact. Thereafter, at the request of the Vendor (or at the request of either party in the case of (b) above),
the Purchaser undertakes (at the cost of the Vendor) to execute or procure the relevant Group Company executes such documents and
does such acts as may be reasonably necessary to procure the transfer of any such asset, right or New Spectrum together with any
liabilities and/or any benefit or sum paid or accruing, in each case, to the extent relating thereto, or the reallocation of the
relevant employee, to a member of the Retained Group nominated by the Vendor as soon as reasonably practicable and the Vendor shall
do all things reasonably necessary to facilitate such a transfer or reallocation. In case of transfer of any asset, right or liability,
such asset, right or liability shall be transferred at its nominal value (or where the value of such asset is included in the Completion
Accounts, at the value accounted for in the Completion Accounts). In the case of transfer or 

 

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reallocation of any employee pursuant
to this clause, if, having taken such steps as reasonably necessary to reallocate such employee it is not possible to do so, the
Purchaser may terminate such employee.

 

		(2)	If at any time following Completion, either party becomes aware that (a) any member of the Retained
Group owns any asset (other than real property or any New Spectrum) or right (including Intellectual Property Rights but excluding
the Assigned IPR) which in the 12 months prior to the date of this Agreement has been used predominantly in the business of a Group
Company; (b) any Relevant Employee (save for any such employee who transferred to a member of the Retained Group in accordance
with the Employee Journeys Document) is employed by a member of the Retained Group; or (c) any member of the Retained Group owns
any asset or right which is to be transferred to, owned by or vested in a Group Company in accordance with the Reorganisation Steps
Plan, then that party shall notify the other party of that fact. Thereafter, at the request of the Purchaser, the Vendor undertakes
(at its own cost) to execute or procure the relevant Retained Group company executes such documents and does such acts as may be
reasonably necessary to procure the transfer of any such asset or right together with any liabilities and/or any benefit or sum
paid or accruing, in each case, to the extent relating thereto, or the reallocation of the relevant employee, to a Group Company
nominated by the Purchaser as soon as reasonably practicable and the Purchaser shall (at the Vendor’s cost) do all things
reasonably necessary to facilitate such a transfer or reallocation. In case of transfer of any asset or right, such asset or right
or liability shall be transferred at its nominal value (or where the value of such asset is included in the Completion Accounts,
at the value accounted for in the Completion Accounts).

 

		(3)	If at any time after Completion, either party becomes aware that any real property which is not
listed in Schedule 15 and is not used for the purposes of the Group at the date of this Agreement is vested in the Group, then
that party shall notify the other party of that fact. Thereafter, at the request of the Vendor, the Purchaser undertakes (at the
cost of the Vendor) to execute or procure the relevant Group Company executes such documents and does such acts as may be reasonably
necessary to procure the transfer of the title to such real property to a member of the Retained Group nominated by the Vendor
as soon as reasonably practicable and the Vendor shall do all things reasonably necessary to facilitate such a transfer. The real
property shall be transferred at no consideration (or where the value of such real property is included in the Completion Accounts,
at the value accounted for in the Completion Accounts) but otherwise at the Vendor’s expense.

 

		(4)	If at any time after Completion, either party becomes aware that any real property which is used
for the purposes of the Group at the date of this Agreement is vested in a member of the Retained Group, then that party shall
notify the other party of that fact. Thereafter, at the request of the Purchaser, the Vendor undertakes (at the cost of the Vendor)
to execute or procure the relevant member of the Retained Group executes such documents and does such acts as may be reasonably
necessary to procure the transfer of the title to such real property to a Group Company nominated by the Purchaser as soon as reasonably
practicable and the 

 

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Vendor shall do all things reasonably necessary to facilitate such a transfer. The real property shall be transferred
at no consideration (or where the value of such real property is included in the Completion Accounts, at the value accounted for
in the Completion Accounts) but otherwise at the Vendor’s expense.

 

		(5)	Pending such valid transfer in accordance with sub-clauses (1) to (4) (inclusive) above, such asset,
right or liability or real property shall be held by the relevant party as agent of and trustee for the other party.

 

		(6)	If any payment under this clause 5.3.10 constitutes the consideration for a taxable supply for
VAT purposes, then (i) the recipient shall promptly provide to the payer a valid VAT invoice, and (ii) except where the reverse
charge procedure applies, and subject to the provision of a valid VAT invoice in accordance with (i), in addition to that payment
the payer shall pay to the recipient any VAT due.

 

		5.3.11	No Double Recovery and No Double Counting

 

None of the Vendor, the Purchaser
nor any Group Company may recover under this Agreement or any of the Transaction Documents or otherwise more than once in respect
of the same liability suffered or amount for which the relevant party is otherwise entitled to claim (or part of such liability
or amount), and no liability or amount (or part of any liability or amount) shall be taken into account, set off or credited more
than once under this Agreement or any of the Transaction Documents or otherwise, with the intent that there will be no double counting
under this Agreement or any of the Transaction Documents or otherwise.

 

		5.4	Indemnities

 

		5.4.1	[***] Indemnity

 

The Vendor covenants to pay
to the Purchaser on demand by way of adjustment to the purchase price for the Shares an amount equal to any payment made or other
loss suffered following Completion by the Purchaser or any Group Company to the extent arising from the [***], provided
that the fees and disbursements of advisers reasonably incurred in connection with investigating, rectifying, defending or settling
any litigation, arbitration commenced or threatened arising from such [***] shall be a loss for the purposes of this clause
5.4.1 and provided further that the Vendor’s liability in respect of any liabilities of any of the JV Companies shall be
limited to its Proportionate Share of such liability. The Vendor shall not be liable for any claim in respect of this clause 5.4.1
to the extent that a claim is made on or after the date which is 7 years from the date of this Agreement.

 

		5.4.2	[***] Indemnity

 

The Vendor covenants to pay
to the Purchaser on demand by way of adjustment to the purchase price for the Shares an amount equal to any payment made or other
loss suffered following Completion by the Purchaser or any Group Company to the extent arising from the [***], provided
that the fees and disbursements of advisers reasonably incurred in connection with investigating, rectifying, defending or settling
any litigation, arbitration commenced or threatened arising as a result of

 

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the [***] shall be a loss for the purpose of
this clause 5.4.2 and provided further that the Vendor’s liability in respect of any liabilities of any of the JV Companies
shall be limited to its Proportionate Share of such liability. The Vendor shall not be liable for any claim in respect of this
clause 5.4.2 to the extent that a claim is made on or after the date which is 7 years from the date of this Agreement.

 

		5.4.3	[***] Indemnity

 

The Vendor covenants to pay
to the Purchaser on demand by way of adjustment to the purchase price for the Shares an amount equal to any payment made or other
loss suffered following Completion by the Purchaser or any Group Company to the extent arising from any breach of, or failure to
meet the milestones or other contractual obligations or commitments in, the [***] occurring prior to Completion (including
any liquidated damages incurred in accordance with the [***] and any loss of incentive payments) provided that the fees
and disbursements of advisers reasonably incurred in connection with investigating, rectifying, defending or settling any litigation
or arbitration shall be a loss for the purposes of this clause 5.4.3. The Vendor shall not be liable for any claim in respect of
this clause 5.4.3 to the extent that a claim is made on or after the date which is 6 years from the date of this Agreement.

 

		5.4.4	Conduct of Indemnity Claims

 

If at any time the Purchaser
or any Group Company becomes aware of any claim, action or demand against the Purchaser or any Group Company which may result in
the Purchaser bringing an Indemnity Claim against the Vendor (save in respect of any Indemnity Claims under clauses 4.9.2 and 5.3.6(B)):

 

		(1)	the Purchaser shall (and shall procure that the relevant Group Company shall):

 

		(i)	notify the Vendor in writing of the details of such claim as soon as reasonably practicable and
provide such information and access to personnel, premises, chattels, documents and records to the Vendor and its professional
advisers as they may reasonably require relating to the action taken or proposed to be taken by the Purchaser or the relevant Group
Company; and

 

		(ii)	not make (and will procure that its officers and employees will not make) any admission of liability,
agreement, settlement or compromise with any third party in relation to any such claim or adjudication without the prior written
consent of the Vendor;

 

		(2)	the Vendor shall have sole conduct of the defence or compromise of the claim and as between the
Vendor and the Purchaser, the Vendor shall have the sole right to any costs and damages awarded as a result; and

 

		(3)	the Purchaser shall (and shall ensure that the relevant Group Company shall):

 

		(i)	act in accordance with the instructions of the Vendor and provide the Vendor such assistance as
it shall reasonably require, at the Vendor’s cost (provided such costs of the Purchaser and the relevant 

 

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Group Company are
properly incurred), in respect of the conduct of such defence or compromise;

 

		(ii)	take all reasonable steps to mitigate any loss suffered by it in that regard including, at the
Vendor’s cost, any reasonable steps required by the Vendor; and

 

		(iii)	keep the Vendor informed in a timely fashion of the progress of other proceedings or actions in
connection with the claim; and

 

		(4)	notwithstanding any other provision of this clause 5.4.4, if any claim, action or demand against
the Purchaser or a Group Company remains outstanding against the Purchaser or the relevant Group Company on the date which is one
year prior to the expiry of the relevant indemnity time limit in connection with any of the Indemnity Claims under clauses 5.4.1
to 5.4.3, the Purchaser shall have the right to resume sole conduct of the defence or compromise of the claim and may take any
steps in connection with defending or compromising such claim as it, in its sole discretion, determines except where the Vendor
covenants to pay the Purchaser for an extended period, in which case, this provision shall apply on the date falling one year prior
to the end of such extension.

 

		5.5	Intra Group Agreements

 

Save in respect of any intra
group arrangements referred to in the Transitional Services Agreement, the Vendor acknowledges that the Purchaser shall have an
option to terminate any Intra Group Agreement, on demand and without compensation or any termination payment, within three months
following Completion by serving written notice on the relevant member of the Telefonica Group. The Vendor agrees that any Group
Company which is either a party to, or has obligations under, benefits from or adheres to, any supply or procurement contract to
which any member of the Retained Group is party, including the Sourcing Services Contract, shall, on request by the Purchaser,
be released with effect from Completion from such contract and any obligation or liabilities arising thereunder.

 

		5.6	Assignment of Certain Trade Marks

 

Prior to carrying out the Pre-Completion
Reorganisation, the Vendor shall procure that: (i) Telefonica Digital Espana shall assign to Telefonica UK, UK trade mark registrations
nos. 2649981 MICROGAFF and 2649984 NANOGAFF, and (ii) the relevant forms are filed with the UK Intellectual Property Office for
the recordal of the change in title from Telefonica Digital Espana to Telefonica UK.

 

		5.7	Purchaser Pensions Obligations

 

		5.7.1	The Purchaser covenants to pay to the Vendor by way of adjustment to the purchase price for the
Shares an amount equal to any payment made or other loss suffered or liability incurred in respect of the Telefonica UK Pension
Plan by the Vendor (acting for itself and as agent and trustee for each member of the Telefonica Group), any member of the Telefonica
Group, or any other person connected to, or associated with the Vendor or any member of the Telefonica Group, as a result of or
in connection with the exercise on or after Completion by 

 

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the Pensions Regulator of his powers to issue a financial support direction
or contribution notice under sections 38 to 51 of the Pensions Act 2004 to the extent that such exercise arises as a result of
or in connection with any action or inaction by the Purchaser or any member of the Purchaser’s Group after Completion or
in relation to a financial support direction solely in respect of any circumstances of any member of the Purchaser’s Group
that arise after Completion.

 

		5.7.2	If at any time the Vendor becomes aware of any exercise (whether actual or threatened) by the Pensions
Regulator of his powers under sections 38 to 51 of the Pensions Act 2004 in a manner to which the provisions of Clause 5.7.1 may
reasonably be expected to apply, the Vendor shall (and shall procure that each member of the Telefonica Group shall):

 

		(1)	notify the Purchaser in writing of the details of such exercise by the Pensions Regulator as soon
as reasonably practicable and provide such information and access to such information and access to personnel, premises, chattels,
documents and records to the Purchaser and its professional advisers as they may reasonably require relating to the applicable
act, failure to act or circumstances;

 

		(2)	co-operate and consult in good faith with the Purchaser in connection with any investigation undertaken
by the Pensions Regulator and any engagement with the Pensions Regulator in connection with such exercise; and

 

		(3)	not make (and will procure that its officers and employees will not make) any admission of liability,
agreement, settlement or compromise with the Pensions Regulator in relation to any such exercise of the Pensions Regulator's powers
without the prior written consent of the Purchaser (such consent not to be unreasonably withheld or delayed).

 

		5.7.3	At the reasonable request of the Vendor, MergeCo shall, on reasonable notice, engage in a discussion
with the Pensions Trustee with a view to providing the Pensions Trustee with reasonable information regarding the proposed financial
position and credit profile of MergeCo and the Group following Completion and with such other information as the Pensions Trustee
may reasonably require for the purposes of forming a view on the covenant strength of MergeCo and the Group following Completion.
To the extent that MergeCo provides information to the Pensions Trustee in accordance with this clause 5.7.2, MergeCo shall promptly
provide a copy to the Vendor save that MergeCo shall not provide to the Vendor any information that it considers, acting reasonably,
to be commercially sensitive.

 

		5.7.4	The Purchaser shall, and shall procure that the relevant members of the Purchaser’s Group
shall, use reasonable endeavours, and work together with the Vendor and the relevant members of the Telefonica Group in good faith
and in a commercially reasonable manner, in order to secure that (i) any amounts payable under clause 4.8, (ii) any Section 75
Debts that may be payable prior to Completion, and (iii) any Section 75 Debts that may be payable by or on behalf of any Ceasing
Pensions Employer post Completion, are paid to the Telefonica UK Pension Plan in a tax efficient manner including in accordance
with such arrangements as are reasonably requested or proposed by the Vendor for that 

 

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purpose, including, without limitation, any
Section 75 Debt apportionment mechanism under the Employer Debt Regulations.

 

		5.8	Repayment of Outstanding Intra Group Amounts

 

The Purchaser undertakes to
procure that within ten (10) Business Days of the Completion Date all items taken into account in (s) of the definition of Debt,
shall in each case be repaid in full by the relevant Group Company to the relevant member of the Retained Group.

 

		5.9	[***]

 

Prior to Completion:

 

		5.9.1	the Vendor shall procure that [***] and [***] enter into an agreement with Telefonica
UK, on substantially the same terms as the agreements in place with the Retained Group, in so far as those agreements relate to
[***], to provide the same products and services that they are currently providing to members of the Group and the Retained
Group, in respect of [***]-related software including the [***] Modules, ("[***] Software"), and
shall notify the Purchaser within fifteen (15) Business Days upon the putting in place of such agreements; and

 

		5.9.2	the Vendor shall procure that the members of the Retained Group shall assign to Telefonica UK:

 

		(1)	the Intellectual Property Rights owned by the Retained Group in the [***] Software; and

 

		(2)	all the [***]-related Documentation and know-how owned by the Retained Group, and will provide
such training as may reasonably be required by Telefonica UK to maintain, develop, modify, enhance and operate the [***]
Software.

 

		5.10	Directors and Officers insurance

 

For a period of six (6) years
from the Completion Date, the Purchaser agrees to procure that the Company purchases a run-off directors and officers insurance
policy in respect of any liabilities that may arise as a result of acts committed prior to Completion, such liabilities not exceeding
one hundred million (100,000,000) Euros per annum in respect of aggregated claims.

 

		5.11	[***]

 

		5.11.1	If: (i) the Vendor has not obtained the waiver of the change of control rights in the [***]
pursuant to clause 3.11(3) prior to Completion; and (ii) [***] is re-phased or otherwise accelerated by [***] in
accordance with its contractual rights as a result of the transaction contemplated by this Agreement, the Vendor covenants to pay
to the Purchaser on demand by way of adjustment to the purchase price for the Shares an amount equal to the difference between
the [***] (such amount being the “[***]”), provided that this clause 5.11.1 shall not apply to the extent
that the aggregate payments required under such re-phased [***] exceed the aggregate payments set out in the [***].

 

		5.11.2	The
Purchaser shall provide a written notification (the “[***]”) to the Vendor of its calculation of the [***]
(including workings) as soon as practicable after the

 

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amendments to the [***] that
have been required by [***] take effect. If the Vendor disagrees with the Purchaser’s calculation of the [***]
as set out in the [***] it shall provide a written notification (the “[***]”) to the Purchaser within
five Business Days of receipt of the [***]. If no [***] has been received by the Purchaser upon the expiry of such
five Business Day period then the calculation set out in the [***] shall be deemed to have been agreed by the Vendor.

 

		5.11.3	If the Vendor serves a [***] on the Purchaser, the Vendor and the Purchaser shall, during
the five Business Days following delivery, use their reasonable efforts to reach agreement on the [***]. If, during such
period, the Vendor and the Purchaser are unable to reach agreement they shall promptly thereafter jointly appoint an Independent
Accountant to determine the [***]. The provisions of paragraphs 5 to 9 of Part B of Schedule 8 shall apply mutatis mutandis
to the appointment of and determination of the [***] by the Independent Accountant.

 

		5.11.4	Any payment pursuant to this clause 5.11 shall be made within five Business Days of agreement or
determination of the [***].

 

		5.11.5	If [***] exercises its rights under the [***] in accordance with clause 5.11.1, the
Purchaser undertakes to: (i) use its reasonable efforts to minimise the financial effect on Telefonica UK of such re-phasing or
acceleration of the [***]; and (ii) not agree any other amendment to the [***] which would have an adverse effect
on any payments pursuant to this clause 5.11 from the date of such exercise until the date of such re-phasing or acceleration is
effected, without the prior written consent of the Vendor (not to be unreasonably withheld or delayed).

 

		5.11.6	For the purposes of this clause 5.11:

 

[***];

 

[***];

 

[***]; and

 

[***].

 

		6	UPSIDE INTEREST SHARING

 

From the
Completion Date onwards the provisions of Schedule 7 shall apply.

 

		7	MISCELLANEOUS PROVISIONS

 

7.1        
Announcements:

 

		7.1.1	Neither party will make any announcement to shareholders, employees, customers or suppliers or
to securities markets or other authorities or to the media or otherwise, regarding the subject matter of any of the Transaction
Documents or any term or provision of any of them without the prior written approval of the other party to this Agreement.

 

		7.1.2	Clause 7.1.1 will not apply if, and to the extent that, such announcement is required by any law
applicable to the party making the announcement or by:

 

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		(1)	bona fide contractual arrangements with unrelated third parties in existence at the date of this
Agreement; or

 

		(2)	any securities exchange, regulatory or governmental authority or court having jurisdiction over
the party making the announcement, whether or not the requirement has the force of law,

 

provided that any such announcement
may only be made after prior consultation with the other party to this Agreement to the fullest extent permitted by law or by the
rules or requirements of any such exchange, authority or court.

 

		7.1.3	If either party proposes to make an announcement pursuant to this clause 7.1, it will provide copies
of that proposed announcement to the other party to this Agreement before the announcement is made unless this is not reasonably
practicable or would be in breach of any law or regulation, in which case a copy of the announcement will be so provided to each
party as soon as reasonably practicable or in accordance with law or regulation.

 

		7.2	Confidentiality:

 

		7.2.1	

 

		(1)	The Purchaser undertakes with the Vendor (and undertakes from Completion as agent and trustee for
each Group Company) that it will and will procure that each of its Affiliates and its and their respective directors, officers,
employees and agents will preserve the confidentiality of, and not directly or indirectly reveal, report, publish, disclose, transfer
or use for its own or any other purposes, the Group Confidential Information (at any time up to the date of Completion) or the
Retained Group Confidential Information (at any time) except:

 

		(a)	in the circumstances set out in clause 7.2.1(2);

 

		(b)	to the extent otherwise expressly permitted by the Transaction Documents;

 

		(c)	to its professional advisers where such professional advisers are under a confidentiality obligation
in respect of such information;

 

		(d)	to its potential and actual providers of debt and/or equity financing and their respective professional
advisers, provided that the categories of information to be shared with such persons has been agreed between the parties in writing
in advance; or

 

		(e)	with the prior written consent of the Vendor.

 

		(2)	The Purchaser (the disclosing party) is permitted to disclose Confidential Information:

 

		(a)	where the Confidential Information is in or, after the date of this Agreement, enters, the public
domain otherwise than as a result of: (i) a breach by the disclosing party of its obligations in this clause 7.2.1 or (ii) a breach
by the person who disclosed that Confidential Information of a confidentiality obligation where the 

 

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disclosing party is or was
or should reasonably have been aware of such breach; or

 

		(b)	if and to the extent that the disclosing party discloses Confidential Information to any person:
(i) in compliance with any requirement of law, or (ii) in response to a requirement of any securities exchange, regulatory authority,
governmental authority, Tax Authority or court having jurisdiction over the disclosing party, or (iii) in order to obtain tax or
other clearances or consents from HMRC or other relevant Tax or regulatory authorities, PROVIDED that any such information disclosable
pursuant to this sub-clause may, to the fullest extent permitted by law, be disclosed only after prior consultation with the Vendor.

 

		7.2.2	

 

		(1)	The Vendor undertakes with the Purchaser (and undertakes as agent and trustee for each member of
the Retained Group) that it will and will procure that each of its Affiliates and its and their respective directors, officers,
employees and agents will preserve the confidentiality of, and not directly or indirectly reveal, report, publish, disclose, transfer
or use for its own or any other purposes, the Group Confidential Information or the Purchaser Confidential Information (at any
time) except:

 

		(a)	in the circumstances set out in clause 7.2.2(2);

 

		(b)	to the extent otherwise expressly permitted by the Transaction Documents;

 

		(c)	to its professional advisers where such professional advisers are under a confidentiality obligation
in respect of such information; or

 

		(d)	with the prior written consent of the Purchaser.

 

		(2)	The Vendor (the disclosing party) is permitted to disclose Group Confidential Information:

 

		(a)	where the Group Confidential Information is in or, after the date of this Agreement, enters, the
public domain otherwise than as a result of: (i) a breach by the disclosing party of its obligations in this clause 7.2.2 or (ii)
a breach by the person who disclosed that Group Confidential Information of a confidentiality obligation where the disclosing party
is or was or should reasonably have been aware of such breach; or

 

		(b)	if and to the extent that the disclosing party discloses Group Confidential Information to any
person: (i) in compliance with any requirement of law, or (ii) in response to a requirement of any securities exchange, regulatory
authority, governmental authority, Tax Authority or court having jurisdiction over the disclosing party, or (iii) in order to obtain
tax or other clearances or consents from HMRC or other relevant Tax or regulatory authorities, PROVIDED that any such information
disclosable pursuant to this sub-clause may, to the 

 

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fullest extent permitted by law, be disclosed only after prior consultation
with the Purchaser.

 

		7.2.3	The parties agree to procure that from the date of Completion, the existing confidentiality agreement
between the Vendor and Hutchison International Limited dated 8 February 2015 shall terminate and be of no further effect, without
prejudice to any accrued rights of the parties thereunder.

 

		7.3	Assignment:

 

		7.3.1	Subject to clause 7.3.2, neither party may assign, transfer, novate, declare a trust of the benefit
of or in any other way alienate any of its rights or obligations under this Agreement whether in whole or in part, except the Purchaser
shall be entitled to assign or transfer its rights by way of security in connection with any Proposed Financing to a security agent
or pledgee which is an Approved Bank, provided that such lenders shall not be entitled to receive under this Agreement any greater
amount than that to which the Purchaser would have been entitled.

 

		7.3.2	The parties acknowledge MergeCo has the right to assign, transfer, novate or otherwise alienate
all or any of its rights or obligations under this Agreement in favour of and/or to the Purchaser on notice to the parties to this
Agreement, provided that the Purchaser Guarantee will continue to apply to such obligations as transferred or novated in accordance
with this clause.

 

		7.4	Costs and Expenses: Each party to this Agreement will pay its own costs and expenses of,
and incidental to, the negotiation, preparation and implementation of any Transaction Document or otherwise incurred with a view
to effecting the transaction. Without prejudice to its rights under the Tax Deed, the Purchaser shall pay all stamp and other transfer
duties and registration fees applicable to any document which arise as a result of the purchase of the Shares under this Agreement.

 

		7.5	Severability: All of the terms and provisions of this Agreement and of each of the Transaction
Documents are distinct and severable and if any term or provision is held or declared to be unenforceable, illegal or void in whole
or in part by any court, regulatory authority or other competent authority it will, to that extent only, be deemed not to form
part of this Agreement and the enforceability, legality and validity of the remainder of this Agreement will not in any event be
affected. The parties will then use reasonable endeavours to agree to replace the unenforceable, illegal or void term or provision
with a term or provision which is legal and enforceable and which has an effect that is as near as possible to the intended effect
of the term or provision to be replaced.

 

7.6        
Whole Agreement:

 

		7.6.1	The Transaction Documents supersede all prior representations, arrangements, understandings and
agreements and set out the entire, complete and exclusive agreement and understanding between the parties in relation to the subject
matter of the Transaction Documents.

 

		7.6.2	The
Purchaser acknowledges and agrees that, other than as expressly set out in this Agreement, it has not been given and has not been
relied upon nor been induced to enter into any Transaction Document in reliance upon, any warranty,

 

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representation, covenant, undertaking, agreement, understanding, assurance or other statement (in each case express or
implied) of any nature (Pre-Contractual Matters).

 

		7.6.3	The Purchaser acknowledges and agrees with the Vendor that neither the Vendor nor any of its respective
representatives, directors, officers, agents, employees or advisers has given or made any guarantee, representation or assurance
to the Purchaser or to any of its directors, officers, agents, employees or advisers (Representatives), including as to the accuracy
or completeness of the forecasts, estimates, projections, statements of intent or statements of opinion or in relation to any other
information provided to the Purchaser or its Representatives (howsoever and whensoever provided) other than those expressly set
out in this Agreement or, to the extent that any of them have so relied or been so induced, the Purchaser hereby unconditionally
and irrevocably waives any claim or remedy which it or its Representatives might otherwise have had in relation thereto. The Purchaser
and MergeCo acknowledges that the business plan set out in document 4.2.10.1 in the Virtual Data Room was provided on the basis
set out in that document and in particular on a non-reliance basis and for the avoidance of doubt the provisions of this clause
7.6.3 shall apply to that document.

 

		7.6.4	The Purchaser acknowledges and agrees with the Vendor that any warranty or other right which may
be implied by applicable law in relation to the sale of the Shares is hereby excluded and if any such warranty or other right or
remedy is incapable of exclusion, the Purchaser hereby irrevocably and unconditionally waives any claim, right or remedy which
it might otherwise have had in relation thereto.

 

		7.6.5	The Purchaser unconditionally and irrevocably waives any claims, rights or remedies which the Purchaser
might otherwise have in relation to any Pre-Contractual Matters and the Vendor will have no liability in respect of them.

 

		7.6.6	The Purchaser may make a claim for breach of contract in respect of any breach by the Vendor under
any of the Transaction Documents but will have no claim or remedy in respect of rescission (save as otherwise provided herein)
or misrepresentation (whether negligent or otherwise, whether made prior to and/or in this Agreement and whether in respect of
any Pre-Contractual Matter or otherwise). In particular, except as otherwise provided in this Agreement, no circumstance, fact
or matter which renders any Warranty incorrect or inconsistent with any other Warranty will give rise to any claim against the
Vendor other than a claim for breach of contract in respect of the Warranty concerned.

 

		7.6.7	This clause 7.6 will not exclude any liability for or remedy in respect of fraud, fraudulent misrepresentation,
or wilful misstatement, by either party.

 

		7.6.8	The parties acknowledge that they have equal bargaining power and the contract price is based,
amongst other things, on the terms of this clause and, having taken independent advice, each of its sub-clauses are reasonable.

 

		7.6.9	Save as expressly set out in this Agreement, neither party will owe any duty of care to the other
party.

 

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		7.7	Survival: This Agreement (other than any obligations which have already been fully performed)
remains in full force and effect following Completion. Without prejudice to the foregoing, the Post-Termination Provisions will
continue to have effect notwithstanding failure to waive or satisfy the Conditions.

 

		7.8	Remedies Cumulative: Subject always to clause 7.5, the provisions of this Agreement and
the rights and remedies of the parties are independent, cumulative and are without prejudice and in addition to any other rights
or remedies which a party may have whether arising under statute, at common law, in equity, under contract, by virtue of custom
or otherwise. The exercise by a party of any one right or remedy under this Agreement or at law or in equity will not (unless expressly
provided in this Agreement or at law or in equity) operate so as to hinder or prevent the exercise by that party of any other right
or remedy.

 

		7.9	Waiver: A waiver by either party of any breach of any of the terms, provisions, conditions
or covenants of this Agreement or the acquiescence of either party in any act (whether commission or omission) which but for such
acquiescence would be a breach, will not constitute a general waiver of the term, provision, condition or covenant or of any subsequent
act which is inconsistent with it.

 

		7.10	Further Assurance: At any time after the date of this Agreement, each party hereto will
use reasonable endeavours to procure that any documents are executed and any acts and things are done as may reasonably be required
by the other party and at the sole cost and expense of the other party, for the purpose of giving to that party the full benefit
of the provisions of this Agreement. For the avoidance of doubt, the parties agree that completion of this Agreement is not in
any way subject to or conditional upon compliance with any conditions of any acquisition finance of the Purchaser.

 

		7.11	Effect of Delay: No failure or delay by the Purchaser in exercising any right or remedy
provided by law or under this Agreement or any Transaction Document shall impair such right or remedy or operate or be construed
as a waiver or variation of it or preclude its exercise at any subsequent time and no single or partial exercise of any such right
or remedy shall preclude any further exercise of it or the exercise of any other remedy.

 

7.12     
Notices:

 

		7.12.1	Any notice or other communication to be given or served under this Agreement will be in writing,
addressed to the relevant party and expressed to be a notice or communication under this Agreement and, without prejudice to the
validity of another method of service (subject to clause 7.12.3), may be delivered or sent by pre-paid post or facsimile addressed
as follows:

 

	to the Vendor: 	
        Telefonica S.A.

        Ronda de la Comunicación s/n,

        28050 Madrid, Spain

Fax: 34917271401

Attention: Group General Counsel

 

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	to the Purchaser:	Hutchison House, 5 Hester Road, Battersea, London, SW11 4AN

Fax: + 44(0) 207 350 5711

Attention: The Company Secretary
	 	 
	with a copy to:	Hutchison Whampoa Limited,

22 Floor, Hutchison House, 10 Harcourt Road, Hong Kong

Fax: + 852 2128 1778

Attention: The Company Secretary
	 	 
	to the MergeCo:	Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1 -1104, Cayman Islands

Fax: +1 345 949 8080

Attention: The Company Secretary
	 	 
	with a copy to:	Hutchison Whampoa Limited,

22 Floor, Hutchison House, 10 Harcourt Road, Hong Kong

Fax: + 852 2128 1778 

Attention: The Company Secretary
	 	 

or to such other address or
facsimile number as the addressee may have previously substituted by notice.

 

		7.12.2	A notice or other communication will be deemed to have been duly served or given:

 

		(1)	in the case of delivery, at the time of delivery;

 

		(2)	in the case of posting, 48 hours after posting (and proof that the envelope containing the notice
or communication was properly addressed, prepaid, registered and posted by airmail will be sufficient evidence that the notice
or other communication has been duly served or given); or

 

		(3)	in the case of facsimile, upon receipt by the addressee of the complete text in legible form,

 

but if a notice is given or
served at business premises other than between 9.00 am and 5.00 pm on a Business Day, it will be deemed to be given or served between
those hours on the next following Business Day.

 

		7.12.3	A party giving or serving a notice or other communication under this Agreement by facsimile will
also give or serve a copy by post but without prejudice to the validity and effectiveness of the service by facsimile.

 

		7.12.4	All notices or other communications will be in the English language.

 

		7.13	Service of Agent: Without prejudice to any other mode of service:

 

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		7.13.1	the Vendor irrevocably appoints Telefonica Digital, 20 Air Street, London, W1B 5AN and MergeCo
irrevocably appoints the Purchaser as agent for service of process relating to any proceedings before the courts of England in
connection with this Agreement, and each such party agrees to maintain as its agent the process agent in England so notified hereby
during the term of this Agreement and after that during such period as any action may be taken under it; and

 

		7.13.2	failure by a process agent to notify a party of the process will not invalidate the proceedings
concerned.

 

		7.14	Third Party Rights: A person who is not a party to this Agreement has no right under the
Contracts (Rights of Third Parties) Act 1999 to enforce any term of, or enjoy any benefit under, this Agreement.

 

		7.15	Payments:

 

		7.15.1	All sums payable under this Agreement shall be paid free and clear of all deductions, withholdings,
set-offs or counterclaims whatsoever save only as required by law. If any deductions or withholdings are required by law in respect
of the payment of the consideration for the Shares payable under clause 2 (but, for the avoidance of doubt, not in respect of any
Purchase Price Locked Box Fee payable under clause 3.18 or any payment which is treated as an adjustment to the consideration)
in circumstances where the deduction or withholding is a Purchaser-Linked Deduction, the Purchaser or MergeCo shall be obliged
to pay to the Vendor such sum as will, after such deduction or withholding has been made, leave the Vendor with the same amount
as it would have been entitled to receive in the absence of any such requirement to make such a deduction or withholding, provided
that if the Vendor shall have assigned or transferred (for the avoidance of doubt, by whatever means, including by way of a declaration
of trust or anything that amounts in substance to an assignment or transfer) the benefit in whole or in part of this Agreement
or shall have changed its tax residence or the permanent establishment to which the rights under this Agreement are allocated then
the liability of the Purchaser or MergeCo under this clause 7.15 shall be limited to that (if any) which it would have been had
no such assignment, transfer, or change taken place.

 

		7.15.2	For the purposes of this clause 7.15, a “Purchaser-Linked Deduction” means any
deduction or withholding imposed on the consideration payable for the Shares under clause 2 (or any part thereof) (but, for the
avoidance of doubt, not in respect of any Purchase Price Locked Box Fee payable under clause 3.18 or any payment which is treated
as an adjustment to the consideration)

 

		(1)	which arises as a result of a connection of the Purchaser, MergeCo or any other member of the Purchaser’s
Group (other than a Group Company) and not by virtue of any connection of the Vendor or any member of the Telefonica Group with
the jurisdiction imposing it, other than where that jurisdiction is the United Kingdom or Spain; or

 

		(2)	to the extent that the amount of any deduction or withholding is greater than it would have been
but for an assignment or transfer (for the avoidance of 

 

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doubt) by whatever means, including by way of a declaration of trust or
anything that amounts in substance to an assignment or transfer) by the Purchaser or MergeCo of the benefit in whole or in part
of this Agreement or a change by the Purchaser or MergeCo of its tax residence or the permanent establishment to which rights under
this Agreement are allocated.

 

		7.15.3	If, and to the extent that, any relevant Tax Authority notifies any party that it considers that
any amount (including, for these purposes, where such amount is nil) deducted or withheld from a payment of the consideration for
the Shares payable under clause 2 of this Agreement (but, for the avoidance of doubt, not in respect of any Purchase Price Locked
Box Fee payable under clause 3.18 or any payment which is treated as an adjustment to the consideration) is less than the amount
required by law:

 

		(1)	the parties shall co-operate in order to ensure that the correct amount is accounted for to the
relevant Tax Authority; and

 

		(2)	

 

		(a)	where, had the correct amount been deducted or withheld, the Purchaser or MergeCo would, pursuant
to clause 7.15.1, have been obliged to increase the amount of the payment to the Vendor as a result of the Purchaser-Linked Deduction,
the Purchaser or MergeCo shall indemnify the Vendor and the Vendor’s Affiliates against any loss suffered as a result thereof;
and

 

		(b)	in all other cases, the Vendor shall indemnify the Purchaser, MergeCo and the Purchaser’s
Affiliates against any loss suffered as a result thereof,

 

except, in each case, in respect
of any interest and penalties to the extent that such interest and penalties are attributable to an unreasonable delay or default
by the indemnified party or its Affiliates.

 

		7.15.4	The Vendor shall claim from the appropriate Tax Authority any exemption, rate reduction, refund,
credit or similar benefit (including pursuant to any relevant double tax treaty) to which it is entitled in respect of any deduction
or withholding in respect of which a payment has been or would otherwise be required to be made pursuant to clause 7.15.1 and,
for such purposes, shall, within any applicable time limits, submit any claims, notices, returns or applications and send a copy
of them to the Purchaser.

 

		7.15.5	If the Vendor receives a credit for or refund of any Taxation payable by it or similar benefit
by reason of any deduction or withholding for or on account of Taxation then it shall reimburse to the Purchaser or MergeCo such
part of such additional amounts paid pursuant to this clause 7.15 as the Vendor certifies to the Purchaser will leave it (after
such reimbursement) in no better and no worse position than would have arisen if the Purchaser or MergeCo had not been required
to make such deduction or withholding.

 

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		7.16	Counterparts: This Agreement may be executed in any number of counterparts and by the several
parties to it on separate counterparts, each of which when so executed will constitute an original but all of which together will
evidence the same agreement.

 

		7.17	Governing Law: Each of the Transaction Documents and any Dispute arising out of or in connection
with them or their subject matter, existence, negotiation, validity, termination or enforceability (including non-contractual disputes
or claims) shall be governed by and construed in accordance with English law.

 

		7.18	Jurisdiction: The English courts will have exclusive jurisdiction to hear, settle and/or
decide any Dispute. The Purchaser, MergeCo and the Vendor agree that the English courts are the most appropriate and convenient
courts to hear and decide any Dispute and therefore that they will not argue to the contrary.

 

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SCHEDULE 1

THE COMPANY

 

 

 

 

 

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SCHEDULE 2A

SUBSIDIARIES

 

 

 

 

 

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SCHEDULE 2B

 

JV COMPANIES

 

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SCHEDULE 2C

NEW PERIMETER COMPANIES

 

 

 

 

 

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SCHEDULE 3

WARRANTIES

 

 

 

 

 

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SCHEDULE 4

COMPLETION OBLIGATIONS

 

 

 

 

 

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SCHEDULE 5

LIMITATIONS

 

 

 

 

 

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SCHEDULE 6

LIST OF INDIVIDUALS WITH KNOWLEDGE

 

 

 

 

 

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SCHEDULE 7

UPSIDE SHARING

 

 

 

 

 

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SCHEDULE 8

NET DEBT WORKING CAPITAL ADJUSTMENT

 

 

 

 

 

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SCHEDULE 9

NET DEBT REFERENCE SCHEDULE

 

 

 

 

 

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SCHEDULE 10

PROFORMA FINANCIAL INFORMATION

 

 

 

 

 

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SCHEDULE 11

EBITDA DEFINITION

 

 

 

 

 

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SCHEDULE 12

WORKING CAPITAL REFERENCE SCHEDULE

 

 

 

 

 

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SCHEDULE 13

AGREED FORM DOCUMENTS

 

 

 

 

 

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SCHEDULE 14

DATA ROOM INDEX

 

 

 

 

 

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SCHEDULE 15

PROPERTIES

 

 

 

 

 

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SCHEDULE 16

REGISTERED OWNED IPR

 

 

 

 

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SCHEDULE 17

KEY CONTRACTS

 

 

 

 

 

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SCHEDULE 18

CAPITAL EXPENDITURE REFERENCE SCHEDULE

 

 

 

 

 

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SCHEDULE 19

BALANCE SHEET MAPPING

 

 

 

 

 

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IN WITNESS whereof this Agreement
has been duly executed by the parties to it on the date set out at the beginning of this Agreement.

 

SIGNED FOR AND ON BEHALF OF

 

TELEFONICA S.A.

 

	by: 	
	 	Special Attorney

 

 

FOR AND ON BEHALF OF

 

HUTCHISON 3G UK INVESTMENTS LIMITED

 

	by: 	
	 	Signature of Director

 

 

FOR AND ON BEHALF OF

 

HUTCHISON 3G UK HOLDINGS (CI) LIMITED

 

	by: 	
	 	Signature of Director

 

 

 

 

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AMICUS THERAPEUTICS, INC.

$100,000,000 OF SHARES

 

COMMON STOCK (PAR VALUE $0.01 PER SHARE)

 

SALES AGREEMENT

 

February 26, 2016

 

Cowen and Company, LLC

599 Lexington Avenue

New York, NY 10022

 

Ladies and Gentlemen:

 

Amicus Therapeutics, Inc., a Delaware corporation (the “Company”), confirms its agreement (this “Agreement”) with Cowen and Company, LLC (“Cowen”), as follows:

 

1.                                      Issuance and Sale of Shares.  The Company agrees that, from time to time during the term of this Agreement, on the terms and subject to the conditions set forth herein, it may issue and sell through Cowen, acting as agent and/or principal, shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), having an aggregate offering price of up to $100,000,000; provided, however, that the Company will ensure that the aggregate amount of shares of Common Stock issued pursuant to this Agreement shall not exceed 24,917,067 shares of Common Stock (the “Offering”).  Notwithstanding anything to the contrary contained herein, the parties hereto agree that compliance with the limitation set forth in this Section 1 on the number of shares of Common Stock issued and sold under this Agreement shall be the sole responsibility of the Company, and Cowen shall have no obligation in connection with such compliance.  The issuance and sale of Common Stock through Cowen will be effected pursuant to the Registration Statement (as defined below) filed by the Company and declared or deemed effective by the Securities and Exchange Commission (the “Commission”), although nothing in this Agreement shall be construed as requiring the Company to use the Registration Statement (as defined below) to issue the Common Stock.

 

The Company will file, in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations thereunder (collectively, the “Securities Act”), with the Commission a registration statement on Form S-3, including a prospectus specifically relating to the Offering (the “Offering Prospectus”), including the Common Stock, to be issued from time to time by the Company, and which incorporates by reference documents that the Company has filed or will file in accordance with the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (collectively, the “Exchange Act”). The Company will furnish to Cowen, for use by Cowen, copies of the prospectus included as part of such registration statement, as supplemented by any prospectus supplement, relating to the Offering.  Except where the context otherwise requires, such registration statement, as amended when it became effective, including all documents filed as part thereof or incorporated by reference therein, and including any information contained in a Prospectus (as defined below)

 

 

subsequently filed with the Commission pursuant to Rule 424(b) under the Securities Act or deemed to be a part of such registration statement pursuant to Rule 430B or 462(b) of the Securities Act, is herein called the “Registration Statement.”  The Offering Prospectus, including all documents incorporated therein by reference, included in the Registration Statement, as it may be supplemented by a prospectus supplement, in the form in which such prospectus and/or prospectus supplement have most recently been filed by the Company with the Commission pursuant to Rule 424(b) under the Securities Act, together with any “issuer free writing prospectus,” as defined in Rule 433 of the Securities Act (“Rule 433”), relating to the Offering that (i) is required to be filed with the Commission by the Company or (ii) is exempt from filing pursuant to Rule 433(d)(5)(i), in each case in the form filed with the Registration Statement or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g), is herein called the “Prospectus.” Any reference herein to the Registration Statement, the Prospectus or any amendment or supplement thereto shall be deemed to refer to and include the documents incorporated by reference therein, and any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement or the Prospectus shall be deemed to refer to and include the filing after the execution hereof of any document with the Commission deemed to be incorporated by reference therein. For purposes of this Agreement, all references to the Registration Statement, the Prospectus or to any amendment or supplement thereto shall be deemed to include any copy filed with the Commission pursuant to either the Electronic Data Gathering Analysis and Retrieval System or Interactive Data Electronic Applications (collectively “IDEA”).

 

2.                                      Placements.  Each time that the Company wishes to issue and sell the Common Stock hereunder (each, a “Placement”), it will notify Cowen by email notice (or other method mutually agreed to in writing by the parties) (a “Placement Notice”) containing the parameters in accordance with which it desires the Common Stock to be sold, which shall at a minimum include the number of shares of Common Stock to be issued (the “Placement Shares”), the time period during which sales are requested to be made, any limitation on the number of Common Stock that may be sold in any one Trading Day (as defined in Section 3) and any minimum price below which sales may not be made, a form of which containing such minimum sales parameters necessary is attached hereto as Schedule 1.  The Placement Notice shall originate from any of the individuals from the Company set forth on Schedule 2 (with a copy to each of the other individuals from the Company listed on such schedule), and shall be addressed to each of the individuals from Cowen set forth on Schedule 2, as such Schedule 2 may be amended from time to time. The Placement Notice shall be effective upon receipt by Cowen unless and until (i) in accordance with the notice requirements set forth in Section 4, Cowen declines to accept the terms contained therein for any reason, in its sole discretion, (ii) the entire amount of the Placement Shares have been sold, (iii) in accordance with the notice requirements set forth in Section 4, the Company suspends or terminates the Placement Notice, (iv) the Company issues a subsequent Placement Notice with parameters superseding those on the earlier dated Placement Notice, or (v) the Agreement has been terminated under the provisions of Section 11.  The amount of any discount, commission or other compensation to be paid by the Company to Cowen in connection with the sale of the Placement Shares shall be calculated in accordance with the terms set forth in Schedule 3.  It is expressly acknowledged and agreed that neither the Company nor Cowen will have any obligation whatsoever with respect to a Placement or any Placement Shares unless and until the Company delivers a Placement Notice to Cowen and

 

2

 

Cowen does not decline such Placement Notice pursuant to the terms set forth above, and then only upon the terms specified therein and herein.  In the event of a conflict between the terms of this Agreement and the terms of a Placement Notice, the terms of the Placement Notice will control. For the avoidance of doubt, the Company will not issue any Placement Notices prior to the Registration Statement becoming effective.

 

3.                                      Sale of Placement Shares by Cowen.  Subject to the terms and conditions herein set forth, upon the Company’s issuance of a Placement Notice, and unless the sale of the Placement Shares described therein has been declined, suspended, or otherwise terminated in accordance with the terms of this Agreement, Cowen, for the period specified in the Placement Notice, will use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of the Nasdaq Stock Market, Inc. (“Nasdaq”) to sell such Placement Shares up to the amount specified, and otherwise in accordance with the terms of such Placement Notice.  Cowen will provide written confirmation to the Company (including by email correspondence to each of the individuals of the Company set forth on Schedule 2, if receipt of such correspondence is actually acknowledged by any of the individuals to whom the notice is sent, other than via auto-reply) no later than the opening of the Trading Day (as defined below) immediately following the Trading Day on which it has made sales of Placement Shares hereunder setting forth the number of Placement Shares sold on such day, the volume-weighted average price of the Placement Shares and the Net Proceeds (as defined below) payable to the Company.  Cowen may sell Placement Shares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act, including without limitation sales made through Nasdaq, on any other existing trading market for the Common Stock or to or through a market maker.  If expressly authorized by the Company in a Placement Notice, Cowen may also sell Placement Shares in negotiated transactions.  Notwithstanding the provisions of Section 6(dd), Cowen shall not purchase Placement Shares for its own account as principal unless expressly authorized to do so by the Company in a Placement Notice.  The Company acknowledges and agrees that (i) there can be no assurance that Cowen will be successful in selling Placement Shares, and (ii) Cowen will incur no liability or obligation to the Company or any other person or entity if it does not sell Placement Shares for any reason other than a failure by Cowen to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell such Placement Shares as required under this Section 3.  For the purposes hereof, “Trading Day” means any day on which the Company’s Common Stock is purchased and sold on the principal market on which the Common Stock is listed or quoted.

 

4.                                      Suspension of Sales.

 

(a)                                 The Company or Cowen may, upon notice to the other party in writing (including by email correspondence to each of the individuals of the other party set forth on Schedule 2, if receipt of such correspondence is actually acknowledged by any of the individuals to whom the notice is sent, other than via auto-reply) or by telephone (confirmed immediately by verifiable facsimile transmission or email correspondence to each of the individuals of the other party set forth on Schedule 2), suspend any sale of Placement Shares; provided, however, that such suspension shall not affect or impair either party’s obligations with respect to any Placement Shares sold hereunder prior to the receipt of such notice.  Each of the Parties agrees that no such

 

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notice under this Section 4 shall be effective against the other unless it is made to one of the individuals named on Schedule 2 hereto, as such schedule may be amended from time to time.

 

(b)                                 Notwithstanding any other provision of this Agreement, during any period in which the Company is in possession of material non-public information, the Company and Cowen agree that (i) no sale of Placement Shares will take place, (ii) the Company shall not request the sale of any Placement Shares, and (iii) Cowen shall not be obligated to sell or offer to sell any Placement Shares.

 

5.                                      Settlement.

 

(a)                                 Settlement of Placement Shares.  Unless otherwise specified in the applicable Placement Notice, settlement for sales of Placement Shares will occur on the third (3rd) Trading Day (or such earlier day as is industry practice for regular-way trading) following the date on which such sales are made (each, a “Settlement Date” and the first such settlement date, the “First Delivery Date”).  The amount of proceeds to be delivered to the Company on a Settlement Date against receipt of the Placement Shares sold (the “Net Proceeds”) will be equal to the aggregate sales price received by Cowen at which such Placement Shares were sold, after deduction for (i) Cowen’s commission, discount or other compensation for such sales payable by the Company pursuant to Section 2 hereof, (ii) any other amounts due and payable by the Company to Cowen hereunder pursuant to Section 7(g) (Expenses) hereof, and (iii) any transaction fees imposed by any governmental or self-regulatory organization in respect of such sales.

 

(b)                                 Delivery of Placement Shares.  On or before each Settlement Date, the Company will, or will cause its transfer agent to, electronically transfer the Placement Shares being sold by crediting Cowen’s or its designee’s account (provided Cowen shall have given the Company written notice of such designee prior to the Settlement Date) at The Depository Trust Company through its Deposit and Withdrawal at Custodian System or by such other means of delivery as may be mutually agreed upon by the parties hereto which in all cases shall be freely tradeable, transferable, registered shares in good deliverable form.  On each Settlement Date, Cowen will deliver the related Net Proceeds in same day funds to an account designated by the Company on, or prior to, the Settlement Date.  The Company agrees that if the Company, or its transfer agent (if applicable), defaults in its obligation to deliver duly authorized Placement Shares on a Settlement Date, the Company agrees that in addition to and in no way limiting the rights and obligations set forth in Section 9(a) (Indemnification and Contribution) hereto, it will (i) hold Cowen harmless against any loss, claim, damage, or expense (including reasonable legal fees and expenses), as incurred, arising out of or in connection with such default by the Company and (ii) pay to Cowen any commission, discount, or other compensation to which it would otherwise have been entitled absent such default.

 

6.                                      Representations and Warranties of the Company.  The Company represents and warrants to, and agrees with, Cowen that as of each Applicable Time (as defined in Section 20(a)):

 

(a)                                 Compliance with Registration Requirements. As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, the Registration Statement and any Rule 462(b) Registration Statement shall have been declared or deemed effective by the

 

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Commission under the Securities Act.  The Company shall have to its knowledge complied to the Commission’s satisfaction with all requests of the Commission for additional or supplemental information.  No stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement is in effect and no proceedings for such purpose have been instituted or are pending or, to the best knowledge of the Company, are contemplated or threatened by the Commission.  The Company meets the requirements for use of Form S-3 under the Securities Act.  The sale of the Placement Shares hereunder meets the requirements of General Instruction I.B.1 of Form S-3.

 

(b)                                 No Misstatement or Omission.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, the Prospectus when filed complied and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act.  Each of the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendment thereto, at the time it became effective, complied and, as of each Applicable Time occurring on or after the date of the first Placement Notice hereunder and each of the Settlement Dates, if any, will comply in all material respects with the Securities Act and did not and, as of each Applicable Time occurring on or after the date of the first Placement Notice hereunder and as of the Settlement Dates, if any, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus, as amended or supplemented, as of its date, did not and, as of each Applicable Time occurring on or after the date of the first Placement Notice hereunder and each of the Settlement Dates, if any, will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties set forth in the two immediately preceding sentences do not apply to statements in or omissions from the Registration Statement, any Rule 462(b) Registration Statement, or any post-effective amendment thereto, or the Prospectus, or any amendments or supplements thereto, made in reliance upon and in conformity with information relating to Cowen furnished to the Company in writing by Cowen expressly for use therein. There are no contracts or other documents required to be described in the Prospectus or to be filed as exhibits to the Registration Statement which have not been described or filed as required.

 

(c)                                  Offering Materials Furnished to Cowen. As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, the Company shall have delivered to Cowen one complete copy of the Registration Statement and a copy of each consent and certificate of experts filed as a part thereof, and conformed copies of the Registration Statement (without exhibits) and the Prospectus, as amended or supplemented, in such quantities and at such places as Cowen has reasonably requested.

 

(d)                                 Distribution of Offering Material By the Company. The Company has not distributed and will not distribute, prior to the completion of Cowen’s distribution of the Common Stock, any offering material in connection with the Offering other than the Prospectus or the Registration Statement.

 

(e)                                  The Sales Agreement. This Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company, enforceable in accordance with its terms, except as rights to indemnification hereunder may be limited by applicable law and except as the enforcement hereof may be limited by bankruptcy, insolvency, reorganization,

 

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moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles.

 

(f)                                   Authorization of the Common Stock. The Common Stock to be sold by Cowen, acting as agent and/or principal for the Company, has been duly authorized for issuance and sale pursuant to this Agreement and, when issued and delivered by the Company to Cowen pursuant to this Agreement, will be duly authorized, validly issued, fully paid and nonassessable.

 

(g) Description of Capital Stock.  The capital stock of the Company, including the Common Stock to be sold by Cowen, acting as agent and/or principal for the Company, conforms in all material respects to the description thereof contained in the Prospectus.

 

(h) No Applicable Registration or Other Similar Rights. There are no persons with registration or other similar rights to have any equity or debt securities registered for sale under the Registration Statement or included in the offering contemplated by this Agreement, except for such rights as have been duly waived.

 

(i)                                     No Material Adverse Change.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, except as otherwise disclosed in the Prospectus, subsequent to the respective dates as of which information is given in the Prospectus: (i) there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, operations or prospects, whether or not arising from transactions in the ordinary course of business, of the Company and its subsidiaries, considered as one entity (any such change is called a “Material Adverse Change”); (ii) the Company and its subsidiaries, considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, not in the ordinary course of business nor entered into any material transaction or agreement not in the ordinary course of business; (iii) there has been no dividend or distribution of any kind declared, paid or made by the Company or, except for regular quarterly dividends publicly announced by the Company or dividends paid to the Company or other subsidiaries, by any of its subsidiaries on any class of capital stock or repurchase or redemption by the Company or any of its subsidiaries of any class of capital stock; (iv) there has not been any transaction which is material to the Company, except obligations incurred in the ordinary course of business consistent with past practice, (v) there has not been any obligation, direct or contingent (including any off-balance sheet obligations), incurred by the Company, which is material to the Company, except obligations incurred in the ordinary course of business consistent with past practice, and (vi) there has not been any material change in the capital stock of the Company.

 

(j) Capitalization. As of the time immediately subsequent to the issuance of the first Placement Notice, the Company has an authorized and outstanding capitalization as set forth or incorporated by reference in the Prospectus as of the date or dates set forth therein (subject to the issuance of shares of Common Stock upon conversion of existing convertible securities, the exercise of existing stock options and warrants disclosed as outstanding in the Prospectus and the grant of options under existing stock option plans described in the Prospectus).

 

(k) Stock Options.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, except as described in the Prospectus, with respect to the stock options (the “Stock Options”) granted pursuant to the stock-based compensation plans of the

 

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Company and its subsidiaries (the “Company Stock Plans”), (i) each Stock Option designated by the Company at the time of grant as an “incentive stock option” under Section 422 of the Internal Revenue code of 1986, as amended (the “Code”) so qualifies, (ii) each grant of a Stock Option was duly authorized no later than the date on which the grant of such Stock Option was by its terms to be effective (the “Grant Date”) by all necessary corporate action, including, as applicable, approval by the board of directors of the Company (or a duly constituted and authorized committee thereof) and any required stockholder approval by the necessary number of votes or written consents, and the award agreement governing such grant (if any) was duly executed and delivered by each party thereto, (iii) each such grant was made in accordance with the terms of the Company Stock Plans, the Exchange Act and all other applicable laws and regulatory rules or requirements, including the rules of NASDAQ, (iv) the per share exercise price of each Stock Option was equal to or greater than the fair market value of a share of Common Stock on the applicable Grant Date and (v) each such grant was accounted for in accordance with GAAP (as defined below) in the financial statements of the Company and disclosed in the Company’s filings with the Commission in accordance with the Exchange Act and all other applicable laws; there is no and has been no policy of the Company of granting Stock Options prior to, and the Company does not otherwise coordinate the grant of Stock Options with, the release or other public announcements of material information regarding the Company or its subsidiaries or their results of operations.

 

(l) Incorporation and Good Standing of the Company. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with the requisite corporate power and authority to own, lease and operate its properties and conduct its business.

 

(m) Incorporation and Good Standing of the Subsidiaries.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, each subsidiary of the Company (collectively, the “Subsidiaries”) has been duly organized and is validly existing and is in good standing under the laws of its jurisdiction of organization, with the requisite power and authority to own, lease and operate its properties and conduct its business as described or incorporated by reference in the Prospectus, and all of the issued shares of each Subsidiary have been duly and validly authorized and issued, are fully paid and are non-assessable and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims except (i) for liens and encumbrances specifically referenced in the financial statements of the Company, (ii) as described in the Prospectus or (iii) as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change.

 

(n) Foreign Qualification. Each of the Company and its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified and in good standing would not have a Material Adverse Change.

 

(o) Organizational Documents.  Complete and correct copies of the certificate of incorporation and the bylaws, of the Company and its Subsidiaries and all amendments thereto have been made available to Cowen.

 

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(p) No Default.  Neither the Company nor its Subsidiaries is in breach or violation of or in default under (nor has any event occurred which with notice, lapse of time or both would result in any breach or violation of, constitute a default under or give the holder of any indebtedness (or a person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a part of such indebtedness under) its (i) certificate of incorporation or bylaws or similar organizational documents of the Subsidiaries, or (ii) any indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any license, lease, contract or other agreement or instrument to which the Company is a party or by which it or any of its properties may be bound or affected, except, in the case of clause (ii) above, where such breach, violation or default would not, individually or in the aggregate, have a Material Adverse Change, and the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby will not conflict with, result in any breach or violation of or constitute a default under (nor constitute any event which with notice, lapse of time or both would result in any breach or violation of or constitute a default under or give the holder of any indebtedness (or a person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a part of such indebtedness under) (x) the certificate of incorporation or bylaws of the Company or similar organizational documents of the Subsidiaries, (y) any indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, license, lease, contract or other agreement or instrument to which the Company or any Subsidiary is a party or by which any of them or any of its properties may be bound or affected, or (z) any federal, state, local or foreign law, regulation or rule or any decree, judgment or order applicable to the Company or any Subsidiary, except, in the case of clauses (y) and (z) above, where such breach, violation or default, would not, individually or in the aggregate, have a Material Adverse Change.

 

(q) No Consent.  No approval, authorization, consent or order of or filing with any federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency or of or with NASDAQ, or approval of the stockholders of the Company, is required in connection with the Offering or the consummation by the Company of the transactions contemplated hereby other than (i) filings or applications with NASDAQ, (ii) filings with the Commission in relation to the registration of the offering contemplated hereby under the Securities Act and the Offering (iii) any necessary qualification under the securities or blue sky laws of the various jurisdictions in which the Placement Shares are being offered under the terms of this Agreement or under the rules and regulations of the Financial Industry Regulatory Authority (“FINRA”) and (iv) such notices or filings that would not individually or in the aggregate have a Material Adverse Change.

 

(r) No Preemptive Rights.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, except as set forth in the Prospectus, (i) no person has the right, contractual or otherwise, to cause the Company to issue or sell to it any shares of Common Stock or shares of any other capital stock or other equity interests of the Company, (ii) no person has any preemptive rights, resale rights, rights of first refusal or other rights to purchase any shares of Common Stock or shares of any other capital stock or other securities of the Company, and (iii) except as provided herein, no person has the right to act as an underwriter, placement agent or financial advisor to the Company in connection with the Offering, in the case of each of the foregoing clauses (i), (ii) and (iii), whether as a result of the filing or effectiveness of the

 

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Registration Statement or the Offering as contemplated thereby or otherwise and except, in each case, for such rights as have been duly and validly satisfied or waived.

 

(s) Licenses.  Each of the Company and its Subsidiaries has all licenses, authorizations, consents and approvals and has made all filings required under any federal, state, local or foreign law, regulation or rule, and has obtained all authorizations, consents and approvals from other persons, necessary in order to conduct its business except where such failure to do so would not, individually or in the aggregate, have a Material Adverse Change; neither the Company nor its Subsidiaries is in violation of, or in default under, or has received notice of any proceedings relating to revocation or modification of, any such license, authorization, consent or approval or any federal, state, local or foreign law, regulation or rule or any decree, order or judgment applicable to the Company or its Subsidiaries, except where such violation, default, revocation or modification would not, individually or in the aggregate, have a Material Adverse Change

 

(t) Clinical Trials.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, the preclinical and clinical trials conducted by or on behalf of the Company that are described in the Prospectus were and, if still pending, are being conducted in all material respects in accordance with procedures and controls pursuant to accepted professional scientific standards and all applicable local, state and federal and foreign laws, rules, regulations and published guidance, including, but not limited to, the Federal Food, Drug and Cosmetic Act and implementing regulations at 21 C.F.R. Parts 50, 54, 56, 58 and 312; the Company has orally or in writing, to Cowen or to counsel to Cowen, fairly summarized in all material respects the substance of all of its material communications with representatives of the U.S. Food and Drug Administration or any foreign, state or local governmental body exercising comparable authority and has no knowledge of any pending communication from the U.S. Food and Drug Administration or any foreign, state or local governmental body exercising comparable authority that would cause the Company to materially revise in an adverse way its strategy for seeking marketing approval from the U.S. Food and Drug Administration or any foreign, state or local governmental body exercising comparable authority for any of the Company’s products under development as described in the Prospectus; the descriptions of the results of such studies, tests and trials contained in the Prospectus are accurate and complete in all material respects; other than as described in the Prospectus, the Company is not aware of any studies, tests or trials the results of which reasonably call into question the clinical trial results described or referred to in the Prospectus when viewed in the context in which such results are described and the clinical state of development; and other than as described in the Prospectus, the Company has not received any written notices or correspondence from the U.S. Food and Drug Administration or any foreign, state or local governmental body exercising comparable authority requiring the termination or suspension of any preclinical or clinical trials conducted by or on behalf of the Company.

 

(u) Disclosure. As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, all legal or governmental proceedings, affiliate transactions, off-balance sheet transactions, contracts, licenses, agreements, leases or documents of a character required to be described under the Securities Act in the Prospectus or to be filed as an exhibit to the Registration Statement have been so described or filed as required.

 

(v) No Proceedings.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, except as disclosed in the Prospectus, there are no actions,

 

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suits, claims, investigations or proceedings pending or, to the Company’s knowledge, threatened to which the Company or any of its Subsidiaries or any of their directors or officers is or would be a party or of which any of its properties is or would be subject at law or in equity, before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency, except any such action, suit, claim, investigation or proceeding which would not, if determined adversely to the Company, result in a judgment, decree or order having, individually or in the aggregate, a Material Adverse Change or prevent consummation of the transactions contemplated hereby

 

(w) Independent Accountants.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, Ernst & Young LLP, who have expressed their opinion with respect to the consolidated financial statements (which term as used in this Agreement includes the notes thereto) of the Company and Scioderm, Inc. (“Scioderm”) filed with the Commission and incorporated by reference as a part of the Registration Statement and Prospectus, is an independent registered public accounting firm as required by the Securities Act and the Exchange Act.  Except as pre-approved in accordance with the requirements set forth in Section 10A of the Exchange Act, Ernst & Young LLP have not been engaged by the Company to perform any “prohibited activities” (as defined in Section 10A of the Exchange Act).

 

(x)                                 Preparation of the Financial Statements. As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, the financial statements of the Company and Scioderm incorporated by reference in the Registration Statement and Prospectus, together with the related notes and schedules, present fairly in all material respects the consolidated financial position of the Company or Scioderm, as applicable, as of the dates indicated and the consolidated results of operations and cash flows of the Company or Scioderm, as applicable, for the periods specified subject, in the case of unaudited interim statements, to normal, year-end audit adjustments and have been prepared in compliance with the requirements of the Securities Act and in conformity with, generally accepted accounting principles in the United States as applied by the Company or Scioderm, as applicable, on a consistent basis during the periods involved (“GAAP”), except (i) as may be otherwise specified in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements; the other financial data of the Company or Scioderm set forth in the Registration Statement and the Prospectus are accurately presented and prepared on a basis consistent with the financial statements and books and records of the Company or Scioderm, as applicable; the assumptions used in preparing the pro forma financial statements included in the Registration Statement and Prospectus provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma columns therein reflect the proper application of those adjustments to the corresponding historical financial statement amounts; there are no financial statements (historical or pro forma) that are required by the Securities Act to be included in the Registration Statement and the Prospectus that are not included as required by the Securities Act; and the Company does not have any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations), not disclosed in the Registration Statement or the Prospectus.

 

(y)                                 As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, the interactive data in eXtensible Business Reporting Language included or

 

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incorporated by reference in each Registration Statement fairly presents the information called for in all material respects and has been prepared in accordance with the Commission’s rules and guidelines applicable thereto.

 

(z) [Reserved.]

 

(aa)                          Company Not an “Investment Company”. The Company is not an “investment company” or an entity “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”), nor is the Company a “passive foreign investment company” or a “controlled foreign corporation” as such terms are defined in the Code.

 

(bb) Title to Property. As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, except as described in the Prospectus, the Company and its Subsidiaries have good and marketable title to all material property (real and personal) described in the Prospectus as being owned by each of them, free and clear of all liens, claims, security interests or other encumbrances, or subject only to liens, claims, security interests or other encumbrances (i) specifically referenced in the financial statements of the Company; (ii) that are disclosed in the Prospectus, or (iii) that do not individually or in the aggregate materially affect the value of such property or materially interfere with the use made of such property by the Company and its Subsidiaries; and all the property described in the Prospectus as being held under lease by the Company is held thereby under valid, subsisting and enforceable leases except as would not reasonably be expected to result in a Material Adverse Change.

 

(cc) Intellectual Property.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, except as described in the Prospectus, the Company and its Subsidiaries own, or has obtained valid and enforceable licenses for, or other rights to use, the inventions, patent applications, patents, trademarks (both registered and unregistered), tradenames, copyrights, trade secrets and other proprietary information (collectively, “Intellectual Property”) described in the Prospectus as being owned or licensed by it, except where such failure to do so would not, individually or in the aggregate, have a Material Adverse Change; to the Company’s knowledge and except as described in the Prospectus, the Company and its Subsidiaries own, or has obtained valid and enforceable licenses for, or other rights to use, all Intellectual Property used in, or necessary for the conduct of, its business as described in the Prospectus except as would not reasonably be expected to result in a Material Adverse Change; to the Company’s knowledge, there is no pending or threatened action, suit, proceeding or claim by others that the Company or any of its Subsidiaries infringes or otherwise violates any Intellectual Property rights of others, except as could not reasonably be expected to have a Material Adverse Change, and the Company is unaware of any facts which could form a reasonable basis for any such claim; and none of the technology employed by the Company or any of its Subsidiaries has been obtained or is being used by the Company or any of its Subsidiaries in violation of any contractual obligation binding on the Company or any of its Subsidiaries or, to the Company’s knowledge, upon any of its officers, directors or employees except as would not reasonably be expected to result in a Material Adverse Change.

 

(dd) Exclusive Intellectual Property.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, to the Company’s knowledge, there are no third parties who have rights to any Intellectual Property described in the Prospectus as owned or

 

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exclusively licensed by the Company (“Exclusive Intellectual Property”), except as could not reasonably be expected to have a Material Adverse Change or except for licenses granted in writing by the Company or its Subsidiaries to any third-parties; there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the Company’s ownership or rights in or to any Exclusive Intellectual Property, and the Company is unaware of any facts which could form a reasonable basis for any such claim except as would not reasonably be expected to have a Material Adverse Change; there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any Exclusive Intellectual Property, and the Company is unaware of any facts which could form a reasonable basis for any such claim except as could not reasonably be expected to have a Material Adverse Change.

 

(ee) No Patent Claims.  To the Company’s knowledge, there is no patent that contains claims that interfere with the issued or pending claims of any of the Company’s Intellectual Property except as would not reasonably be expected to have a Material Adverse Change; and to the Company’s knowledge, there is no prior art material to any patent or patent application of the Exclusive Intellectual Property that has not been disclosed to the U.S. Patent and Trademark Office, except as would not reasonably be expected to have a Material Adverse Change.

 

(ff) Labor Practices.  The Company is not engaged in any unfair labor practice; except for matters which would not, individually or in the aggregate, have a Material Adverse Change, (i) there is (A) no unfair labor practice complaint pending or, to the Company’s knowledge, threatened against the Company or any Subsidiary before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending or, to the Company’s knowledge, threatened, (B) no strike, labor dispute, slowdown or stoppage pending or, to the Company’s knowledge, threatened against the Company or any Subsidiary and (C) no union representation dispute currently existing concerning the employees of the Company, and (ii) to the Company’s knowledge, (A) no union organizing activities are currently taking place concerning the employees of the Company or any Subsidiary and (B) there has been no violation of any federal, state, local or foreign law relating to discrimination in the hiring, promotion or pay of employees, any applicable wage or hour laws or any provision of the Employee Retirement Income Security Act of 1974 (“ERISA”) or the rules and regulations promulgated thereunder concerning the employees of the Company or any Subsidiary.

 

(gg) Environmental.  The Company and its Subsidiaries and its properties, assets and operations are in compliance with, and hold all permits, authorizations and approvals required to conduct its business under, Environmental Laws (as defined below), except to the extent that failure to so comply or to hold such permits, authorizations or approvals would not, individually or in the aggregate, have a Material Adverse Change; there are no past, present or, to the Company’s knowledge, reasonably anticipated future events, conditions, circumstances, activities, practices, actions, omissions or plans that could reasonably be expected to give rise to any material costs or liabilities to the Company or any Subsidiary under, or to interfere with or prevent compliance by the Company with, Environmental Laws, except as would not, individually or in the aggregate, have a Material Adverse Change; the Company (i) is not the subject of any investigation, (ii) has not received any notice or claim, (iii) is not a party to or affected by any pending or threatened action, suit or proceeding, (iv) is not bound by any

 

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judgment, decree or order or (v) has not entered into any agreement, in each case relating to any alleged violation of any Environmental Law or any actual or alleged release or threatened release or cleanup at any location of any Hazardous Materials (as defined below) and in each case except as would not, individually or in the aggregate, have a Material Adverse Change (as used herein, “Environmental Law” means any federal, state, local or foreign law, statute, ordinance, rule, regulation, order, decree, judgment, injunction, permit, license, authorization or other binding requirement, or common law related to the protection of the environment, including ambient air, surface water, groundwater or land, or Hazardous Materials, or emissions, discharges or releases of Hazardous Materials into the environment, or otherwise relates to the handling of Hazardous Materials or the investigation, clean-up or other remediation, in each case, that are applicable to the business as conducted by the Company on the Execution Date, and “Hazardous Materials” means any “hazardous substance,” “hazardous waste,” “pollutant,” “contaminant” or “toxic substance” (as defined or regulated by any Environmental Law) and also includes petroleum and petroleum products, polychlorinated biphenyls or asbestos).

 

(hh) Taxes.  The Company (i) has timely filed all necessary federal, state, local and foreign tax returns, and all such returns were true, complete and correct, (ii) has paid all federal, state, local and foreign taxes, assessments, governmental or other charges due and payable for which it is liable, including, without limitation, all sales and use taxes and all taxes which the Company is obligated to withhold from amounts owing to employees, creditors and third parties, and (iii) does not have any tax deficiency or claims outstanding or assessed or, to its knowledge, proposed against any of them, except those, in each of the cases described in clauses (i), (ii) and (iii) of this paragraph, that would not, singularly or in the aggregate, reasonably be expected to have a Material Adverse Change; the Company has not engaged in any transaction which to the Company’s knowledge a corporate tax shelter or could be characterized as such by the Internal Revenue Service or any other taxing authority; the accruals and reserves on the books and records of the Company in respect of tax liabilities for any taxable period not yet finally determined are adequate to meet any assessments and related liabilities for any such period, and since December 31, 2015, the Company has not incurred any liability for taxes other than in the ordinary course.

 

(ii) Insurance.  The Company and each of its Subsidiaries maintain insurance covering its properties, operations, personnel and businesses as the Company or such Subsidiary deems appropriate; such insurance insures against such losses and risks to an extent which is adequate and customary for the business and the locations in which the Company or such Subsidiary is engaged; all such insurance is fully in force on the date hereof and the Company or such Subsidiary has no reason to believe that such insurance will not be fully in force at the Closing Time; the Company has not received any notice and has no reason to believe that it will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change; the Company has not been denied any insurance coverage that it has sought or for which it has applied.

 

(jj) Internal Controls.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, except as otherwise disclosed in the Prospectus, the Company maintains (i) effective internal control over financial reporting as defined in Rule 13a-15 under

 

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the Exchange Act, as amended, and (ii) a system of internal accounting controls sufficient to provide reasonable assurance that (A) transactions are executed in accordance with management’s general or specific authorizations; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (C) access to assets is permitted only in accordance with management’s general or specific authorization; (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences and (E) the interactive data in eXtensible Business Reporting Language included as an exhibit to the Registration Statement is accurate.

 

(kk) Material Weakness.  Since the end of the Company’s most recent audited fiscal year, there has been (i) no material weakness in design or operation of the Company’s internal control over financial reporting (whether or not remediated) which are not reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (ii) no change in the Company’s internal control over financial reporting that has materially adversely affected, or is reasonably likely to materially adversely affect, the Company’s internal control over financial reporting.

 

(ll) Disclosure Controls.  The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act); the principal executive officers (or their equivalents) and principal financial officers (or their equivalents) of the Company have made all certifications required by the Sarbanes-Oxley Act of 2002 and any related rules and regulations promulgated by the Commission (the “Sarbanes-Oxley Act”), and the statements contained in any such certification are complete and correct; and the Company is otherwise in compliance in all material respects with all applicable provisions of the Sarbanes-Oxley Act that are effective.

 

(mm) No Unlawful Payments.  Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

 

(nn) Money Laundering.  The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

 

(oo) OFAC.  None of the Company, any of its Subsidiaries or, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its

 

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subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”); and the Company will not, directly or indirectly, use the proceeds of the offering of the Placement Shares hereunder, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

 

(pp) No Stabilization.  Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any of its directors, officers, affiliates or controlling persons has taken, directly or indirectly, any action designed, or which has constituted or might reasonably be expected to cause or result in, under the Exchange Act or otherwise, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Common Stock.

 

(qq) Minute Books.  The minute books of the Company have been made available to Cowen and counsel for Cowen, and such books (i) contain a complete and accurate summary of all meetings and actions of the board of directors (including each board committee) and stockholders of the Company (or analogous governing bodies and interest holders, as applicable) from February 2013 to February 2016, and (ii) accurately in all material respects reflect all transactions referred to in such minutes.

 

(rr) As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, there is no franchise, lease, contract, agreement or document required by the Securities Act to be described in the Prospectus or to be filed as an exhibit to the Registration Statement or a document incorporated by reference therein which is not described or filed therein as required; and all descriptions of any such franchises, leases, contracts, agreements or documents contained in the Prospectus are accurate descriptions of such documents in all material respects, which descriptions are sufficiently comprehensive to fulfill the Company’s obligations under applicable law with respect to thereto; other than as described in the Prospectus, no such franchise, lease, contract or agreement has been suspended or terminated for convenience or default by the Company or any of the other parties thereto, and the Company has not received notice nor does the Company have any other knowledge of any such pending or threatened suspension, termination or non-renewal, except for such pending or threatened suspensions, terminations or non-renewals that would not reasonably be expected to, singularly or in the aggregate, have a Material Adverse Change.

 

(ss) Relationships.  No relationship, direct or indirect, exists between or among the Company on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of its affiliates on the other hand, which is required under the rules and regulations of the Securities Act or the Exchange Act to be described in the Prospectus and which is not so described.

 

(tt) Margin Securities.  The Company does not own any “margin securities” as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), and none of the proceeds of the sale of the Placement Shares will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Placement

 

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Shares to be considered a “purpose credit” within the meanings of Regulation T, U or X of the Federal Reserve Board.

 

(uu)                          Exchange Act Compliance.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, the documents incorporated or deemed to be incorporated by reference in the Prospectus at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Exchange Act, and, when read together with the other information in the Prospectus, at the Settlement Dates, will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(vv)                          Forward-Looking Statements.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, no forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.

 

(ww) Reporting Compliance.  The Company is subject to and in compliance in all material respects with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. The Offering is registered pursuant to Section 12(b) of the Exchange Act and is listed on Nasdaq, and the Company has taken no action designed to, or reasonably likely to have the effect of, terminating the registration of the Offering under the Exchange Act or delisting the Common Stock from Nasdaq, nor has the Company received any notification that the Commission or Nasdaq is contemplating terminating such registration or listing; no consent, approval, authorization or order of, or filing, notification or registration with, Nasdaq is required for the listing and trading of the shares of Common Stock on Nasdaq, except for (i) a Notification: Listing of Additional Shares and (ii) a Notification: Change in the Number of Shares Outstanding.

 

(xx) Corporate Governance.  The Company is in compliance in all material respects with all corporate governance requirements set forth in the rules promulgated by Nasdaq applicable to the Company.

 

(yy) As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, there are no transactions, arrangements or other relationships between and/or among the Company, any of its affiliates (as such term is defined in Rule 405 of the Securities Act) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that would reasonably be expected to materially affect the Company’s liquidity or the availability of or requirements for its capital resources required to be described in the Prospectus which have not been described, or will not have been described prior to the issuance of the first Placement Notice, as required.

 

(zz) No Loans.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, there are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the

 

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Company to or for the benefit of any of the officers or directors of the Company, or any of their respective family members, except as disclosed in the Registration Statement and the Prospectus.

 

(aaa) Statistical Data.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder, the statistical and market related data included in the Registration Statement and the Prospectus are based on or derived from sources that the Company believes to be reliable and accurate, and such data agree with the sources from which they are derived.

 

(bbb) No FINRA Members.  To the Company’s knowledge, neither the Company nor any of its affiliates (within the meaning of NASD Conduct Rule 2720(b)(1)(a)) directly or indirectly controls, is controlled by, or is under common control with, or is an associated person (within the meaning of Article I, Section 1(ee) of the By-laws of the NASD) of, any member firm of FINRA.

 

(ccc) No Approval.  No approval of the stockholders of the Company under the rules and regulations of Nasdaq is required for the Company to sell the Common Stock as contemplated by this Agreement.

 

(ddd) Brokers.  Other than the compensation set forth in Schedule 3, there is no broker, finder or other party that is entitled to receive from the Company any brokerage or finder’s fee or other fee or commission as a result of any transactions contemplated by this Agreement.

 

(eee) No Reliance.  The Company has not relied upon Cowen or legal counsel for Cowen for any legal, tax or accounting advice in connection with the offering and sale of the Placement Shares.

 

(fff) Cowen Purchases.  The Company acknowledges and agrees that Cowen has informed the Company that Cowen may, to the extent permitted under the Securities Act and the Exchange Act, purchase and sell shares of Common Stock for its own account while this Agreement is in effect, provided, that no such purchase or sales shall take place while a Placement Notice is in effect (except to the extent Cowen may engage in sales of Placement Shares purchased or deemed purchased from the Company as a “riskless principal” or in a similar capacity).

 

(ggg) Compliance with Laws.  The Company has not been advised, and has no reason to believe, that it and each of its subsidiaries are not conducting business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting business, except where failure to be so in compliance would not result in a Material Adverse Change.

 

Any certificate signed by an officer of the Company and delivered to Cowen or to counsel for Cowen shall be deemed to be a representation and warranty by the Company to Cowen as to the matters set forth therein.

 

The Company acknowledges that Cowen and, for purposes of the opinions to be delivered pursuant to Section 7 hereof, counsel to the Company and counsel to Cowen, will rely upon the accuracy and truthfulness of the foregoing representations and hereby consents to such reliance.

 

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7.                                      Covenants of the Company.  The Company covenants and agrees with Cowen that:

 

(a)                                 Registration Statement Amendments.  As of each Applicable Time occurring on or after the date of the first Placement Notice hereunder and during any period in which a Prospectus relating to any Placement Shares is required to be delivered by Cowen under the Securities Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act), (i) the Company will notify Cowen promptly of the time when any subsequent amendment to the Registration Statement, other than documents incorporated by reference, has been filed with the Commission and/or has become effective or any subsequent supplement to the Prospectus has been filed and of any request by the Commission for any amendment or supplement to the Registration Statement or Prospectus or for additional information, (ii) the Company will prepare and file with the Commission, promptly upon Cowen’s request, any amendments or supplements to the Registration Statement or Prospectus that, in Cowen’s reasonable opinion, may be necessary or advisable in connection with the distribution of the Placement Shares by Cowen (provided, however, that the failure of Cowen to make such request shall not relieve the Company of any obligation or liability hereunder, or affect Cowen’s right to rely on the representations and warranties made by the Company in this Agreement); (iii) the Company will not file any amendment or supplement to the Registration Statement or Prospectus, other than documents incorporated by reference, relating to the Placement Shares or a security convertible into the Placement Shares unless a copy thereof has been submitted to Cowen within a reasonable period of time before the filing and Cowen has not reasonably objected thereto (provided, however, that the failure of Cowen to make such objection shall not relieve the Company of any obligation or liability hereunder, or affect Cowen’s right to rely on the representations and warranties made by the Company in this Agreement) and the Company will furnish to Cowen at the time of filing thereof a copy of any document that upon filing is deemed to be incorporated by reference into the Registration Statement or Prospectus, except for those documents available via IDEA; and (iv) the Company will cause each amendment or supplement to the Prospectus, other than documents incorporated by reference, to be filed with the Commission as required pursuant to the applicable paragraph of Rule 424(b) of the Securities Act.

 

(b)                                 Notice of Commission Stop Orders.  The Company will advise Cowen, promptly after it receives notice or obtains knowledge thereof, of the issuance or threatened issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement, of the suspension of the qualification of the Placement Shares for offering or sale in any jurisdiction, or of the initiation or threatening of any proceeding for any such purpose; and it will promptly use its commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such a stop order should be issued.

 

(c)                                  Delivery of Prospectus; Subsequent Changes.  During any period in which a Prospectus relating to the Placement Shares is required to be delivered by Cowen under the Securities Act with respect to a pending sale of the Placement Shares, (including in circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act), the Company will comply with all requirements imposed upon it by the Securities Act, as from time to time in force, and to file on or before their respective due dates all reports and any definitive proxy or information statements required to be filed by the Company

 

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with the Commission pursuant to Sections 13(a), 13(c), 14, 15(d) or any other provision of or under the Exchange Act.  If during such period any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not misleading, or if during such period it is necessary to amend or supplement the Registration Statement or Prospectus to comply with the Securities Act, the Company will promptly notify Cowen to suspend the offering of Placement Shares during such period and the Company will promptly amend or supplement the Registration Statement or Prospectus (at the expense of the Company) so as to correct such statement or omission or effect such compliance.

 

(d)                                 Listing of Placement Shares.  During any period in which the Prospectus relating to the Placement Shares is required to be delivered by Cowen under the Securities Act with respect to a pending sale of the Placement Shares (including in circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act), the Company will use its commercially reasonable efforts to cause the Placement Shares to be listed on Nasdaq and to qualify the Placement Shares for sale under the securities laws of such jurisdictions as Cowen reasonably designates and to continue such qualifications in effect so long as required for the distribution of the Placement Shares; provided, however, that the Company shall not be required in connection therewith to qualify as a foreign corporation or dealer in securities or file a general consent to service of process in any jurisdiction.

 

(e)                                  Delivery of Registration Statement and Prospectus.  The Company will furnish to Cowen and its counsel (at the expense of the Company) copies of the Registration Statement, the Prospectus (including all documents incorporated by reference therein) and all amendments and supplements to the Registration Statement or Prospectus that are filed with the Commission during any period in which a Prospectus relating to the Placement Shares is required to be delivered under the Securities Act (including all documents filed with the Commission during such period that are deemed to be incorporated by reference therein), in each case as soon as reasonably practicable and in such quantities as Cowen may from time to time reasonably request and, at Cowen’s request, will also furnish copies of the Prospectus to each exchange or market on which sales of the Placement Shares may be made; provided, however, that the Company shall not be required to furnish any document (other than the Prospectus) to Cowen to the extent such document is available on IDEA.

 

(f)                                   Earnings Statement.  The Company will make generally available to its security holders as soon as practicable, but in any event not later than 15 months after the end of the Company’s current fiscal quarter, an earnings statement covering a 12-month period that satisfies the provisions of Section 11(a) and Rule 158 of the Securities Act.

 

(g)                                  Expenses.  The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, in accordance with the provisions of Section 11 hereunder, will pay the following expenses all incident to the performance of its obligations hereunder, including, but not limited to, expenses relating to (i) the preparation, printing and filing of the Registration Statement and each amendment and supplement thereto, of each Prospectus and of each amendment and supplement thereto, (ii) the preparation, issuance and delivery of the Placement Shares, (iii) the qualification of the Placement Shares under securities laws in accordance with the provisions of Section 7(d) of this Agreement, including filing fees

 

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(provided, however, that any fees or disbursements of counsel for Cowen in connection therewith shall be paid by Cowen except as set forth in (vii) below), (iv) the printing and delivery to Cowen of copies of the Prospectus and any amendments or supplements thereto, and of this Agreement, (v) the fees and expenses incurred in connection with the listing or qualification of the Placement Shares for trading on Nasdaq, (vi) filing fees and expenses, if any, of the Commission and the FINRA Corporate Financing Department (including, with respect to any required review by FINRA, the reasonable fees and expenses of Cowen’s counsel in an amount not to exceed $10,000) and (vii) the Company shall reimburse Cowen for the fees and disbursements of Cowen’s counsel in an amount not to exceed $50,000.

 

(h) Use of Proceeds.  The Company will use the Net Proceeds as described, or as will be described, in the Prospectus in the section entitled “Use of Proceeds.”

 

(i) Notice of Other Sales.  During the pendency of any Placement Notice given hereunder, and for 5 trading days following the termination of any Placement Notice given hereunder, the Company shall provide Cowen notice as promptly as reasonably possible before it offers to sell, contracts to sell, sells, grants any option to sell or otherwise disposes of any shares of Common Stock (other than Placement Shares offered pursuant to the provisions of this Agreement) or securities convertible into or exchangeable for Common Stock, warrants or any rights to purchase or acquire Common Stock; provided, that such notice shall not be required in connection with the (i) issuance, grant or sale of Common Stock, options to purchase shares of Common Stock or Common Stock issuable upon the exercise of options or other equity awards pursuant to the any stock option, stock bonus or other stock plan or arrangement described in the Prospectus, (ii) the issuance of securities in connection with an acquisition, merger or sale or purchase of assets or (iii) the issuance or sale of Common Stock pursuant to any dividend reinvestment plan that the Company may adopt from time to time provided the implementation of such is disclosed to Cowen in advance or (iv) any shares of common stock issuable upon the exchange, conversion or redemption of securities or the exercise of warrants, options or other rights in effect or outstanding.

 

(j)                                    Change of Circumstances.  The Company will, at any time during a fiscal quarter in which the Company intends to tender a Placement Notice or sell Placement Shares, advise Cowen promptly after it shall have received notice or obtained knowledge thereof, of any information or fact that would alter or affect in any material respect any opinion, certificate, letter or other document provided to Cowen pursuant to this Agreement.

 

(k)                                 Due Diligence Cooperation.  The Company will cooperate with any reasonable due diligence review conducted by Cowen or its agents in connection with the transactions contemplated hereby, including, without limitation, providing information and making available documents and senior corporate officers, during regular business hours and at the Company’s principal offices, as Cowen may reasonably request.

 

(l)                                     Required Filings Relating to Placement of Placement Shares.  The Company agrees that on such dates as the Securities Act shall require, the Company will (i) file a prospectus supplement with the Commission under the applicable paragraph of Rule 424(b) under the Securities Act (each and every filing under Rule 424(b), a “Filing Date”), which prospectus supplement will set forth, within the relevant period, the amount of Placement Shares sold through Cowen, the Net Proceeds to the Company and the compensation payable by the

 

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Company to Cowen with respect to such Placement Shares, and (ii) deliver such number of copies of each such prospectus supplement to each exchange or market on which such sales were effected as may be required by the rules or regulations of such exchange or market.

 

(m)                             Representation Dates; Certificate.  On or prior to the First Delivery Date and each time the Company (i) files the Prospectus relating to the Placement Shares or amends or supplements the Registration Statement or the Prospectus relating to the Placement Shares (other than a prospectus supplement filed in accordance with Section 7(l) of this Agreement) by means of a post-effective amendment, sticker, or supplement but not by means of incorporation of document(s) by reference to the Registration Statement or the Prospectus relating to the Placement Shares; (ii) files an annual report on Form 10-K under the Exchange Act; (iii) files its quarterly reports on Form 10-Q under the Exchange Act; or (iv) files a report on Form 8-K containing amended financial information (other than an earnings release) under the Exchange Act (each date of filing of one or more of the documents referred to in clauses (i) through (iv) shall be a “Representation Date”); the Company shall furnish Cowen with a certificate, in the form attached hereto as Exhibit 7(m) within three (3) Trading Days of any Representation Date if requested by Cowen.  The requirement to provide a certificate under this Section 7(m) shall be waived for any Representation Date occurring at a time at which no Placement Notice is pending, which waiver shall continue until the earlier to occur of the date the Company delivers a Placement Notice hereunder (which for such calendar quarter shall be considered a Representation Date) and the next occurring Representation Date; provided, however, that such waiver shall not apply for any Representation Date on which the Company files its annual report on Form 10-K.  Notwithstanding the foregoing, if the Company subsequently decides to sell Placement Shares following a Representation Date when the Company relied on such waiver and did not provide Cowen with a certificate under this Section 7(m), then before the Company delivers the Placement Notice or Cowen sells any Placement Shares, the Company shall provide Cowen with a certificate, in the form attached hereto as Exhibit 7(m), dated the date of the Placement Notice.

 

(n)                                 Legal Opinion.  On or prior to the First Delivery Date and within three (3) Trading Days of each Representation Date with respect to which the Company is obligated to deliver a certificate in the form attached hereto as Exhibit 7(m) for which no waiver is applicable, the Company shall cause to be furnished to Cowen a written opinion of Pepper Hamilton LLP, counsel for the Company, or other counsel satisfactory to Cowen, in form and substance satisfactory to Cowen and its counsel, dated the date that the opinion is required to be delivered, modified, as necessary, to relate to the Registration Statement and the Prospectus as then amended or supplemented; provided, however, that in lieu of such opinions for subsequent Representation Dates, counsel may furnish Cowen with a letter (a “Reliance Letter”) to the effect that Cowen may rely on a prior opinion delivered under this Section 7(n) to the same extent as if it were dated the date of such letter (except that statements in such prior opinion shall be deemed to relate to the Registration Statement and the Prospectus as amended or supplemented at such Representation Date).

 

(o)                                 Comfort Letter.  On or prior to the First Delivery Date and within three (3) Trading Days of each Representation Date with respect to which the Company is obligated to deliver a certificate in the form satisfactory to Cowen and its counsel for which no waiver is applicable, the Company shall cause Ernst & Young LLP to furnish Cowen letters (the

 

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“Comfort Letters”), dated the date of the Comfort Letter is delivered,  (i) confirming that they are an independent registered public accounting firm within the meaning of the Securities Act and the PCAOB, (ii) stating, as of such date, the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants’ “comfort letters” to Cowen in connection with registered public offerings (the first such letters, the “Initial Comfort Letters”) and (iii) updating the Initial Comfort Letters with any information that would have been included in the Initial Comfort Letters had they been given on such date and modified as necessary to relate to the Registration Statement and the Prospectus, as amended and supplemented to the date of such letter.

 

(p)                                 Market Activities.  The Company will not, directly or indirectly, (i) take any action designed to cause or result in, or that constitutes or might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Common Stock or (ii) sell, bid for, or purchase the Common Stock to be issued and sold pursuant to this Agreement, or pay anyone any compensation for soliciting purchases of the Common Stock other than Cowen; provided, however, that the Company may bid for and purchase shares of its common stock in accordance with Rule 10b-18 under the Exchange Act.

 

(q)                                 Insurance.  The Company and its Subsidiaries shall maintain, or caused to be maintained, insurance in such amounts and covering such risks as is reasonable and customary for the business for which it is engaged.

 

(r)                                    Compliance with Laws.  The Company and each of its Subsidiaries shall maintain, or cause to be maintained, all material environmental permits, licenses and other authorizations required by federal, state and local law in order to conduct their businesses, and the Company and each of its Subsidiaries shall conduct their businesses, or cause their businesses to be conducted, in substantial compliance with such permits, licenses and authorizations and with applicable environmental laws, except where the failure to maintain or be in compliance with such permits, licenses and authorizations could not reasonably be expected to result in a Material Adverse Change.

 

(s)                                   Investment Company Act.  The Company will conduct its affairs in such a manner so as to reasonably ensure that neither it nor the Subsidiaries will be or become, at any time prior to the termination of this Agreement, an “investment company,” as such term is defined in the Investment Company Act, assuming no change in the Commission’s current interpretation as to entities that are not considered an investment company.

 

(t)                                    Securities Act and Exchange Act.  The Company will use its best efforts to comply with all requirements imposed upon it by the Securities Act and the Exchange Act as from time to time in force, so far as necessary to permit the continuance of sales of, or dealings in, the Placement Shares as contemplated by the provisions hereof and the Prospectus.

 

(u)                                 No Offer to Sell.  Other than a free writing prospectus (as defined in Rule 405 under the Act) approved in advance by the Company and Cowen in its capacity as principal or agent hereunder, neither Cowen nor the Company (including its agents and representatives, other than Cowen in its capacity as such) will make, use, prepare, authorize, approve or refer to any written communication (as defined in Rule 405 under the Act), required to be filed with the

 

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Commission, that constitutes an offer to sell or solicitation of an offer to buy Common Stock hereunder

 

(v)                                 Sarbanes-Oxley Act.  The Company and the Subsidiaries will use their best efforts to comply with all effective applicable provisions of the Sarbanes-Oxley Act.

 

8.                                      Conditions to Cowen’s Obligations. The obligations of Cowen hereunder with respect to a Placement will be subject to the continuing accuracy and completeness of the representations and warranties made by the Company herein, to the due performance by the Company of its obligations hereunder, to the completion by Cowen of a due diligence review satisfactory to Cowen in its reasonable judgment, and to the continuing satisfaction (or waiver by Cowen in its sole discretion) of the following additional conditions:

 

(a)                                 Registration Statement Effective.  The Registration Statement shall be effective and shall be available for (i) all sales of Placement Shares issued pursuant to all prior Placement Notices and (ii) the sale of all Placement Shares contemplated to be issued by any Placement Notice.

 

(b)                                 No Material Notices.  None of the following events shall have occurred and be continuing:  (i) receipt by the Company or any of its Subsidiaries of any request for additional information from the Commission or any other federal or state governmental authority during the period of effectiveness of the Registration Statement, the response to which would require any post-effective amendments or supplements to the Registration Statement or the Prospectus; (ii) the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Placement Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv) the occurrence of any event that makes any material statement made in the Registration Statement or the Prospectus or any material document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related Prospectus or such documents so that, in the case of the Registration Statement, it will not contain any materially untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and, that in the case of the Prospectus, it will not contain any materially untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(c)                                  No Misstatement or Material Omission.  Cowen shall not have advised the Company that the Registration Statement or Prospectus, or any amendment or supplement thereto, contains an untrue statement of fact that in Cowen’s reasonable opinion is material, or omits to state a fact that in Cowen’s opinion is material and is required to be stated therein or is necessary to make the statements therein not misleading.

 

(d)                                 Material Changes.  Except as contemplated in the Prospectus, or disclosed in the Company’s reports filed with the Commission, there shall not have been any material adverse change, on a consolidated basis, in the authorized capital stock of the Company or any Material

 

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Adverse Change or any development that could reasonably be expected to result in a Material Adverse Change, or any downgrading in or withdrawal of the rating assigned to any of the Company’s securities (other than asset backed securities) by any rating organization or a public announcement by any rating organization that it has under surveillance or review its rating of any of the Company’s securities (other than asset backed securities), the effect of which, in the case of any such action by a rating organization described above, in the reasonable judgment of Cowen (without relieving the Company of any obligation or liability it may otherwise have), is so material as to make it impracticable or inadvisable to proceed with the offering of the Placement Shares on the terms and in the manner contemplated in the Prospectus.

 

(e)                                  Company Counsel Legal Opinion.  Cowen shall have received the opinion of company counsel required to be delivered pursuant Section 7(n) on or before the date on which such delivery of such opinion is required pursuant to Section 7(n).

 

(f)                                   Cowen Counsel Legal Opinion.  Cowen shall have received from Morgan, Lewis & Bockius LLP, counsel for Cowen, such opinion or opinions, on or before the date on which the delivery of the company counsel legal opinions are required pursuant to Section 7(n), with respect to such matters as Cowen may reasonably require, and the Company shall have furnished to such counsel such documents as they request for enabling them to pass upon such matters.

 

(g)                                  Comfort Letters.  Cowen shall have received the Comfort Letters required to be delivered pursuant Section 7(o) on or before the date on which such delivery of such Comfort Letters is required pursuant to Section 7(o).

 

(h)                                 Representation Certificate.  Cowen shall have received the certificate required to be delivered pursuant to Section 7(m) on or before the date on which delivery of such certificate is required pursuant to Section 7(m).

 

(i)                                     Secretary’s Certificate.  On or prior to the First Delivery Date, Cowen shall have received a certificate, signed on behalf of the Company by its corporate Secretary, in form and substance satisfactory to Cowen and its counsel.

 

(j)                                    No Suspension.  Trading in the Common Stock shall not have been suspended on Nasdaq.

 

(k)                                 Other Materials.  On each date on which the Company is required to deliver a certificate pursuant to Section 7(m), the Company shall have furnished to Cowen such appropriate further information, certificates and documents as Cowen may have reasonably requested. All such opinions, certificates, letters and other documents shall have been in compliance with the provisions hereof. The Company will furnish Cowen with such conformed copies of such opinions, certificates, letters and other documents as Cowen shall have reasonably requested.

 

(l)                                     Securities Act Filings Made.  All filings with the Commission required by Rule 424 under the Securities Act to have been filed prior to the issuance of any Placement Notice hereunder shall have been made within the applicable time period prescribed for such filing by Rule 424.

 

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(m)                             Approval for Listing.  The Placement Shares shall either have been (i) approved for listing on Nasdaq, subject only to notice of issuance, or (ii) the Company shall have filed an application for listing of the Placement Shares on Nasdaq at, or prior to, the issuance of any Placement Notice.

 

(n)                                 No Termination Event.  There shall not have occurred any event that would permit Cowen to terminate this Agreement pursuant to Section 11(a).

 

9.                                      Indemnification and Contribution.

 

(a)                                 Company Indemnification.  The Company agrees to indemnify and hold harmless Cowen, the directors, officers, partners, employees and agents of Cowen and each person, if any, who (i) controls Cowen within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, or (ii) is controlled by or is under common control with Cowen (a “Cowen Affiliate”) from and against any and all losses, claims, liabilities, expenses and damages (including, but not limited to, any and all reasonable investigative, legal and other expenses  incurred in connection with, and any and all amounts paid in settlement (in accordance with Section 9(c)) of, any action, suit or proceeding between any of the indemnified parties and any indemnifying parties or between any indemnified party and any third party, or otherwise, or any claim asserted), as and when incurred, to which Cowen, or any such person, may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based, directly or indirectly, on (x) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or any amendment or supplement to the Registration Statement or the Prospectus or in any free writing prospectus or in any application or other document executed by or on behalf of the Company or based on written information furnished by or on behalf of the Company filed in any jurisdiction in order to qualify the Common Stock under the securities laws thereof or filed with the Commission, (y) the omission or alleged omission to state in any such document a material fact required to be stated in it or necessary to make the statements in it not misleading or (z) any breach by any of the indemnifying parties of any of their respective representations, warranties and agreements contained in this Agreement; provided, however, that this indemnity agreement shall not apply to the extent that such loss, claim, liability, expense or damage arises from the sale of the Placement Shares pursuant to this Agreement and is caused directly or indirectly by an untrue statement or omission made in reliance upon and in conformity with written information relating to Cowen and furnished to the Company by Cowen expressly for inclusion in any document as described in clause (x) of this Section 9(a). This indemnity agreement will be in addition to any liability that the Company might otherwise have.

 

(b)                                 Cowen Indemnification. Cowen agrees to indemnify and hold harmless the Company and its directors and each officer of the Company that signed the Registration Statement, and each person, if any, who (i) controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act or (ii) is controlled by or is under common control with the Company (a “Company Affiliate”) against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 9(a), as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendments thereto), the Prospectus (or any amendment or supplement thereto), or any free writing prospectus in reliance upon and in

 

25

 

conformity with written information relating to Cowen and furnished to the Company by Cowen expressly for inclusion in any document as described in clause (x) of Section 9(a).

 

(c)                                  Procedure.  Any party that proposes to assert the right to be indemnified under this Section 9 will, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section 9, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served, but the omission so to notify such indemnifying party will not relieve the indemnifying party from (i) any liability that it might have to any indemnified party otherwise than under this Section 9 and (ii) any liability that it may have to any indemnified party under the foregoing provision of this Section 9 unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel reasonably satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified party or parties. All such fees, disbursements and other charges will be reimbursed by the indemnifying party promptly as they are incurred. An indemnifying party will not, in any event, be liable for any settlement of any action or claim effected without its written consent.  No indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by this Section 9 (whether or not any indemnified party is a party thereto), unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising or that may arise out of such claim, action or proceeding.

 

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(d)           Contribution.  In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs of this Section 9 is applicable in accordance with its terms but for any reason is held to be unavailable from the Company or Cowen, the Company and Cowen will contribute to the total losses, claims, liabilities, expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the Company from persons other than Cowen, such as persons who control the Company within the meaning of the Securities Act, officers of the Company who signed the Registration Statement and directors of the Company, who also may be liable for contribution) to which the Company and Cowen may be subject in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and Cowen on the other. The relative benefits received by the Company on the one hand and Cowen on the other hand shall be deemed to be in the same proportion as the total Net Proceeds from the sale of the Placement Shares (before deducting expenses) received by the Company bear to the total compensation received by Cowen from the sale of Placement Shares on behalf of the Company.  If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Company, on the one hand, and Cowen, on the other, with respect to the statements or omission that resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or Cowen, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and Cowen agree that it would not be just and equitable if contributions pursuant to this Section 9(d) were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense, or damage, or action in respect thereof, referred to above in this Section 9(d) shall be deemed to include, for the purpose of this Section 9(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim to the extent consistent with Section 9(c) hereof.  Notwithstanding the foregoing provisions of this Section 9(d), Cowen shall not be required to contribute any amount in excess of the commissions received by it under this Agreement and no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 9(d), any person who controls a party to this Agreement within the meaning of the Securities Act, and any officers, directors, partners, employees or agents of Cowen, will have the same rights to contribution as that party, and each officer of the Company who signed the Registration Statement will have the same rights to contribution as the Company, subject in each case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 9(d), will notify any such party or parties from whom contribution may be sought, but the omission to so notify will not relieve that party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 9(d) except to the extent that the

 

27

 

failure to so notify such other party materially prejudiced the substantive rights or defenses of the party from whom contribution is sought. Except for a settlement entered into pursuant to the last sentence of Section 9(c) hereof, no party will be liable for contribution with respect to any action or claim settled without its written consent if such consent is required pursuant to Section 9(c) hereof.

 

10.          Representations and Agreements to Survive Delivery.  The indemnity and contribution agreements contained in Section 9 of this Agreement and all representations and warranties of the Company herein or in certificates delivered pursuant hereto shall survive, as of their respective dates, regardless of (i) any investigation made by or on behalf of Cowen, any controlling persons, or the Company (or any of their respective officers, directors or controlling persons), (ii) delivery and acceptance of the Placement Shares and payment therefor or (iii) any termination of this Agreement.

 

11.          Termination.

 

(a)           Cowen shall have the right by giving notice as hereinafter specified at any time to terminate this Agreement if (i) any Material Adverse Change, or any development that could reasonably be expected to result in a Material Adverse Change has occurred that, in the reasonable judgment of Cowen, may materially impair the ability of Cowen to sell the Placement Shares hereunder, (ii) the Company shall have failed, refused or been unable to perform any agreement on its part to be performed hereunder; provided, however, in the case of any failure of the Company to deliver (or cause another person to deliver) any certification, opinion, or letter required under Sections 7(m), 7(n), or 7(o), Cowen’s right to terminate shall not arise unless such failure to deliver (or cause to be delivered) continues for more than thirty (30) days from the date such delivery was required; or (iii) any other condition of Cowen’s obligations hereunder is not fulfilled, or (iv), any suspension or limitation of trading in the Placement Shares or in securities generally on Nasdaq shall have occurred.  Any such termination shall be without liability of any party to any other party except that the provisions of Section 7(g) (Expenses), Section 9 (Indemnification and Contribution), Section 10 (Representations and Agreements to Survive Delivery), Section 16 (Applicable Law; Consent to Jurisdiction) and Section 17 (Waiver of Jury Trial) hereof shall remain in full force and effect notwithstanding such termination. If Cowen elects to terminate this Agreement as provided in this Section 11(a), Cowen shall provide the required notice as specified in Section 12 (Notices).

 

(b)           The Company shall have the right, by giving ten (10) days’ notice as hereinafter specified to terminate this Agreement in its sole discretion at any time after the date of this Agreement.  Any such termination shall be without liability of any party to any other party except that the provisions of Section 7(g), Section 9, Section 10, Section 16 and Section 17 hereof shall remain in full force and effect notwithstanding such termination.

 

(c) Cowen shall have the right, by giving ten (10) days’ notice as hereinafter specified to terminate this Agreement in its sole discretion at any time after the date of this Agreement.  Any such termination shall be without liability of any party to any other party except that the provisions of Section 7(g), Section 9, Section 10, Section 16 and Section 17 hereof shall remain in full force and effect notwithstanding such termination.

 

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(d)           Unless earlier terminated pursuant to this Section 11, this Agreement shall automatically terminate upon the issuance and sale of all of the Placement Shares through Cowen on the terms and subject to the conditions set forth herein; provided that the provisions of Section 7(g), Section 9, Section 10, Section 16 and Section 17 hereof shall remain in full force and effect notwithstanding such termination.

 

(e)           This Agreement shall remain in full force and effect unless terminated pursuant to Sections 11(a), (b), (c) or (d) above or otherwise by mutual agreement of the parties; provided, however, that any such termination by mutual agreement shall in all cases be deemed to provide that Section 7(g), Section 9, Section 10, Section 16 and Section 17 shall remain in full force and effect.

 

(f)            Any termination of this Agreement shall be effective on the date specified in such notice of termination; provided, however, that such termination shall not be effective until the close of business on the date of receipt of such notice by Cowen or the Company, as the case may be. If such termination shall occur prior to the Settlement Date for any sale of Placement Shares, such Placement Shares shall settle in accordance with the provisions of this Agreement.

 

12.          Notices.  All notices or other communications required or permitted to be given by any party to any other party pursuant to the terms of this Agreement shall be in writing, unless otherwise specified in this Agreement, and if sent to Cowen, shall be delivered to Cowen at Cowen and Company, LLC, 599 Lexington Avenue, New York, NY 10022, fax no. 646-562-1124, Attention:  General Counsel; or if sent to the Company, shall be delivered to 1 Cedar Brook Drive, Cranbury, New Jersey 08512, Attention: Chief Executive Officer with a copy to Pepper Hamilton LLP, 3000 Two Logan Square, Eighteenth and Arch Streets, Philadelphia, Pennsylvania 19103-2799, Attention: Steven J. Abrams, Esq. Each party to this Agreement may change such address for notices by sending to the parties to this Agreement written notice of a new address for such purpose.  Each such notice or other communication shall be deemed given (i) when delivered personally or by verifiable facsimile transmission (with an original to follow) on or before 4:30 p.m., New York City time, on a Business Day (as defined below), or, if such day is not a Business Day on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to a nationally-recognized overnight courier and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid). For purposes of this Agreement, “Business Day” shall mean any day on which the Nasdaq and commercial banks in the City of New York are open for business.

 

13.          Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the Company and Cowen and their respective successors and the affiliates, controlling persons, officers and directors referred to in Section 9 hereof. References to any of the parties contained in this Agreement shall be deemed to include the successors and permitted assigns of such party. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. Neither party may assign its rights or obligations under this Agreement without the prior written consent of the other party; provided, however, that Cowen may assign its rights and obligations hereunder to an affiliate of Cowen without obtaining the Company’s consent.

 

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14.          Adjustments for Share Splits.  The parties acknowledge and agree that all share-related numbers contained in this Agreement shall be adjusted to take into account any share split, share dividend or similar event effected with respect to the Common Stock.

 

15.          Entire Agreement; Amendment; Severability.  This Agreement (including all schedules and exhibits attached hereto and Placement Notices issued pursuant hereto) constitutes the entire agreement and supersedes all other prior and contemporaneous agreements and undertakings, both written and oral, among the parties hereto with regard to the subject matter hereof. Neither this Agreement nor any term hereof may be amended except pursuant to a written instrument executed by the Company and Cowen.  In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable as written by a court of competent jurisdiction, then such provision shall be given full force and effect to the fullest possible extent that it is valid, legal and enforceable, and the remainder of the terms and provisions herein shall be construed as if such invalid, illegal or unenforceable term or provision was not contained herein, but only to the extent that giving effect to such provision and the remainder of the terms and provisions hereof shall be in accordance with the intent of the parties as reflected in this Agreement.

 

16.          Applicable Law; Consent to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the principles of conflicts of laws. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan, for the adjudication of any dispute hereunder or in connection with any transaction contemplated hereby, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof (certified or registered mail, return receipt requested) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.

 

17.          Waiver of Jury Trial.  The Company and Cowen each hereby irrevocably waives any right it may have to a trial by jury in respect of any claim based upon or arising out of this Agreement or any transaction contemplated hereby.

 

18.          Absence of Fiduciary Relationship.  The Company acknowledges and agrees that:

 

(a)           Cowen has been retained solely to act as sales agent in connection with the Offering and that no fiduciary, advisory or agency relationship between the Company and Cowen has been created in respect of any of the transactions contemplated by this Agreement, irrespective of whether Cowen has advised or is advising the Company on other matters;

 

(b)           the Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement;

 

30

 

(c)           the Company has been advised that Cowen and its affiliates are engaged in a broad range of transactions which may involve interests that differ from those of the Company and that Cowen has no obligation to disclose such interests and transactions to the Company by virtue of any fiduciary, advisory or agency relationship; and

 

(d)           the Company waives, to the fullest extent permitted by law, any claims it may have against Cowen, for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that Cowen shall have no liability (whether direct or indirect) to the Company in respect of such a fiduciary claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Company, including stockholders, partners, employees or creditors of the Company.

 

19.          Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of an executed Agreement by one party to the other may be made by facsimile transmission.

 

20.          Definitions. As used in this Agreement, the following term has the meaning set forth below:

 

(a)           “Applicable Time” means the date of this Agreement, each Representation Date, the date on which a Placement Notice is given, and any date on which Placement Shares are sold hereunder.

 

[Remainder of Page Intentionally Blank]

 

31

 

If the foregoing correctly sets forth the understanding between the Company and Cowen, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between the Company and Cowen.

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
COWEN   AND COMPANY, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/   Robert Sine
    
	
 
    	
 
    	
Name:
    	
Robert   Sine
    
	
 
    	
 
    	
Title:
    	
Managing   Director
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ACCEPTED   as of the date first-above written:
    
	
 
    	
 
    
	
 
    	
AMICUS   THERAPEUTICS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   William D. Baird III
    
	
 
    	
Name:
    	
William   D. Baird III
    
	
 
    	
Title:
    	
Chief   Financial Officer
    

 

[Signature Page to Sales Agreement]

 

 

SCHEDULE 1

 

FORM OF PLACEMENT NOTICE

 

	
From:
    	
[                            ]
    
	
Cc:
    	
[                            ]
    
	
To:
    	
[                            ]
    
	
Subject:
    	
Cowen at the Market Offering—Placement   Notice
    

 

Gentlemen:

 

Pursuant to the terms and subject to the conditions contained in the Sales Agreement between Amicus Therapeutics, Inc. (the “Company”), and Cowen and Company, LLC (“Cowen”) dated [         ](the “Agreement”), I hereby request on behalf of the Company that Cowen sell up to [  ] shares of the Company’s common stock, par value $0.01 per share, at a minimum market price of $        per share.  Sales should begin on the date of this Notice and shall continue until [DATE] [all shares are sold].

 

 

SCHEDULE 2

 

Authorized Placement Notice Parties

 

	
COMPANY
    	
 
    	
COWEN
    
	
John F. Crowley, Chief Executive Officer
    	
 
    	
Robert Sine
    
	
William D. Baird, III, Chief Financial Officer
    	
 
    	
William Follis
    

 

 

SCHEDULE 3

 

Compensation

 

Cowen shall be paid compensation in an amount agreed to in writing by the parties up to 3% of the gross proceeds from the sales of Common Stock pursuant to the terms of this Agreement.

 

 

Exhibit 7(m)

 

OFFICER CERTIFICATE

 

The undersigned, the duly qualified and elected                        , of Amicus Therapeutics, Inc. (“Company”), a Delaware corporation, does hereby certify in such capacity (and not in his or her individual capacity) and on behalf of the Company, pursuant to Section 7(m) of the Sales Agreement dated               .                    , 2016 (the “Sales Agreement”) between the Company and Cowen and Company, LLC, that to the best of the knowledge of the undersigned.

 

(i)                                     The representations and warranties of the Company in Section 6 of the Sales Agreement (A) to the extent such representations and warranties are subject to qualifications and exceptions contained therein relating to materiality or Material Adverse Change, are true and correct on and as of the date hereof with the same force and effect as if expressly made on and as of the date hereof, except for those representations and warranties that speak solely as of a specific date and which were true and correct as of such date, and (B) to the extent such representations and warranties are not subject to any qualifications or exceptions, are true and correct in all material respects as of the date hereof as if made on and as of the date hereof with the same force and effect as if expressly made on and as of the date hereof except for those representations and warranties that speak solely as of a specific date and which were true and correct as of such date; and

 

(ii)                                  The Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied pursuant to the Sales Agreement at or prior to the date hereof.

 

	
 
    	
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