Document:

nano-ex1024_246.htm

 

Exhibit 10.24

EXECUTION VERSION

STOCK PURCHASE AGREEMENT

by and among

NANOMETRICS INCORPORATED,

a Delaware corporation,

4D TECHNOLOGY CORPORATION,

an Arizona corporation,

THE SELLERS

named herein

AND

DR. JAMES WYANT,

as the Representative

October 26, 2018

 

 

 

TABLE OF CONTENTS

 

	
 
	
 
	
Page

	
ARTICLE I DEFINITIONS
	
 
	
1

	
 
	
 
	
 

	
ARTICLE II THE CLOSING TRANSACTIONS
	
 
	
15

	
 
	
 
	
 
	
 
	
 

	
Section 2.01
	
 
	
Stock Purchase
	
 
	
15

	
Section 2.02
	
 
	
Cancellation of Options
	
 
	
16

	
Section 2.03
	
 
	
The Closing
	
 
	
16

	
Section 2.04
	
 
	
Deliveries at the Closing
	
 
	
17

	
Section 2.05
	
 
	
Closing Certificate
	
 
	
19

	
Section 2.06
	
 
	
Post-Closing Adjustment
	
 
	
19

	
Section 2.07
	
 
	
Withholding Rights
	
 
	
21

	
 
	
 
	
 
	
 
	
 

	
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	
 
	
21

	
 
	
 
	
 
	
 
	
 

	
Section 3.01
	
 
	
Organization of the Company
	
 
	
21

	
Section 3.02
	
 
	
Authorization of Transactions by the Company
	
 
	
22

	
Section 3.03
	
 
	
Noncontravention
	
 
	
22

	
Section 3.04
	
 
	
Litigation
	
 
	
22

	
Section 3.05
	
 
	
Subsidiaries
	
 
	
23

	
Section 3.06
	
 
	
Capitalization
	
 
	
23

	
Section 3.07
	
 
	
Brokers’ Fees
	
 
	
24

	
Section 3.08
	
 
	
Financial Statements
	
 
	
24

	
Section 3.09
	
 
	
Absence of Changes
	
 
	
24

	
Section 3.10
	
 
	
Absence of Undisclosed Liabilities
	
 
	
27

	
Section 3.11
	
 
	
Legal Compliance
	
 
	
27

	
Section 3.12
	
 
	
Assets
	
 
	
28

	
Section 3.13
	
 
	
Real Property
	
 
	
29

	
Section 3.14
	
 
	
Tax Matters
	
 
	
30

	
Section 3.15
	
 
	
Intellectual Property
	
 
	
32

	
Section 3.16
	
 
	
Material Contracts and Commitments
	
 
	
35

	
Section 3.17
	
 
	
Insurance
	
 
	
37

	
Section 3.18
	
 
	
Employees
	
 
	
37

	
Section 3.19
	
 
	
Employee Benefits
	
 
	
38

	
Section 3.20
	
 
	
Environmental Matters
	
 
	
40

	
Section 3.21
	
 
	
Customers and Suppliers
	
 
	
41

	
Section 3.22
	
 
	
Affiliate Transactions
	
 
	
41

	
Section 3.23
	
 
	
Accounts Receivable; Accounts Payable
	
 
	
41

	
Section 3.24
	
 
	
Bank Accounts
	
 
	
42

	
Section 3.25
	
 
	
Product Liability; Product Recall
	
 
	
42

	
Section 3.26
	
 
	
Inventory
	
 
	
43

	
Section 3.27
	
 
	
Disclosure
	
 
	
43

	
 
	
 
	
 
	
 
	
 

i

 

 

	
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS
	
 
	
43

	
 
	
 
	
 
	
 
	
 

	
Section 4.01
	
 
	
Shares
	
 
	
44

	
Section 4.02
	
 
	
Organization; Authorization of Transactions by the Sellers
	
 
	
44

	
Section 4.03
	
 
	
Noncontravention
	
 
	
44

	
Section 4.04
	
 
	
Litigation
	
 
	
44

	
Section 4.05
	
 
	
Investor Suitability
	
 
	
44

	
Section 4.06
	
 
	
Investment Experience
	
 
	
45

	
Section 4.07
	
 
	
Purchase for Own Account
	
 
	
45

	
Section 4.08
	
 
	
Acknowledgements
	
 
	
45

	
Section 4.09
	
 
	
Restrictive Legends
	
 
	
45

	
Section 4.10
	
 
	
Limitation on Representations
	
 
	
45

	
 
	
 
	
 
	
 
	
 

	
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
	
 
	
46

	
 
	
 
	
 
	
 
	
 

	
Section 5.01
	
 
	
Organization of Purchaser
	
 
	
46

	
Section 5.02
	
 
	
Authorization of Transactions by Purchaser
	
 
	
46

	
Section 5.03
	
 
	
Noncontravention
	
 
	
46

	
Section 5.04
	
 
	
Litigation
	
 
	
46

	
Section 5.05
	
 
	
Brokers’ Fees
	
 
	
47

	
 
	
 
	
 
	
 
	
 

	
ARTICLE VI PRE-CLOSING COVENANTS
	
 
	
47

	
 
	
 
	
 
	
 
	
 

	
Section 6.01
	
 
	
Access; Opportunity to Ask Questions
	
 
	
47

	
Section 6.02
	
 
	
Conduct of Business
	
 
	
47

	
Section 6.03
	
 
	
Further Actions
	
 
	
50

	
Section 6.04
	
 
	
Consents and Conditions
	
 
	
51

	
Section 6.05
	
 
	
Physical Inventory Count
	
 
	
51

	
 
	
 
	
 
	
 
	
 

	
ARTICLE VII ADDITIONAL AGREEMENTS
	
 
	
51

	
 
	
 
	
 
	
 
	
 

	
Section 7.01
	
 
	
Press Releases
	
 
	
51

	
Section 7.02
	
 
	
Confidentiality; Non-Competition; Non-Solicitation; Non-Disparagement
	
 
	
51

	
Section 7.03
	
 
	
Transfer Taxes
	
 
	
54

	
Section 7.04
	
 
	
Tax Indemnification and Other Matters
	
 
	
54

	
Section 7.05
	
 
	
Further Assurances
	
 
	
56

	
Section 7.06
	
 
	
Release
	
 
	
56

	
Section 7.07
	
 
	
Waiver of Milestone Payments
	
 
	
58

	
 
	
 
	
 
	
 
	
 

	
ARTICLE VIII CONDITIONS
	
 
	
58

	
 
	
 
	
 
	
 
	
 

	
Section 8.01
	
 
	
Conditions to the Obligations of the Purchaser
	
 
	
58

	
Section 8.02
	
 
	
Conditions to Obligation of the Company and the Sellers
	
 
	
59

	
 
	
 
	
 
	
 
	
 

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ARTICLE IX INDEMNIFICATION
	
 
	
60

	
 
	
 
	
 
	
 
	
 

	
Section 9.01
	
 
	
Survival of Representations, Warranties, Covenants and Agreements
	
 
	
60

	
Section 9.02
	
 
	
Indemnification by the Principal Shareholders
	
 
	
61

	
Section 9.03
	
 
	
Indemnification by Purchaser
	
 
	
62

	
Section 9.04
	
 
	
Limitations on Indemnification
	
 
	
92

	
Section 9.05
	
 
	
Special Definitions
	
 
	
64

	
Section 9.06
	
 
	
Procedures for Third-Party Claims
	
 
	
64

	
Section 9.07
	
 
	
Procedures for Inter-Party Claims
	
 
	
65

	
Section 9.08
	
 
	
Offset
	
 
	
66

	
Section 9.09
	
 
	
Anti-Circularity
	
 
	
66

	
Section 9.10
	
 
	
Payments
	
 
	
66

	
Section 9.11
	
 
	
Treatment of Indemnity Payments
	
 
	
67

	
 
	
 
	
 
	
 
	
 

	
ARTICLE X TERMINATION
	
 
	
67

	
 
	
 
	
 
	
 
	
 

	
Section 10.01
	
 
	
Termination
	
 
	
67

	
 
	
 
	
 
	
 
	
 

	
ARTICLE XI MISCELLANEOUS
	
 
	
67

	
 
	
 
	
 
	
 
	
 

	
Section 11.01
	
 
	
Representative
	
 
	
67

	
Section 11.02
	
 
	
No Third-Party Beneficiaries
	
 
	
70

	
Section 11.03
	
 
	
Remedies
	
 
	
70

	
Section 11.04
	
 
	
Entire Agreement
	
 
	
70

	
Section 11.05
	
 
	
Successors and Assigns
	
 
	
70

	
Section 11.06
	
 
	
Counterparts
	
 
	
70

	
Section 11.07
	
 
	
Headings
	
 
	
70

	
Section 11.08
	
 
	
Notices
	
 
	
71

	
Section 11.09
	
 
	
Amendments and Waivers
	
 
	
72

	
Section 11.10
	
 
	
Incorporation of Schedules
	
 
	
72

	
Section 11.11
	
 
	
Construction
	
 
	
72

	
Section 11.12
	
 
	
Interpretation
	
 
	
72

	
Section 11.13
	
 
	
Governing Law
	
 
	
73

	
Section 11.14
	
 
	
Waiver of Jury Trial
	
 
	
73

	
Section 11.15
	
 
	
Consent to Jurisdiction; Choice of Forum
	
 
	
73

	
Section 11.16
	
 
	
Specific Performance
	
 
	
73

	
Section 11.17
	
 
	
Arbitration
	
 
	
73

	
Section 11.18
	
 
	
Disclosure Schedules
	
 
	
75

 

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EXHIBITS AND SCHEDULES

EXHIBITS

 

Exhibit A - Sample Working Capital Exhibit 

B-1 – Cash Escrow Agreement Exhibit B-2 

– Stock Escrow Agreement Exhibit C – 

Financial Statements

SCHEDULES

 

Stock Purchase Schedule

Schedule 2.03(g) – Payoff Indebtedness

Schedule 2.03(h) – Company Transaction Expenses 

Schedule 2.05(k) – Termination Agreements Schedule 

2.03(n) – Payoff Indebtedness

Schedule 3.01 - Business Qualifications

Schedule 3.03 - Consents, Permits and Authorizations 

Schedule 3.04(a) - Pending Litigation

Schedule 3.04(b) - Judgments, Injunctions and Orders 

Schedule 3.04(c) - Governmental Authority Proceedings 

Schedule 3.05 - Subsidiaries

Schedule 3.06(a) - Capitalization

 

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Schedule 3.07 - Brokers’ Fees Schedule 

3.08 - Financial Statements Schedule 

3.08(b) - Indebtedness Schedule 3.09 – 

Absence of Changes Schedule 3.10 – 

Undisclosed Liabilities Schedule 3.11(a) – 

Legal Compliance Schedule 3.11(b) – 

Permits

Schedule 3.12(a) - Assets

Schedule 3.13(b) - Leased Real Property 

Schedule 3.13(c) - Improvements Schedule 

3.14(b) - Tax Matters

Schedule 3.15(a) - Intellectual Property Rights

Schedule 3.15(c) - Third Party Intellectual Property Infringement and Payments Schedule 

3.15(d) - Company Intellectual Property Infringement

Schedule 3.16(a) - Contracts and Commitments 

Schedule 3.16(b) - Performance of Obligations 

Schedule 3.17 - Insurance

Schedule 3.18(a) - Employees Schedule 

3.18(b) - Employees Schedule 3.19(a) – 

Employee Benefits

Schedule 3.19(b) - Employee Benefits Obligations and Liabilities Schedule 

3.19(h) - Employee Bonuses

Schedule 3.20 - Environmental Compliance Schedule 

3.21 - Customers and Suppliers Schedule 3.22(a) – 

Affiliate Transactions

Schedule 3.22(b) - Affiliate Interest in Assets and Properties

Schedule 3.23 - Accounts Receivable Collateral and Security Arrangements Schedule 

3.23(b) - Accounts and Notes Payable

Schedule 3.24 – Bank Accounts Schedule 

3.25(b) – Product Warranties Schedule 3.26 

- Inventory

Schedule 4.01 - Ownership of Shares

 

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STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement (this “Agreement”) is entered into on October 26, 2018, by and among (i) 4D Technology Corporation, an Arizona corporation (the “Company”), (ii) Nanometrics Incorporated, a Delaware corporation (“Purchaser”, (iii) each of the individuals signatory hereto under the heading “Sellers” on the signature pages hereto (the “Sellers”), and (v) Dr. James Wyant, as the representative of the Sellers (the “Representative”). Each of the above referenced parties is sometimes herein referred to individually as a “Party” and collectively as the “Parties.”

 

The Sellers collectively own all of the issued and outstanding capital stock of the Company (the “Shares”).

 

At the Closing, on the terms and subject to the conditions set forth herein, the Sellers desire to sell to Purchaser, and Purchaser intends to purchase from the Sellers, all of the Shares in exchange for the delivery by Purchaser to (a) the Principal Shareholders cash and Purchaser Stock and (b) the Minority Shareholders of cash, in each case, as set forth herein (the “Stock Purchase”).

 

NOW, THEREFORE, in consideration of the foregoing and the mutual promises herein made, and in consideration of the representations, warranties, covenants and agreements herein contained, the Parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

“Accounting Firm” has the meaning set forth in Section 2.06(b).

 

“Action” means any action, suit, proceeding (including arbitration proceeding), investigation, complaint, examination, subpoena, claim, charge, grievance, order, audit, information request, governmental charge or inquiry.

 

“Actual Cash” has the meaning set forth in Section 2.06(b).

 

“Actual Company Transaction Expenses” has the meaning set forth in Section 2.06(b).

 

“Actual Indebtedness” has the meaning set forth in Section 2.06(b).

 

“Actual Working Capital Deficiency” has the meaning set forth in Section 2.06(b).

 

“Actual Working Capital Surplus” has the meaning set forth in Section 2.06(b)

 

“Adjustment due to Purchaser” has the meaning set forth in Section 2.06(c).

 

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“Affiliate” of a specified Person means any other Person that directly or indirectly controls, is controlled by, or is under common control with, such specified Person. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Agreement” has the meaning set forth in the preface above.

 

“Business” means the activities conducted or planned to be conducted and the services offered or planned to be offered by the Company as of the date of this Agreement, including the manufacturing and sale of interferometers, surface roughness profilers and surface defect gauges, for measuring precision surfaces and optics.

 

“Business Day” means a day other than Saturday, Sunday or any day on which banks located in the State of New York are authorized or obligated to close.

 

“Business Name” means “4D Technology,” either alone or in combination with other words, graphics or designs, including all Intellectual Property in said term, and any variation, derivative, translation, transliteration, shortening or acronym thereof.

 

“Cancelled Option” has the meaning set forth in Section 2.02.

 

“Cash” means, at any particular time, the cash and cash equivalents of the Company excluding issued but uncleared checks and drafts and customer deposits.

 

“Cash Escrow Agreement” means the Escrow Agreement, to be dated as of the Closing Date, by and among Purchaser, the Representative and the Escrow Agent, substantially in the form of Exhibit B-1 attached hereto.

 

“Claim” has the meaning set forth in Section 11.17(a).

 

“Closing” has the meaning set forth in Section 2.01.

 

“Closing Balance Sheet” has the meaning set forth in Section 2.06(a).

 

“Closing Certificate” has the meaning set forth in Section 2.05.

 

“Closing Consideration” means Closing Cash Consideration plus Closing Stock Consideration.

 

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“Closing Cash Consideration” means (i) $40,000,000, plus (ii) the Estimated Cash, minus (iii) the Estimated Indebtedness, minus (iv) the Estimated Working Capital Deficiency, if any,  plus (v) the Estimated Working Capital Surplus, if any, minus (vi) the Estimated Company Transaction Expenses, minus (vii) the Option Payment and minus (viii) the Working Capital Escrow Amount, minus (ix) the Indemnification Escrow Stock Amount, minus (x) the IP Indemnification Escrow Cash Amount minus (xi) the Sales Tax Indemnification Escrow Cash Amount minus (xii) Closing Stock Consideration, in each case of clauses (ii)-(vii) foregoing, as set forth on the Closing Certificate delivered to Purchaser pursuant to Section 2.05.

“Closing Date” has the meaning set forth in Section 2.01.

“Closing Stock Consideration” means $4,000,000 of Purchaser Stock (or 125,117 shares of Purchaser Stock based on the weighted average closing price of the common stock of Purchaser on NASDAQ during the twenty (20) consecutive trading days immediately prior to the date hereof).

 

“COBRA” means Part 6 of Subtitle B of Title I of ERISA, section 4980B of the Code and any similar state Law.

 

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

 

“Company” has the meaning set forth in the preface above.

 

“Company Board” has the meaning set forth in Section 3.02.

 

“Company Intellectual Property” has the meaning set forth in Section 3.15(a).

 

“Company Software” has the meaning set forth in Section 3.15(a).

 

“Company Systems” has the meaning set forth in Section 3.15(e).

 

“Company Transaction Expenses” means all fees, costs and expenses incurred by or on behalf of the Company in anticipation of, in connection with, or otherwise related to, the Transactions and/or any related or alternative transactions (including (i) all of the fees, expenses and other costs of legal counsel, investment bankers, brokers, accountants and other representatives and consultants, (ii) all change of control, severance, termination or similar payments, (iii) any amounts paid in connection with obtaining any consents of Governmental Authorities or third parties in connection with the Transactions and (iv) employer’s share of payroll Taxes attributable to any payments made in anticipation of, in connection with, or otherwise related to, the Transactions.

 

“Confidential Information” means the information, observations and data (including trade secrets) obtained by a Seller during such Seller’s employment with, service to or ownership of the Company concerning the business or affairs of the Company, excluding any such information that is or becomes generally available to the public (other than as a result of a disclosure by the Company, any Seller or any of their respective Affiliates, Subsidiaries, officers, directors, members, partners, employees, attorneys, accountants or other representatives or agents).

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“Customer Agreement” has the meaning set forth in Section 3.16(a)(ii).

 

“Damages” has the meaning set forth in Section 9.02.

 

“Disclosing Party” has the meaning set forth in Section 11.17(d).

 

“Disclosure Schedules” means the disclosure schedules delivered by the Company to Purchaser concurrently with the execution and delivery of this Agreement.

 

“Dispute Period” has the meaning set forth in Section 2.06(b).

“Employee Benefit Plan” means each “employee benefit plan” (as defined in section 3(3) of ERISA), each retention, employment, severance, bonus, incentive, change-in-control, retirement, pension, profit-sharing, nonqualified, deferred compensation, equity or equity-based, welfare, vacation, health or medical, disability, or sick leave contract, plan, program, policy, agreement or arrangement, and each other benefit or compensation contract, plan, program, policy, agreement or arrangement that is maintained, sponsored, contributed to or required to be contributed to by the Company or its Affiliates, or with respect to which the Company, its or Affiliates, or any ERISA Affiliate has or could reasonably be expected to have any current or potential liability or obligation.

 

“Environmental Laws” means all Laws, including all rules and regulations promulgated thereunder, and other provisions having the force or effect of Law, all judicial and administrative orders and determinations, and all contractual obligations, whenever enacted or in effect, relating to or imposing liability or standards of conduct concerning pollution, protection of the environment, worker health or safety, or public health or safety, including, without limitation, all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, Release, threatened Release, control, exposure to, manufacturing or cleanup of any Hazardous Substances or wastes, noise or odor.

 

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

 

“ERISA Affiliate” means any Person that at any relevant time is or was considered a single employer with the Company or any of its Affiliates under section 414 of the Code.

 

“Escrow Agent” means Computershare Trust Company, N.A.

 

“Escrow Agreements” means the Stock Escrow Agreement and the Cash Escrow Agreement.

 

“Estimated Cash” means the estimated Cash of the Company as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date, as set forth on the Closing Certificate delivered to Purchaser pursuant to Section 2.05.

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“Estimated Company Transaction Expenses” means the estimated Company Transaction Expenses of the Company as of as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date, as set forth on the Closing Certificate delivered to Purchaser pursuant to Section 2.05.

 

“Estimated Indebtedness” means the estimated Indebtedness of the Company as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date, as set forth on the Closing Certificate delivered to Purchaser pursuant to Section 2.05.

 

“Estimated Working Capital Deficiency” means the estimated Working Capital Deficiency of the Company as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date, as set forth on the Closing Certificate delivered to Purchaser pursuant to Section  2.05.

“Estimated Working Capital Surplus” means the estimated Working Capital Surplus of the Company as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date, as set forth on the Closing Certificate delivered to Purchaser pursuant to Section 2.05.

“Financial Statements” has the meaning set forth in Section 3.08.

“Fundamental Representations” has the meaning set forth in Section 9.01.

“Fully Diluted Capital Stock” means the sum, without duplication, of (1) the aggregate number of shares of common stock of the Company that are outstanding immediately prior to the Closing, and (2) the aggregate number of shares of common stock issuable upon the exercise of Options for which an Option Payment will be made.

“GAAP” United States generally accepted accounting principles, as of the date hereof, consistently applied and, to the extent not inconsistent with GAAP, using the same accounting principles, practices, procedures, policies, assumptions and methods (with consistent classifications, judgments, inclusions, exclusions and valuation and estimation methodologies) used by the Company in the preparation of the 2017 Financial Statements.

“Governmental Authority” means any (i) government; (ii) governmental or quasigovernmental authority of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal or arbitral); or (iii) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature; or (iv) any Person acting pursuant to a grant of authority from a Governmental Authority, in the case of any of clause (i) through (iv), whether federal, state, local, municipal, foreign, supranational or of any other jurisdiction.

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“Hazardous Substance” means (a) petroleum or petroleum products, flammable materials, explosives, radioactive materials, radon gas, lead-based paint, asbestos in any form, per- and polyfluoroalkyl substances, urea formaldehyde foam insulation, polychlorinated biphenyls, and toxic mold or fungus of any kind or species, (b) any chemicals or other materials or substances which are defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “toxic substances,” “toxic pollutants,” “contaminants,” “pollutants,” or words of similar import under any applicable Environmental Law, and (c) any other chemical, material, waste or substance exposure to which is prohibited, limited or regulated under any applicable Environmental Law.

“Improvements” has the meaning set forth in Section 3.13(c).

“Indebtedness” means at a particular time, without duplication and whether current or non- current, (i) any indebtedness for borrowed money or issued in substitution or exchange for indebtedness for borrowed money, (ii) any indebtedness evidenced by any loan agreement, note, bond, debenture or other debt security or similar instrument, (iii) any indebtedness for the deferred purchase price of property or services with respect to which a Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current liabilities, in each case to the extent included as current liabilities in the definition of “Working Capital”), (iv) any commitment by which a Person assures a creditor against loss (including contingent reimbursement obligations with respect to letters of credit), (v) any indebtedness guaranteed in any manner by a Person (including guaranties in the form of an agreement to repurchase or reimburse), (vi) any obligations under capitalized leases with respect to which a Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or with respect to which obligations a Person assures a creditor against loss, (vii) any indebtedness secured by a Lien on a Person’s assets, (viii) customer deposits, progress payments and other deferred revenue, (ix) accrued interest to and including the Closing Date in respect of any of the obligations described in the foregoing clauses (i) through (viii) of this definition and all premiums, penalties, charges, fees, expenses and other amounts that are or would be due (including with respect to early termination) in connection with the payment and satisfaction in full of such obligations, (x) all unpaid Taxes of the Company for all Pre- Closing Tax Periods and (xi) any liabilities of the Company that were not incurred in the Ordinary Course of Business (including as may result from the Transactions), in each case, whether or not such items are included as indebtedness or liabilities in accordance with GAAP. For the avoidance of doubt, as it relates to the Company on or prior to the Closing, Indebtedness shall also include any amounts due to any Seller.

“Indemnification Escrow Funds” means the (i) Indemnification Escrow Stock, if any of such stock has not been sold in exchange for cash, (ii) if any of such stock has been sold in exchange for cash, the amount of such cash plus any interest or other investment proceeds thereon, (iii) the IP Indemnification Escrow Cash Amount plus any interest or other investment proceeds thereon and (iv) the Sales Tax Indemnification Escrow Cash Amount plus any interest or other investment proceeds thereon. The Indemnification Escrow Funds will be available to satisfy any amounts owed by the Principal Shareholders to Purchaser under this Agreement in accordance with the terms of the Escrow Agreements.

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“Indemnification Escrow Stock” means 125,117 shares of Purchaser Stock issued to the Principal Shareholders to be held by the Escrow Agent pursuant to the terms of this Agreement and the Stock Escrow Agreement, which Purchaser Stock will be available to satisfy any amounts owed by the Principal Shareholders to Purchaser under this Agreement in accordance with the terms of the Stock Escrow Agreement. To the extent that any Purchaser Stock is released to an Indemnified Party under ARTICLE VII such Purchaser Stock shall be valued based on the weighted average closing price of the common stock of Purchaser on NASDAQ during the twenty (20) consecutive trading days immediately prior to the date hereof. “Indemnification Escrow Stock Amount” means $3,000,000.

“Indemnified Party” means either a Purchaser Indemnified Party or a Seller Indemnified Party, as applicable.

“Indemnifying Party” has the meaning set forth in Section 9.05.

“Individual Seller Breach” means, with respect to any Seller, the breach by such Seller of any representation or warranty made solely as to such Seller in ARTICLE V or any covenant or agreement made by such Seller in this Agreement, or in each case in any of the certificates, agreements or other documents furnished by such Seller pursuant to this Agreement.

“Intellectual Property” means all of the following in any jurisdiction throughout the world:

(i)all patents, patent applications (including originals, divisionals, continuations, continuations-in-part, extensions, revisions, reexaminations and reissues thereof), patent disclosures, inventions and invention disclosures (whether or not patentable); (ii) all trademarks, service marks, trade dress, trade names, corporate names, logos, slogans, and all other indicia or origin (and all translations, transliterations, adaptations, derivations and combinations of the foregoing) and Internet domain names, franchises, and all registrations, applications and renewals for any of the foregoing together with all goodwill associated with each of the foregoing (collectively, “Trademarks”); (iii) all works of authorship (whether or not copyrightable), copyrights and copyrightable works (including “look-and-feel”), mask works and moral rights, and all registrations, applications and renewals for any of the foregoing (collectively, “Copyrights”); (iv) all data, databases and database rights; (v) all trade secrets, confidential information, customer and supplier lists, data and customer records, reports, studies, software development methodologies, technical information, pricing and cost information, marketing plans and proposals, proprietary business information, process technology, plans, drawings, blue prints, know-how, techniques, protocols, processes, methods, specifications, data, algorithms, compositions, industrial models, architectures layouts, designs, research and development and inventions (whether patentable or unpatentable and whether or not reduced to practice) (collectively, “Trade Secrets”); (vi) all Software; (vii) all right of publicity and privacy, including the right to use the name, voice, likeness, signature and biographies of real persons, together with all goodwill related thereto; (viii) all other proprietary or industrial rights and all other intellectual property and all rights associated with any of the foregoing; and (ix) all copies and tangible embodiments or descriptions of any of the foregoing (in whatever form or medium).

 

“Inter-Party Claim” has the meaning set forth in Section 9.07.

 

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“Inventory” means the Company’s, including all raw materials and supplies, packaging materials, manufactured or purchased products or parts, work in process, finished products and goods, products and goods in transit and returned products and goods, net of the reserves (including with respect to reserves for slow-moving, obsolete or damaged Inventory) applicable thereto (as shown on the Latest Balance Sheet).

 

“IP Indemnification Escrow Cash Amount” means $4,000,000.

 

“IP Indemnification Escrow Funds” means the IP Indemnification Escrow Cash Amount plus any interest or other investment proceeds thereon.

 

“IRS” means the Internal Revenue Service.

 

“Item of Dispute” has the meaning set forth in Section 2.06(b).

 

“JAMS Rules” has the meaning set forth in Section 11.17(a).

 

“Key Sellers” means James Millerd and Neal Brock.

 

“Knowledge” means, (a) with respect to the Company, the actual knowledge of James Wyant, James Millerd, and Neal Brock, Al Davis, Eric Novak and Chris Lesadd, after reasonable inquiry of such individuals direct reports, and (b) with respect to the Seller, the actual knowledge of such Seller. 

“Latest Balance Sheet” has the meaning set forth in Section 3.08.

 

“Law” means all laws (including common law), by-laws, statutes, rules, regulations, codes, injunctions, decrees, orders, settlements, awards, ordinances, registration requirements, disclosure requirements and other pronouncements having the effect of law of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental Authority.

 

“Leased Real Property” has the meaning set forth in Section 3.13(b).

 

“Leases” has the meaning set forth in Section 3.13(b).

 

“Lien” means any security interest, pledge, license, bailment (in the nature of a pledge or for purposes of security), mortgage, deed of trust, option, warrant, purchase right, commitment, right of first refusal, grant of a power to confess judgment, conditional sale and title retention agreement (including any lease in the nature thereof), charge, third-party claim, demand, equity, security title, lien, encumbrance or other similar arrangement or interest in real or personal property.

 

“Majority Seller” means James Wyant.

 

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“Material Adverse Effect” means any actual effect or change that, individually or together with any other effects or changes, has been or could reasonably be expected to be materially adverse to the businesses, assets and properties, customer, supplier or employee relationships, condition (financial or otherwise), cash flows, prospects, results of operations or operations of the Company taken as a whole, or on the ability of the Company to consummate timely the Transactions, without regard to the duration or persistence, of such effects or changes, and regardless of whether or not such adverse effect or change can be cured or whether Purchaser has knowledge of such effect or change on the date hereof; provided, however, that the foregoing shall not include any such effects or changes resulting from any of the following, to the extent occurring after the date of this Agreement: (i) changes in general economic conditions which do not disproportionately affect the Company as compared to the effect of any such change on other companies in the same industry, (ii) changes resulting from acts of terrorism, acts of war or escalation of hostilities, or (iii) changes or effects directly resulting from any breach by Purchaser of this Agreement.

 

“Material Contracts” has the meaning set forth in Section 3.16(a).

 

“Minority Shareholder” shall mean any shareholder of the Company, other than a Principal Shareholder.

 

“Named Competitors” means KLA-Tencor, ASML, Nova Measuring Instruments, Zygo/Ametek, Bruker, Rudolph Technology, Applied Materials and any successor or assignee thereof, whether by acquisition, merger, assignment or otherwise, to a material portion of such Person’s business or assets.

 

“Notice of Disagreement” has the meaning set forth in Section 2.06(b).

 

“Option” means an option to purchase Common Stock of 4D Technology Corporation, an Arizona corporation, pursuant to the Plan.

 

“Option Payment” has the meaning set forth in Section 2.02.

 

“Optionholder” means each holder of an Option.

 

“Option Release Agreements” means those agreements set forth in items 2 through 6 on Schedule 3.16(a)(v).

 

“Ordinary Course of Business” means the usual and ordinary course of business of the Company consistent with past custom and practice (including with respect to quantity, timing, duration and frequency).

 

“Party” and “Parties” each has the respective meaning set forth in the preface above.

 

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“Permits” means all licenses, permits, franchises, approvals, authorizations, qualifications, clearances, registrations, notifications, exemptions, certificates of need, accreditations, certifications, determinations, participation agreements, consents or orders of, or filings with, any Governmental Authority or any other Person necessary for the Company to carry on its business.

 

“Percentage Allocation” means (i) with respect to the Majority Seller, 70%, (ii) with respect to James Millerd, 15% and (iii) with respect to Neal Brock, 15%.

 

“Person” means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, a Governmental Authority, arbitrator, or another entity.

 

“Personal Information” means information that, alone or in combination with other information, allows the identification of an individual or can be used to contact an individual, or serve advertisements to an individual, including without limitation, name; Social Security number; government-issued identification numbers; health or medical information, including health insurance information; financial account information; passport numbers; user names/email addresses in combination with a password or security code that would allow access to an online account; unique biometric identifiers (e.g., fingerprints, retinal scans, face scans, or DNA profile); employee ID numbers; date of birth; digital signature; Internet Protocol (IP) addresses or other information that is regulated by one or more Privacy Laws (as defined herein).

 

“Physical Inventory Count” has the meaning set forth in Section 6.05.

 

“Plan” means the 4D Technology Corporation Amended and Restated Stock Option Plan.

 

“Pre-Closing Tax Period” means (a) all taxable periods ending on or before the Closing Date and (b) the portion of any Straddle Period through the end of the Closing Date.

 

“Principal Shareholders” means the Majority Seller and the Key Shareholders.

“Privacy and Security Requirements” means, to the extent applicable to the Company, (a) all Privacy Laws; (b) all Privacy Contracts, and (c) all Privacy Policies.

 

“Privacy Contracts” means all Contracts between the Company and any Person that are applicable to the Processing of Personal Information.

 

“Privacy Laws” means the Payment Card Industry Data Security Standard (“PCI DSS”) and any Laws applicable to the Processing of Personal Information including, without limitation, the Health Insurance Portability and Accountability Act and all regulations promulgated thereunder, Section 5 of the Federal Trade Commission Act, all state Laws related to unfair or deceptive trade practices, the Fair Credit Reporting Act (“FCRA”), the Controlling the Assault of Non-Solicited Pornography And Marketing Act of 2003 (“CAN-SPAM”), the Telephone Consumer Protection Act (“TCPA”), all Laws related to telemarketing and text messaging, all Laws related to breach notification, and all applicable foreign Laws including Regulation 2016/679 of the European Parliament and of the Council of 27 April 2016 (“GDPR”) and Directive 2002/58/EC as amended by Directive 2009/136/EC.

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“Privacy Policies” means all written policies and procedures applicable to the Company relating to the Processing of Personal Information, including without limitation all website and mobile application privacy policies and internal information security procedures.

 

“Pro Rata Closing Cash Consideration to Minority Shareholder” means, with respect to any Minority Shareholder, a fraction, (A) the numerator of which is (i) $40,000,000, plus (ii) the Estimated Cash, minus (iii) the Estimated Indebtedness, minus (iv) the Estimated Working Capital Deficiency, if any, plus (v) the Estimated Working Capital Surplus, if any, minus (vi) the Estimated Company Transaction Expenses, in each case of clauses (ii)-(vi) foregoing, as set forth on the Closing Certificate delivered to Purchaser pursuant to Section 2.05, and (B) the denominator of which is the Fully Diluted Capital Stock.

 

“Pro Rata Closing Cash Consideration to Principal Shareholder” means, with respect to any Principal Shareholder, a fraction, (A) the numerator of which is (i) $40,000,000, plus (ii) the Estimated Cash, minus (iii) the Estimated Indebtedness, minus (iv) the Estimated Working Capital Deficiency, if any, plus (v) the Estimated Working Capital Surplus, if any, minus (vi) the Estimated Company Transaction Expenses, and minus (vii) the Working Capital Escrow Amount,  minus (viii) the Indemnification Escrow Stock Amount, minus (ix) the IP Indemnification Escrow Cash Amount minus (x) the Sales Tax Indemnification Escrow Cash Amount minus (xi) the Closing Stock Consideration, in each case of clauses (ii)-(vi) foregoing, as set forth on the Closing Certificate delivered to Purchaser pursuant to Section 2.05, and (B) the denominator of which is the Fully Diluted Capital Stock.

 

“Process” or “Processing” means the creation, collection, use (including, without limitation, for the purposes of sending telephone calls, text messages and emails), storage, maintenance, processing, recording, distribution, transfer, transmission, receipt, import, export, protection (including safeguarding, security measures and notification in the event of a breach of security), access, disposal or disclosure or other activity regarding data (whether electronically or in any other form or medium).

 

“Prohibited Transaction” has the meaning set forth in section 406 of ERISA and section 4975 of the Code.

 

“Purchased Shares” has the meaning set forth in Section 2.01.

 

“Purchaser” has the meaning set forth in the preface above.

 

“Purchaser Fundamental Representation” has the meaning set forth in Section 9.01.

 

“Purchaser Indemnified Party” has the meaning set forth in Section 9.02.

 

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“Purchaser Transaction Expenses” means all fees, costs and expenses incurred by or on behalf of the Purchaser and its Affiliates in anticipation of, in connection with, or otherwise related to, the Transactions and/or any related or alternative transactions, including all of the fees, expenses and other costs of legal counsel, investment bankers, brokers, accountants and other representatives and consultants.

 

“Related Party” means any officer, director, manager, equityholder, member or Affiliate of the Company, any individual related by blood, marriage or adoption to any such Person, and any Person controlled by any of the foregoing.

 

“Release” means the release, spill, emission, leaking, pumping, pouring, emptying, escaping, dumping, injection, deposit, disposal, discharge, dispersal, leaching or migrating of any Hazardous Substance into or thorough the environment.

 

“Released Claim” has the meaning set forth in Section 7.06.

 

“Releasee” has the meaning set forth in Section 7.06.

 

“Representative” has the meaning set forth in the preface above.

 

“Sales Tax Indemnification Escrow Cash Amount” means $834,000.

 

“Sales Tax Indemnification Escrow Funds” means the Sales Tax Indemnification Escrow Cash Amount plus any interest or other investment proceeds thereon. The Sales Tax Indemnification Escrow Funds will be available to satisfy any amounts owed by the Principal Shareholders to Purchaser under this Agreement in respect of Sales Taxes in accordance with the terms of the Cash Escrow Agreement.

 

“Sales Taxes” means any and all sales, use, business, occupation and similar Taxes attributable to periods or portions thereof ending on or before the Closing Date, including interest and penalties thereon.

 

“Section 1542” has the meaning set forth in Section 7.06.

 

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

 

“Security Breach” means security breach or breach of Personal Information under applicable Laws.

 

“Security Incident” means any attempted or successful unauthorized access, use, disclosure, modification, or destruction of information or interference with system operations of IT Assets.

 

“Seller Fundamental Representation” has the meaning set forth in Section 9.01.

 

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“Seller Indemnified Party” has the meaning set forth in Section 9.03.

 

“Sellers” has the meaning set forth in the preface above.

 

“Shares” has the meaning set forth in the preface above.

 

“Software” means any and all (i) computer programs, architectures, libraries, firmware and middleware, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, (ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (iii) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, and (iv) all programmer and user documentation, including user manuals and training materials, relating to any of the foregoing.

 

“State / Local Tax Proceeding” has the meaning set forth in Section 7.04(f)(i).

 

“Stock Escrow Agreement” means the Escrow Agreement, to be dated as of the Closing Date, by and among Purchaser, the Representative and the Escrow Agent, substantially in the form of Exhibit B-2 attached hereto.

 

“Stock Purchase” has the meaning set forth in the preface above.

 

“Straddle Period” means any taxable period that includes (but does not end on) the Closing Date.

 

“Subsidiary” means, with respect to any Person, any corporation, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, limited liability company or other business entity, a majority of the partnership, limited liability company or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more of the other Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership, limited liability company or other business entity if such Person or Persons shall be allocated a majority of partnership, limited liability company or other business entity gains or losses or shall be or control the managing director or general partner of such partnership, limited liability company or other business entity.

“Supply Agreement” has the meaning set forth in Section 7.07.

 

“Target Working Capital” means $4,500,000.

 

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“Tax” means (i) any federal, state, local or foreign taxes, charges, fees, levies or other similar assessments or liabilities (including income, receipts, ad valorem, value added, excise, real or personal property, sales, occupation, service, stamp, transfer, registration, natural resources, severance, premium, windfall or excess profits, environmental, customs duties, use, licensing, escheat, withholding, employment, social security, unemployment, disability, payroll, share, capital, surplus, alternative, minimum, add-on minimum, estimated, franchise or any other taxes, charges, fees, levies or other similar assessments or liabilities of any kind whatsoever and denominated by any name whatsoever), whether computed on a separate, consolidated, unitary or combined basis or in any other manner, and includes any interest, fines, penalties, assessments, deficiencies or additions thereto, (ii) any and all liability for amounts described in clause (i) of any member of an affiliated, consolidated, combined or unitary group of which the Company (or any predecessor of any of the foregoing) is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulations section 1.1502-6 or any analogous or similar state, local or foreign Law or regulation, and (iii) any and all liability for amounts described in clause (i) or (ii) of any Person (other than the Company) imposed on the Company as a transferee or successor, by contract or pursuant to any Law, rule or regulation, which Taxes relate to an event or transaction occurring before the Closing.

 

“Tax Proceeding” has the meaning set forth in Section 7.04(f)(ii).

 

“Tax Return” means any federal, state, local, foreign or other applicable return, declaration, report, claim for refund, information return or statement or other document (including any amendment thereto and any related or supporting schedules, statements or information) with respect to any Tax filed or required to be filed with the Internal Revenue Service or any other Governmental Authority or Taxing Authority or agency or in connection with the determination, assessment or collection of any Tax of any party or the administration of any Laws, regulations or administrative requirements relating to any Tax.

 

“Taxing Authority” means any Governmental Authority having or purporting to have jurisdiction with respect to any Tax.

 

“Third-Party Claim” has the meaning set forth in Section 9.06.

 

“Threshold” has the meaning set forth in Section 9.04(a)(i).

 

“Total Indemnity Cap” has the meaning set forth in Section 9.04(b)(i).

 

“Tracking Applications” means any software disseminated by any entity on behalf of the Company that is installed on consumers’ computers or devices and used by any entity on behalf of the Company to monitor, record or transmit information about activities occurring on the computers on which it is installed, or about data that is stored or created on, transmitted from or transmitted to the computers or devices on which it is installed.

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“Transaction Documents” means this Agreement, the Escrow Agreements, the Option Release Agreements and the agreements, documents and instruments contemplated hereby and thereby (including each of the agreements, documents and instruments contemplated by the Disclosure Schedules).

 

“Transactions” means the Stock Purchase and the other transactions contemplated by this Agreement.

 

“Transfer Taxes” has the meaning set forth in Section 7.03.

 

“Treasury Regulations” means the regulations under the Code promulgated by the United States Treasury Department.

 

“VDA Filing” has the meaning set forth in Section 7.04(g).

 

“WARN Act” has the meaning set forth in Section 3.18(b).

 

“Working Capital” means (x) the book value of all current assets of the Company, including accounts receivable, inventories and prepaid expenses (net of reserves), but specifically excluding Cash, marketable securities and Tax assets, minus (y) the book value of all current liabilities of the Company, including accounts and other amounts payable and accrued expenses, but specifically excluding customer deposits, progress payments, deferred revenue, Tax liabilities, unpaid Company Transaction Expenses and Indebtedness, in each case determined in accordance with GAAP and the Sample Working Capital set forth on Exhibit A (to the extent the Sample Working Capital was prepared in accordance with GAAP).

 

“Working Capital Deficiency” means the excess, if any, of the Target Working Capital over the Working Capital as of immediately prior to the Closing.

 

“Working Capital Escrow Amount” means $500,000.

 

“Working Capital Escrow Funds” means the Working Capital Escrow Amount, plus any interest or other investment proceeds thereon.

 

“Working Capital Surplus” means the excess, if any, of the Working Capital over the Target Working Capital as of immediately prior to the Closing.

 

ARTICLE II

THE CLOSING TRANSACTIONS

 

Section 2.01Stock Purchase.  At the Closing, on the terms and subject to the conditions set forth in this Agreement, Purchaser and the Sellers shall consummate the Stock Purchase, pursuant to which each Seller shall sell, transfer and assign to Purchaser all of such Seller’s right, title and interest in and to each of the Shares set forth opposite such Seller’s name on the Stock Purchase Schedule under the column labeled “Purchased Shares” (the “Purchased Shares”), free and clear of all Liens and with no restrictions on the voting or transfer thereof, in exchange for (a) 

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the issuance by Purchaser to the Principal Shareholders of a number of shares of Purchaser Stock (the “Purchaser Stock”) set forth opposite such Seller’s name on the Stock Purchase Schedule under the column heading “Shares of Purchaser Stock,” (b) payment by Purchaser to each Principal Shareholder, by wire transfer of immediately available funds, of cash in an amount equal to the Pro Rata Closing Consideration to Principal Shareholder for each share of common stock held by such Principal Shareholder as of the Closing and as set forth opposite such Principal Shareholder’s name on the Closing Statement, subject to Purchaser’s review and consent, and (c) payment by Purchaser to each Minority Shareholder, by wire transfer of immediately available funds, of cash in an amount equal to the Pro Rata Closing Consideration to Minority Shareholder for each share of common stock held by such Minority Shareholder as of the Closing and as set forth opposite such Minority Shareholder’s name on the Closing Statement, subject to Purchaser’s review and consent.

 

Section 2.02Cancellation of Options.

 

(a)Immediately prior to the Closing, each Option shall be surrendered to the Company and immediately cancelled by the Company (each, a “Cancelled Option”) in exchange for the right to receive an amount of cash (without interest) (such amount payable with respect to each Option hereunder being referred to as the “Option Payment” and collectively with respect to all Options, the “Option Payments”) as provided in this Section 2.02 and pursuant to the Option Release Agreements.

 

(b)Simultaneously with the Closing, Purchaser shall, on behalf of the Company, make the Option Payments to the Optionholders. For each Optionholder, the Option Payment shall be an amount of cash (without interest) as set forth in such Optionholder’s Option Release Agreement. Each such Option Payment paid by Purchaser shall be paid to the Optionholders net of any applicable withholding, and all withholdings shall be timely remitted to the appropriate Governmental Authority.

 

(c)Notwithstanding anything to the contrary contained in this Agreement, any payments in respect of Cancelled Options that were issued to a Person in exchange for services (including an employee of the Company) shall be treated as compensation for Tax purposes to the extent required by Law.

 

(d)Simultaneously with the Closing, the Plan shall be terminated, following the Closing Date, no Optionholder or any participant in the Plan will have any right to acquire any equity securities of the Company as a result of such holder’s Options.

 

Section 2.03The Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place (a) at 10:00 a.m. local time on November 15, 2018, provided, that all of the conditions to the obligations of the Parties to consummate the Transactions (other than conditions with respect to actions the respective Parties shall take at the Closing itself) have been satisfied or waived, (b) if such conditions have not been satisfied or waived on or prior to November 15, 2018, then at 10:00 a.m. local time on the third Business Day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the Transactions (other than conditions with respect to actions the respective Parties shall take at the Closing itself), or (c) on such other date as the Parties may mutually determine in writing (the “Closing Date”).

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Section 2.04Deliveries at the Closing. At the Closing, the Parties shall deliver, or cause to be delivered, each of the following:

 

(a)Each Seller shall deliver, in each case accompanied by a stock power duly executed by such Seller (and, if a married individual, a spousal consent duly executed by such Seller’s spouse), to Purchaser, accompanied by certificates representing such Seller’s Purchased Shares, in each case, in form and substance satisfactory to Purchaser;

 

(b)Purchaser shall issue to the Principal Shareholders a number of shares of Purchaser Stock as determined pursuant to Section 2.01, and shall record such issuance on its books and records;

 

(c)Purchaser shall deliver to each Principal Shareholder cash as determined pursuant to Section 2.01, by wire transfer of immediately available funds to a bank account designated in writing by each such Principal Shareholder;

 

(d)Purchaser shall deliver to each Minority Shareholder cash as determined pursuant to Section 2.01, by wire transfer of immediately available funds to a bank account designated in writing by each such Minority Shareholder;

 

(e)Purchaser, the Representative and the Escrow Agent shall deliver to each other a duly executed copy of each of the Escrow Agreements;

 

(f)Purchaser shall deliver to the Escrow Agent the Working Capital Escrow Amount, the IP Indemnification Escrow Cash Amount and the Sales Tax Indemnification Escrow Cash Amount, by wire transfer of immediately available funds to a bank account designated in writing by the Escrow Agent;

 

(g)Purchaser shall deliver to the Escrow Agent the Indemnification Escrow Stock;

 

(h)The Purchaser shall repay, on behalf of the Company, each item of Indebtedness listed on Schedule 2.04(h), by wire transfer of immediately available funds to the Persons and accounts specified in the payoff letters delivered pursuant to Section 2.04(n);

 

(i)The Purchaser shall pay, on behalf of the Company, the Company Transaction Expenses specified on Schedule 2.04(i) (which shall be delivered by the Company to Purchaser at least three (3) Business Days prior to the Closing), by wire transfer of immediately available funds to the Persons or bank accounts specified on Schedule 2.04(i) and the Company shall have delivered to Purchaser invoices for all such Company Transaction Expenses, in each case, prior to the Closing Date;

 

(j)The Purchaser shall make the Option Payments to be made by it pursuant to Section2.02 and deliver to the Purchaser evidence of each Cancelled Option;

 

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(k)As requested by Purchaser, the Company shall deliver to Purchaser resignations, effective as of the Closing, from each Person who holds any director, or officer position with the Company as of immediately prior to the Closing; 

(l)The Parties shall have made all filings required to be made by them and have obtained all Permits and other authorizations and consents required to be obtained under all applicable Laws to consummate the Transactions in compliance with such Laws, in each case on terms and conditions satisfactory to the Purchaser;

 

(m)The Company shall deliver to Purchaser a certificate of the Secretary of the Company, in form and substance reasonably satisfactory to the Purchaser, dated as of the Closing Date, attaching (A) copies of the articles of incorporation and bylaws of the Company and (B) a copy of the resolutions of the Company’s board of directors approving this Agreement, the other Transaction Documents and the Transactions;

 

(n)The Company shall deliver to Purchaser a payoff letter in respect of each item of Indebtedness set forth on Schedule 2.04(h) indicating that, upon payment of the payoff amount specified in such payoff letter, all outstanding obligations of the Company arising under or related to the Indebtedness owed to the Persons thereunder shall be repaid and extinguished in full and that, upon receipt of such amount, such Persons shall release its Liens in the assets and properties of the Company, in each case in form and substance reasonably satisfactory to Purchaser;

 

(o)The Company shall have obtained releases of all Liens relating to the Business, in each case in form and substance satisfactory to Purchaser (collectively, “Lien Releases”), and the Company shall deliver to Purchaser copies of each such Lien Release;

 

(p)The Company shall obtain, maintain and fully pay for irrevocable “tail” insurance policies naming the current and former directors and officers of the Company as direct beneficiaries with a claims period of at least five (5) years from the Closing Date, and providing for coverage in the amount of at least $1,000,000 per occurrence and $2,000,000 in the aggregate, the cost of which “tail” insurance policies shall be a Company Transaction Expense, and the Company shall deliver a copy of such insurance policies to Purchaser;

 

(q)The Company shall deliver to Purchaser a (i) certificate of good standing of the Company issued by the Arizona Corporation Commission and (ii) tax clearance certificate of the Company issued by the Department of Revenue of the State and taxing authority of its state of incorporation, in each case, dated as of a recent date, and in any state where the Company has material operations;

 

(r)Within five (5) Business Days following Closing, the Sellers shall deliver to Purchaser a CD containing true, correct and complete copies of such documents or agreements (together with all amendments, waivers or other changes thereto), and an index of such documents and agreements, which were posted to the Project Fang online data room hosted by Clio Connect as of immediately prior to Closing; and

 

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(s)The Company shall deliver to Purchaser a certificate from the Company, in form and substance as required under Treasury Regulation Section 1.897-2(h), certifying that stock of the Company is not a “United States real property interest” for purposes of Section 1445 of the Code, together with evidence reasonably satisfactory to Purchaser that the Company will provide notice to the IRS in accordance with the provisions of Treasury Regulation Section 1.897-2(h).

Section 2.05Closing Certificate. No later than three (3) Business Days prior to the Closing, the Company shall have delivered to Purchaser a certificate, duly certified by an authorized officer of the Company, and in form and substance acceptable to Purchaser (the “Closing Certificate”) accurately setting forth: (a) the Estimated Cash as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date, (b) the Estimated Indebtedness as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date, (c) the Estimated Working Capital Deficiency, if any, as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date, (d) the Estimated Working Capital Surplus, if any, as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date, (e) the Estimated Company Transaction Expenses, as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date, (f) the Closing Consideration, (g) the Pro Rata Closing Consideration to Principal Shareholder and (h) the Pro Rata Share Consideration to Minority Shareholder. Concurrently with delivery of the Closing Certificate, the Company shall also deliver to Purchaser, in such detail as is reasonably acceptable to Purchaser, all information on which the calculations reflected in the Closing Certificate are based.

 

Section 2.06Post-Closing Adjustment.

 

(a)Promptly, but in any event within one hundred twenty (120) days after the Closing Date, Purchaser shall prepare and deliver to the Representative a balance sheet of the Company (the “Closing Balance Sheet”), which will reflect Purchaser’s determination of (i) the Cash of the Company as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date, (ii) the Indebtedness of the Company as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date, (iii) the Working Capital Deficiency, if any, as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date, (iv) the Working Capital Surplus, if any, as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date, (v) the Company Transaction Expenses, as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date and (vi) the Closing Consideration. The Closing Balance Sheet shall be prepared in accordance with GAAP and the Sample Working Capital.

 

(b)If the Representative in good faith disagrees with Purchaser’s determination of the Cash, Indebtedness, Working Capital Deficiency, if any, Working Capital Surplus, if any, and/or Company Transaction Expenses, in each case as set forth on the Closing Balance Sheet, the Representative may, within thirty (30) days after receipt of the Closing Balance Sheet (the “Dispute Period”), deliver a written notice (the “Notice of Disagreement”) to Purchaser setting forth each item of dispute (each, an “Item of Dispute”), the reasonable basis for such dispute and the Representative’s calculation of such Item of Dispute. If Purchaser does not receive a Notice of Disagreement within thirty (30) days after delivery by Purchaser of the Closing Balance Sheet, the Closing Balance Sheet shall be conclusive and binding upon each of the Parties. If Purchaser receives a Notice of Disagreement from the Representative within thirty (30) days after delivery by 

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Purchaser of the Closing Balance Sheet, Purchaser and the Representative shall attempt in good faith to resolve each Item of Dispute, and, if any Item of Dispute is so resolved, the Closing Balance Sheet shall be modified to the extent necessary to reflect such resolution. If any Item of Dispute remains unresolved as of the thirtieth (30th) day after timely delivery by the Representative of the Notice of Disagreement, Purchaser and the Representative shall jointly retain BPM to resolve such remaining disagreement, it being understood that any item not included as an Item of Dispute on the Notice of Disagreement shall be conclusive and binding upon each of the Parties as set forth on the Closing Balance Sheet. Notwithstanding the foregoing, if BPM is then unavailable for such purposes, Purchaser and the Representative shall jointly retain an independent accounting firm of national standing to resolve such remaining disagreement; provided, that if Purchaser and the Representative are unable to agree on the choice of such accounting firm, then such accounting firm will be selected by lot (after each of Purchaser, on one hand, and the Representative, on the other hand, submits two such firms and excludes one firm submitted by the other) (the firm actually retained pursuant to this Section 2.06, the “Accounting Firm”). Purchaser and the Representative shall request that the Accounting Firm render a determination as to each unresolved Item of Dispute as soon as practicable after its retention, and each of Purchaser, the Representative and each of their respective agents and representatives shall cooperate with the Accounting Firm and shall provide the Accounting Firm with reasonable access to their respective books, records, personnel and representatives and such other information as the Accounting Firm may reasonably request, so as to enable it to make such determination as quickly and accurately as practicable. The Accounting Firm shall consider only those items and amounts that were set forth in the Closing Balance Sheet and the Notice of Disagreement and that remain unresolved by Purchaser and the Representative, and in resolving any such Item of Dispute, the Accounting Firm may not assign a value to any item greater than the greatest value for such item claimed by either Party nor less than the smallest value for such item claimed by either Party. The Accounting Firm’s determination(s) shall be based upon the definitions of Cash, Indebtedness, Working Capital Deficiency, Working Capital Surplus and Company Transaction Expenses (as applicable) included herein. The Accounting Firm’s determination of each Item of Dispute submitted to it shall be in writing, shall conform to this Section 2.06 and, absent manifest error, shall be conclusive and binding upon each of the Parties, and the Closing Balance Sheet shall be modified to the extent necessary to reflect such determination(s). The Accounting Firm shall allocate its fees, costs and expenses between Purchaser on the one hand, and the Sellers on the other hand, based upon the percentage which the portion of the contested amount not awarded to each such Person bears to the amount actually contested by such Person (treating the Sellers as a single Person for such purpose). The Cash, Indebtedness, Working Capital Deficiency, Working Capital Surplus and Company Transaction Expenses, in each case as of immediately prior to the Closing and as finally determined pursuant to this Section 2.06, are referred to herein as the “Actual Cash,” “Actual Indebtedness,” “Actual Working Capital Deficiency,” “Actual Working Capital Surplus,” and “Actual Company Transaction Expenses,” respectively. The Accounting Firm shall provide a determination of the “Final Adjustment Amount” which shall be equal to (and which may be a positive or negative number) the Accounting Firm’s determination of Closing Consideration pursuant to this Section 2.06 minus the Seller’s determination of Closing Consideration set forth in the Closing Certificate.

 

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(c)Payments. Within five (5) days after the determination of the Final Adjustment Amount, (i) if the Final Adjustment Amount is a positive number, Purchaser shall pay (or cause to be paid) to the account(s) designated in writing by the Representative an amount in cash equal to the Final Adjustment Amount; (ii) if the Final Adjustment Amount is a negative number, the Representative and Purchaser shall direct the Escrow Agent to pay to the account designated in writing by Purchaser (x) an amount in cash from the Working Capital Escrow Funds equal to the lesser of the Final Adjustment Amount and the amount of Working Capital Escrow Funds, and (y) an amount in cash from the Indemnification Escrow Funds held in the Working Capital Escrow Account (as defined in the Cash Escrow Agreement) equal to the amount by which the Final Adjustment Amount exceeds the Working Capital Escrow Funds, if any. In the event any Working Capital Escrow Funds remain in escrow following payment of the Final Adjustment Amount pursuant to the foregoing clauses (i) and (ii), Purchaser and the Representative shall jointly direct the Escrow Agent to pay immediately to the account designated in writing by the Representative an amount in cash equal to all of the Working Capital Funds remaining in the Working Capital Escrow Account. In the event that the Final Adjustment Amount is a negative number and the Working Capital Escrow Funds and Indemnification Escrow Funds are insufficient to satisfy the Majority Seller’s and Key Seller’s obligation to pay the Final Adjustment Amount to Purchaser in full, then within five (5) days after the determination of the Final Adjustment Amount, the Majority Seller and Key Sellers shall pay (in accordance with their Percentage Allocations) to Purchaser by wire transfer of immediately available funds the amount of such deficiency. Furthermore, in the event that any Indemnification Escrow Funds are used to satisfy the Majority Seller’s and Key Sellers’ obligation to pay a Final Adjustment Amount to Purchaser, within five (5) days following such payment, the Majority Seller and Key Sellers shall (in accordance with their Percentage Allocations), in order to replenish the Indemnification Escrow Account, pay to the Escrow Agent, by wire transfer of immediately available funds, an amount equal to the amount of Indemnification Escrow Funds used to pay such Final Adjustment Amount to Purchaser.

 

Section 2.07Withholding Rights. Notwithstanding anything herein to the contrary, Purchaser, the Company and the Representative shall be entitled to deduct and withhold from amounts otherwise payable pursuant to this Agreement such amounts as any such Person is required to deduct and withhold under the Code or any provision of state, local or foreign Tax Law. To the extent that amounts are so withheld by any such Person, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

As a material inducement to Purchaser to enter into and perform their respective obligations under this Agreement, the Company represents and warrants to Purchaser, as of the date hereof and as of the Closing Date, as follows:

 

Section 3.01Organization of the Company. The Company is duly organized, validly existing and in good standing under the Laws of Arizona and is duly qualified, licensed or admitted to do business as a foreign entity and is in good standing in every jurisdiction in which the operation of its business or the ownership of its assets requires it to be so qualified, licensed, admitted or in good standing. Schedule 3.01 lists all of the jurisdictions in which each of the Company is qualified to do business as a foreign entity.

 

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Section 3.02Authorization of Transactions by the Company. The Company has full right, power and authority, and all licenses, permits and authorizations necessary, to own, lease and operate its properties, to carry on its businesses as now conducted, and to execute and deliver the Transaction Documents to which it is a party and to perform its obligations hereunder and thereunder. The Board of Directors of the Company (the “Company Board”) has unanimously (a) determined that the Transactions are in the best interests of the Company and its shareholders and (b) authorized and approved the Transaction Documents to which the Company is a party, the execution and delivery by the Company of such Transaction Documents, and the performance by the Company of its obligations thereunder. The Transaction Documents to which the Company is a party have been duly executed and delivered by the Company, and, assuming due authorization, execution and delivery by the other parties thereto, constitute, or will constitute, the legal, valid and binding obligations of the Company enforceable in accordance with their respective terms and conditions (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general equitable principles).

 

Section 3.03Noncontravention. Except as set forth on Schedule 3.03, neither the execution and the delivery by the Company of the Transaction Documents, nor the consummation of the Transactions or the performance of any obligations hereunder and thereunder, (a) violate or conflict with any provisions of the Company’s governing documents, (b) violate, conflict with or result in a violation of, or constitute a default (whether after the giving of notice, lapse of time or both) under, any provision of any Law or order to which the Company is subject, or (c) violate, conflict with or result in a breach of any provision of, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in or create in any Person the right to, accelerate, terminate, modify or cancel, require any notice under, or result in the imposition or creation of a Lien upon or with respect to any equity interests or assets of the Company under, any note, bond, mortgage, indenture, deed of trust, lease, contract or other agreement to which the Company is a party, or by which the Company or any of its assets or properties are bound. No consent, approval, license, Permit, order or authorization of, or registration, declaration or filing with, any Governmental Authority or other Person is required to be obtained or made by or on behalf of the Company in connection with the execution, delivery and performance of the Transaction Documents or the consummation of the Transactions. The Company has not received any written notice from any Governmental Authority indicating that such Governmental Authority would oppose or not promptly grant or issue its consent or approval, if requested, with respect to the Transactions.

 

Section 3.04Litigation.

 

(a)Except as set forth on Schedule 3.04(a), there is, and for the previous five (5) years there has been, no Action, whether written or oral, pending or, to the Company’s Knowledge, threatened against, related to or affecting the Company or any of its assets or properties, at Law or in equity by or before a third Person or a Governmental Authority, including any Action with respect to the Transactions, and, to the Company’s Knowledge, there exists no basis for any of the foregoing. The Company has not received any notice of, and, to the Company’s Knowledge, there has been no, fact, circumstance or event which is or has been caused by or has allegedly been 

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caused by or is otherwise involving any services performed in connection with or on behalf of the Company that is reasonably likely to result in or serve as a basis for an Action by or for Damages to any Person. Neither the Company nor any of its assets is subject to or bound by any settlement or conciliation agreement, or any judgment, order, award, or decree of any court or Governmental Authority (including any restricting the use or disposition thereof).

 

(b)Except as set forth in Schedule 3.04(b), there are, and for the previous five (5) years there have been, no judgments, settlements, awards, injunctions or orders outstanding against or affecting the Company or against or affecting any Seller or director or officer of the Company.

(c)Schedule 3.04(c) includes a brief summary description of all Actions, examinations, visitation reports, off-site reviews, subpoenas, audits, investigations, sweep letters or other inquiries by a Governmental Authority involving the Company, or any of its or their directors, officers, employees, or equityholders arising in connection with or relating to the Business occurring, arising or existing during the past five (5) years.

 

(d)The Company has delivered to Purchaser all responses of counsel for the Company to auditors’ requests for information regarding Actions pending or threatened against, relating to or affecting the Company, if any.

 

Section 3.05Subsidiaries. The Company does not have any Subsidiaries and does not hold any equity, partnership, joint venture or other interest in any Person.

 

Section 3.06Capitalization.

 

(a)The authorized capital stock of the Company consists of 11,200,000 shares of voting common stock, no par value, of which 10,983,000 shares are issued and outstanding. All of such Shares are held beneficially and of record by the Sellers, in the amounts set forth on Schedule 3.06(a).

 

(b)Except for the Shares described in Section 3.06(a), there are (i) no other equity securities or voting securities of the Company, (ii) no securities of the Company convertible into or exchangeable for capital stock or other equity securities or voting securities of the Company and (iii) no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights or other similar contracts or commitments that could require the Company to issue, sell or otherwise cause to become outstanding any of its equity interests. There are no voting trusts, proxies or other agreements or understandings with respect to the voting of any Shares. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to the Company or any repurchase, redemption or other obligation to acquire for value any equity interests of the Company.

 

(c)All outstanding equity interests of the Company are duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the Arizona Revised Statutes, the articles of incorporation of the Company, the bylaws of the Company or any agreement to which the Company is a party or otherwise bound. None of the outstanding Shares have been issued in violation of any federal or state securities Laws. There are no accrued and unpaid dividends with respect to any outstanding capital stock of the Company.

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Section 3.07Brokers’ Fees. Except as provided on Schedule 3.07, the Company  does not and will not have any liability or obligation (whether matured or unmatured) to pay any fees, commissions or other compensation to any broker, finder, investment banker, financial advisor, agent or other similar Person with respect to the Transactions on the basis of any act or statement made by or on behalf of the Company, any Seller, or any of their respective Affiliates, or any director, officer, manager, member, investment banker, financial advisor, attorney, accountant or other Person retained by or acting for or on behalf of any of them.

 

Section 3.08Financial Statements.

(a)Exhibit C contains true and complete copies of the following financial statements (collectively, the “Financial Statements”): (a) the balance sheets of the Company as of December 31, 2017, 2016 and 2015, and the related statements of income, stockholders’ equity and cash flows for the fiscal years then ended, (b) the balance sheet of the Company as of June 30, 2018 and the related statements of income, stockholders’ equity and cash flows for the six (6) month period then ended, and (c) the balance sheet of the Company as of September 30, 2018 (the “Latest Balance Sheet”) and the related statements of income, stockholders’ equity and cash flows for the nine (9) month period then ended. Each of the Financial Statements (including in all cases the notes thereto, if any) is accurate and complete in all material respects, has been prepared from and is consistent with the books and records of the Company (which books and records are correct and complete in all material respects) and accurately presents in all material respects the financial condition and results of operations of the Company as of the times and for the periods referred to therein. Except as set forth on Schedule 3.08, the Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, subject to the absence of footnote disclosures (none of which footnote disclosures would, alone or in the aggregate, be materially adverse to the business, operations, assets, liabilities, financial condition, operating results, cash flow, Cash or Working Capital of the Company).

 

(b)Schedule 3.08(b) sets forth the Indebtedness of the Company, including the name of the lender, the principal amount owed as of the date of this Agreement, the interest accrued to the date of this Agreement and the per diem interest owing.

 

Section 3.09Absence of Changes. Since June 30, 2018, there has not been, and there has been no event, circumstance or occurrence that has had or could reasonably be expected to have, a Material Adverse Effect. Without limiting the foregoing, since such date, except as set forth on Schedule 3.09, the Company has been operated only in the Ordinary Course of Business, and the Company has not:

 

(a)sold, licensed, leased, transferred or assigned any of its assets, tangible or intangible, or purchased any assets or properties of any Person, in each case other than for fair consideration in the Ordinary Course of Business;

 

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(b)entered into any agreement, contract or arrangement (or series of related agreements, contracts and arrangements) either involving more than $25,000 or outside the Ordinary Course of Business, or any lease, sublease or license or other agreement relating to the use or occupancy of real property;

 

(c)caused or suffered any acceleration, amendment, termination (partial or complete), modification or cancellation of, or granted any waiver or given any consent or release with respect to, any agreement, contract, lease, license or arrangement (or series of related agreements, contracts, leases, licenses and arrangements) with a customer or supplier or otherwise involving more than $25,000 or any lease, sublease or licensee or other agreement for the use or occupancy of real property, in each case to which the Company is a party or by which the Company or any of its assets is bound, and, to the Company’s Knowledge, no party intends to take any such action;

 

(d)imposed or suffered to exist any Lien upon any of its assets, tangible or intangible;

(e)made any capital investment in, any loan to or any acquisition of (or series of related capital investments in, loans to, or acquisitions of) the securities or assets (other than inventory in the Ordinary Course of Business) of any Person;

 

(f)(i) issued any note, bond or other debt security or created, incurred, assumed or guaranteed any Indebtedness or (ii) made any voluntary purchase, cancellation, prepayment or complete or partial discharge in advance of a scheduled payment date with respect to, or granted any waiver of any right of the Company under, any Indebtedness of or owing to the Company;

 

(f)cancelled, compromised, waived or released any right or claim (or series of related rights or claims) or settled or compromised any Action;

 

(g)made any capital expenditures or commitments therefor exceeding $25,000 in the aggregate;

 

(h)delayed or postponed the payment of accounts or other amounts payable or other obligations or liabilities or accelerated the collection of any accounts or other amounts receivable;

 

(i)made any change in accounting practices or policies other than as required by applicable Law, including not having changed conduct related to cash management customs and practices (including with respect to maintenance of working capital balances, collection of accounts receivable, payment of accounts payable, accrued liabilities and other liabilities and pricing and credit policies) or, since the date of the Latest Balance Sheet, having changed conduct related to cash management in any manner whatsoever;

 

(j)sold, securitized, factored or otherwise transferred any accounts receivable;

 

(k)experienced any material damage, destruction or loss (whether or not covered by insurance) to any real or personal property or equipment;

 

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(l)entered into, terminated or modified the terms of, any Material Contract;

 

(m)granted any increase in the base compensation of any of its current or former directors, officers, managers, members, partners, employees or consultants other than any increase that, when combined with all other increases in the prior twelve (12)-month period, did not exceed three percent (3%) of the compensation on the date of such increase or increases and was in the Ordinary Course of Business, or made any payment of or agreed to become obligated to pay any bonus, severance or change of control payments or other consideration of any nature whatsoever (other than salary, commissions or consulting fees) to any of its current or former directors, officers, managers, members, partners, employees or consultants;

 

(n)implemented any facility closings or employee layoffs that could implicate the WARN Act;

 

(o)adopted, amended, modified or terminated any Employee Benefit Plan or other bonus, profit-sharing, incentive, severance or other plan, contract or commitment for the benefit of any of its directors, members, managers, officers, employees or representatives;

(p)made any loans or advances to any of its directors, members, managers, officers, employees, customers, suppliers or Affiliates or entered into any transaction with or for the benefit of any Affiliate other than the Transactions;

 

(q)granted any license or sublicense of, or covenant not to sue with respect to, any rights under or with respect to any Company Intellectual Property;

 

(r)sold, licensed, leased, transferred, assigned, abandoned, permitted to lapse or otherwise disposed of any Company Intellectual Property (other than items of registered Intellectual Property expiring at the end of their statutory terms) or disclosed any Trade Secrets of the Company other than pursuant to an agreement requiring each Person to whom the disclosure was made to maintain the confidentiality of, and preserve all rights of, the Company in such Trade Secrets;

 

(s)made or changed any tax election, changed any annual accounting period, adopted or changed any method of accounting, filed any amended Tax Return, entered into any closing agreement, failed to pay any Tax when due and payable, settled any claim or assessment, surrendered any right to claim a refund, offset or other reduction in liability, or consented to any extension or waiver of the limitations period applicable to any claim or assessment, in each case with respect to Taxes;

 

(t)authorized or effected any amendment or change in its articles of incorporation or bylaws or other organizational documents;

 

(u)instituted any Action;

 

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(v)authorized, issued, sold or otherwise disposed of any of its capital stock or other equity interests, or granted any options, warrants or other rights to purchase or obtain (including upon conversion, exchange or exercise) any of its capital stock or other equity interests, or modified or amended any right of any holder of any of its outstanding capital stock or other equity interests;

 

(w)declared, set aside or paid any dividend or made any distribution with respect to its capital stock or other equity interests (whether in cash or in kind) or directly or indirectly redeemed, purchased or otherwise acquired any of its capital stock or other equity interests;

 

(x)accelerated the delivery or sale of products, offered discounts or price protections on the sale of products, delayed or cancelled the purchase of products or Inventory, or paid premiums on the purchase of products, in each case, outside the Ordinary Course of Business;

(a)materially diminished, increased or terminated any material promotional program;

(y)entered into a new line of business or abandoned or discontinued any existing line of business;

 

(z)taken or omitted to take any action which has or would reasonably be expected to result in a Material Adverse Effect; or

(aa)authorized or entered into any agreement, contract or commitment to do any of the foregoing or authorized, taken or agreed to take (or fail to take) any action with respect to the foregoing.

 

Section 3.10Absence of Undisclosed Liabilities.  Except as set forth on Schedule 3.10, the Company have no liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due and regardless of when asserted), except for liabilities set forth on the Latest Balance Sheet, and to Company’s Knowledge there is no basis for any Action with respect to any such liability. Without limitation on the foregoing, the Company has no pending or, to the Company’s Knowledge, threatened liability in respect of any product or service warranties outside of the Ordinary Course of Business.

 

Section 3.11Legal Compliance.

 

(a)The Company is in compliance with, and for the previous five (5) years has been in compliance in all material respects with, all applicable Laws of Governmental Authorities relating to the operation of the Business and the maintenance and operation of its properties and assets. Except as set forth on Schedule 3.11(a), no notices have been received by and no claims have been filed against the Company alleging a violation of any such Laws.

 

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(b)The Company owns, holds or possesses and has at all times materially complied with, and is in compliance with, all material Permits which are required for the operation and ownership of the Business. Schedule 3.11(b) sets forth a complete and correct list and brief description of each Permit owned, held or possessed by the Company, as of the date hereof, and all such Permits are valid and in full force and effect. Except as set forth on Schedule 3.11(b), (i) the Company has fulfilled and performed in all material respects its obligations under each of the Permits which it owns, holds or possesses, and (ii) no written notice of cancellation, default or dispute concerning any Permit, or of any event, condition or state of facts described in the preceding clause, has been received by the Company as a result of the execution of this Agreement or any other Transaction Document or consummation of the Transactions or otherwise and all of the Permits will be available for use by the Company immediately after the Closing. The Company has not been a party to or subject to any proceeding seeking to revoke, suspend or otherwise limit any Permit. The Company is not in breach or violation of, or default under, any such Permit. The Company has not received any notice from any Governmental Authority that any of its properties, facilities, equipment, operations or business procedures or practices fails to comply with any applicable Law or Permit. The Company is not in breach or violation of any of the items listed on Schedule 3.11(b). There has been no decision by the Company not to renew any Permit.

 

(c)The Company is in compliance, and during all periods for which any applicable statute of limitations has not expired has complied, in all material respects, with the applicable provisions of the U.S. Foreign Corrupt Practices Act, the U.S. Bank Secrecy Act and the USA PATRIOT Act of 2001, in each case as amended, and other similar Laws of any other jurisdiction and has not (i) made any contribution, bribe, gift, rebate, payoff, influence payment, kickback or other payment to any Person, private or public, regardless of form, whether in money, property or services in violation of any Law (x) to obtain favorable treatment in securing business for the Company, (y) to pay for favorable treatment for business secured by the Company, or (z) to obtain special concessions or for special concessions already obtained, for or in respect of the Company or the Business, (ii) accepted or received any unlawful contributions, payments, expenditures or gifts in connection with the Business or (iii) established or maintained any fund or asset that has not been recorded in the books and records of the Company.

 

(d)None of the Company nor any of the Company’s officers or senior management employees is (or during the last five years has been) under or subject to any administrative, civil or criminal investigation, indictment, audit, information lawsuit, subpoena, document request, Action, or mediation involving or related to the Company or any of its Affiliates, officers or employees with respect to an alleged, potential or actual violation of any Law or breach of contract.

 

Section 3.12Assets.

 

(a)The Company is in possession of and, except as set forth on Schedule 3.12(a), owns good and marketable title, free and clear of all Liens (other than Liens for current Taxes not yet due and payable and Liens otherwise reflected on the Latest Balance Sheet) to all of the properties and assets (i) reflected on the face of the Latest Balance Sheet, (ii) located on any of the premises of the Company, or (iii) necessary for, or used in, the conduct of the Businesses, except, in the case of clauses (ii) and (iii) foregoing, for the Leased Real Property.

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(b)The facilities, machinery, equipment and other tangible assets of the Company have been maintained in accordance with normal industry practice, subject to normal wear and tear, are in good condition and repair in all respects, fit for their particular purpose, and are usable in the Ordinary Course of Business. The Company owns or leases under valid leases all facilities, machinery, equipment and other tangible assets necessary for the conduct of its business as currently conducted.

 

(c)The properties and assets owned by the Company, together with the Leased Real Property are sufficient for the conduct of the Business, as conducted and as presently contemplated to be conducted by Sellers as of the date of this Agreement.

 

Section 3.13Real Property.

 

(a)The Company does not own or have any options to acquire any real property.

 

(b)Schedule 3.13(b) sets forth and describes, including address and the name of the landlord, sublandlord, licensor or grantor, a true and complete list of all real property leased, subleased, licensed to or otherwise used or occupied by the Company (the “Leased Real Property”). The Leased Real Property comprises all of the real property occupied or operated in connection with, used or intended to be used in, or otherwise related to, the business of the Company. The Company has delivered to Purchaser correct and complete copies of the leases, subleases, licenses, occupancy agreements and other similar agreements set forth on Schedule 3.13(b), including all amendments, extensions, renewals, guaranties and other agreements with respect thereto (collectively hereinafter referred to as the “Leases”). With respect to each Lease set forth or required to be set forth on Schedule 3.13(b):

 

(i)the Lease is legal, valid, binding, enforceable and in full force and effect; 

(ii)the Lease shall continue to be legal, valid, binding, enforceable and in full force and effect on identical terms following the consummation of the Transactions;

 

(iii)the Company is not and, to the Company’s Knowledge, no other party to any such Lease is, in material breach or default, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification or acceleration thereunder;

 

(iv)the Company’s possession and quiet enjoyment of the Leased Real Property under such Lease has not been disturbed;

 

(v)no security deposit or portion thereof deposited with respect to such Lease has been applied in respect of a breach or default under such Lease which has not been redeposited in full;

 

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(vi)the Company does not owe, and will not owe in the future, any brokerage commissions or finder’s fees with respect to such Lease;

 

(vii)the Company has not subleased, licensed or otherwise granted any Person the right to use or occupy such Leased Real Property or any portion thereof;

 

(viii)the Company has not collaterally assigned or granted any other security interest in such Lease or any interest therein; and

 

(ix)there are no Liens on the estate or interest created by such Lease.

 

(c)All buildings, structures, improvements, fixtures, building systems and equipment, and all components thereof, located on, attached to and included in the Leased Real Property (the “Improvements”) are, except as set forth on Schedule 3.13(c), in good condition and repair, subject to normal wear and tear, and sufficient for the operation of and occupancy relative to the businesses of the Company in the Ordinary Course of Business. There are no structural deficiencies or latent defects affecting any of the Improvements and, there are no facts or conditions affecting any of the Improvements which would, individually or in the aggregate, interfere in any material respect with the use or occupancy of the Improvements or any portion thereof in the operation of the Business.

 

Section 3.14Tax Matters.

 

(a)All Tax Returns required to have been filed by the Company have been timely filed (taking into account any extensions thereof), and each such Tax Return is true, correct, and accurate in all material respects and prepared in accordance with applicable Laws. All Taxes have been paid whether or not shown on any Tax Return. The Company has timely withheld and paid to the appropriate Taxing Authority (i) all amounts required to have been withheld and paid in connection with amounts paid or owing to, or required to be shown on any information return provided to, any member, employee, creditor, independent contractor or other third Person and (ii) all sales, use, ad valorem and value added Taxes, and all required information returns with respect to any such amounts have been correctly prepared and filed. There are no Liens on any assets of the Company that arose in connection with the failure to pay any Tax other than Liens for Taxes not yet due and payable. The Company (i) has not been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company), (ii) has no liability for the Taxes of any Person under any state, local or foreign analogue of section 1.1502 6 of the Treasury Regulations, as a transferee or successor, by contract or otherwise and (iii) is not party to any Tax allocation or sharing agreement.

 

(b)Except as provided on Schedule 3.14(b), there is no Action or request for a private letter ruling or other formal or informal tax guidance pending with respect to the Company in respect of any Taxes in any jurisdiction, nor has there been any such activity since January 1, 2010. The Company has not been informed of the commencement or anticipated commencement of any such activity, and the Company is not aware that any such activity is contemplated by any Taxing Authority. No claim has been made in writing by any Taxing Authority in a jurisdiction where the Company and have not filed a Tax Return that it is or may be subject to Tax by such jurisdiction. 

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The Company has not commenced a voluntary disclosure proceeding in any state, local or non-U.S. jurisdiction that has not been fully resolved or settled. Neither the Company nor any member of any affiliated, combined or unitary group of which the Company is or has been a member, has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency, which period (after giving effect to such extension or waiver) has not expired.

 

(c)Since the date of the Latest Balance Sheet, the Company has not incurred any liability for Taxes arising from extraordinary gains or losses, as such term is used in GAAP, except in the Ordinary Course of Business.

 

(d)The Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of (i) any change in method of accounting for a taxable period ending on or prior to the Closing Date, (ii) any “closing agreement” as described in section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Tax Law) executed on or prior to the Closing Date, (iii) any installment sale or open transaction disposition made on or prior to the Closing Date, (iv) intercompany transaction or excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local, or non-U.S. income Tax law), (v) any use of an improper method of accounting for a taxable period ending on or prior to the Closing Date, (vi) any prepaid amounts received on or prior to the Closing Date, (vii) election under section 108(i) of the Code or (viii) use of the cash method of accounting for income Tax purposes.

 

(e)The Company does not own an interest in (i) any entity, plan or arrangement that is treated for income Tax purposes as a partnership, (ii) a “controlled foreign corporation” within the meaning of Section 957 of the Code, or (iii) a “passive foreign investment corporation” within the meaning of Code Section 1297.

 

(f)The Company (i) is not currently subject to a limitation under any state, local or foreign analogue of section 382, 383 or 384 of the Code, (ii) has not been a party to any “reportable transaction” within the meaning of section 6707A of the Code or section 1.6011-4 of the Treasury Regulations that could affect the Tax liability of the Company for any taxable year not closed by the applicable statute of limitations, (iii) has not distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Sections 355 or 361 of the Code, (iv) is not and has never been a “United States Real Property Holding Company” within the meaning of section 897 of the Code, (v) is not a party to any contract, agreement, plan or arrangement, including this Agreement, which could give rise to the payment of any amount that would not be deductible or on which a penalty or excise tax could be imposed, either on the payor or the payee, pursuant to section 404, 409A or 4999 of the Code, (vi) is not a party to any agreement, contract, or plan that has resulted or could result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Section 280G of the Code (or any corresponding provision of state, local, or non-U.S. Tax law), (vii) does not have a permanent establishment (within the meaning of an applicable Tax treaty) or otherwise has an office or fixed place of business in a country other than the country in which it is organized, (vii) is not and has not been subject to adjustment under Section 482 of the Code (including any similar provision of state, local, or foreign Tax law) and (viii) is not subject to any Tax holiday or Tax incentive or grant in any jurisdiction.

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(g)Each agreement, contract, plan, or other arrangement that is a “nonqualified deferred compensation plan” subject to Section 409A of the Code to which the Company or any Subsidiary is a party complies with and has been maintained in accordance with the requirements of Section 409A of the Code and any Treasury Regulations or Internal Revenue Service guidance issued thereunder and no amount under any such agreement, contract, plan, or other arrangement is subject to or has been subject to the interest and additional tax set forth under Section 409A(a)(1)(B) of the Code. Neither the Company nor any of its Subsidiaries has any obligation to reimburse or otherwise ‘‘gross-up’’ any Person for the interest or additional tax.

 

(h)The Company is a corporation described in Section 280G(b)(5)(A)(i) of the Code.

 

(i)No debt of the Company is “corporate acquisition indebtedness” within the meaning of Section 279 of the Code or an “applicable high yield debt obligation” within the meaning of Section 163(e)(5) of the Code. No interest accrued or paid by the Company (whether as stated interest, imputed interest, or original issue discount) on any debt obligation of the Company is not deductible for income Tax purposes.

 

(j)No asset of the Company is tax-exempt use property under Section 168(h) of the Code. No portion of the cost of any asset of the Company has been financed directly or indirectly from the proceeds of any tax-exempt state or local government obligation described in Section 103(a) of the Code. None of the assets of the Company is property that is required to be treated as being owned by any other Person pursuant to the safe harbor lease provision of former Section 168(f)(8) of the Code.

 

Section 3.15Intellectual Property.

 

(a)Schedule 3.15(a) sets forth a complete and correct list of all of the following owned by, or filed in the name of, the Company: (i) patented or registered Intellectual Property (including Internet domain names) and pending patent applications and applications for registrations of other Intellectual Property; (ii) unregistered Trademarks that are (A) currently used in connection with any material product or service sold, provided or offered by the Company, or (B) otherwise material to the business of the Company; (iii) unregistered Copyrights that are (A) embodied in or necessary to any material product or service sold, provided or offered by the Company, or (B) otherwise material to the business of the Company; and (iv) all material Software owned by the Company (collectively, “Company Software”), including, in each case: (A) where applicable, the domestic or foreign jurisdiction in which each such item of Intellectual Property has been issued or registered or in which any application for such issuance or registration has been filed and (B) the owner of record for each such item of Intellectual Property. The Company owns and possesses all right, title and interest in and to all of the Intellectual Property set forth on Schedule 3.15(a) and the Business Name and owns and possesses all right, title and interest in and to, or have a valid and enforceable license to use pursuant to a written license agreement set forth on Schedule 3.15(a), all other Intellectual Property (in each case, free and clear of all Liens) necessary for, or used or held for use in, the operation of the business of the Company or any of its Subsidiaries (as applicable) as presently conducted and as presently proposed to be conducted by Sellers (collectively, and together with the Business Name and the Intellectual Property set forth on Schedule 3.15(a), the 

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“Company Intellectual Property”). The Transactions shall not impair any right, title or interest of the Company in or to any of the Company Intellectual Property or Company Systems. Immediately subsequent to the Closing, the Company Intellectual Property and Company Systems will be owned or available for use by the Company on terms and conditions identical to those under which the Company owned or used the Company Intellectual Property and Company Systems immediately prior to the Closing.

 

(b)All Intellectual Property disclosed on Schedule 3.15(a) is valid, enforceable, has been duly maintained, is subsisting and in full force and effect, and has not been cancelled, expired or abandoned and is not the subject of any cancellation, opposition or other similar proceeding. With respect to any Trademarks owned by the Company, the Company has not licensed such Trademarks. The Company is not obligated to pay any royalties and/or fees or any other payments or compensation, presently or at any time hereafter to any Person under any patent, Trademark, Copyright or other Intellectual Property license or other agreement, other than under those licenses listed on Schedule 3.15(a) for which there is also a notation regarding such an obligation to pay such royalties and/or fees.

 

(c)To the Knowledge of the Company, there has not been, and there is not currently any, unauthorized use, disclosure, infringement, misappropriation or dilution or any other violation of any Company Intellectual Property or the Business Name by any Person, including by any employee, consultant, former employee or former consultant of the Company, and to the Knowledge of the Company, there are no facts that indicate the likelihood of any of the foregoing. Except as disclosed on Schedule 3.15(c), the Company has not sent to any Person or otherwise communicated to any Person any charge, complaint, claim, demand or notice asserting that such Person has infringed, misappropriated, diluted or acted in conflict with or otherwise violated any of the Company Intellectual Property, including any assertion that such other Person has conducted any acts of unfair competition. Except as set forth on Schedule 3.15(c), there are no royalties, fees or other payments or compensation payable to any Person, or to the Company by any Person by reason of the Company’s ownership, use, sale or disposition of any Company Intellectual Property. The Company and its Subsidiaries have taken reasonable measures to protect and maintain the confidentiality of its and their Trade Secrets (including all Confidential Information) and other Intellectual Property; including by ensuring that each of the current employees of the Company and its Subsidiaries have executed non-solicitation, non-disclosure and proprietary information assignment  agreements  (including  assignments  pursuant  to  which  all  Intellectual  Property conceived, developed, discovered or otherwise created by such Person within the scope of such Person’s employment or other engagement with the Company has been assigned to the Company).

 

(d)The Company, including its use of the Business Name or any other Company Intellectual Property, has not infringed, misappropriated, diluted or conflicted with or otherwise violated, and the conduct of the business of the Company as conducted presently or in the past and as presently proposed to be conducted by Sellers (including any use of the Business Name) do not and will not infringe, misappropriate, dilute or conflict with or otherwise violate, and have not infringed, misappropriated, diluted or conflicted with or otherwise violated, any Intellectual Property of any Person. The Company has not engaged in any acts of unfair competition and, to the Knowledge of the Company, there are no facts that indicate the likelihood of any of the foregoing. 

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Except as set forth on Schedule 3.15(d), the Company has not received any allegations, assertions or suggestions of any charge, complaint, claim, demand or notice (including any unsolicited offers to license letters) that: (i) the Company has infringed, misappropriated, diluted or acted in conflict with or otherwise violated any of the Intellectual Property owned by any Person; (ii) the Company has conducted any acts of unfair competition or other legal wrong against any third party; or (iii) the Company Intellectual Property is invalid, unenforceable or otherwise defective, inoperable, unregisterable, unpatentable or ineffective. or challenging the Company’s ownership of, or right to use, any Company Intellectual Property. To the Knowledge of the Company, there are no facts that indicate the likelihood of any of the foregoing.

(e)The Company has information technology systems (including Software) sufficient to operate its businesses as presently conducted and as presently proposed to be conducted by Sellers (the “Company Systems”). The Company has appropriate disaster recovery plans, procedures and facilities for their respective businesses, have routinely tested such plans, and have taken all reasonable steps to safeguard the information technology systems utilized in the operation of their respective businesses as presently conducted and as presently proposed to be conducted by Sellers, including the use of commercially available antivirus software with the intention of protecting the Company’s products from becoming infected by viruses and other harmful code. To the Knowledge of Company, there have been no successful unauthorized intrusions or breaches of the security of the Company’s information technology systems. There has not been any material malfunction with the Company’s information technology systems that has not been remedied or replaced in all material respects, or any unplanned downtime or service interruption. The Company has implemented or is in the process of implementing in a timely manner any and all security patches or security upgrades that are generally available for the Company’s information technology systems. No third party providing information technology services to the Company has failed to meet any service obligations.

 

(f)The Company has not experienced any Security Breaches or material Security Incidents, and the Company is not aware of any written or oral notices or complaints from any Person regarding such a Security Breach or material Security Incident. The Company has not received any written or oral complaints, claims, demands, inquiries or other notices, including without limitation a notice of investigation, from any Person (including any Governmental Authority or self-regulatory authority or entity) regarding the Company's Processing of Personal Information or compliance with applicable Privacy and Security Requirements.

 

(g)The Company is and always has been in compliance with all applicable Privacy and Security Requirements. The Company has a valid and legal right (whether contractually, by law or otherwise) to access or use all Personal Information and any other information of any Person that is Processed by or on behalf of the Company in connection with the use and/or operation of its products, services and business.

 

(h)The Company has implemented Privacy Policies as required by applicable Privacy and Security Requirements, and the Company is in compliance in all material respects with all such Privacy Policies. The Company has not any Tracking Applications in a manner that violates any applicable Privacy and Security Requirements.

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(i)The Company has implemented reasonable physical, technical and administrative safeguards designed to protect Personal Information in its possession or control from unauthorized access by any Person, including the Company's employees and contractors, and to ensure compliance in all material respects with all applicable Privacy and Security Requirements. The Company contractually requires all third parties who have access to or receive Personal Information from the Company to materially comply with all applicable Privacy and Security Requirements, and to use commercially reasonable efforts consistent with industry standards to store and secure all Personal Information to protect against unauthorized Processing of the Personal Information.

 

(j)The execution, delivery, or performance of this Agreement and the consummation of the Contemplated Transactions will not violate any applicable Privacy and Security Requirements or result in or give rise to any right of termination or other right to impair or limit the Company's rights to own or Process any Personal Information used in or necessary for the operation of the business of the Company.

 

Section 3.16Material Contracts and Commitments.

 

(a)Except as set forth on Schedule 3.16(a), the Company is not a party to or bound by, nor are any of its assets or properties bound by, any outstanding (in each case, whether written or oral) (“Material Contracts”):

 

(i)agreement with respect to the solicitation of customers, suppliers or prospective customers or suppliers;

 

(ii)contract or agreement with any of the customer of the Company (each, a “Customer Agreement”) and, any waiver, amendment or modification of any Customer Agreement;

 

(iii)contract for the employment or engagement of any officer, individual employee, or other Person on a full-time, part-time, consulting, independent contractor or other basis or agreement providing severance or other termination payments or change of control or other special compensation arrangement, or benefits or relating to loans to officers, directors, employees or affiliates;

 

(iv)obligation for Indebtedness; or any agreement or indenture relating to the borrowing of money or to the mortgaging, pledging, guaranteeing or otherwise placing a Lien on any asset or group of assets of the Company;

 

(v)partnership, joint venture, collaboration, joint marketing, equityholders’ or other similar contract with any Person;

 

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(vi)lease, sublease, license or other similar agreement under which it is lessee or lessor of, or holds or operates or permits any third party to hold or operate, any property, real or personal, except for the Leases and except for any lease of personal property;

 

(vii)(x) agreement relating to the licensing of (or granting of a covenant not to sue with respect to) any Intellectual Property by the Company to any Person (including intra-Company license agreements) or by any Person to the Company o (except for licenses of unmodified commercially available mass marketed Software applications with a replacement cost and/or an aggregate annual license and maintenance fee of less than no greater than $15,000 for any such license or group of related licenses), (y) agreement relating to the development or assignment of any Intellectual Property and/or (z) any agreement affecting the Company’s ability to use or disclose any Intellectual Property (including any co-existence or settlement agreement);

 

(viii)contract or group of related contracts (excluding purchase orders entered into in the Ordinary Course of Business) for the purchase or sale of products or services under which the undelivered balance of such products and services has a selling price in excess of $50,000; or any other contract involving the payment or potential payment by or to the Company of more than $100,000 during any twelve (12)-month period;

 

(ix)contract with any Person containing any provision or covenant prohibiting or limiting the ability of the Company to engage in any business activity or compete with any Person or prohibiting or limiting the ability of any Person to compete with the Company or prohibiting or limiting disclosure or use of any confidential or proprietary information or other Intellectual Property;

 

(x)contract that contains a “most favored nation” or similar provision;

 

(xi)letter of intent, memorandum of understanding or definitive agreement relating to the acquisition or disposition of any business (whether by merger, sale of stock, sale of assets or otherwise) within the last five (5) years;

 

(xii)power of attorney or other similar agreement or grant of agency;

 

(xiii)profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance or other similar plan or arrangement for the benefit of its current or former directors, managers, unitholders, members, officers or employees;

 

(xiv)collective bargaining agreement or other agreement to or with any labor organization or other employee representative;

 

(xv)settlement,  conciliation  or  similar  agreement  with  any  Governmental Authority;

 

(xvi)contract for transportation or freight services;

 

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(xvii)contract to provide rebates to any third parties; or

 

(xviii)other material agreement (or group of related agreements) not entered into in the Ordinary Course of Business.

 

(b)Each agreement, lease, contract, commitment or other arrangement set forth or required to be set forth on Schedule 3.16(a) is in full force and effect and is a legal, valid and binding obligation of the Company (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general equitable principles). Except as specifically set forth on Schedule 3.16(b), the Company has performed all material obligations required to be performed by it and is not, and to the Company’s Knowledge no other Party is, in default under or in breach of or in receipt of any claim of default or breach under any agreement, lease, contract, commitment or other arrangement set forth or required to be set forth on Schedule 3.16(a); and to Company’s Knowledge no event has occurred which with the passage of time or the giving of notice or both would result in a default, breach or event of noncompliance under any such agreement. The Company has provided Purchaser with a correct and complete copy of, or, if oral, a reasonably complete and accurate written description of, each contract set forth or required to be set forth on Schedule 3.16(a), together with all amendments, waivers or other changes thereto.

 

Section 3.17Insurance. Schedule 3.17 lists and briefly describes each insurance policy maintained by the Company with respect to its properties, assets, Business, operations and employees. All of such insurance policies are valid and binding and in full force and effect, and the Company is not in default with respect to its obligations under any of such insurance policies and has not received any notification of cancellation of any of such insurance policies, has no Knowledge of any reason or state of facts that could lead to the cancellation of such policies, and has no claim outstanding which could be expected to cause a material increase in the rates of such insurance policies. All premiums due under such policies have been paid when due, and the insurance coverage provided by any such policies will not terminate or lapse by reason of any of the Transactions or any of the Transaction Documents. The insurance policies listed on Schedule 3.17 are in amounts and provide coverages as required by applicable Governmental Authority, Law and any contract to which the Company is a party or by which any of its assets or properties is bound. The Company has not received notice that any insurer under any policy referred to in this Section 3.17 is denying liability with respect to a claim thereunder or defending under a reservation of rights clause.

 

Section 3.18Employees.

 

(a)With respect to each employee and officer of the Company, Schedule 3.18(a) contains a list of the position or function, annual base salary or wages, any incentive, severance or bonus arrangement with respect to such Person, such Person’s unused vacation or paid time off accrual, 2017 cash bonuses received and target 2018 cash bonuses to be received, employment classification (exempt or non-exempt), and with respect to any such Person on leave at the time of the Closing, the nature of such leave and the anticipated date of return for such Person.

 

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(b)Except as provided on Schedule 3.18(b), no executive, key employee, or group of employees of the Company have notified the Company of such Person’s or group’s intent to terminate employment with the Company, and there are, and for the past three (3) years have been, no pending or, to the Knowledge of the Company, threatened Actions, material disputes, disagreements, grievances, or controversies between the Company, on the one hand, and any employee, former employee, consultant or other independent contractor of the Company or any labor union or similar labor organization, on the other hand. The Company is not party to any collective bargaining agreement or collective bargaining relationship with any labor union or employee representative. To the Knowledge of the Company, no union organizing or decertification activities are underway or threatened, and no such activities have occurred since January 1, 2008. There are no pending or, to the Knowledge of the Company, threatened stoppages, strikes, lockouts, walkouts, or other material labor disputes with respect to the any of the Company, and no such dispute has occurred since January 1, 2008. The Company has complied in all material respects with all Laws relating to the employment of labor, including provisions thereof relating to wages, hours, equal opportunity, collective bargaining, immigration, vacations, workplace safety and the payment of social security and other Taxes. All independent contractors of or to the Company are properly classified as such for purposes of applicable Law. Within the past three (3) years, the Company has not implemented any layoff of employees or facility closing that could implicate the Worker Adjustment and Retraining Notification Act of 1988, as amended, or any similar Law (collectively, the “WARN Act”), and no such action will be implemented without advance notification to Purchaser. None of the Company’s employees are employed pursuant to employment-related visas.

 

Section 3.19Employee Benefits.

 

(a)Schedule 3.19(a) contains an accurate and complete list of each Employee Benefit Plan. With respect to each Employee Benefit Plan, the Company provided Purchaser with true and complete copies of, where applicable, (i) the three (3) most recent annual reports (IRS Form 5500 series, with all applicable attachments), (ii) the plan and trust documents and all amendments thereto (including written summaries of all Employee Benefit Plans that are not in writing), (iii) the most recent summary plan description, (iv) the most recent favorable determination letter issued by the IRS, (v) all related insurance contracts, other funding arrangements and administrative service agreements, and (vi) all other material documents pursuant to which such Employee Benefit Plan is maintained, funded and administered.

 

(b)Except as set forth on Schedule 3.19(b), none of the Company, any of its Affiliates, or any ERISA Affiliate maintains, sponsors, contributes to, has any obligation to contribute to, or has any current or potential obligation or liability under or with respect to (i) any “defined benefit plan” (as defined in section 3(35) of ERISA) or any other plan subject to the funding requirements of section 412 or 430 of the Code or section 302 or Title IV of ERISA, (ii) any “multiemployer plan” (as defined in section 3(37) of ERISA), (iii) any plan, program, agreement or arrangement that provides for post-retirement or post-termination welfare or welfare-type benefits (other than health continuation coverage required by COBRA for which the covered individual pays the full cost of coverage), (iv) any multiple employer plan (as described in section 413(c) of Code or section 210 of ERISA) or (v) any “multiple employer welfare arrangement” (as defined in section 3(40) of ERISA). None of the Company, any of its Affiliates, or any ERISA Affiliate has any 

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current, or to Company’s Knowledge, potential liability or obligation under Title IV of ERISA. The Company, its Affiliates, and the ERISA Affiliates have complied and are in compliance with the requirements of COBRA. Neither the Company nor any of its Affiliates has any current or potential liability or obligation under or with respect to any “employee benefit plan” (within the meaning of Section 3(3) of ERISA) by reason of its being treated at any time as a single employer with any other Person.

 

(c)With respect to each Employee Benefit Plan, all payments, premiums, contributions (including all employer contributions and employee salary reduction contributions), distributions, reimbursements and accruals required to have been made under any Employee Benefit Plan have been made by the due date thereof and all payments, premiums, contributions, distributions, reimbursements and accruals for all periods ending prior to or as of the Closing Date shall have been made or properly accrued on the Latest Balance Sheet and there is no unfunded liability which is not reflected on the Latest Balance Sheet.

 

(d)Each Employee Benefit Plan (and each related trust, insurance contract or fund) has been maintained, funded and administered, in form and operation, in accordance with its terms and in compliance with all applicable Laws, including ERISA and the Code (including, where applicable, sections 401(a)(4) and 410(b) thereof). With respect to each Employee Benefit Plan, (i) there have been no Prohibited Transactions, and (ii) there has been no breach of fiduciary duty (as determined under ERISA) or any other failure to act or comply in connection with the administration or investment of the assets of such Employee Benefit Plan. No Action with respect to any Employee Benefit Plan (other than routine claims for benefits) is pending or threatened, and there are no facts or circumstances that would give rise to or could reasonably be expected to give rise to any such Action.

 

(e)Each Employee Benefit Plan that is intended to be a qualified plan within the meaning of section 401(a) of the Code has received a current favorable determination letter from the IRS, and nothing has occurred that could reasonably be expected to adversely affect the qualification of such Employee Benefit Plan.

 

(f)The Company and its Affiliates have, for purposes of each Employee Benefit Plan, correctly classified those individuals performing services for the Company and its Affiliates as common law employees, leased employees, independent contractors or agents of the Company and its Affiliates.

 

(g)The consummation of the Transactions (either alone or in combination with another event) will not result in (i) acceleration of the time of payment or vesting, or trigger any payment or funding, of any compensation or benefit or trigger any other obligation under any Company Employee Plan, (ii) the inability of any amount to be deductible by reason of Section 280G of the Code, or (iii) the provision of any reimbursement of excise Taxes under Section 4999 of the Code. The Company does not have any obligation to reimburse any individual for taxes that may be imposed under Section 4999 or Section 409A of the Code.

(h)Except as set forth on Schedule 3.19(h), the Company does not have any obligation to pay any year-end, performance, transaction or other bonus to any of its employees or independent contractors.

 

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Section 3.20Environmental Matters.

 

(a)Except as set forth on Schedule 3.20(a), the Company and each of its predecessors and Affiliates have at all times complied and are in compliance with all Environmental Laws.

 

(b)Without limiting the generality of the foregoing, except as set forth on Schedule 3.20(b), the Company has obtained and has at all times complied with, and is in compliance with all Permits which are required for the occupation of their facilities and the ownership and operation of the Business under all applicable Environmental Laws (“Environmental Permits”). All of the Environmental Permits are valid, final and in full force and effect, and no Action is pending or threatened that seeks or would reasonably be expected to result in the termination, revocation or adverse modification of any Environmental Permit.

 

(c)Except as set forth on Schedule 3.20(c), the Company and each of its predecessors and Affiliates have not received any notice, report, order, directive or other information, and no Action has been threatened, filed, or commenced against any of them, regarding or alleging any failure to comply with, or any liability or potential liability under, any Environmental Laws or Environmental Permits relating to any of them, the Business, the Leased Real Property or their formerly owned or operated facilities.

(d)Except as set forth on Schedule 3.20(d), the Company and each of its predecessors and Affiliates have not generated, treated, stored, handled, manufactured, distributed, transported, Released or disposed of any Hazardous Substance, arranged for or permitted the disposal of any Hazardous Substance, exposed any Person to any Hazardous Substance, or owned or operated its Business or any property or facility (and no such property or facility is contaminated by any Hazardous Substance) so as to give rise to any current or future liability, including any corrective or remedial obligation under any Environmental Laws.

 

(e)Except as set forth on Schedule 3.20(e), the Company has not assumed or undertaken, provided any indemnification with respect to, or otherwise become subject to, any liability of any other Person under any Environmental Laws.

 

(f)Except as set forth on Schedule 3.20(f), neither the Company nor any of its predecessors or Affiliates have designed, manufactured, sold, marketed, installed, repaired or distributed products or items containing asbestos, silica, lead or other Hazardous Substances, and none of the foregoing Persons have any liability, contingent or otherwise, with respect to the presence or alleged presence of, or exposure to, asbestos, silica, lead or other Hazardous Substances in any product or item or at, under or upon any property or facility, including but not limited to the Leased Real Property or their formerly owned or operated facilities.

 

(g)Neither the Transactions, this Agreement nor the consummation of the transactions that are the subject of this Agreement impose or will result in any obligations under any Environmental Laws for site investigation or cleanup, or notification to or consent of any Governmental Authorities or third parties.

(h)Sellers and the Company have delivered to Purchaser all environmental reports, audits, assessments and any other material environmental, health or safety documents relating to the Company, any of its predecessors or any of its current or former facilities or operations, or the Business.

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Section 3.21Customers and Suppliers. Schedule 3.21 contains a true, correct and complete list of the ten (10) largest customers and ten (10) largest suppliers of the Company during the 12-month period ended September 30, 2018, measured by dollar volume of transactions. Since December 31, 2017, no customer or supplier listed or required to be listed on Schedule 3.21 has (i) terminated, modified or amended any written or oral purchase order, contract or other agreement or commitment to purchase goods or services of the Company or supply materials, products or services to the Company, (ii) notified the Company or any Seller of its intention to terminate, modify or amend any written or oral purchase order, contract or other agreement or commitment to purchase goods or services of the Company or supply materials, products or services to the Company, or (iii) notified the Company or any Seller or its intention to stop, materially decrease the rate of or materially change the terms (whether related to payment, price or otherwise, except for any price adjustment related to a corresponding change in scope) with respect to, buying products and services from the Company or supplying materials, products or services to the Company, in each case, whether as a result of the consummation of the Transactions or otherwise.

 

Section 3.22Affiliate Transactions.

 

(a)Except as set forth on Schedule 3.22(a), (i) there are no agreements, understanding, arrangements (in each case whether written or oral), liabilities or obligations between the Company, on the one hand, and any Seller or any current or former Related Party, (ii) the Company does not provide or cause to be provided any assets, services or facilities to any Person described in clause (i) foregoing, (iii) no Person described in clause (i) foregoing provides or causes to be provided any assets, services or facilities to the Company (other than, in the case of employees of the Company, employment services in the Ordinary Course of Business), and (iv) the Company do not beneficially own, directly or indirectly, any interests or investment assets of any Person described in clause (i) foregoing.

 

(b)Except as set forth on Schedule 3.22(b), and except for the ownership by the Sellers of the Shares, none of the Sellers nor any of their Related Parties (other than the Company), have any interest of any nature in any of the assets and properties used for or related to the Business or operations of the Company.

 

Section 3.23Accounts Receivable; Accounts Payable.

 

(a)The accounts and notes receivable reflected on the Latest Balance Sheet:

 

(i)are collectible in the Ordinary Course of Business (net of contractual allowances and bad debt reserves established in accordance with prior practice), (ii) represent legal, valid and binding obligations for services actually performed by the Company, enforceable in accordance with their terms, (iii) are not the subject of any Action and (iv) have arisen only from bona fide sales transactions in the Ordinary Course of Business and are payable on ordinary trade terms. The reserve for bad debts shown on the Latest Balance Sheet or, with respect to accounts receivable arising after the date of the Latest Balance Sheet, on the accounting records of the Company has been determined in accordance with GAAP. No Person has any Lien on such accounts receivable or any part thereof, and no agreement for deduction, free goods, discount or other deferred price or quantity adjustment has been made with respect to any such accounts receivables.

 

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(b)The accounts and notes payable of the Company (i) are in each case not overdue nor have been outstanding for more than forty-five (45) days, except as set forth on Schedule 3.23(b) in the case of accounts and notes payable which, by their terms may have been outstanding for up to sixty (60) days, (ii) represent obligations of the Company for products or services actually received, (iii) are not the subject of any Action (whether pending or threatened) and (iv) have arisen only from bona fide purchases in the Ordinary Course of Business and are payable on ordinary trade terms. Schedule 3.23(b) sets forth a description of any security arrangements and collateral securing the repayment or other satisfaction of payables of the Company.

 

Section 3.24Bank Accounts. Schedule 3.24 lists a correct and complete list of (a) each bank, trust company and stock or other broker with which the Company has an account, credit lien or safe deposit box or vault, or otherwise maintains a relationship (collectively, the “Bank Accounts”) and (b) all Persons authorized to draw on, or to have access to, each of the Bank Accounts.

 

Section 3.25Product Liability; Product Recall.

 

(a)There are no existing liabilities, claims or obligations arising from or, to the Company’s Knowledge, alleged to arise from any actual or alleged injury to Persons, damage to property or other loss as a result of the ownership, possession or use of any product manufactured, assembled, sold, distributed, leased or delivered by the Company. There is no, nor has there ever been any, Action by any Governmental Authority or any other Person (including any distributor or wholesaler) pending or, to the Company’s Knowledge, threatened against the Company for the recall (including any voluntary recalls), suspension, seizure or market-withdraw of or other similar corrective action with respect to any of the Company’s products.  To the Company’s Knowledge, (a) none of the co-manufacturers, assemblers or distributors which produce, receive, assemble or distribute any of the Company’s products is subject (or has been subject during the period of the Company’s business relationship with such Person) to any such Action with respect to any products of the Company, and (b) there is presently no reasonable basis for any such Action with respect to any products of the Company or which would reasonably be expected to cause the Company to recall, withdraw or suspend any of the products manufactured, assembled, sold, distributed, leased or delivered by the Company from the market or to cease further distribution or marketing of such products. To the Company’s Knowledge, no Governmental Authority has prohibited any product or process from being marketed or used in the jurisdictions in which the Company conducts business which is substantially similar to any product of the Company or to a process used for making, handling or distributing any such products. The Company has not received any written information or report from any Governmental Authority responsible for regulating the Company’s products, indicating that any of the Company’s products is unsafe or unsuitable for its intended use. Since December 31, 2017, no product distributed or sold by the Company posed a material defect so that a product recall should have occurred or did, in fact, occur.

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(b)Except as set forth on Schedule 3.25(b): (a) each product sold or delivered and each service rendered by the Company has been in conformity in all material respects with all applicable contractual commitments and all express and implied warranties, and the Company does not have any material liabilities or obligations for replacement or repair thereof or other damages in connection therewith, subject only to any reserve for product and service warranty claims accrued on the Latest Balance Sheet; (b) no product sold or delivered or service rendered by the Company is subject to any guaranty, warranty or other indemnity beyond the applicable standard terms and conditions with respect thereto; and (c) prior to the date hereof, the Company has delivered to Purchaser copies of the standard terms and conditions of sale for products delivered and services rendered by the Company with respect to the Business (containing all applicable guaranty, warranty and indemnity provisions).

Section 3.26Inventory. The Inventory shown on the Latest Balance Sheet and on the books and records of the Company as of the Closing Date, net of the reserves applicable thereto (as shown on the Latest Balance Sheet and on the books and records of the Company as of the Closing Date, as the case may be), consists of a quantity and quality usable and saleable in the Ordinary Course of Business, is not slow-moving, obsolete or damaged (except as otherwise specifically reserved for on the Latest Balance Sheet), is merchantable and fit for its intended use and is not defective. The Inventory currently exists in quantities and in a product mix reasonable in the present circumstances for the operation of the Company in the Ordinary Course of Business. The Company has not made any explicit consignment or guaranteed sales of Inventory which would allow a customer to return any unsold Inventory to the Company or Purchaser following the Closing Date in any material amount or to receive a material credit or refund from the Company or Purchaser following the Closing Date for any unsold Inventory. All items included in Inventory are the property of the Company, free and clear of Liens, and conform in all material respects to all standards applicable to such Inventory or its use or sale imposed by Governmental Authorities. Schedule 3.26 identifies all Inventory and its depletion during the month of September 2018.

Section 3.27Disclosure. Neither this Agreement, any of the Exhibits or Schedules attached hereto, nor any of the written statements, documents, certificates or other items prepared and supplied to Purchaser by or on behalf of the Company, any of the Sellers or the Representative with respect to the Transactions contain any untrue statement of a material fact or omit a material fact necessary to make each statement contained herein or therein, in light of the circumstances in which they were made, not misleading. There is no fact that has not been disclosed to Purchaser that materially and adversely affects or could reasonably be anticipated to materially and adversely affect the businesses, assets, financial condition, operating results, relations with employees, customers or suppliers or business prospects of the Company.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

 

As a material inducement to Purchaser to enter into and perform their respective obligations under this Agreement, each Seller (and Principal Shareholders where noted) represents and warrants, as of the date hereof and as of the Closing Date, to Purchaser as follows:

 

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Section 4.01Shares. Such Seller (i) owns, beneficially and of record, as of immediately prior to the Closing, all of the Shares as set forth opposite such Seller’s name on Schedule 4.01. All of the Shares are, and when sold to Purchaser pursuant to the Stock Purchase pursuant to this Agreement, as applicable, will be, free and clear of any and all restrictions on transfer (other than any restrictions under the Securities Act and state securities Laws), Taxes, options, warrants, purchase rights, contracts, commitments, equities, claims, demands or Liens. Such Seller is not a party to any option, warrant, purchase right, or other contract or commitment that could require any such Seller to sell, transfer or otherwise dispose of any Shares or other securities of the Company, other than this Agreement. Such Seller is not a party to any voting trust, proxy or other agreement or understanding with respect to the voting of any Shares or other securities of the Company.

 

Section 4.02Organization; Authorization of Transactions by the Sellers.  If such Seller is a trust, such Seller is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization. Such Seller has full right, power and authority to execute and deliver the Transaction Documents to which such Seller is a party and to perform his, her or its obligations hereunder and thereunder. The Transaction Documents to which such Seller is a party have been, or will be at the Closing, duly executed and delivered by such Seller and, assuming due authorization, execution and delivery by the other parties thereto, constitute, or will constitute at the Closing, the legal, valid and binding obligations of such Seller and enforceable in accordance with their respective terms and conditions (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general equitable principles).

 

Section 4.03Noncontravention. Neither the execution and delivery by such Seller of the Transaction Documents nor the consummation of the Transactions will (a) violate, conflict with or result in a violation of, or constitute a default (whether after the giving of notice, lapse of time or both) under, any provision of Law or order to which such Seller is subject or (b) violate, conflict with or result in a breach of any provision of, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in acceleration of, create in any Person the right to accelerate, terminate, modify or cancel, require any notice under, or result in the imposition or creation of a Lien upon any assets of such Seller under, any note, bond, mortgage, indenture, deed of trust, lease, contract or other agreement to which such Seller is a party, or by which such Person or any of his or its assets or properties is bound. No consent, approval, license, Permit, order or authorization of, or registration, declaration or filing with, any Governmental Authority or Person is required to be obtained or made by or on behalf of such Seller in connection with the execution, delivery and performance of the Transaction Documents or the consummation of the Transactions.

 

Section 4.04Litigation. There is no Action pending or, to such Seller’s knowledge, threatened against such Seller, which, if adversely determined, (a) would delay, hinder or prevent the consummation of the Transactions by such Seller or (b) would have, individually or in the aggregate with all other such Actions, a material adverse effect on the ability of such Seller to perform his or its respective obligations under the Transaction Documents.

 

Section 4.05Investor Suitability. Each Principal Shareholder is an “accredited investor” as such term is defined in Rule 501 under the Securities Act.

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Section 4.06Investment Experience.  Each Principal Shareholder has such knowledge, experience and skill in evaluating and investing in securities, based on actual participation in financial, investment and business matters, so that he, she or it is capable of evaluating the merits and risks of an investment in the Purchaser Stock, and has such knowledge, experience and skill in financial, investment and business matters that he is capable of evaluating the merits and risks of the investment in Purchaser and the suitability of the Purchaser Stock as an investment and can bear the economic risk of an investment in the Purchaser Stock indefinitely. Each Principal Shareholder understands that no guarantees have been made or can be made with respect to the future value, if any, of the Purchaser Stock, or the profitability or success of Purchaser’s business.

 

Section 4.07Purchase for Own Account. Each Principal Shareholder is acquiring the Purchaser Stock for his, her or its own account, and not as a nominee or agent, with the present intention of holding such securities for purposes of investment, and not with a view to the sale or distribution of any part thereof. Each Principal Shareholder has no intention of selling, granting any participation in, or otherwise distributing such securities in a public distribution in violation of the federal securities Laws or any applicable state securities Laws.

 

Section 4.08Acknowledgements. Each Principal Shareholder understands and acknowledges that the offering of the Purchaser Stock pursuant to this Agreement will not be registered under the Securities Act on the grounds that the offering and sale of securities contemplated by this Agreement are exempt from registration pursuant to Section 4(2) of the Securities Act and Regulation D (or Rule 701 promulgated under the Securities Act, as applicable), and that Purchaser’s reliance upon such exemption is predicated upon the Sellers’ representations set forth in this Agreement.

 

Section 4.09Restrictive Legends. Each Principal Shareholder acknowledges that each certificate or instrument representing Purchaser Stock shall be imprinted with a legend in substantially the following form:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON [ ], HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS (“STATE ACTS”) AND MAY NOT BE SOLD, ASSIGNED, PLEDGED OR TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR STATE ACTS OR AN EXEMPTION FROM REGISTRATION THEREUNDER.”

 

Section 4.10Limitation on Representations.

 

(a)EACH PRINCIPAL SHAREHOLDER UNDERSTANDS AND AGREES THAT, EXCEPT AS SPECIFICALLY SET FORTH HEREIN, THE PURCHASER IS NOT MAKING AND HAS NOT MADE ANY, AND THE PURCHASER DISCLAIMS ALL, REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING ANY AND ALL IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR AS TO THE CONDITION OF PURCHASER OR THE EQUITY SECURITIES (INCLUDING THE PURCHASER STOCK), ASSETS, PROPERTIES OR RIGHTS THEREOF.

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(b)Such Principal Shareholder agrees that he has made his own inquiry and investigation into, and based thereon, has formed an independent judgment concerning, Purchaser and its assets and properties.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

As a material inducement to the Company and the Sellers to enter into and perform their respective obligations under this Agreement, the Purchaser represents and warrants to the Company and the Sellers, as of the date hereof and as of the Closing Date, as follows:

 

Section 5.01Organization of Purchaser. Purchaser is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Delaware.

 

Section 5.02Authorization of Transactions by Purchaser. Purchaser has full right, power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations thereunder. The board of directors the Purchaser has authorized and approved the Transaction Documents to which Purchaser is a party, the execution and delivery by Purchaser of such Transaction Documents, and the performance by Purchaser of its obligations thereunder. The Transaction Documents to which Purchaser is a party have been, or will be at the Closing, duly executed and delivered by Purchaser and, assuming due authorization, execution and delivery by the other parties thereto, constitute, or will constitute at the Closing, the legal, valid and binding obligations of Purchaser, enforceable in accordance with their respective terms and conditions (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general equitable principles).

 

Section 5.03Noncontravention. Neither the execution and the delivery by the Purchaser of the Transaction Documents, nor the consummation of the Transactions, (a) violate or conflict with any provisions of either of the Purchaser’s governing documents, (b) violate or conflict with any Law or order to which the Purchase is subject, or (c) violate, conflict with or result in a breach of any provision of, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in acceleration of, create in any Person the right to accelerate, terminate, modify or cancel, require any notice under, or result in the imposition or creation of a Lien upon or with respect to any equity interests or assets of the Purchaser under, any note, bond, mortgage, indenture, deed of trust, lease, contract or other agreement to which Purchaser is a party, or by which Purchaser or any of its assets or properties is bound. No consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any Governmental Authority or Person is required to be obtained or made by or on behalf of Purchaser in connection with the execution, delivery and performance of the Transaction Documents or the consummation of the Transactions.

 

Section 5.04Litigation. There is no Action pending or, to the Purchaser’s knowledge, threatened against Purchaser, which, if adversely determined, (a) would delay, hinder or prevent the consummation of the Transactions by Purchaser or (b) would have, individually or in the aggregate with all other such Actions, a material adverse effect on the ability of Purchaser to perform its obligations under the Transaction Documents.

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Section 5.05Brokers’ Fees. The Sellers shall have no liability or obligation (whether matured or unmatured) to pay any fees, commissions or other compensation to any broker, finder, investment banker, financial advisor, agent or other similar Person with respect to the Transactions on the basis of any act or statement made or alleged to have been made by or on behalf of the Purchaser or any of its Affiliates, or any director, officer, manager, member, investment banker, financial advisor, attorney, accountant or other Person retained by or acting for or on behalf of any of them.

 

ARTICLE VI

PRE-CLOSING COVENANTS

 

From the date of this Agreement until (A) with respect to covenants contained herein that relate solely to the pre-Closing period, the earlier of (i) the termination of this Agreement in accordance with ART ICLE X and (ii) the Closing, and (B) with respect to any covenants set forth herein with obligations continuing after Closing, until such covenants are fully performed in accordance with their terms, Purchaser and Seller covenant and agree as follows:

 

Section 6.01Access; Opportunity to Ask Questions. Sellers shall, and shall cause their respective Affiliates (including the Company), equityholders, managers, directors, officers, employees, consultants, financial advisors, legal counsel, accountants and other agents to, permit Purchaser and Purchaser’s Affiliates, equityholders, managers, directors, officers, employees, consultants, financial advisors, legal counsel, accountants and other agents to have reasonable access to (a) senior management of the Company and the Business to answer questions concerning the operations and affairs of the Business, and (b) the Leased Real Property, corporate records, books of accounts, assets and properties of the Company and the Business; provided, that in each case, such access shall be: (x) subject to any limitations that are reasonably required to (1) comply with any Law or contractual obligation or (2) preserve any applicable attorney-client privilege, and (y) given at reasonable times and upon reasonable notice and without undue interruption to the Business or operations or personnel of Sellers, Sellers’ Affiliates (including the Company) or the Business.

 

Section 6.02Conduct of Business.

 

(a)From and after the date hereof until the earlier of (i) the termination of this Agreement and (ii) the Closing Date, except (A) as otherwise expressly required by this Agreement, (B) as Purchaser shall otherwise consent in writing, the Company shall, and each Seller covenants and agrees that it shall, and shall cause the Company to, (i) conduct the Business and its operations only in the Ordinary Course of Business (subject to any restrictions set forth in Section 6.02(b)), (ii) use reasonable best efforts, consistent with sound business practices, to keep in full force and effect its existence and all material rights, Permits, franchises, Intellectual Property and contracts, pertaining to the Business, (iii) maintain the Company’s assets in such general state of repair as is reasonably necessary for the conduct of the Business consistent with then-present needs and past practices, including replacement in accordance with reasonably prudent business practices of any inoperable, worn out or obsolete assets with assets of a quality consistent with reasonably prudent business practices and then-current needs, (iv) maintain its books, accounts and records as they relate to the Business in accordance with past custom and practice, (v) maintain all of its insurance policies that are in effect as of the date hereof or obtain reasonable replacement policies 

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therefor, (vi) use reasonable best efforts to preserve its relationship with its customers and suppliers and to retain the services of its employees and service providers, and (vii) in the event of a condemnation, casualty, loss or other material damage to any of the assets of the Company prior to the Closing Date, either, at the direction of the Purchaser, use reasonable best efforts to repair or replace such condemned or damaged property through the use of the proceeds of such condemnation or insurance, or preserve such proceeds for use by the Company, as applicable, following the Closing.

 

(b)Without limiting the generality of Section 6.02(a), from and after the date hereof until the earlier of (i) the termination of this Agreement and (ii) the Closing Date, except (A) as otherwise expressly required by this Agreement or (B) as Purchaser shall otherwise consent in writing, which consent shall not be unreasonably withheld, delayed or conditioned, the Company shall not, and each Seller covenants and agrees that it shall (cause the Company to not:

 

(i)sell, lease, license, abandon, permit to lapse, or otherwise dispose of any material assets or Intellectual Property, except for sales of inventory in the Ordinary Course Business;

 

(ii)(A) increase or enhance the compensation or benefits of any Business employee or any former employee of the Company other than as required by applicable Law, (B) establish, enter into, adopt, amend or terminate, or increase or accelerate or commit to increase or accelerate the funding, payment or vesting of the compensation or benefits provided under, any Employee Benefit Plan or any other benefit or compensation plan, agreement, contract, program, policy or arrangement that would be an Employee Benefit Plan if in effect on the date hereof, (C) except to the extent required by applicable Law or by written agreements existing on the date of this Agreement that have been disclosed on the Disclosure Schedules, enter into or amend any contracts of employment or any consulting, bonus, severance, retention, change in control, retirement or similar agreement, except for employment agreements or offer letters for any newly hired officer, director, employee or other service provider of the Company or related to the Business in the ordinary course of business with an annual base salary and incentive compensation opportunity not to exceed $50,000, (D) hire, materially modify the job responsibility of, or terminate (other than for “cause”) any officer, director, employee or other service provider of the Company or related to the Business with an annual compensation in excess of $50,000, (E) implement any employee layoffs that could implicate the WARN Act, or (F) unless required by Law, recognize or certify any labor union, labor organization, works council, or group of employees as the bargaining representative for any Company employee or individual providing services to any the Company;

 

(iii)change, amend or restate the charter, certificate of formation or incorporation, operating agreement or bylaws (or other comparable organizational or governing documents) of the Company;

 

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(iv)authorize for issuance, issue, sell or deliver or agree or commit to issue, sell or deliver (A) any capital stock of, or other equity or voting interest in, the Company or (B) any securities convertible into, exchangeable for or evidencing the right to subscribe for or acquire either (1) any capital stock of, or other equity or voting interest in, the Company or (2) any securities convertible into, exchangeable for or evidencing the right to subscribe for or acquire, any shares of the capital stock of, or other equity or voting interest in, the Company;

 

(v)(A) change, modify, or write-off as uncollectible any notes or accounts receivable of the Business, except write-offs in the Ordinary Course of Business and any write-off of such notes and accounts receivable that are fully reserved for in a manner consistent with GAAP, (B) accelerate any accounts receivable or defer any accounts payable, or take any other action outside the Ordinary Course of Business with respect to the working capital of the Company, (C) make any material change in the terms of sale or collection practices, nor (D) materially alter its practices with respect to inventory levels or the product offerings;

 

(vi)split, combine, redeem or reclassify, or purchase or otherwise acquire, any shares of its capital stock or its other securities;

 

(vii)(A) incur any Indebtedness, other than short-term Indebtedness for borrowed money under existing credit facilities, or (B) make any loans or advances to any other Person, other than de minimis routine advances to employees in the Ordinary Course of Business;

 

(viii)other than in the Ordinary Course of Business, (A) make, change or revoke any material Tax election or make any material change to an accounting method for Tax purposes, (B) settle or compromise any material Tax liability, (C) file any amended income Tax Return or other material Tax Return, (D) surrender any material claim for a Tax refund, (E) enter into any agreements, consents or waivers extending the statutory period of limitations applicable to the payment or assessment of any Taxes, or (F) enter into any contractual obligation in respect of Taxes with any tax related Governmental Authority;

 

(ix)enter into, amend or terminate any Material Contract (or contract that would constitute a Material Contract if in existence as of the date hereof) or waive material rights with respect thereto, other than terminations by way of expiration of the term of the applicable contract in the Ordinary Course of Business;

 

(x)acquire, merge or consolidate with, or effect any business combination with, any Person, or acquire any material assets of any Person, in each case whether by purchase of stock, securities or assets, property transfers or otherwise;

 

(xi)adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;

 

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(xii)settle or compromise any Action or initiate any Action;

 

(xiii)grant any Lien, or permit to be subject to any Lien, on the Purchased Shares, any other equity interest of the Company or any of the properties or assets owned, used or occupied by the Company;

 

(xiv)discontinue any business of the Company or enter into any new line of business;

 

(xv)except as is required by GAAP, make any change in the Company’s methods, principles and practices of accounting;

 

(xvi)take any action that could reasonably be expected to result in a complete or partial withdrawal under an Employee Benefit Plan;

 

(xvii)terminate, transfer or modify the job responsibilities of any (i) employee of the Company (or who would have been an Employee of the Company but for such termination, transfer or modification) in a manner that results in such employee ceasing to be an employee of the Company; and

 

(xviii)enter into any agreement or letter of intent (whether or not binding) or enter into any other commitment, whether or not in writing, to do any of the foregoing.

 

Section 6.03Further Actions. Subject to the other terms and conditions of this Agreement, including Section 6.04:

 

(a)Each Party shall use commercially reasonable efforts to take, or cause to be taken, all actions, and do, or cause to be done (and to cooperate and provide assistance with the taking of such actions and the doing of such things) necessary, proper or advisable to consummate the Transaction as soon as practicable, including (i) executing and delivering all documents and instruments to effect all necessary filings, notices, petitions, statements, registrations, submissions of information and applications (whether or not expressly contemplated by this Agreement or any other Transaction Document) and (ii) cause the conditions precedent to Closing set forth in ARTICLE VIII to be satisfied as promptly as possible.

 

(b)Each Party shall keep each other Parties reasonably apprised of the status of matters relating to the consummation of the Transaction, including delivering to the other Parties promptly

(i)notice of any Actions commenced or to the knowledge of such Party, threatened in writing, relating to or otherwise affecting the Company, the Purchased Assets, the Business, this Agreement or the Transaction, and (ii) the existence or occurrence of any Event (or nonoccurrence of any Event) that is reasonably likely to constitute a breach of this Agreement or to cause any condition precedent in ARTICLE VIII not to be satisfied.

 

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Section 6.04Consents and Conditions. Each Party shall use its best efforts to: (i) obtain all necessary consents, approvals, Permits, Orders or waivers from, and give any necessary notifications to, Persons required to be obtained in connection with the execution, delivery and performance of the Transaction Documents and consummation of the Transaction; provided, that neither the Company shall not enter into any contract, amend or terminate any contract, make any payment (other than (x) amounts required to be paid by such Party or any of its Affiliates under the terms of any contract, and (y) filing fees and similar amounts) or grant any concession (or permit the Company to make take any of the foregoing actions), in each case for the purpose of obtaining any consent, waiver or approval, without the prior written consent of Purchaser; and (ii) defend or contest any Action challenging any Transaction Document or that may otherwise prevent, materially impede, interfere with, hinder or delay the consummation of the Transaction, including seeking to have any stay or temporary restraining Order entered by any Governmental Authority vacated or reversed. From the date hereof until such time as the necessary consents, approvals, Permits, Orders or waivers required by this Section 6.04 are received (including, for the avoidance of doubt, after the Closing to the extent such consents, approvals, Permits, Orders or waivers are not received prior to Closing), Sellers and the Representative shall use and cause their respective Affiliates to use commercially reasonable efforts to secure an alternative arrangement reasonably satisfactory to Purchaser under which the Company would, in compliance with applicable Law, obtain the benefits associated with the applicable portion of such arrangement or contract.

 

Section 6.05Physical Inventory Count. On November 12, 2018 or November 13, 2018, the Company shall cause an independent firm mutually agreed upon by Purchaser and the Representative to conduct a physical Inventory count at each location where the Company maintains Inventory (the “Physical Inventory Count”). Purchaser shall be notified of the date and location(s) of the Physical Inventory Count at least five (5) Business Days prior to the date thereof, and Purchaser and its representatives shall be given an opportunity to observe the Physical Inventory Count. Such Physical Inventory Count will be used as a basis in calculating Inventory for purposes of the estimated Working Capital in the Closing Statement (rolling forward such Physical Inventory Count to a calculation of Inventory as of 11:59 p.m. Eastern time on the Business Day immediately preceding the Closing Date).

 

ARTICLE VII

ADDITIONAL AGREEMENTS

 

Section 7.01Press Releases. The Parties agree that, except to the extent required by applicable Law or regulation of any stock exchange, no press release or other public announcement (including in any trade journal or other publication) of or related to the Transactions shall be made without the prior written consent of Purchaser. For the avoidance of doubt, the restrictions in the immediately preceding sentence shall apply solely to press releases or other public announcements of or related to the Transactions, and nothing in this Section 7.01 shall limit any right of the Purchaser or the Company, from and after the Closing, to make any statements or announcements regarding the operations or performance of the businesses of the Company.

 

Section 7.02Confidentiality; Non-Competition; Non-Solicitation; Non-Disparagement.

 

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(a)Confidentiality. From and after the Closing, each of the Sellers and the Representative agrees that (i) it shall, and shall cause each of its Affiliates to, hold in strict confidence and not disclose to any third parties any confidential, non-public or proprietary information and materials regarding the Purchaser, or any Confidential Information with respect to the Company and any of their respective Affiliates, including the existence of this Agreement and the terms and conditions contained herein (except (x) to the extent disclosure of such information is required by Law, (y) to the extent the information becomes publicly known except through the actions or inactions of any such Person, or (z) that each Seller and the Representative may confer on a confidential basis with its legal and tax advisors, it being understood that such disclosing party shall be responsible for compliance by such legal and tax advisors with the confidentiality provisions hereof), in each case except with the prior written consent of Purchaser,(ii) it shall take all appropriate steps (and cause each of its Affiliates to take all appropriate steps) to safeguard such information and to protect it against disclosure, misuse, espionage, loss and theft, and (iii) in the event such Person or any of its Affiliates is required by Law to disclose any such information, such Person shall promptly notify the Purchaser in writing, which notification shall include the nature of the legal requirement and the extent of the required disclosure, and shall cooperate with the Purchaser to preserve the confidentiality of such information consistent with applicable Law.

 

(b) Non-Competition. Each Principal Shareholder acknowledges and agrees that the Purchaser and its Affiliates would be irreparably damaged if such Seller were to provide services or to otherwise participate in the operations or business of any Person competing with the Businesses of Company or the business of any of its Affiliates or in any similar business and that any such competition would result in a significant loss of goodwill by the Purchaser in respect of such businesses. Each Principal Shareholder further acknowledges and agrees that the covenants and agreements set forth in this Section 9.02 were a material inducement to the Purchaser to enter into this Agreement and to perform their obligations hereunder, and that the Purchaser and its Affiliates would not obtain the benefit of the bargain set forth in this Agreement as specifically negotiated by the parties hereto if any such Seller breached the provisions of this Section 7.02. Therefore, in further consideration of the Purchased Shares Cash Consideration and the goodwill of the businesses of the Company and sold in connection therewith, each such Seller agrees that,(a) until the date that is three (3) years following the Closing Date, such Seller shall not, directly or indirectly, own any interest in, manage, control, participate in, consult with, render services for, be employed in an executive, managerial or administrative capacity by, or in any manner engage in, any business or entity competing with the Businesses, within North America, Europe, India, China and Japan, Korea, Singapore and Taiwan and (b) until the date that is five (5) years following the Closing Date, such Seller shall not, directly or indirectly, own any interest in, manage, control, participate in, consult with, render services for, be employed in an executive, managerial or administrative capacity by, or in any manner engage in any business with, any of the Named Competitors (the “Restricted Period”). Nothing herein shall prohibit (a) any such Seller from being a passive owner of not more than 2% of any class of stock of a corporation, which class of stock is publicly traded, so long as such Seller has no active participation in the business of such corporation or (b) the Majority Seller from teaching and conducting courses at any accredited high school, community college, university or professional society sponsored conference short courses (i.e., SPIE).

 

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(c)Non-Solicitation. Until the date that is three (3) years following the Closing Date, each Principal Shareholder shall not, directly or indirectly, through another Person (i) induce or attempt to induce any Person who at any time prior to the Closing was an employee or consultant of the Company or its Affiliates to leave the employ or service of the Company or any of its Affiliates (including, after the Closing, the Purchaser and its Affiliates), or in any way interfere with the relationship between the Company and any of its Affiliates and any employee or consultant thereof, (ii) hire any person who was an employee or consultant of the Company or any of its Affiliates at any time prior to the Closing, unless such person’s employment with or engagement by the Company and its Affiliates was terminated no less than six (6) months prior to the earliest date on which any Seller, directly or indirectly, engages in any discussions or communications with such person regarding such hiring, or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company or any of its Affiliates to cease doing business with the Company or any of its Affiliates.

 

(d)Non-Disparagement. Each Seller agrees not to make any negative or disparaging statements or communications regarding the Company and its Affiliates (including, after the Closing, the Purchaser and its Affiliates), any of their respective services or practices, or any of their respective directors, managers, officers, agents, representatives, direct or indirect equity holders or Affiliates, either orally or in writing, at any time from and after the date hereof.

 

(e)Enforcement. If, at the time of enforcement of Section 7.02(a), Section 7.02(b), Section 7.02(c) or Section 7.02(d) a court holds that the restrictions stated therein are unreasonable under circumstances then existing, the Parties agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained therein to cover the maximum period, scope and area permitted by Law. Because each Seller has had access to confidential, non-public or proprietary information and materials regarding the Company by virtue of its investment in and involvement with (and as, applicable, employment by) the Company, the Parties agree that the Purchaser and its Affiliates would suffer irreparable harm from a breach of  Section 7.02(a), Section 7.02(b), Section 7.02(c) or Section 7.02(d) by such Seller and that money damages would not be an adequate remedy for any such breach of this Agreement. Therefore, in the event of a breach or threatened breach of this Agreement, the Purchaser and its Affiliates and their successors or assigns, in addition to other rights and remedies existing in their favor, shall be entitled to specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). In addition, in the event of a breach or violation by such Seller of this Section 7.02, the Restricted Period shall be automatically extended by the amount of time between the initial occurrence of the breach or violation and when such breach or violation has been duly cured. Such Seller acknowledges that the restrictions contained in this Section 7.02 are reasonable and that he, she or it has reviewed the provisions of this Agreement with his, her or it legal counsel.

 

(f)Each Seller acknowledges that (i) the enforcement of any covenants set forth in this Section 7.02 against such Seller would not impose any undue burden upon such Seller and (ii) none of the covenants set forth in this Section 7.02 are unreasonable as to duration or scope.

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Section 7.03Transfer Taxes. All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement (collectively, “Transfer Taxes”), if any, shall be borne by the Sellers and shall be paid by the Sellers when due. The Representative will file all necessary Tax Returns and other documentation with respect to all such Transfer Taxes (the expense of which shall be borne by the Sellers) and, if required by applicable Law, Purchaser will join in the execution of any such Tax Returns and other documentation.

 

Section 7.04Tax Indemnification and Other Matters.

 

(a)Tax Indemnification. The Principal Shareholders shall, on a several basis, indemnify and hold harmless the Purchaser Indemnified Parties from and against any loss, claim, liability, expense, or other damage attributable to (i) all Taxes (or the non-payment thereof) of the Company for all taxable periods ending on or before the Closing Date and the portion through the end of the Closing Date for any taxable period that includes (but does not end on) the Closing Date (“Pre-Closing Tax Period”), (ii) any and all Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Company (or any predecessor thereof) is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulations section 1.1502-6 or any analogous or similar state, local or foreign Law, (iii) any and all Taxes of any Person (other than the Company) imposed on the Company as a transferee or successor, by contract or pursuant to any Law, which Taxes are imposed on the Company as a result of an event or transaction occurring on or prior to the Closing Date, (iv) all Transfer Taxes, (v) all reasonable out of pocket expenses of preparing Tax Returns for any Pre-Closing Tax Period, and (vi) all reasonable out of pocket costs and expenses of contesting any audit or other proceeding that would result in the imposition of any Tax described in clauses (i) through (iv) of this Section 7.04(a); provided, however, that Principal Shareholders shall be liable for a Tax and any related Damages only to the extent that the amount of such Tax exceeds the amount taken into account as Indebtedness for purposes of determining the Closing Consideration or as ultimately determined pursuant to Section 2.06. Any liability of the Sellers pursuant to this (a) shall be determined and paid in accordance with the provisions of ARTICLE VII.

 

(b)Tax Sharing Agreements. Any and all existing Tax sharing or similar agreements involving the Company, shall be terminated, and all payables and receivables arising thereunder shall be settled, in each case prior to the Closing Date. After the Closing Date, the Company shall not have any further rights or liabilities thereunder or under any payables or receivables arising thereunder.

 

(c)Cooperation on Tax Matters. Each Party shall cooperate fully, as and to the extent reasonably requested by any other Party, in connection with the preparation and filing of any Tax Return and any Action with respect to Taxes. Such cooperation shall include the retention and, upon request, the provision of records and information which are reasonably relevant to any such Tax Return or Action or any tax planning and shall also include making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Each Party further agrees, upon request, to use its commercially reasonable efforts to obtain any certificate or other document from any Governmental Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including any Transfer Taxes).

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(d)Preparation of Tax Returns. Purchaser shall prepare and file, or cause to be prepared and filed, all Tax Returns that are filed or required to be filed after the Closing by or with respect to the Company. Purchaser shall provide income Tax Returns that include any Pre- Closing Tax Period to the Representative for review and comment prior to filing.

 

(e)Allocation of Tax Liability for Straddle Periods. For purposes of the indemnity provisions of this Agreement, in the case of any taxable period that includes (but does not end on) the Closing Date, (a “Straddle Period”), (i) the amount of any income Taxes and Taxes measured by receipts, sales, payments or payroll of the Company for the Pre- Closing Tax Period shall be determined based on an interim closing of the books as of the close of business on the Closing Date (and for such purpose, the taxable period of any partnership or other pass-through entity in which the Company holds a beneficial interest shall be deemed to terminate at such time); provided, however, that any item determined on an annual or periodic basis (including amortization and depreciation deductions and the effects of graduated rates) shall be determined in accordance with clause (ii) of this Section 7.04(e), (ii) the amount of other Taxes of the Company for a Straddle Period that relates to the Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of days in such Straddle Period, and (iii) the amount of Taxes in the form of interest or penalties to the extent relating to a Tax for a Pre-Closing Tax Period shall be treated as relating to the Pre-Closing Tax Period whether such items are incurred, accrued, assessed or similarly charged on, before or after the Closing Date.

 

(f)Tax Proceedings.

 

(i)After the Closing, the Representative shall have the right to control the conduct of any Tax audit, examination, or similar proceeding, and any administrative or judicial proceeding relating solely to state or local Taxes involving the Company (“State / Local Tax Proceeding”) that relates exclusively to a Pre-Closing Period, provided, however, that (A) the Representative shall conduct any such State / Local Tax Proceeding diligently and in good faith, (B) the Representative shall provide Purchaser and the Company with a timely and reasonably detailed account of each phase of such State / Local Tax Proceeding, (C) the Representative shall consult with Purchaser and the Company before taking any significant action in connection with such State / Local Tax Proceeding, (D) the Representative shall not submit any written materials prepared or furnished in connection with such State / Local Tax Proceeding without the prior written consent of Purchaser, which consent shall not be unreasonably withheld, (E) Purchaser and the Company shall be entitled to participate in such State / Local Tax Proceeding, including by participating in any in-person meetings or telephone conversation with taxing authorities, and (F) the Representative shall not settle, compromise or abandon any such State / Local Tax Proceeding without obtaining the prior written consent of Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed.

 

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(ii)After the Closing, Purchaser shall have the right to control the conduct of any Tax audit, examination, or similar proceeding, and any administrative or judicial proceeding relating to Taxes involving the Company (“Tax Proceeding”) not described in (i); provided, however, that to the extent any such Tax Proceeding relates to a Pre-Closing Tax Period, (A) Purchaser shall provide the Representative with a timely and reasonably detailed account of each phase of such Tax Proceeding, (B) Purchaser shall consult with the Representative before taking any significant action in connection with such Tax Proceeding, (C) Purchaser shall consult with Representative and offer the Representative an opportunity to comment before submitting any written materials prepared or furnished in connection with such Tax Proceeding, (D) Purchaser shall defend such Tax Proceeding diligently and in good faith as if it were the only party in interest in connection with such Tax Proceeding, (E) Representative shall be entitled to participate in such Tax Proceeding, at the Representative’ expense, and (F) Purchaser shall not settle, compromise or abandon any such Tax Proceeding without obtaining the prior written consent of the Representative, which consent shall not be unreasonably withheld, conditioned or delayed.

 

(g)Sales Taxes. Notwithstanding anything herein to the contrary (including Section 7.04(f)), Purchaser may, subject to the provisions of this Section 7.04(g), cause the Company to apply for and enter into voluntary disclosure agreements and/or make any filings or amendments, or any amnesty or similar agreement or filing in respect of Sales Taxes relating to any taxable period ending (or deemed pursuant to Section 7.04(e) to end) on or before the Closing Date (“VDA Filing”); provided that (i) not less than twenty (20) Business Days prior to the filing of each such proposed VDA Filing, Purchaser shall provide the Representative with a draft copy of such proposed VDA Filing for the Representative’s consideration and review; (ii) Purchaser shall consider any comments and/or alternative suggestions made by the Representative on such proposed VDA Filing provided to Purchaser no later than ten (10) Business Days after such proposed VDA Filing is provided to the Representative; (iii) during the ten (10) Business Days after such proposed VDA Filing is provided to the Representative, Purchaser shall, upon request of the Representative, make the personnel of Purchaser and the Company who prepared such VDA Filing reasonably available to the Representative during normal business hours for the purpose of discussing any comments the Representative may have on such VDA Filing (provided that the inclusion of any such comments in such VDA Filing shall be at Purchaser’s discretion); and (iv) Purchaser shall inform the Representative of any proposed settlement with respect to such VDA Filing. For the avoidance of doubt, Purchaser shall be entitled to indemnification pursuant to Section 7.04(a) for any Sales Taxes payable as the result of a VDA Filing that is permitted to be filed pursuant to this Section 7.04(g) attributable to a Pre-Closing Tax Period.

 

Section 7.05Further Assurances. From and after the Closing, in the event any further action is necessary to carry out the purposes of this Agreement, the Parties and, as applicable, the proper officers, directors, managers or members of each Party, shall take all such necessary action as may be reasonably requested by Purchaser or the Company to achieve such intent.

 

Section 7.06Release.

 

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(a)Each of the Sellers, on behalf of itself and each of his, her or its Affiliates, hereby releases and forever discharges Purchaser and its Affiliates, and any individual, joint or mutual, past, present and future representatives, agents, financial advisors, attorneys, other consultants, employees, officers, directors, managers, equityholders, partners, members, controlling persons, subsidiaries, successors and assigns of any of the foregoing (individually, a “Releasee” and, collectively, “Releasees”), from any and all claims, demands, Actions, causes of action, orders, obligations, contracts, debts and liabilities whatsoever, whether known or unknown, suspected or unsuspected, both at law and in equity, which such Seller or any of its respective Affiliates, or any of their respective heirs, executors, administrators or assigns, now has, has ever had, or may hereafter have against any Releasee arising contemporaneously with or prior to the Closing Date or on account of or arising out of any matter, cause or event occurring contemporaneously with or prior to the Closing Date (all of the foregoing collectively referred to herein as the “Released Claims”); provided, however, that nothing contained herein shall operate to release any obligations of Purchaser under this Agreement or under any other Transaction Document executed and delivered to such Seller by Purchaser at the Closing in connection with the Transactions, or for salaries owed by the Company to such Seller in connection with such Seller’s employment with the Company. Each Seller represents that it has not made any assignment or transfer of any Released Claim or other matter covered by this Section 7.06. Each Seller hereby irrevocably covenants to refrain from, directly or indirectly, asserting any Released Claim, or commencing, instituting, or causing to be commenced, any Action of any kind against any Releasee, based upon any matter released hereby.

 

(b)Each Seller hereby acknowledges and intends that this release shall be effective as a bar to each and every one of the Released Claims hereinabove mentioned or implied. Each Seller expressly consents that this release shall be given full force and effect in accordance with each and every express term or provision, including those (i) relating to any Released Claims hereinabove mentioned or implied or (ii) relating to unknown and unsuspected claims (notwithstanding any state statute that expressly limits the effectiveness of a general release of unknown, unsuspected and unanticipated claims). Seller and each Seller has read Section 1542 of the Civil Code of the State of California (“Section 1542”), which provides as follows:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 

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(c)Each Seller understands that Section 1542, or a comparable Law of another jurisdiction, gives it the right not to release existing claims of which it is not aware, unless it voluntarily chooses to waive this right. Having been so apprised, Each Seller nevertheless hereby voluntarily elects to and does waive the rights described in Section 1542, or such other comparable Law, and elects to assume all risks for claims that exist, existed or may hereafter exist in his favor, known or unknown, arising out of or related to liabilities arising from any claims or other matters purported to be released pursuant to this Section 7.06. Each Seller acknowledges and agrees that the foregoing waiver is an essential and material term of this Agreement and that, without such waiver, Purchaser would not have agreed to the terms of this Agreement.

 

Section 7.07Waiver of Milestone Payments. Effective as of the Closing, the Company hereby waives all milestone payments payable by the Purchaser to Company under that certain Supply, Development, and License Agreement, dated as of April 6, 2017, by and between Purchaser and the Company, as amended by Amendment No. 1 thereto, dated as of December 12, 2017 (the “Supply Agreement”), including all payments under Section 3.4 (Milestone Payments) thereof. For the avoidance of doubt, (a) if Closing does not occur on or before November 30, 2018 and (b) the Company has complied with all of (any is not in breach of any of) the terms and conditions set forth in the Supply Agreement, including without limitation, the technology transfer thereunder, the Milestone Payments under Section 3.4 (Milestone Payments) of the Supply Agreement shall be payable by Purchaser to the Company in accordance with the terms of the Supply Agreement; provided, however, that, in the event that the Closing does not occur on or prior November 30, 2018 as a result of (i) the Company’s, Representative’s or any Seller’s breach of this Agreement or (ii) any of the conditions to the obligations of the Purchaser set forth in Section 8.01(a) failing to be satisfied in full on or prior to November 30, 2018, then no such Milestone Payments shall be due from Purchaser to the Company.

 

ARTICLE VIII CONDITIONS

 

Section 8.01Conditions to the Obligations of the Purchaser. The obligation of Purchaser to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions as of the Closing:

(a)Representations and Warranties. (i) Each of the Fundamental Representations of the Company and the Sellers shall be true and correct in all respects on the date hereof and at and as of the Closing as though such representation or warranty was made at and as of the Closing, and (ii) each of the other representations and warranties made by the Company and the Sellers in this Agreement shall be true and correct in all material respects (if not qualified by materiality or by Material Adverse Effect) and in all respects (if qualified by materiality or by Material Adverse Effect), on the date hereof and at and as of the Closing as though such representation or warranty was made at and as of the Closing, in the case of clauses (i) and (ii) foregoing excluding those representations and warranties made as of a specific date, which shall be so true and correct as of such date.

 

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(b)Performance of Covenants. Each of the Company, the Representative and the Sellers shall have performed and complied with in all material respects all of the covenants and agreements to the extent required to be performed or complied with by him, her or it under this Agreement prior to or on the Closing Date.

 

(c)Absence of Material Adverse Effect. Since the date of this Agreement, there shall have been no Material Adverse Effect or any fact, event or circumstance reasonably likely to result in a Material Adverse Effect.

 

(d)Absence of Litigation. As of the Closing, there shall not be any Action pending or threatened by any Governmental Authority seeking to restrain or prohibit the consummation of the Transactions or which would reasonably be expected to have a Material Adverse Effect.

 

(e)Governmental Consents. The Company shall have received all necessary consents and approvals of Governmental Authorities or third parties for the consummation of the Transactions.

 

(f)Certificate. Purchaser shall have received a certificate, duly executed by the Company, certifying as to the satisfaction of each of the conditions set forth in Section 8.02(a)-(e).

 

(g)Deliveries. The Company and the Sellers shall have delivered or filed or caused to be delivered or filed each item required to be delivered by them pursuant to Section 2.03.

 

(h)Absence of Orders. There shall not be any injunction, writ or temporary restraining order or any other order of any nature issued by a court or Governmental Authority of competent jurisdiction directing that the Transactions or any of them not be consummated substantially as herein provided.

 

(i)Physical Inventory Count. Completion of the Physical Inventory Count in a manner as is reasonably satisfactory to Purchaser.

 

Section 8.02Conditions to Obligation of the Company and the Sellers. The obligations of the Company and the Sellers to consummate the transactions to be performed by each of them in connection with the Closing is subject to satisfaction of the following conditions as of the Closing:

 

(a)Representations and Warranties. (i) Each of the Fundamental Representations of Purchaser shall be true and correct in all respects on the date hereof and at and as of the Closing as though such representation or warranty was made at and as of the Closing, and (ii) each of the other representations and warranties made by Purchaser in this Agreement shall be true and correct in all material respects (if not qualified by materiality or by material adverse effect) and in all respects (if qualified by materiality or by material adverse effect) on the date hereof and at and as of the Closing as though such representation or warranty was made at and as of the Closing, in the case of clauses (i) and (ii) foregoing excluding those representations and warranties made as of a specific date, which shall be true and correct as of such date.

 

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(b)Performance of Covenants. Purchaser shall have performed and complied with in all material respects all of the covenants and agreements required to be performed or complied with by it under this Agreement prior to the Closing Date.

 

(c)Certificate. The Representative shall have received a certificate, duly executed by Purchaser, certifying as to the satisfaction of each of the conditions set forth in Section  8.02(a)-(b)

 

(d)Deliveries. Purchaser shall have delivered or caused to be delivered each item required to be delivered by it pursuant to Section 2.03.

 

(e)Absence of Orders. There shall not be any injunction, writ or temporary restraining order or any other order of any nature issued by a court or Governmental Authority of competent jurisdiction directing that the Transactions or any of them not be consummated substantially as herein provided.

 

ARTICLE IX

INDEMNIFICATION

 

Section 9.01Survival of Representations, Warranties, Covenants and Agreements. The representations, warranties, covenants and agreements contained in this Agreement set forth in any of (x) Section 3.01 (Organization of the Company), Section 3.02 (Authorization of Transactions by the Company), Section 3.05 (Subsidiaries), Section 3.06 (Capitalization), Section 3.07 (Brokers’ Fees), Section 3.12 (Assets), Section 3.22 (Affiliate Transactions), Section 4.01 (Shares), Section 4.02 (Authorization of Transactions by the Sellers), Section 4.05 (Investor Suitability), Section 4.06 (Investment Experience), Section 4.07 (Purchase for Own Account),  Section 4.08 (Acknowledgments), Section 4.09 (Restrictive Legends) and Section 4.10 (Limitation of Representations) (each of the foregoing in this clause (x), a “Seller Fundamental Representation”), and (y) Section 5.01 (Organization of Purchaser), Section 5.02 (Authorization of Transactions by Purchaser) and Section 5.05 (Brokers’ Fees) (each of the foregoing in this clause (y), a “Purchaser Fundamental Representation,” and, collectively with the Seller Fundamental Representations, the “Fundamental Representations”)) shall survive the execution and delivery of this Agreement and the consummation of the Transactions and shall continue in full force and effect for ten years following the date of this Agreement thereafter. Notwithstanding the foregoing, (a) the representations and warranties of the Company set forth in Section 3.14 (Tax Matters), and Section 3.19 (Employee Benefits) shall survive the Closing and continue in full force and effect until the date that is ninety (90) days following the expiration of the statute of limitations applicable to any claim arising under any such representation or warranty (after giving effect to any extensions or waivers thereof), (b) the representations and warranties of the Company set forth in Section 3.15 (Intellectual Property) shall survive the Closing until the date that is forty- eight (48) months following the Closing Date and (c) all other representations and warranties other than the Fundamental Representations and other than the representations and warranties referenced in clause (a) foregoing shall survive the Closing until the date that is twelve (12) months following the Closing Date. Notwithstanding the foregoing, (A) the representations and warranties of each Party under this Agreement shall survive in accordance with this Section 9.01, regardless of any investigation made by or on behalf of any Party or any knowledge any Party may have with respect to any misrepresentation or breach at the time of the Closing, (B) any representation or warranty that would otherwise terminate in accordance with the immediately preceding sentence shall 

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survive and continue in full force and effect if a notice shall have been timely given under Section 9.6 or Section 9.07 (as applicable) on or prior to such termination date, until the related claim for indemnification has been satisfied or otherwise resolved as provided in this ARTICLE IX, and (C) the obligations of the Sellers to indemnify and hold harmless Purchaser for any claim based on or arising out of fraud, gross negligence, willful misconduct, intentional misrepresentation or knowing and intentional breach of any of the provisions of this Agreement shall not terminate.

 

Section 9.02Indemnification by the Principal Shareholders.

 

(a)The Principal Shareholders shall, on a several but not joint basis, indemnify and hold harmless the Purchaser and each of its Affiliates (including, from and after the Closing, the Company), and each of the officers, directors, managers, equity holders, partners, employees, agents, successors, permitted assigns and representatives of the foregoing, and any Person claiming by or through any of them (each, a “Purchaser Indemnified Party”), against and in respect of any and all claims, costs, expenses, penalties, damages, liabilities, diminution in value, losses or deficiencies (including reasonable attorneys’ fees and other costs and expenses incident to any suit, action, settlement or proceeding) (“Damages”) arising out of, resulting from, or incurred in connection with:

 

(i)any inaccuracy in any representation or the breach of any warranty made by the Company in this Agreement, any other Transaction Document or in any certificate delivered pursuant hereto or thereto (with the Damages related thereto (and not the inaccuracy) to be determined without regard to any qualifications therein referencing the terms “materiality,” “Material Adverse Effect” or other terms of similar import or effect);

 

(ii)the breach by the Company of any covenant or agreement to be performed by it hereunder or under any other Transaction Document, or by the Representative of any covenant or agreement to be performed by him, her or it hereunder or under any other Transaction Document;

 

(iii)the Company’s failure to obtain the written consent of Goodrich Corporation to the transactions contemplated by this Agreement under the United Technologies Corporation Standard Terms and Conditions of Purchase - Product - November 2016 Version, applicable to Purchase Order: 200680470, dated as of May 8, 2018, by and between Goodrich Corporation and the Company; and

(iv)any claim regarding or other challenge to the form or amount of consideration payable or paid to the Sellers or Optionholders in accordance with the terms of this Agreement or the other Transaction Documents.

 

Any Taxes (and related Damages) resulting from a breach of a covenant or agreement to be performed by the Company hereunder or under any other Transaction Document, or by the Representative of any covenant or agreement to be performed by him, her or it hereunder or under any other Transaction Document shall be governed by Section 7.04(a) rather than Section  8.02(a)(ii).

 

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(b)Each Principal Shareholder shall, on a several but not joint basis, indemnify and hold harmless the Purchaser Indemnified Parties, against and in respect of any and all Damages arising out of, resulting from, or incurred in connection with:

 

(i)any inaccuracy in any representation or the breach of any warranty made by such Seller in this Agreement, any other Transaction Document or in any certificate delivered pursuant hereto or thereto (in each case, the existence of such inaccuracy or breach, and in each case, the Damages related thereto, to be determined without regard to any qualifications therein referencing the terms “materiality,” “Material Adverse Effect” or other terms of similar import or effect); and

 

(ii)the breach by such Seller of any covenant or agreement to be performed by such Seller hereunder or under any other Transaction Document.

 

Any Taxes (and related Damages) resulting from a breach of a covenant or agreement to be performed by any Seller hereunder or under any other Transaction Document shall be governed by Section 7.04(a) rather than Section 8.02(b)(ii).

 

Section 9.03Indemnification by Purchaser. The Purchaser shall indemnify and hold harmless the Sellers (pro rata based on their respective Percentage Allocations) and each of their respective Affiliates, employees, agents, successors, permitted assigns and representatives, and any Person claiming by or through any of them (each, a “Seller Indemnified Party”), against and in respect of any and all Damages arising out of, resulting from, or incurred in connection with:

 

(a)any inaccuracy in any representation or the breach of any warranty made by Purchaser in this Agreement, any other Transaction Document or in any certificate delivered pursuant hereto or thereto (in each case, the existence of such inaccuracy or breach, together with the Damages related thereto, determined without regard to any qualifications therein referencing the term “materiality,” “material adverse effect” or other terms of similar import or effect); and

 

(b)the breach by Purchaser of any covenant or agreement to be performed by it hereunder or under any other Transaction Document.

 

Section 9.04Limitations on Indemnification.

 

(a)Threshold.

(i)The Sellers shall not be required to indemnify any Purchaser Indemnified Party pursuant to, and shall not have any liability under, Section 9.02(a)(i) until the aggregate amount of all Damages for which the Sellers would, but for this Section  9.04(a)(i), be liable under Section 9.02 exceeds on a cumulative basis an amount equal to $100,000 (the “Threshold”), in which case, the Sellers shall become liable for all of such Damages (i.e., if such cumulative Damages exceed the Threshold, this Section 9.04(a)(i) shall be without effect in respect thereof); provided, however, that the Threshold shall not apply to any Damages related to any inaccuracy or breach of any Seller Fundamental 

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Representation, or of Section 3.14 (Tax Matters), Section 3.19 (Employee Benefits), or  Section 3.15 (Intellectual Property), or any claim based on fraud, gross negligence, willful misconduct, intentional misrepresentation or knowing and intentional breach of any of the provisions of this Agreement or any other Transaction Document.

 

(ii)Purchaser shall not be required to indemnify any Seller Indemnified Party pursuant to, and shall not have any liability under, Section 9.03(a) until the aggregate amount of all Damages for which Purchaser would, but for this Section 9.04(a)(ii), be liable under Section 9.03 exceeds on a cumulative basis an amount equal to the Threshold, in which case, Purchaser shall become liable for all of such Damages (i.e., if such cumulative Damages exceed the Threshold, this Section 9.04(a)(ii) shall be without effect in respect thereof); provided, however, that the Threshold shall not apply to any Damages related to any inaccuracy or breach of any Purchaser Fundamental Representation or any claim based on fraud, gross negligence, willful misconduct, intentional misrepresentation or knowing and intentional breach of any of the provisions of this Agreement or any other Transaction Document.

 

(b)Cap.

 

(i)The Sellers shall not be required to indemnify any Purchaser Indemnified Party pursuant to, and shall not have any further liability under Section 9.02(a) once the aggregate amount of all payments made by or on behalf of the Sellers, collectively, in respect of the indemnification obligations under Section 9.02(a) equals (A) the aggregate amount of Closing Consideration, plus (B) the fair market value (based on the weighted average closing price of the common stock of Purchaser on NASDAQ during the twenty (20) consecutive trading days immediately prior to the date hereof)) of the shares of Purchaser Stock issued to the Sellers at Closing, plus (C) any cash proceeds released to the Sellers from the Escrow Account and plus (D) the fair market value (based on the weighted average closing price of the common stock of Purchaser on NASDAQ during the twenty (20) consecutive trading days immediately prior to the date hereof) of any shares of Indemnification Escrow Stock released to the Sellers from the Escrow Account (the “Total Indemnity Cap”).

 

(ii)Purchaser shall not be required to indemnify any Seller Indemnified Party pursuant to, and shall not have any further liability under, (A) Section 9.03(a)(i) once the aggregate amount of all payments made by Purchaser in respect of the indemnification obligations under Section 9.03(a)(i) equals the Total Indemnity Cap; provided that this  Section 9.04(b)(ii) shall not apply to any Damages related to any inaccuracy or breach of any Purchaser Fundamental Representation or any claim based on fraud, gross negligence, intentional misrepresentation or knowing and intentional breach of any of the provisions of this Agreement or any Transaction Document, and no such amounts shall be counted towards the Cap and (B) Section 9.03 once the aggregate amount of all payments made by or on behalf of the Purchaser, collectively, in respect of the indemnification obligations under Section 9.03 equals the Total Indemnity Cap.

 

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(c)Indemnification Priority.

 

(i)Any claim for indemnification made pursuant to Section 9.02(a)(i), Section 9.02(a)(ii) or Section 9.02(b) shall be made in the following order of priority: (A) first, to the extent that any Indemnification Escrow Stock remains in the Escrow Account, from the Indemnification Escrow Stock, (B) second, to the extent that any Indemnification Escrow Stock has been sold for cash, from such cash in an amount not to exceed, together with all amounts recovered pursuant to Section 9.04(c)(i)(A), $3,000,000 (other than claims with respect to breaches of the representations and warranties set forth in Section 3.15 (Intellectual Property), which shall be subject to Section 9.02(c)(ii) below), and (C) third, directly from the Principal Shareholders.

 

(ii)Any claim for indemnification made with respect to breaches of the representations set forth in Section 3.15 (Intellectual Property) pursuant to Section 9.02(a)(i) shall be satisfied from the IP Indemnification Escrow Funds in an amount not to exceed $4,000,000.

 

(iii)Any claim for indemnification made pursuant to Section 9.02(a)(iii) or Section 9.02(a)(iv) shall be made in the following order of priority: (A) first, to the extent that any Indemnification Escrow Stock remains in the Escrow Account, from the Indemnification Escrow Stock, (B) second, to the extent that any Indemnification Escrow Stock has been sold for cash, from such cash in an amount not to exceed, together with all amounts recovered pursuant to Section 9.04(c)(iii)(A), $3,000,000, and (C) third, directly from the Principal Shareholders.

 

(iv)Any claim for indemnification made pursuant to Section 7.04(a) in respect of Sales Taxes shall be made in the following order of priority: (A) first, from the Sales Tax Indemnification Escrow Funds until such funds have been exhausted, (B) second, to the extent that any Indemnification Escrow Stock remains in the Escrow Account, from the Indemnification Escrow Stock, (C) third, to the extent that any Indemnification Escrow Stock has been sold for cash, from such cash in an amount not to exceed, together with all amounts recovered pursuant to Section 9.04(c)(iv)(A), $3,000,000, and (D) fourth, directly from the Principal Shareholders.

 

Section 9.05Special Definitions. Any Person providing indemnification pursuant to the provisions of this ARTICLE XI is hereinafter referred to as an “Indemnifying Party.”

 

Section 9.06Procedures for Third-Party Claims. In the case of any claim for indemnification arising from a claim of a third party (a “Third-Party Claim”), an Indemnified Party shall give prompt written notice to the Indemnifying Party of any claim or demand for which such Indemnified Party has knowledge and as to which it may request indemnification hereunder (provided that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless, and then solely to the extent, the Indemnifying Party is prejudiced thereby). Except as otherwise provided herein, the Indemnifying Party shall have the right to defend and to direct the defense against any such Third- Party Claim (other than any Third Party Claim that constitutes or arises out of a Tax Proceeding), in its name or in the name of the Indemnified Party, as the case may be, at the expense of the 

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Indemnifying Party, and with counsel selected by the Indemnifying Party; provided, however, the Indemnifying Party shall not be entitled to assume the defense or control of a Third-Party Claim and shall pay the fees and expenses of counsel retained by the Indemnified Party if (a) the Indemnifying Party does not acknowledge to the Indemnified Party in writing its obligations to indemnify the Indemnified Party with respect to all elements of such claim, (b) such Third-Party Claim seeks an order, injunction or other equitable relief against the Indemnified Party or the Company, (c) such Third-Party Claim involves any criminal proceeding, action, indictment, allegation or investigation, (d) such Third-Party Claim is by or on behalf of any material customer of the Company, (e) the Indemnified Party reasonably believes an adverse determination with respect to the Action giving rise to such claim for indemnification would be materially detrimental to or materially injure the Indemnified Party’s reputation or future business prospects; (f) the claim involves environmental, health or safety matters in which case the Indemnified Party shall have sole control and management authority over the resolution of such claim or (g) counsel to the Indemnified Party shall have reasonably concluded that (A) there is a conflict of interest between the Indemnified Party and the Indemnifying Party in the conduct of the defense of such Third- Party Claim or (B) the Indemnified Party has one or more defenses not available to the Indemnifying Party; provided, further, in the event any Third-Party Claim is brought or asserted which, if adversely determined, would not entitle the Indemnified Party to full indemnity pursuant to this ARTICLE XI, for any reason, the Indemnified Party may elect to participate in a joint defense of such Third-Party Claim for which the expenses of such joint defense will be shared equally by such Parties and the retention of counsel shall be reasonably satisfactory to both Parties. The Indemnified Party shall have the right to participate in the defense of any Third-Party Claim with counsel employed at its own expense; provided, however, that, in the case of any Third-Party Claim described in clause (a) though (g) above or as to which the Indemnifying Party shall not in fact have employed counsel to assume the defense of such Third- Party Claim, the reasonable fees and disbursements of such counsel shall be at the expense of the Indemnifying Party. No compromise or settlement of any Third-Party Claim may be effected by the Indemnifying Party without the Indemnified Party’s consent (which shall not be unreasonably withheld, conditioned or delayed) unless (x) there is no finding or admission of any violation of Law and no effect on any other claims that may be made against such Indemnified Party or its Affiliates and (y) each Indemnified Party that is party to such Third-Party Claim is fully and unconditionally released from liability or obligation with respect to such claim. In the event that the Indemnified Party assumes the defense or control of such Third-Party Claim, the Indemnifying Party shall have the right to participate in the defense of any Third-Party Claim with counsel employed at its own expense. The Indemnifying Party shall have no indemnification obligations with respect to any Third-Party Claim which shall be settled by the Indemnified Party without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. To the extent that there is an inconsistency between this Section 9.06 and Section 7.04 as it relates to a Tax matter, the provisions of Section 7.04 shall govern.

 

Section 9.07Procedures for Inter-Party Claims. In the event that an Indemnified Party determines that it has a claim for Damages against an Indemnifying Party hereunder other than as a result of a Third-Party Claim (an “Inter-Party Claim”), the Indemnified Party shall give reasonably prompt written notice thereof to the Indemnifying Party, specifying the amount of such claim (to the extent then reasonably determinable by the Indemnified Party) and the basis of such claim in reasonable detail (provided that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless, and 

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then solely to the extent, the Indemnifying Party is prejudiced thereby). The Indemnified Party shall provide the Indemnifying Party upon advance written notice by the Indemnifying Party, with reasonable access within normal business hours to its books and records for the purpose of allowing the Indemnifying Party a reasonable opportunity to verify any such claim for Damages. The Indemnifying Party shall notify the Indemnified Party within ten (10) days following its receipt of such notice if the Indemnifying Party disputes its liability to the Indemnified Party under this ARTICLE XI. If the Indemnifying Party does not so notify the Indemnified Party, the claim specified by the Indemnified Party in such notice shall be conclusively deemed to be a liability of the Indemnifying Party under this ARTICLE XI, and the Indemnifying Party shall pay the amount of such liability (in accordance with Section 9.08) to the Indemnified Party on demand or, in the case of any notice in which the amount of the claim (or any portion of the claim) is estimated, on such later date when the amount of such claim (or such portion of such claim) is finally determined by the Indemnified Party.

 

Section 9.08Offset. Subject to the limitations of the Sellers’ liability set forth in this ARTICLE XI, in the event of any Damages for which any Purchaser Indemnified Party has a right to indemnification under this Agreement, the Purchaser may, at its option, offset the amount of such Damages against any other payment obligations Purchaser has to the applicable Seller(s) or any of their respective Affiliates under this Agreement or any other contract.

 

Section 9.09Anti-Circularity. Notwithstanding anything herein to the contrary, if any Purchaser Indemnified Party seeks indemnification from any Seller under this ARTICLE IX, then the Sellers agree that, notwithstanding any right to indemnification, advancement or contribution that such Seller or its Affiliates may have from the Company pursuant to applicable Law, the Purchaser’s or Company’s organizational documents or any contractual theory, that such Seller hereby waives any such right to indemnification, advancement or contribution.

 

Section 9.10Payments.

 

(a)Until the Indemnification Escrow Funds have been exhausted or released pursuant to Section 9.10(d) or Section 9.10(e), as applicable, promptly following the final determination of the amount of any Damages payable to any Purchaser Indemnified Party pursuant to Section 7.04(a) or this ARTICLE IX, Purchaser and the Representative shall diver a Joint Written Direction (as defined in the Stock Escrow Agreement) to the Escrow Agent directing to Escrow Agent to release to Purchaser a number of shares of Purchaser Stock having a value equal to such amount (based on the weighted average closing price of the common stock of Purchaser on NASDAQ during the twenty (20) consecutive trading days immediately prior to the date hereof).

 

(b)Following such time as the Indemnification Escrow Funds have been exhausted or released pursuant to Section 9.10(d) or Section 9.10(e), as applicable, following the final determination of the amount of any Damages payable to a Purchaser Indemnified Party pursuant to Section 7.04(a) or this ARTICLE IX, the Principal Shareholders shall promptly and in any event within five (5) days after the final determination of such Damages, pay to the Purchaser Indemnified Parties, by wire transfer of immediately available funds, cash in an amount equal to the difference between the amount of such Damages, minus the portion thereof that Purchaser has satisfied from the Indemnification Escrow Funds. Any liability of the Principal Shareholders 

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pursuant to this Section 9.10(b) shall be several but not joint among them; provided, however, that no Seller shall have any indemnification obligations in respect of any Individual Seller Breach by any other Seller.

 

(c)Promptly and in any event within fifteen (15) days following the final determination of the amount of any Damages payable to a Seller Indemnified Party pursuant to this ARTICLE  IX, the Purchaser shall pay the Representative (for the benefit of the Sellers), by wire transfer of immediately available funds, cash in an amount equal to the amount of such Damages.

 

(d)Each of Purchaser and the Representative covenants and agrees that, no later than 11:59 p.m. Eastern time on the date that is twelve (12) months following the Closing Date, it shall deliver a Joint Written Direction (as defined in the Stock Escrow Agreement) to the Escrow Agent directing the Escrow Agent to release to the Representative for the benefit of the Principal Shareholders a number of shares of Purchaser Stock equal to (i) in the event that Indemnification Escrow Stock remains in the Escrow Account, (A) all Indemnification Escrow Stock held in the Escrow Account, minus (B) a number of shares of Indemnification Escrow Stock having a value equal to the aggregate amount of all Unresolved Indemnification Claims (as defined in the Stock Escrow Agreement) (other than Unresolved Indemnification Claims made pursuant to Section  9.02(a)(iii) or Section 9.02(a)(iv)) (based on the weighted average closing price of the common stock of Purchaser on NASDAQ during the twenty (20) consecutive trading days immediately prior to the date hereof) and (ii) cash in the amount of $3,000,000 minus the amounts set forth in Section 9.1(d)(i).

 

(e)Each of Purchaser and the Representative covenants and agrees that, no later than 11:59 p.m. Eastern time on the date that is forty-eight (48) months following the Closing Date, it shall deliver a Joint Written Direction (as defined in the Cash Escrow Agreement) to the Escrow Agent directing the Escrow Agent to release to the Representative for the benefit of the Principal Shareholders all Indemnification Escrow Funds held pursuant to the Cash Escrow Agreement in the IP Indemnification Escrow Account (as defined in the Cash Escrow Agreement) minus the amount of all Unresolved IP Indemnification Claims (as defined in the Cash Escrow Agreement).

 

(f)Each of Purchaser and the Representative covenants and agrees that, no later than 11:59 p.m. Eastern time on the date that is twenty-four (24) months following the Closing Date, it shall deliver a Joint Written Direction (as defined in the Cash Escrow Agreement) to the Escrow Agent directing the Escrow Agent to release to the Representative for the benefit of the Principal Shareholders all Indemnification Escrow Funds held pursuant to the Cash Escrow Agreement in the Sales Tax Indemnification Escrow Account (as defined in the Cash Escrow Agreement) minus the amount of all Unresolved Sales Tax Indemnification Claims (as defined in the Cash Escrow Agreement).

 

Section 9.11Treatment of Indemnity Payments. Following the Closing, any payment made pursuant to this ARTICLE IX shall be treated by the Parties hereto, for federal income Tax and other applicable Tax purposes, as an adjustment to the cash proceeds received by the Sellers in the Transactions, to the extent permitted by law.

 

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ARTICLE X

TERMINATION

 

Section 10.01Termination.  This Agreement may be terminated as provided below:

 

(a)by mutual written consent of the Representative and Purchaser;

 

(b)by either Purchaser or the Representative if there has been a material breach or failure to perform on the part of the other Party (which. for purposes of this Section 10.01(b), shall include, in the case of the Representative, the Company and each of the Sellers) of any representation. warranty. covenant or agreement contained in this Agreement, which breach or failure to perform would reasonably be expected to cause the conditions set forth in Section 8.02(a) or Section 8.02(b), as applicable, to not be satisfied at the Closing and which breach or failure, if capable of being cured, shall not have been cured within five (5) days following receipt by such Party of written notice of such breach or failure from the other Party (it being understood and hereby agreed that neither Party may terminate this Agreement pursuant to this Section 10.01(b) if such breach or failure is cured within such five (5) day period);

 

(c)by either Purchaser or the Representative if a Governmental Authority of competent jurisdiction shall have issued a nonappealable final order, decree or ruling or taken any other action having the effect of permanently restraining. enjoining or otherwise prohibiting the Transactions or any of them (provided that the Party seeking to terminate this Agreement pursuant to this Section 10.01(c) shall have complied with its obligations under Section 6.04 by using its reasonable best efforts to have any such order. decree ruling or other action vacated or lifted);

 

(d)by either Purchaser or the Company if the Transactions have not been consummated by December 21, 2018; provided. However, that in no case shall either Purchaser or the Company be entitled to terminate this Agreement pursuant to this Section 10.01(d) if such Party's willful or knowing breach of this Agreement has prevented the consummation of the Transactions.

 

Section 10.02Effect of Termination. Except for the provisions of Section 6.01, Section  6.02(a), ARTICLE IX, ARTICLE XI and this Section 10.02, each of which shall survive any termination of this Agreement, in the event of the termination of this Agreement, this Agreement shall thereafter become void and have no effect, and no Party hereto shall have any liability to any other Party hereto or its equityholders or directors or officers in respect thereof.

 

ARTICLE XI

MISCELLANEOUS

 

Section 11.01Representative.

 

(a)Each  Seller, by virtue of his, her or its approval of this Agreement and/or acceptance of any consideration contemplated by ARTICLE II, shall have irrevocably nominated, constituted and appointed the Representative as the agent, agent for service of process and true and lawful attorney-in-fact of such Seller, with full power of substitution, to act in the name, place and 

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stead of such Seller with respect to this Agreement and the taking by the Representative of any and all actions (whether prior to, contemporaneously with, or after such nomination, constitution and appointment) and the making of any decisions required or permitted to be taken or made by the Representative under this Agreement, which in each case and as applicable shall have accordingly been ratified by such Seller, including the exercise of the power to execute, deliver, acknowledge, certify and file (in the name of any or all of the Sellers or otherwise) any and all documents and to take any and all actions that the Representative may, in its sole discretion, determine to be necessary, desirable or appropriate on or after the date of this Agreement, including the power to act on behalf of any Seller in any dispute, litigation or arbitration involving this Agreement and the power to receive on behalf of, and to distribute (after payment of any unpaid expenses chargeable to a Seller in connection with the transactions contemplated by this Agreement), all amounts payable to such Seller under the terms of this Agreement.

 

(b)All notices delivered by the Purchaser or the Company following the Closing to the Representative (whether pursuant to this Agreement or otherwise) shall constitute notice to the Sellers.

 

(c)Without limiting the generality of Section 11.01 and notwithstanding anything to the contrary contained in this Agreement, Purchaser shall be entitled to deal exclusively with the Representative on all matters described in Section 11.01(a), and each Seller Indemnified Party shall be entitled to deal exclusively with the Representative on all matters relating to ARTICLE  IX, Section 7.04(a) or Section 11.01(a) and each of them shall be entitled to rely conclusively (without further evidence of any kind whatsoever) on any document executed or purported to be executed on behalf of any Seller by the Representative, and on any other action taken or purported to be taken by the Representative on behalf of any Seller by the Representative, as fully binding upon such Seller.

 

(d)The Representative may, by providing written notice to the Purchaser, at any time designate James Millerd as the replacement or substitute Representative with respect to all or any portion of the Representative’s responsibilities or authorities (provided, that once such substitution or replacement is made, the Representative may not rescind such replacement or substitution with respect to the particular matters that such replacement and/or substitution pertains), and each Seller, by virtue of his, her or its approval of this Agreement, hereby consents to such replacement and/or substitute Representative, as applicable. If the Representative shall resign, die, become disabled, be dissolved or otherwise be unable to fulfill its responsibilities as representative of the Sellers, then the Sellers shall, by majority vote within thirty (30) days after such death, disability or dissolution, appoint a successor representative reasonably acceptable to Purchaser. If a successor representative is not so appointed within such period, then Neal Brock shall automatically be appointed the Representative at the end of such period. Any successor appointed pursuant to either of the two preceding sentences shall become the “Representative” for purposes of this Agreement.

 

(e)No bond shall be required of the Representative and the Representative shall receive no compensation for its services. The Representative shall not be liable to any Seller for any act done or omitted hereunder as the Representative while acting in good faith and in the exercise of its reasonable business judgment with respect to any matter arising out of or in connection with the 

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acceptance or administration of its duties hereunder (it being understood that any act done or omitted pursuant to the advice of counsel shall be conclusive evidence of such good faith). The Representative shall be entitled to be indemnified by the Sellers for any loss, liability or expense incurred on the part of the Representative with respect to any matter arising out of or in connection with the acceptance or administration of its duties hereunder.

 

Section 11.02No Third-Party Beneficiaries. Except as expressly set forth in Section  7.04(a) and ARTICLE IX, this Agreement is not intended to, and shall not, confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns.

 

Section 11.03Remedies. Notwithstanding anything herein to the contrary, the Company, the Sellers and the Representative hereby agree that, in the event that the Company, the Sellers or the Representative violate any provisions of this Agreement, the remedies at Law available to Purchaser may be inadequate. In such event, Purchaser shall have the right, in addition to all other rights and remedies they may have, to specific performance and/or injunctive or other equitable relief (including rights of rescission) to enforce or prevent any violations by the Company, the Sellers or the Representative of this Agreement. Notwithstanding anything herein to the contrary, the Purchaser hereby agrees that, in the event that the Purchaser violates any provisions of this Agreement, the remedies at Law available to the Sellers may be inadequate. In such event, the Sellers shall have the right, in addition to all other rights and remedies they may have, to specific performance and/or injunctive or other equitable relief (including rights of rescission) to enforce or prevent any violations by the Purchaser of this Agreement.

 

Section 11.04Entire Agreement. The Transaction Documents constitute the entire agreement among the Parties and supersede any prior understandings, agreements or representations by or among the Parties, written or oral, that may have related in any way to the subject matter hereof.

 

Section 11.05Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. Neither of the Purchaser on the one hand nor the Company, the Representative or any Seller on the other hand may assign either this Agreement or any of his, her or its rights, interests or obligations hereunder without the prior written approval of the other; provided, that the Purchaser may (a) assign any or all of their rights and interests hereunder to one or more of their Affiliates or to any of their financing sources as collateral security and (b) designate one or more of their Affiliates to perform either of their respective obligations hereunder.

 

Section 11.06Counterparts. 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. This Agreement and any amendments hereto, to the extent signed and delivered by means of digital imaging and electronic mail or a facsimile machine, shall be treated in all manner and respects as an original contract and shall be considered to have the same binding legal effects as if it were the original signed version thereof delivered in person.

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Section 11.07Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

 

Section 11.08Notices. All notices, requests and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally against written receipt or by facsimile transmission against facsimile confirmation or mailed by prepaid first class certified mail, return receipt requested, or mailed by overnight courier prepaid, to the Parties at the following addresses and facsimile numbers:

If to Purchaser or, following the Closing, the Company:

Nanometrics Incorporated

1550 Buckeye Drive

Milpitas, CA 95035

Facsimile: (408) 545-6000 Attention: Janet Taylor

with copies (which shall not constitute notice) to:

 

Winston & Strawn LLP 333 South Grand Avenue

Los Angeles, California 90071 Facsimile: 

(213) 615-1750 Attention: Eva Davis

 

If to the Sellers or the Representative:

c/o Hecker, PLLC

405 W. Franklin

Tucson, AZ 85701

Facsimile: (520) 620-0405

Phone: (949) 212-6492

Email: fz1arizona@gmail.com

Attention: Lawrence M. Hecker

 

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

Hecker PLLC

405 W. Franklin

Tucson, Arizona 85701

Facsimile: (520) 620—0405

Attention: Lawrence Hecker

 

and

 

James Wyant

1881 No. King Road

Tucson, AZ 85749

Facsimile: [] Telephone: 

(520) 906-0983

Email: jcwyant@optics.arizona.edu

 

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All such notices, requests and other communications will (a) if delivered personally to the address as provided in this Section 11.08 or by facsimile transmission to the facsimile number as provided in this Section 11.08, be deemed given on the day so delivered, or, if delivered after 5:00 p.m. local time of the recipient or on a day other than a Business Day, then on the next proceeding Business Day, (b) if delivered by mail in the manner described above to the address as provided in this Section 11.08, be deemed given on the earlier of the third (3rd) Business Day following mailing or upon receipt and (c) if delivered by overnight courier to the address as provided for in this Section 11.08, be deemed given on the earlier of the first (1st) Business Day following the date sent by such overnight courier or upon receipt, in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice is to be delivered pursuant to this Section 11.08. Any Party from time to time may change his, her or its address, facsimile number or other information for the purpose of notices to that Party by giving notice specifying such change to each of the other Parties hereto.

 

Section 11.09Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Representative and Purchaser. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty, covenant or agreement hereunder or affect in any way any rights arising by virtue of any such prior or subsequent occurrence.

 

Section 11.10Incorporation of Schedules. The schedules identified in this Agreement are incorporated herein by reference and made a part hereof. The information set forth in each section or subsection of the Disclosure Schedules shall be deemed to provide the information contemplated by, or otherwise qualify, the representations and warranties set forth in the corresponding section or subsection of this Agreement.

 

Section 11.11Construction. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party. If any Party has breached any representation, warranty, covenant or agreement contained in this Agreement in any respect, the fact that there exists another representation, warranty, covenant or agreement relating to the same subject matter (regardless of the relative levels of specificity) which such Party has not breached shall not detract from or mitigate the fact that such Party is in breach of the first representation, warranty, covenant or agreement.

 

Section 11.12Interpretation. Unless the context of this Agreement otherwise requires, (a) words of any gender include each other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement; (d) the terms “Article” or “Section” refer to the specified Article or Section of this Agreement and (e) the word “including” means “including without limitation.”

 

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Section 11.13Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Delaware.

 

Section 11.14Waiver of Jury Trial.

THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY AND THAT ANY ACTION OR PROCEEDING WHATSOEVER AMONG THEM RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

 

Section 11.15Consent to Jurisdiction; Choice of Forum. Solely with respect to disputes and claims with respect to which a Party seeks specific performance pursuant to Section 11.09, each of the Parties to this Agreement hereby submits to the exclusive jurisdiction of the state and federal courts located in the State of Delaware in respect of the claims with respect to which a Party seeks specific performance pursuant to Section 11.16 and waives, and agrees not to assert, any defense in any action for such interpretation or enforcement that such Party is not subject to such jurisdiction or that such action may not be brought or is not maintainable in such courts or that this Agreement may not be enforced in or by such courts, that the action is brought in an inconvenient forum, or that the venue of the action is improper. Service of process with respect thereto may be made upon any Party by mailing a copy thereof by registered or certified mail, postage prepaid, to such Party at its address as provided in Section 11.08.

 

Section 11.16Specific Performance. Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of Section 7.01 (Press Releases) and 7.02 (Confidentiality; Non-Competition; Non-Solicitation; Non- Disparagement Confidentiality) were not performed in accordance with their specific terms or otherwise were breached. Accordingly, each Party agrees that the other Parties shall be entitled to, in addition to any other remedy which it may be entitled to at law or in equity, an injunction or injunctions to prevent breaches of the provisions of Section 7.01 (Press Releases) or Section 6.02 (Confidentiality; Non-Competition; Non-Solicitation; Non-Disparagement Confidentiality))  at any time, and, in each case, to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in the state and federal courts located in the State of Delaware.

 

Section 11.17Arbitration.

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(a)Except for disputes and claims with respect to which a Party seeks specific performance pursuant to Section 11.16 (which may be pursued in any state and federal court in the State of Delaware), each Party agrees that arbitration administered by JAMS, Inc. in accordance with its JAMS Comprehensive Arbitration Rules and Procedures (the “JAMS Rules”) shall be the sole and exclusive method for resolving any claim or dispute (“Claim”) arising out of or relating to the rights and obligations of the Parties under this Agreement, whether such Claim arose or the facts on which such Claim is based occurred prior to or after the execution and delivery of this Agreement.

 

(b)The Parties hereto agree that (i) one arbitrator shall be appointed pursuant to the JAMS Rules to conduct any such arbitration, (ii) such arbitrator shall have at least 15 years of experience with respect to asset purchase agreements and complex commercial contracts, (iii) all meetings of the Parties and all hearings with respect to any such arbitration shall take place in Phoenix, Arizona and (iii) each Party to the arbitration shall bear its own costs and expenses (including all attorneys’ fees and expenses, except to the extent otherwise required by applicable Law), and all costs and expenses of the arbitration proceeding (such as filing fees, the arbitrator’s fees, hearing expenses, etc.) shall be borne equally by the Parties. Notwithstanding anything to the contrary contained in the Escrow Agreements, as between the Sellers and Purchaser, the Representative (on behalf of the Sellers) and Purchaser shall each bear fifty percent (50%) of the fees and expenses that such Persons are jointly and severally responsible for under the Escrow Agreements.

 

(c)In addition, the Parties hereto agree that (i) the arbitrator shall have no authority to make any decision, judgment, ruling, finding, award or other determination that does not conform to the terms and conditions of this Agreement (as executed and delivered by the Parties hereto), and (ii) the arbitrator shall have no greater authority to award any relief than a court having proper jurisdiction pursuant to Section 11.15. Any decision, judgment, ruling, finding, award or other determination of the arbitrator and any information disclosed in the course of any arbitration hereunder (collectively, the “Arbitration Information”) shall be kept confidential by the Parties subject to Section 11.17(d), and any appeal from or motion to vacate or confirm such decision, judgment, ruling, finding, award or other determination shall be filed under seal.

 

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(d)In the event that any Party or any of such Party’s Affiliates, associates or representatives is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand or similar process) to disclose any Arbitration Information (the “Disclosing Party”), such Disclosing Party shall notify the other Parties promptly of the request or requirement so that any such other Party may seek an appropriate protective order or waive compliance with the provisions of this Section 11.17. If, in the absence of a protective order or the receipt of a waiver hereunder, the Disclosing Party or any of its Affiliates, associates or representatives believes in good faith, upon the advice of legal counsel, that it is compelled to disclose any such Arbitration Information, such Disclosing Party may disclose such portion of the Arbitration Information as it believes in good faith, upon the advice of legal counsel, it is required to disclose; provided that the Disclosing Party shall use reasonable efforts to obtain, at the request and expense of such other Party, an order or other assurance that confidential treatment shall be accorded to such portion of the Arbitration Information required to be disclosed as such other Party shall designate. Notwithstanding anything in this Section 11.17 to the contrary, the Parties shall have no obligation to keep confidential any Arbitration Information that becomes generally known to and available for use by the public other than as a result of the disclosing Party’s acts or omissions or the acts or omissions of such Party’s Affiliates, associates or representatives. The Parties agree that, subject to the right of any Party to appeal or move to vacate or confirm any decision, judgment, ruling, finding, award or other determination of an arbitration as provided in this Section 11.17, the decision, judgment, ruling, finding, award or other determination of any arbitration under the JAMS Rules shall be final, conclusive and binding on all of the Parties hereto; provided, however, that nothing in this Section 11.17 shall prohibit any Party hereto from instituting litigation to enforce any final decision, judgment, ruling, finding, award or other determination of the arbitration.

 

Section 11.18Disclosure Schedules. The information set forth in each section or subsection of the Disclosure Schedules shall be deemed to provide the information contemplated by, or otherwise qualify, the representations and warranties of the Company set forth in the corresponding section or subsection of this Agreement and any other section or subsection of ARTICLE III, but only to the extent that it is expressly stated on the face of the disclosure that it applies to such other section or subsection of ARTICLE III.

 

[Remainder of Page Intentionally Left Blank]

 

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

 

			
	
PURCHASHER

	
 
	
 
	
 

	
NANOMETRICS INCORPORATED

	
a Delaware corporation

	
 
	
 
	
 

	
 
	
 
	
 

	
By:
	
 
	
/s/ Pierre-Yves Lesaicherre

	
Name:
	
 
	
Pierre-Yves Lesaicherre

	
Title:
	
 
	
President and Chief Executive Officer

 

 

 

[Signature Page -Stock Purchase Agreement]

 

 

			
	
COMPANY

	
 
	
 
	
 

	
4D TECHNOLOGY CORPORATION

	
an Arizona corporation

	
 
	
 
	
 

	
 
	
 
	
 

	
By:
	
 
	
/s/ James Millard

	
Name:
	
 
	
James Millard

	
Title:
	
 
	
President

 

			
	
REPRESENTATIVE

	
 
	
 
	
 

	
/s/ Dr. James Wyant

	
Dr. James Wyant

 

 

 

[Signature Page - Stock Purchase Agreement]

 

SELLERS

 

	
	
The Family Trust under the Wyant Living Trust U/A September 8, 2000

	
/s/ James Wyant

	
James Wyant, Trustee

	
 

	
/s/ James Millerd

	
James Millerd

	
 

	
/s/ Neal Brock

	
Neal Brock

	
 

	
/s/ Brad Kimbrough

	
Brad Kimbrough

	
 

	
/s/ Steve Martinek

	
Steve Martinek

	
 

	
/s/ James Senrad

	
James Senrad

	
 

	
/s/ Catherine Ornstein

	
Catherine Ornstein

	
 

	
/s/ Michael North-Morris

	
Michael North-Morris

	
 

	
/s/ Eric Frey

	
Eric Frey

	
 

	
/s/ Chris Lesadd

	
Chris Lesadd

	
 

	
/s/ Don Roberts

	
Don Roberts

	
 

	
/s/ Erik Novak

	
Erik Novak

	
 

	
/s/ John Hayes

	
John Hayes

 

[Signature Page - Stock Purchase Agreement]

 

The exhibits and schedules have been excluded and the registrant agrees to furnish them supplementally to the Securities and Exchange Commission upon request.Exhibit
10.62

 

THE
COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL
PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED
IN THIS EXHIBIT WITH “*****”

 

COLLABORATION
AND LICENSE AGREEMENT

 

This
COLLABORATION AND LICENSE AGREEMENT (“Agreement”) is entered into as of December 4, 2018 (the “Effective
Date”) between VBI VACCINES INC., a company organized under the laws of the Province of British Columbia, Canada
(“VBI”), and having a principal place of business at 310 Hunt Club Road, Suite 201, Ottawa ON K1V 1C1, and
Brii Biosciences Limited, an exempted company organized under the laws of the Cayman Islands (“Brii Bio”),
having its registered office at Vistra (Cayman) Limited, PO Box 3119, Grand Pavilion Hibiscus Way, 802 West Bay Road Grand Cayman
KYI-1205.

 

WHEREAS

 

A.
VBI has developed a new recombinant protein based immunotherapeutic for use in treatment of Hepatitis B; and

 

B.
Brii Bio and VBI wish to collaborate on further development of VBI’s Hepatitis B recombinant protein based immunotherapeutic;
and

 

C.
Brii Bio desires to obtain from VBI certain exclusive rights and licenses to make, have made, use, sell, offer for sale and import
VBI’s Hepatitis B recombinant protein based immunotherapeutic in the Field (as defined below) in the Licensed Territory
(as defined below), and VBI is willing to grant to Brii Bio such rights and licenses on the terms and conditions set forth in
this Agreement.

 

NOW,
THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, VBI and Brii Bio hereby agree as follows:

 

Article
1

 

DEFINITIONS

 

As
used in this Agreement, the following terms shall have the meanings set out in this Article 1 unless the context clearly and unambiguously
dictates otherwise.

 

1.1
“Additional Pre-Clinical Trials” has the meaning set forth in Section 5.2(d).

 

1.2
“Adjuvant” shall mean [*****].

 

1.3
“Affiliate” of a Party shall mean any company, partnership or other entity that, directly or indirectly, through
one (1) or more intermediaries, controls, is controlled by, or is under common control with such Party, as the case may be, but
for only so long as such control exists. For the purposes of this definition, “control” shall mean (i) direct or indirect
beneficial ownership of at least fifty percent (50%) of the voting share capital or other equity interest in such Person or (ii)
the power to direct the management of such Person by contract or otherwise.

 

    	-1-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

1.4
“Agreement” has the meaning set forth in the Preamble.

 

1.5
“Alliance Manager” has the meaning set forth in Section 4.5.

 

1.6
“Applicable Laws” shall mean the applicable provisions of any and all national, state and local laws, statutes,
rules, regulations, administrative codes, ordinances, judgments, decrees, directives, injunctions, orders, permits (including
Marketing Approvals) of or from any court, Regulatory Authority or Governmental Authority having jurisdiction over or related
to the subject matter.

 

1.7
“Anti-Corruption Laws” shall mean (a) the U.S. Foreign Corrupt Practices Act of 1977, (b) the U.K. Bribery
Act 2010, (c) the Peoples Republic of China (PRC) Anti-Unfair Competition Law, and (d) the criminal code of each Region in the
Licensed Territory.

 

1.8
“BLA” shall mean a Biologics License Application filed pursuant to the requirements of the FDA under Section
351(k) of the Public Health Services Act (Title 42, U.S.C., Chapter 6A) and 12 C.F.R., Section 601.2, to obtain Marketing Approval
for a biological product in the United States, or the equivalent application or filing in another country (as applicable).

 

1.9
“Brii Bio” shall have the meaning set forth in the Preamble.

 

1.10
“Brii Bio Adjuvant” shall mean an Adjuvant [*****], which Brii Bio Adjuvant shall be designated by Brii Bio in
its sole discretion, subject to Section 4.4.

 

1.11
“Brii Bio Know-How” shall mean Know-How owned or Controlled by Brii Bio as of the Effective Date or developed
during the Term independent of activities under this Agreement excluding any Joint Know-How.

 

1.12
“Brii Bio Patents” shall mean Patents owned or Controlled by Brii Bio as of the Effective Date or during
the Term that cover or claim the Brii Bio Know-How.

 

1.13
“Brii Bio Technology” shall mean the Brii Bio Know-How and the Brii Bio Patents.

 

1.14
“Business Day” shall mean a day other than a Saturday or Sunday or any public holiday in the United States
or China. For the avoidance of doubt, references in this Agreement to “days” shall mean calendar days.

 

    	-2-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

1.15
“Chairperson” shall mean the chairperson of the Joint Steering Committee.

 

1.16
“Clinical Trial” shall mean a study in which human subjects or patients are dosed with a drug, whether
approved or investigational, including any Phase I Clinical Trial, Phase II Clinical Trial, Phase III Clinical Trial or any study
required to be conducted following Marketing Approval as a condition to maintaining such approval.

 

1.17
“CMC” shall mean chemistry, manufacturing and controls.

 

1.18
“Collaboration Clinical Trial” shall mean the Phase II Clinical Trial, to be conducted in accordance with
the Development Plan in the Licensed Territory for the purpose of comparing VBI-2601 and a Novel Composition across multiple cohorts
and dosing regimens.

 

1.19
“Commercial Supply Agreement” shall have the meaning set forth in Section 7.3.

 

1.20
“Commercially Reasonable Efforts” shall mean, with respect to a Party and an obligation to conduct a particular
activity pertaining to the research, development, manufacturing or commercialization obligations hereunder, that level of efforts
and resources reasonably required to carry out such obligation consistent with the efforts commonly used by such Party with respect
to a biopharmaceutical product which is of similar market potential and at a similar stage in its development or product life,
and all other relevant factors. Notwithstanding the foregoing, to the extent that the performance of a Party’s obligations
hereunder is impaired by the other Party’s failure to perform its obligations hereunder, the determination of whether such
first Party has used Commercially Reasonable Efforts in performing a given obligation will be determined in the context of such
other Party’s failure.

 

1.21
“Competing Product” shall mean [*****].

 

1.22
“Confidential Information” shall have the meaning set forth in Section 11.1.

 

1.23
“Confidentiality Agreement” shall mean that certain letter agreement dated July 9, 2018 between VBI and Brii Bio.

 

1.24
“Control” or “Controlled” shall mean, with respect to any Know-How, Patent or other
intellectual property right, the legal authority or right (whether by ownership, license or otherwise but without taking into
account any rights granted by one Party to the other Party under the terms of this Agreement) of a Party or its Affiliates to
grant access, a license or a sublicense of or under such Know-How, Patent or other intellectual property rights to another Party
hereto, or to otherwise disclose proprietary or trade secret information to such other Party, without breaching the terms of any
agreement with a Third Party, or misappropriating the proprietary or trade secret information of a Third Party, in each case in
existence as of the time such Party or its Affiliates would first be required hereunder to grant the other Party such access,
license or sublicense.

 

    	-3-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

1.25
“Development Costs” shall mean, with respect to a Party, such Party’s Internal Costs and External
Costs incurred in the conduct of activities assigned to such Party under the Development Plan, to the extent incurred in accordance
with the budget set forth in the Development Plan.

 

1.26
“Development Plan” shall mean the research and development plan to be conducted by the Parties covering research
and development activities through the completion of the Collaboration Clinical Trial for the purpose of developing improved therapeutic
Hepatitis B recombinant protein based immunotherapeutics comprising the Licensed Compound, as may be amended in accordance with
Section 5.1(b). The initial Development Plan is attached hereto as Schedule C.

 

1.27
“Disclosing Party” shall have the meaning set forth in Section 11.1.

 

1.28
“Distributor” shall mean a Third Party to whom Brii Bio has granted the right to market, detail, promote, advertise,
sell and distribute Product in the Licensed Territory.

 

1.29
“Dollar” or “$” shall mean the legal tender of the United States.

 

1.30
“Effective Date” shall have the meaning set forth in the Preamble hereto.

 

1.31
“External Costs” shall mean amounts paid to Third Parties (or payable to Third Parties and accrued in accordance
with GAAP) by a Party (or its Affiliate) and incurred in the performance of activities under the Development Plan, excluding (a)
pre-paid amounts, capital expenditures, and financing costs, (b) any items included in the FTE Rate, and (c) any mark-up on any
amounts paid to Third Parties imposed by a Party.

 

1.32
“FDA” shall mean the United States Food and Drug Administration or its successor.

 

1.33
“[*****]” shall have the meaning set forth in Section 1.34.

 

1.34
“[*****]” means that certain [*****].

 

1.35
“Field” means the diagnosis and treatment of Hepatitis B.

 

1.36
“First Commercial Sale” shall mean with respect to a Licensed Product in any Region in the Licensed Territory,
the first sale for monetary value for use or consumption of such Licensed Product in such Region after Marketing Authorization
for such Licensed Product has been obtained in such Region.

 

    	-4-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

1.37
“Force Majeure Event” shall have the meaning set forth in Section 17.1.

 

1.38
“FTE” shall mean the equivalent of the work of one duly qualified employee of a Party full time for one
year (consisting of a total of one thousand eight hundred (1,800) hours per year) carrying out development, manufacturing, commercialization,
or other regulatory, distribution, scientific, or technical work under the Development Plan. Overtime, and work on weekends, holidays
and the like will not be counted with any multiplier (e.g., time-and-a-half or double time) toward the number of hours
that are used to calculate the FTE contribution, and no individual may be charged at greater than one FTE, regardless of that
individual’s hours worked during that year. The portion of an FTE billable by a Party for one employee during a given accounting
period will be determined by dividing the number of hours worked directly by such employee on the work to be conducted under this
Agreement during such accounting period by the number of FTE hours applicable for such accounting period based on one thousand
eight hundred (1,800) working hours per calendar year.

 

1.39
“FTE Rate” shall mean the rate of three hundred thousand Dollars (300,000) per FTE per calendar year which
rate will be prorated on a daily basis as necessary, and which rate is subject to one annual adjustment in each calendar year
during the Term by the percentage increase or decrease in the consumer price index (CPI) as of December 31 of each calendar year,
over the level of the CPI as of December 31 of the prior calendar year, with the first such increase to be effective on January
1, 2020. Notwithstanding the foregoing, for any calendar year during the Term that is less than a full year, the above referenced
rate will be proportionately reduced to reflect such portion of such full calendar year.

 

1.40
“GAAP” shall mean generally accepted accounting principles in the United States, or internationally, as appropriate,
consistently applied and shall mean the international financial reporting standards (“IFRS”) at such time as
IFRS becomes the generally accepted accounting standard and applicable laws require that a Party use IFRS.

 

1.41
“Global Clinical Trial” shall mean a Clinical Trial conducted by VBI or Brii Bio in the Licensed Territory
and the VBI Territory in accordance with the Global Development Plan with the intent of generating data to support an application
for Marketing Approval in each of the Licensed Territory and the VBI Territory.

 

1.42
“Global Development Plan” shall mean, for a Licensed Product, the plan setting forth (a) the global development
activities for Licensed Product, including the proposed pre-clinical studies and Clinical Trials and regulatory plans, (b) the
timelines for such activities, (c) an outline of the key elements involved in obtaining Marketing Approval of such Licensed Product,
and (d) the allocation of responsibilities between the Parties of the development activities set forth under such Global Development
Plan, as the same may be amended from time-to-time in accordance with Section 4.1(b).

 

    	-5-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

1.43
“Good Clinical Practices” or “GCP” shall mean all applicable then-current standards for the
design, conduct, performance, monitoring, auditing, recording, analyses and reporting of Clinical Studies, including, as applicable,
as set forth in the ICH Harmonised Tripartite Guideline for Good Clinical Practice (CPMP/ICH/135/95) or any other guidelines for
good clinical practice for trials on medicinal products as required by the equivalent Applicable Laws in any relevant country.

 

1.44
“Good Laboratory Practices” or “GLP” shall mean all applicable then-current standards for laboratory
activities for pharmaceuticals, as set forth in the FDA’s Good Laboratory Practice regulations as defined in 21 C.F.R. Part
58, the PRC Good Laboratory Practice effective as of September 1, 2003, the Good Laboratory Practice principles of the Organization
for Economic Co-Operation and Development (OECD), and any such standards of good laboratory practice as are required by the equivalent
Applicable Laws in any relevant country, or in countries in which the Licensed Product is intended to be sold by the Party that
is subject to such standards.

 

1.45
“Good Manufacturing Practices” or “GMP” shall mean the then-current good manufacturing practices
required by the FDA, as set forth in the United States Federal Food, Drug and Cosmetic Act, as amended, and the regulations promulgated
thereunder, for the manufacture and testing of pharmaceutical materials, and comparable laws or regulations applicable to the
manufacture and testing of pharmaceutical materials in jurisdictions outside the United States, as they may be updated from time
to time. Good Manufacturing Practices shall include applicable quality guidelines promulgated under the ICH.

 

1.46
“Governmental Authority” shall mean any multinational, federal, national, state, provincial or local entity,
office, commission, bureau, agency, political subdivision, instrumentality, branch, department, authority, board, court, arbitral
or other tribunal, official or officer, exercising executive, judicial, legislative, police, regulatory, administrative or taxing
authority or functions of any nature over any of the activities contemplated by this Agreement.

 

1.47
“ICH” shall mean the International Conference on Harmonization (of Technical Requirements for Registration of
Pharmaceuticals for Human Use).

 

1.48
“IFRS” shall have the meaning set forth in Section 1.40.

 

1.49
“IND” shall mean an Investigational New Drug Application (including any amendments thereto) filed with the FDA
pursuant to 21 C.F.R. §312 before commencement of clinical trials of a pharmaceutical product, or any comparable filings
with Regulatory Authorities in the Licensed Territory, including clinical trial applications.

 

    	-6-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

1.50
“Internal Costs” shall mean, for any period and any activity under the Development Plan, (a) the product
obtained by multiplying (i) the actual total FTEs (or portion thereof) devoted to the performance of such activity during
such period, by (ii) the applicable FTE Rate, and (b) a Party’s reasonably allocated other internal costs with respect
to such activity to the extent not included in the FTE Rate.

 

1.51
“Interruption Event” shall mean, with respect to a Party and a Licensed Product, any event caused by facts
or circumstances beyond the reasonable control of such Party including, without limitation, (a) a Force Majeure Event, (b) a delay
caused by the other Party, (c) a delay related to the formulation, manufacturing or release testing of a Brii Bio Adjuvant, (d)
a delay by a Regulatory Authority in providing necessary Marketing Approvals for a Licensed Product, (e) a requirement for such
Party to seek pricing or reimbursement approval in a Region in the Licensed Territory, (f) a withdrawal or recall of such Licensed
Product from the market (to the extent due to circumstances outside of such Party’s reasonable control), or (g) a suspension
of the Marketing Approval of such Licensed Product.

 

1.52
“Inventions” shall mean any and all inventions, discoveries, improvements, processes and techniques discovered,
conceived or first reduced to practice in the course of activities conducted pursuant to the Development Plan, whether or not
patentable or included in any claim of patents and patent applications.

 

1.53
“Joint Inventions” shall mean (a) any and all Inventions discovered, conceived or first reduced to practice jointly
by the Parties (or their Affiliates) during course of carrying out the Development Plan, and (b) any Novel Composition. For the
avoidance of doubt, “Joint Inventions” shall exclude any Inventions to the extent such Inventions comprise improvements
to the VBI Technology or the Brii Bio Technology.

 

1.54
“Joint Know-How” shall mean (a) Know-How developed jointly by the Parties or by Third Parties acting on their
behalf during the conduct of activities under the Development Plan or the Global Development Plan (as applicable) that is necessary
or useful to research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export and otherwise
commercialize the Licensed Products, and (b) any Know-How developed by either Party or jointly by the Parties or by Third Parties
acting on their behalf during the conduct of activities under the Development Plan or the Global Development Plan (as applicable)
to the extent specifically related to the Brii Bio Adjuvant or any Novel Composition.

 

1.55
“Joint Patents” shall mean all Patents claiming any Joint Inventions.

 

    	-7-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

1.56
“Joint Steering Committee” or “JSC” shall have the meaning set forth in Section 4.1(a).

 

1.57
“Joint Technology” shall mean the Joint Know-How and the Joint Patents.

 

1.58
“Know-How” shall mean information including unpatented Inventions, methods, technologies, data, processes, procedures,
techniques, designs, plans, research tools, reagents, formulations, assay techniques, clinical test design, protocols, product
life cycle management strategies and operating conditions except to the extent that such information is publicly available or
is otherwise protect by patent or trade secret law.

 

1.59
“Licensed Compound” shall mean the [*****] owned or Controlled by VBI or an Affiliate of VBI.

 

1.60
“Licensed Product” shall mean VBI-2601 or a Novel Composition (as applicable).

 

1.61
“Licensed Territory” shall mean mainland China, Hong Kong, Taiwan and Macau (each, a “Region”).

 

1.62
“Manufacturing Technology” shall mean any process, technology, information, data or documentation that is necessary
or useful in the manufacture, formulation, vialing or release of the Licensed Compound and Licensed Product, including any assays
or testing required to comply with GMP including process validation, product identity assays, in-process-control assays and any
relevant standard operating procedures.

 

1.63
“Marketing Approval” shall mean, with respect to any particular country or Region, all approvals, licenses, registrations
or authorizations of any Regulatory Authority necessary to commercially distribute, sell or market a Licensed Product in such
country or Region, including, where applicable, (a) pricing or reimbursement approval in such country or Region, (b) pre- and
post-approval marketing authorizations (including any prerequisite manufacturing approval or authorization related thereto), (c)
labeling approval, and (d) technical, medical and scientific licenses.

 

1.64
“Net Sales” shall mean, with respect to a Licensed Product, [*****].

 

1.65
“NMPA” means the National Medical Products Administration of the People’s Republic of China (formerly
the China Food and Drug Administration) and any successor agency(ies) or authority thereto having substantially the same function.

 

    	-8-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

1.66
“Novel Composition” shall mean a new recombinant protein based immunotherapeutic formulation which includes
the Licensed Compound and a Brii Bio Adjuvant.

 

1.67
“Party” shall mean VBI or Brii Bio individually, and “Parties” shall mean VBI and Brii Bio
collectively.

 

1.68
“Patent(s)” shall mean, with respect to any jurisdiction, (a) any and all issued patents and patent applications,
including all provisional applications, continuations, continuations-in-part, divisions and renewals, and all patents granted
thereon, (b) patents-of-addition, reissues, reexaminations and extensions or restorations by existing or future extension or restoration
mechanisms, including patent term adjustments, patent term extensions, supplementary protection certificates or the equivalent
thereof, and (c) other forms of government-issued rights substantially similar to any of the foregoing.

 

1.69
“Person” shall mean any individual, corporation, partnership, limited liability company, trust, Governmental Authority,
or other legal entity of any nature whatsoever.

 

1.70
“Phase I Clinical Trial” means a clinical study of a Licensed Product in humans the purpose of which is
preliminary determination of pharmacokinetics, safety and tolerability of a dosing regime and for which there may or may not be
primary endpoints (as understood by the applicable Regulatory Authorities) in the protocol relating to efficacy.

 

1.71
“Phase II Clinical Trial” means a clinical study of a Licensed Product in humans to assess the safety,
dose ranging and efficacy or therapeutic benefit of such Licensed Product.

 

1.72
“Phase III Clinical Trial” means a controlled clinical study, or a portion of a controlled study, in humans
of the efficacy and safety of a Licensed Product, which study (in its entirety or portion, as applicable), is prospectively designed
to demonstrate statistically whether such Licensed Product is effective and safe for use in a particular indication in a manner
sufficient to file an application for Marketing Approval.

 

1.73
“Pre-clinical Studies” shall mean studies of a Licensed Product in animals for the purpose of assessing preliminary
efficacy, toxicity, pharmacokinetic and safety information.

 

1.74
“Receiving Party” shall have the meaning set forth in Section 11.1

 

1.75
“Region” shall have the meaning set forth in Section 1.61.

 

1.76
“Regulatory Authority” shall mean any national, regional, state or local regulatory agency, department, bureau,
commission, council or other Governmental Authority whose review and/or approval is necessary for the clinical research, development,
manufacture, packaging, use, storage, import, export, distribution, promotion, marketing, offer for sale, selling, pricing or
reimbursement (as applicable) of Licensed Products, including, for the avoidance of doubt, the NMPA and the FDA.

 

    	-9-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

1.77
“Regulatory Documentation” shall mean (a) submissions to any Regulatory Authority, including INDs, BLAs, Drug
Master Files, correspondence with regulatory agencies (registrations and licenses, regulatory drug lists, advertising and promotion
documents), period safety update reports, adverse event files, complaint files and manufacturing records and, if applicable, any
updates or supplements to any of the foregoing and (b) any minutes or contact logs with respect to any telephone conferences conducted
with any Regulatory Authority relating to the subject matter described in clause (a) of this sentence.

 

1.78
“Relevant Factors” shall mean all relevant factors that may affect the development, Marketing Approval
or commercialization of a Licensed Product, including (as applicable): actual and potential issues of safety, efficacy or stability;
product profile (including product modality, category and mechanism of action); stage of development or life cycle status; actual
and projected development, Marketing Approval, manufacturing, and commercialization costs; any issues regarding the ability to
manufacture or have manufactured the Licensed Compound or a Licensed Product; the likelihood of obtaining Marketing Approvals
(including satisfactory price approvals); the timing of such approvals; the current guidance and requirements for Marketing Approval
for a Licensed Product and similar products and the current and projected regulatory status; labeling or anticipated labeling;
the then-current competitive environment and the likely competitive environment at the time of projected entry into the market;
past performance of the Licensed Product or similar products; present and future market potential; existing or projected pricing,
sales, reimbursement and profitability; pricing or reimbursement changes in relevant countries; proprietary position, strength
and duration of patent protection and anticipated exclusivity; and other relevant scientific, technical, operational and commercial
factors.

 

1.79
“Royalty Report” shall have the meaning set forth in Section 9.8.

 

1.80
“Royalty Term” shall have the meaning set forth in Section 9.5(a).

 

1.81
“[*****]” means that certain [*****].

 

1.82
“Senior Executives” shall have the meaning set for in Section 4.4.

 

1.83
“SEC” shall mean the US Securities Exchange Commission.

 

    	-10-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

1.84
“Stock Purchase Agreement” means that certain Stock Purchase Agreement, dated as of the Effective Date, between
the Parties, pursuant to which Brii Bio will purchase certain shares of VBI Common Stock in accordance with the terms and conditions
set forth therein.

 

1.85
“Sublicensee” shall mean a Third Party or an Affiliate of Brii Bio, to whom Brii Bio or an Affiliate of Brii Bio
has granted a sublicense under the VBI Technology to, offer for sale and sell Licensed Product in the Field in any country in
the Licensed Territory as contemplated by Section 2.3(a) of this Agreement. For clarity, the term “Sublicensee” shall
not include any wholesellers that are not granted any sublicense under the VBI Technology to offer for sale and sell Licensed
Product in the Field in the Licensed Territory.

 

1.86
“Term” shall have the meaning set forth in Section 15.1.

 

1.87
“Third Party” shall mean any Person other than VBI, Brii Bio and their respective Affiliates.

 

1.88
“Third Party Claims” shall have the meaning set forth in Section 14.1.

 

1.89
“Third Party Manufacturer” shall have the meaning set forth in Section 7.2(a).

 

1.90
“Third Party Royalties” shall mean royalties payable by VBI under [*****].

 

1.91
“VBI” shall have the meaning set forth in the Preamble.

 

1.92
“VBI-2601” shall mean a recombinant protein based immunotherapeutic for use in treating Hepatitis B developed
by VBI.

 

1.93
“VBI Know-How” shall mean all Know-How owned or Controlled by VBI as of the Effective Date or during the
Term that is necessary or useful to research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import,
export and otherwise commercialize the Licensed Compounds or Licensed Products. For the avoidance of doubt, the “VBI Know-How”
shall not include Joint Know-How.

 

1.94
“VBI Patents” shall mean all Patents owned or Controlled by VBI as of the Effective Date or during the Term that
(a) claim the composition of matter of, or the method of making or using Licensed Compounds or Licensed Products, or (b) are otherwise
necessary or useful to research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or
otherwise commercialize the Licensed Compounds or Licensed Products. For the avoidance of doubt, the “VBI Patents”
shall not include Joint Patents. The VBI Patents existing as of the Effective Date are set forth on Schedule A hereto; provided
that, any Patent not included on Schedule A that otherwise meets the definition of a VBI Patent shall still be considered a VBI
Patent notwithstanding its omission from Schedule A.

 

    	-11-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

1.95
“VBI Technology” shall mean all VBI Know-How, VBI Patents and VBI’s interest in Joint Patents and Joint
Inventions.

 

1.96
“VBI Territory” means all countries outside of the Licensed Territory.

 

Article
2

 

DESCRIPTION
OF THE COLLABORATION

 

2.1
VBI and Brii Bio wish to collaborate on the development of a Hepatitis
B recombinant protein based immunotherapeutic in the Licensed
Territory. This collaboration will initially focus on the execution of a Development Plan by the Parties with the objective
of developing a Novel Composition and comparing such Novel Composition to VBI-2601 in the Collaboration Clinical Trial. Brii Bio
will select the Brii Bio Adjuvant [*****] within five (5) days of the Effective Date. Based on the results of such Pre-clinical
Studies, Brii Bio will select the Novel Compositions to be included in the Collaboration Clinical Trial subject to Section 4.4.
Once selected, INDs for the Novel Composition and the VBI-2601 candidate will be filed in the Licensed Territory and, if approved,
the Novel Composition and the VBI-2601 candidate will be tested in the Collaboration Clinical Trial, after which, Brii Bio will
have the right to select either the Novel Composition or VBI-2601 for further clinical development in support of an application
for Marketing Approval in the Licensed Territory.

 

Article
3

 

GRANT
OF LICENSES

 

3.1
VBI License to Brii Bio. Subject to the terms and conditions of this Agreement,
VBI hereby grants to Brii Bio an exclusive royalty-bearing license, with the right to grant sublicenses through multiple tiers
in accordance with Section 3.3, under the VBI Technology for Brii Bio, its Affiliates and Sublicensees to:

 

(a)
carry out its obligations pursuant to the Development Plan and the Global Development Plan (as applicable);

 

(b)
perform, or have performed, studies (including Clinical Trials) and regulatory and other activities as may be required to
obtain and maintain Marketing Approval of the Licensed Products in the Licensed Territory; and

 

    	-12-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(c)
use, sell and offer for sale the Licensed Products in the Field in the Licensed Territory.

 

3.2
Brii Bio License to VBI. Subject to the terms and conditions of this Agreement,
Brii Bio hereby grants to VBI an exclusive, royalty-free license, with the right to sublicense in accordance with Section 3.3,
under (i) the Brii Bio Technology, solely to the extent that such Brii Bio Technology covers or claims the Brii Bio Adjuvant or
the Novel Composition, and (ii) Brii Bio’s interest in the Joint Technology solely to:

 

(a)
perform, or have performed, activities pursuant to the Development Plan and the Global Development Plan (as applicable) anywhere
in the world for the purpose of the exploitation of Licensed Products in the Field in the Licensed Territory by Brii Bio; and

 

(b)
make, have made, use, sell, and offer for sale the Licensed Products in the Field in the VBI Territory.

 

3.3
Sublicenses.

 

(a)
Brii Bio Right to Sublicense. Brii Bio shall have the right to sublicense any or all rights granted to it under Section 3.1
in any Region in the Licensed Territory to any of its Affiliates or Third Parties through multiple tiers.

 

(b)
VBI Right to Sublicense. VBI shall have the right to sublicense any or all rights granted to it under Section 3.2 to any of
its Affiliates or Third Parties, provided that, with respect to any sublicense of VBI’s obligations set forth in Section
3.2(a), VBI shall be required to obtain Brii Bio’s consent prior to entering into any such sublicense except to the extent
that such sublicense is to an Affiliate.

 

3.4
Rights Reserved. Except for the rights and licenses expressly granted in this
Agreement, VBI retains all rights under its intellectual property, including the VBI Technology, and Brii Bio retains all rights
under its intellectual property.

 

3.5
Option for License Outside the Field. For the duration of the Term, VBI shall
have an option to negotiate with Brii Bio an exclusive license under (a) the Brii Bio Technology that covers or claims the Brii
Bio Adjuvant or the Novel Composition and (b) Brii Bio’s interest in the Joint Technology for use outside the Field in the
VBI Territory. In the event that VBI wishes to exercise its option pursuant to this Section 3.5, VBI shall provide written notice
to Brii Bio thereof, and within thirty (30) days of Brii Bio’s receipt of such notice, the Parties shall commence negotiating
in good faith the terms of such license agreement, which agreement shall include adjuvant licensing terms consistent with market
terms and conditions. If the Parties fail to reach agreement on the terms of such exclusive license agreement within one hundred
and eighty (180) days after such discussions commence, then, provided that the Parties have negotiated in good faith during such
one hundred and eighty (180) day period, Brii Bio shall have no further obligation to negotiate with VBI the terms of such exclusive
license.

 

    	-13-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

Article
4

 

GOVERNANCE

 

4.1
Joint Steering Committee.

 

(a)
Establishment. Within thirty (30) days following the Effective Date, VBI and Brii Bio shall establish a joint development
committee (“Joint Steering Committee” or “JSC”) to oversee, review and coordinate the activities
of the Parties under this Agreement with regard to development and regulatory approval of Licensed Products in the Field in the
Licensed Territory.

 

(b)
Duties. The Joint Steering Committee shall:

 

(i)
promote and facilitate ongoing communication and exchange of information between the Parties regarding conduct of the Development
Plan and the Global Development Plan (as applicable), progress toward obtaining Marketing Approval of the Licensed Product in
the Licensed Territory and manufacture of the Licensed Product for distribution in the Licensed Territory;

 

(ii)
establish the strategic direction for the conduct of the Development Plan and the Global Development Plan (as applicable);

 

(iii)
review and approve any additions or amendments to the Development Plan and the Global Development Plan (as applicable), including
the budget (subject to Section 4.9);

 

(iv)
review and approve the initial Global Development Plan, including the budget (as applicable);

 

(v)
oversee implementation or the Development Plan and the Global Development Plan (as applicable) including assigning roles, responsibilities,
timelines and budgets for activities based upon the Development Plan and the Global Development Plan;

 

(vi)
review and discuss the results obtained during conduct of the Development Plan and the Global Development Plan, including the
Collaboration Clinical Trial;

 

    	-14-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(vii)
discuss disputes that may arise between the Parties in the course of carrying out the terms of this Agreement with a view of facilitating
a mutually satisfactory resolution;

 

(viii)
serve as a forum for information sharing regarding the progress of VBI’s [*****] in accordance with Section 9.7;

 

(ix)
discuss the overall regulatory strategies for obtaining Marketing Approval of the Licensed Product in the Licensed Territory;
and

 

(x)
perform such other duties as are specifically assigned by the Parties to the Joint Steering Committee pursuant to this Agreement.

 

4.2
Joint Steering Committee Membership. The JSC shall be composed of six (6) members,
three (3) of whom shall be nominated by VBI and three (3) of whom shall be nominated by Brii Bio. The JSC shall have two Chairpersons,
one appointed by each Party to serve for a period of twelve (12) months. The meetings of the Joint Steering Committee shall be
led, alternately by one Chairperson. Any member of the Joint Steering Committee may designate a substitute to attend and perform
the functions of that member at any meeting of the Joint Steering Committee. Each Party may, with the consent of the other Party,
such consent not to be unreasonably withheld or delayed, invite non-member, non-voting representatives of such Party to attend
meetings of the Joint Steering Committee, provided that such attendees are subject to non-disclosure agreements and obligations
of confidentiality at least as restrictive as those set forth in Article 11. The Alliance Manager of each Party will attend each
meeting of the JSC as a non-voting participant.

 

4.3
Meetings. All Joint Steering Committee meetings shall be held as often as the
members may determine, but in any event Joint Steering Committee meetings shall occur not less than four (4) times per calendar
year. Such meetings may be held in person, or by any means of telecommunications or video conference, as the members deem necessary
or appropriate; provided, however, that at least one Joint Steering Committee meeting per year shall be held in
person and the location of such in-person meeting shall alternate between VBI’s office in Boston Massachusetts and Brii
Bio’s office in either Durham North Carolina or Beijing, China (at Brii Bio’s election) provided, however, that no
more than one (1) JSC meeting per calendar year will be held in China. The first meeting shall be held at Brii Bio’s offices
in Durham. A quorum for Joint Steering Committee meetings shall be four (4) members, with at least two (2) members from each Party.

 

    	-15-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

4.4
Decision-making of Joint Steering Committee. The Joint Steering Committee may
make decisions with respect to any subject matter that is within the purview of the Joint Steering Committee’s duties. Except
as expressly provided in this Agreement, all decisions of the Joint Steering Committee shall be made by unanimous vote or written
consent, with VBI and Brii Bio each having, respectively, one vote in all decisions. The Joint Steering Committee shall use reasonable
efforts to resolve any disputes concerning the matters within its duties. If, with respect to a matter that is subject to the
Joint Steering Committee’s duties the Joint Steering Committee cannot reach consensus, then the Chairperson of the Joint
Steering Committee shall escalate the dispute for resolution to on behalf of VBI, the Chief Executive Officer of VBI and to, on
behalf of Brii Bio, the President of Brii Bio (collectively, the “Senior Executives”). The Senior Executives
shall use good faith efforts to resolve the matter referred to them within fifteen (15) days of such referral (which shall become
the decision of the Joint Steering Committee). If the Senior Executives fail to resolve such matter within ten (10) Business Days
after the date on which the matter is referred to such Senior Executives (unless a longer period is agreed to by the Parties),
then:

 

(a)
Brii Bio shall have final decision-making authority with respect to matters in dispute relating solely to the development,
Marketing Approval and commercialization of Licensed Products in the Licensed Territory, including (i) selection of the Novel
Composition(s) to be included in the Collaboration Clinical Trial; provided that, [*****], (ii) any modification or amendment
to, or issue arising under, the Development Plan, and (iii) the selection of the Third Party Manufacturer pursuant to Section
7.2(a), but excluding decisions that would reasonably be expected to have a material adverse impact on the development, Marketing
Approval or commercialization of Licensed Products in the VBI Territory or would increase the costs allocated to VBI pursuant
to the Development Plan in contravention of Section 4.9;

 

(b)
VBI shall have final decision-making authority with respect to the development, Marketing Approval and commercialization of
Licensed Products in the VBI Territory, including any modification or amendment to, or issue arising under, the Global Development
Plan (as applicable), except for those decisions that would reasonably be expected to have a material adverse impact on the development,
Marketing Approval or commercialization of Licensed Products in the Licensed Territory or would increase the costs allocated to
Brii Bio pursuant to the Development Plan in contravention of Section 4.9; and

 

(c)
with respect to all other matters in dispute, such matters shall be settled by expert determination pursuant to Section 16.3.

 

4.5
Alliance Manager. Each
of the Parties will appoint a single individual to manage Development and Commercialization obligations between the Parties (each,
an “Alliance Manager”). The role of the Alliance Manager will be to act as a single point of contact between
the Parties to ensure a successful relationship under this Agreement. The Alliance Managers will attend all JSC meetings as non-voting
participants; provided that, an Alliance Manager may bring any matter to the attention of the JSC if such Alliance Manager reasonably
believes that such matter warrants such attention. Each Party will designate its initial Alliance Manager promptly after the Effective
Date and each Party may change its designated Alliance Manager at any time upon written notice to the other Party. Any Alliance
Manager may designate a substitute to temporarily perform the functions of that Alliance Manager by written notice to the other
Party. Each Alliance Manager will also: (a) be the point of first referral in all matters of conflict resolution; (b) provide
a single point of communication for seeking consensus between the Parties regarding key strategy and plan issues; (c) identify
and bring disputes to the attention of the JSC in a timely manner; and (d) take responsibility for ensuring that governance activities,
such as the conduct of required JSC meetings and production of meeting minutes, occur as set forth in this Agreement, and that
the relevant action items resulting from such meetings are appropriately carried out or otherwise addressed.

 

    	-16-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

4.6
Minutes. Minutes for each of the Joint Steering Committee meetings shall be prepared
by a VBI member or a Brii Bio member of the Joint Steering Committee alternately, with Brii Bio’s member preparing the minutes
for the first meeting of the Joint Steering Committee. The draft minutes shall be sent to all members of the Joint Steering Committee
for comment promptly after each such meeting (but in no event more than fifteen (15) days after each such meeting). All actions
noted in the minutes shall be reviewed and approved at subsequent meetings of the Joint Steering Committee; provided that
if the Parties cannot agree as to the content of the minutes by the time the Joint Steering Committee next meets, such minutes
shall be finalized to reflect any areas of disagreement.

 

4.7
Expenses. Each Party shall bear its own costs, including expenses incurred by
the members nominated by it in connection with their activities as members of the Joint Steering Committee or as Chairperson.

 

4.8
Subcommittees. From time to time, the Joint Steering Committee may establish
subcommittees to oversee particular projects or activities within the scope of authority of the Joint Steering Committee, as it
deems necessary or advisable. Each subcommittee shall consist of such number of representatives of each Party as the Joint Steering
Committee determines is appropriate from time to time and shall meet with such frequency as the Joint Steering Committee shall
determine. All decisions of each subcommittee shall be made by unanimous vote or written consent, with VBI and Brii Bio each having,
collectively, one vote in all decisions. If, with respect to a matter that is subject to a subcommittee’s decision-making
authority, the subcommittee cannot reach unanimity, the matter shall be referred to the Joint Steering Committee, which shall
resolve such matter in accordance with Section 4.4.

 

4.9
Scope of Governance; Limitation of Authority. Notwithstanding the creation of
the Joint Steering Committee or any subcommittee, each Party shall retain the rights, powers and discretion granted to it hereunder,
and neither the Joint Steering Committee nor any subcommittee shall be delegated or vested with rights, powers or discretion unless
such delegation or vesting is expressly provided herein, or the Parties expressly so agree in writing. Neither the Joint Steering
Committee nor any subcommittee shall have the power to (a) amend or modify this Agreement, (b) waive either Party’s obligation
to comply with the terms and conditions of this Agreement, or (c) materially increase costs under the Development Plan, unless
such increased costs are a result of a requirement by a Regulatory Authority in the Licensed Territory, and no decision of the
Joint Steering Committee or any subcommittee shall be in contravention of any terms and conditions of this Agreement. It is understood
and agreed that issues to be decided by the Joint Steering Committee or any subcommittee, as applicable, are only those specific
issues within the Joint Steering Committee’s duties.

 

    	-17-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

4.10
Dissolution. The Joint Steering Committee shall dissolve and cease to exist upon
the completion of activities under the Development Plan; provided that, if the Parties elect to enter into a Global Development
Plan in accordance with Section 5.5, then the Joint Steering Committee shall dissolve and cease to exist upon the completion of
all activities under the Global Development Plan.

 

Article
5

 

DEVELOPMENT
ACTIVITIES

 

5.1
Development Plans.

 

(a)
Initial Development Plan. Within sixty (60) days following the Effective Date, the Parties shall, notwithstanding Section
4.4, meet to review the initial Development Plan (including a budget for activities thereunder) attached hereto as Schedule C.
For the avoidance of doubt, Brii Bio shall have the sole right to select the Brii Bio Adjuvant for use in the [*****] and the
Novel Composition(s) to be included in the Collaboration Clinical Trial, subject to Section 4.4. The initial Development Plan
shall include (but not be limited to) and assign responsibility between the Parties for the following:

 

	 	(i)	formulations of Novel Compositions which shall be evaluated
during the conduct of the Development Plan;

 

	 	(ii)	Pre-clinical Studies of recombinant protein based immunotherapeutic
candidates to evaluate immunogenicity;

 

	 	(iii)	in vitro assessment of recombinant protein based immunotherapeutic
candidates for stability;

 

	 	(iv)	preparation of an IND;

 

    	-18-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

	 	(v)	technology transfer of immune-monitoring assays to support
clinical development in the Licensed Territory;

 

	 	(vi)	design of the Collaboration Clinical Trial to support
an application for Marketing Approval in the Licensed Territory; and

 

	 	(vii)	development of Manufacturing Technologies for Licensed
Products.

 

(b)
Review and Amendment of the Development Plan. From time to time, and no less than once per calendar year, the Joint Steering
Committee shall review the Development Plan and determine if any amendments or additions are required in order to advance the
objective of obtaining Marketing Approval for a Licensed Product in the Licensed Territory. Any modifications or amendments to
the Development Plan shall become effective when reduced to writing and signed by both Parties.

 

5.2
Conduct of Development Plan.

 

(a)
Diligence. Each Party shall use Commercially Reasonable Efforts to conduct and complete the activities assigned to such Party
in the Development Plan in accordance with the timelines and budget specified therein. Without limiting the foregoing, each Party
shall use good faith efforts to allocate sufficient time, effort, equipment and facilities to such activities and to use personnel
with sufficient skills and experience as are required to accomplish such activities in accordance with the Development Plan and
the terms of this Agreement. In addition, Brii Bio shall use Commercially Reasonable Efforts to initiate the Collaboration Clinical
Trial within [*****] following the Effective Date. Following the completion of the Collaboration Clinical Trial, subject to the
terms of this Agreement, Brii Bio shall have sole responsibility for, and sole discretion with respect to all development activities
regarding the Licensed Product in the Field in the Licensed Territory.

 

(b)
Compliance with Applicable Laws. Each Party shall conduct the activities assigned to it, including with respect to documentation
and records requirements, in the Development Plan in compliance in all material respects with all Applicable Laws.

 

(c)
Records; Reports. Each Party shall maintain records regarding its activities under the Development Plan in sufficient detail
and in good scientific manner appropriate for patent and regulatory purposes, which shall fully and properly reflect all work
done and results achieved by or on behalf of such Party, including with respect to Clinical Trials relating to the Licensed Compound,
drafting formal clinical study reports in compliance with Applicable Laws and ICH guidelines. Each Party shall keep the Joint
Steering Committee appropriately informed of the status of such activities. Upon request by the Joint Steering Committee, without
limiting the foregoing, each Party shall provide the Joint Steering Committee with reasonably detailed summaries of data and results
generated or obtained in the course of such Party’s performance of activities under the Development Plan. With respect to
Clinical Trials relating to the Licensed Compound (including Global Clinical Trials, as applicable), the Party responsible for
the conduct of such Clinical Trial shall present to the Joint Steering Committee at each meeting thereof a summary of the progress
of such ongoing Clinical Trial including, when available, a summary of the resulting data. Following completion of a Clinical
Trial relating to the Licensed Compound, the Party that conducted such Clinical Trial (or Global Clinical Trial, as applicable)
shall provide the other Party with a copy of the clinical study reports and access to data underlying any such study report.

 

    	-19-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(d)
Conduct of Clinical Trials. Brii Bio shall be the sponsor for, and shall use Commercially Reasonable Efforts to, conduct any
and all Clinical Trials (excluding Pre-Clinical Studies) set out in the Development Plan as are required to support Marketing
Approval in the Licensed Territory. In the event that, following submission of a IND for a Licensed Product in a Region in the
Licensed Territory, the applicable Regulatory Authority does not approve such IND and requests that additional Pre-clinical Studies
of such Licensed Product be conducted (the “Additional Pre-clinical Studies”), then Brii Bio shall conduct
such Additional Pre-clinical Studies, and the Parties shall amend the Development Plan to include such Additional Pre-Clinical
Studies.

 

5.3
Development Funding.

 

(a)
Development Plan Costs. Each Party shall be responsible for costs and expenses associated with activities assigned to such
Party under the Development Plan, provided that VBI shall be responsible for clinical supply costs and expenses to the extent
set forth in Schedule 7.1(a).

 

(b)
Post-Development Plan Costs. With the exception of costs related to Global Clinical Trials (as applicable), all Clinical Trials
conducted in the Licensed Territory following the conclusion of the Development Plan shall be borne by Brii Bio.

 

5.4
Post- Development Plan. Following the completion of the Development Plan, Brii Bio shall use Commercially Reasonable Efforts
to develop a Licensed Product in the Licensed Territory in the Field, and in the event that the Parties do not enter into a Global
Development Plan pursuant to Section 5.5, then Brii Bio shall provide annual high-level development reports to VBI describing
ongoing and planned development activities until such time as a first Marketing Approval is obtained in mainland China.

 

    	-20-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

5.5
Global Development. Following the completion of the Collaboration Clinical Study and within ninety (90) days following the
provision of a clinical study report to the JSC pursuant to Section 5.2(c), each Party shall determine, in its sole discretion,
whether it intends to pursue subsequent development activities in its territory for VBI-2601 or the Novel Composition evaluated
in such Collaboration Clinical Study. In the event that the Parties both elect to proceed with further development of VBI-2601
or the Novel Composition, then the Parties shall decide, through the JSC, whether to enter into a Global Development Plan to govern
the conduct of Global Clinical Trials with the objective of obtaining clinical trial data to support applications for Marketing
Approval in the Field for the applicable product in both the Licensed Territory and countries within the VBI Territory. If the
Parties so decide to enter into such Global Development Plan, then the Parties shall mutually agree upon such plan through the
JSC, including the allocation of costs between the Parties for such Global Clinical Trials. Notwithstanding the foregoing, the
Parties may elect not to jointly conduct a Global Clinical Trial under the Global Development Plan, which election must be made
prior to the commencement of any activities relating to such Global Clinical Trial, in which event, neither Party shall thereafter
have a right to use any efficacy data resulting from such Clinical Trial to support Marketing Approval in its respective territory.

 

Article
6

 

REGULATORY
ACTIVITIES

 

6.1
Marketing Approval.

 

(a)
Regulatory Plan. Brii Bio shall develop, in its sole discretion, a regulatory plan for each Licensed Product that describes
the regulatory actions to be taken by Brii Bio to obtain Marketing Approval in the Field in the Licensed Territory with respect
to such Licensed Product. The regulatory plan shall be submitted to the Joint Steering Committee for review and comment, and Brii
Bio shall consider such comments in good faith. Such regulatory plan shall be updated to reflect regulatory activities and changes
agreed upon by the JSC at least once per year, until such time as the applicable Licensed Product receives Marketing Approval.

 

(b)
Diligence. Brii Bio shall use Commercially Reasonable Efforts to obtain and maintain Marketing Approval for at least one Licensed
Product in the Licensed Territory.

 

(c)
Regulatory Submissions.

 

(i)
Licensed Territory. Brii Bio, or its designated Affiliate, shall have the sole right to prepare and submit all Regulatory
Documentation in the Licensed Territory, including applications for Marketing Approval in the Licensed Territory; provided that
in mainland China, Brii Bio shall conduct such regulatory activities (and any and all regulatory activities delegated to Brii
Bio hereunder) (i) as the express and authorized regulatory agent of record for VBI , with VBI retaining ownership of such Marketing
Approvals, and the applicable product importation licenses, (ii) on behalf of VBI and for the benefit of VBI, and (iii) in accordance
with the applicable regulatory plan set forth in Section 6.1(a). Promptly after the Effective Date, the Parties shall execute
such documents as are required for Brii Bio to act as VBI’s express and authorized regulatory agent of record in mainland
China, including powers of attorney. For the avoidance of doubt, as soon as practicable in accordance with Applicable Law, VBI
shall transfer the Marketing Authorization(s) for the Licensed Product in mainland China to Brii Bio. In the Regions in the Licensed
Territory other than mainland China, Brii Bio or its designated local Affiliate will own all Marketing Approvals relating to the
Licensed Product in the Field.

 

    	-21-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(ii)
VBI Territory. VBI shall have sole responsibility and authority for the preparation and submission of all Regulatory Documentation
in the VBI Territory with respect to (a) INDs, permission to conduct Clinical Trials and ongoing correspondence with the relevant
Regulatory Authorities relating thereto; (b) applications for Marketing Approval and ongoing correspondence relating thereto.
For the avoidance of doubt, Brii Bio shall have no rights to any Marketing Approvals for Licensed Products in the VBI Territory.

 

(d)
Communications with Regulatory Authorities. Brii Bio shall have sole responsibility and authority to communicate with Regulatory
Authorities in the Licensed Territory regarding the Clinical Trials and the Marketing Approvals. VBI shall have sole responsibility
and authority to communicate with Regulatory Authorities in the VBI Territory regarding the Clinical Trials and the Marketing
Approvals.

 

(e)
VBI Assistance. VBI shall, and shall cause its Affiliates to, provide all reasonable assistance, facilitation and support
including providing all documents and data reasonably requested by Brii Bio in a timely manner and at Brii Bio’s cost to
obtain and maintain Marketing Approvals in the Licensed Territory and the applicable product importation licenses. Such documents
shall include copies of any clinical study reports or clinical data regarding the Licensed Products in its possession and by providing
comments on Regulatory Documentation to be filed by Brii Bio at Brii Bio’s request. For the avoidance of doubt, VBI shall
not be obligated as a result of this Section 6.1(e) to develop or prepare additional information or materials beyond those that
it has otherwise developed or prepared for its own purposes.

 

6.2
Exchange of Information. Each of Brii Bio and VBI shall promptly provide to the
other copies of any communications received from, or sent to any Regulatory Authority in the Licensed Territory or the VBI Territory,
as applicable, with respect to the Clinical Trials, the Marketing Approval or the Licensed Products.

 

6.3
Coordination of Regulatory Activities. Each Party shall permit the other Party
to review and comment, in a timely manner, on Regulatory Documentation for submission in the Licensed Territory or VBI Territory,
as applicable, and the Parties shall use reasonable efforts to ensure that such Regulatory Documentation are consistent as between
the Licensed Territory and VBI Territory.

 

    	-22-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

6.4
Rights of Reference. Each Party shall have the right to cross reference, file
or incorporate by reference any regulatory submission for any Licensed Product, or any component thereof (including all Approvals),
in order to support regulatory submissions that such Party may make for a Licensed Product in its respective territory. For the
avoidance of doubt, no Party shall be obligated as a result of this Section 6.4 to develop or prepare additional information or
materials beyond those that it has otherwise developed or prepared for its own purposes. For the avoidance of doubt, in the event
that the Parties decide not to jointly develop and implement a Global Development Plan pursuant to Section 5.5, then neither Party
shall have the right to reference any data obtained by the other Party pursuant to independent Clinical Trials conducted by such
other Party, except that the Parties shall provide to each other any information or data generated in any Clinical Trials regarding
the safety of the Licensed Products.

 

6.5
Pharmacovigilance. VBI shall be responsible, at its own expenses, for the creation
and maintenance of the global safety database for Licensed Product. VBI shall be the sole owner of this global safety database.
Brii Bio shall (at its sole cost and expense), and shall cause its Affiliates, Sublicensees and Distributors to submit to VBI
all data relating to adverse events relating to Licensed Products in the Licensed Territory. Within six (6) months after the Effective
Date, the Parties shall enter into a pharmacovigilance agreement on terms no less stringent than those required by ICH guidelines,
including: (i) providing detailed procedures regarding the maintenance of core safety information and the exchange of safety data
relating to Licensed Product within appropriate timeframes and in an appropriate format to enable each Party to meet both expedited
and periodic regulatory reporting requirements; and (ii) ensuring compliance with the reporting requirements of all applicable
Regulatory Authorities for the reporting of safety data in accordance with standards stipulated in the ICH guidelines, and all
applicable regulatory and legal requirements regarding the management of safety data.

 

6.6
Funding Obligation. Brii Bio shall bear one hundred percent (100%) of all costs
and expenses relating to requesting and maintaining Marketing Approval for the Licensed Product in the Licensed Territory.

 

    	-23-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

Article
7

 

SUPPLY
OBLIGATIONS

 

7.1
Clinical Supply Obligations.

 

(a)
VBI shall supply quantities of Licensed Product for use by Brii Bio in the conduct of Clinical Trials in the Licensed Territory,
either itself or through a Third Party Manufacturer, subject to Section 7.2, in accordance with the terms and conditions set forth
on Schedule 7.1(a) hereto, including the deliverables, cost allocation and timeframes set forth therein. For the avoidance of
doubt, VBI shall not be required to develop formulation processes for the manufacture of any Licensed Product other than VBI-2601
pursuant to this Section 7.1(a) and any such formulation processes shall be developed by the Parties pursuant to the terms of
the Development Plan.

 

(b)
In the event that VBI fails to meet any of its final deliverable obligations set forth in Table I on Schedule 7.1(a) hereto
in accordance with the timeframes set forth therein, then Brii Bio shall have the right to reduce the milestone payment that is
next owed by Brii Bio to VBI under Section 9.3 or Section 9.4 (as applicable) by [*****] Dollars ($[*****]) for each month beyond
the first month that VBI is so delayed in meeting such obligation, with the first such reduction being triggered on the thirty-first
(31st) day following the date on which such obligation is required to be completed pursuant to Schedule 7.1(a). For
example, if VBI is delayed in meeting a final deliverable obligation set forth in Table I of Schedule 7.1(a) by seventy-five (75)
days, then Brii Bio would have the right to deduct [*****] Dollars ($[*****]) from the next milestone payment owed by Brii Bio
to VBI under Section 9.3 or Section 9.4 (as applicable). Notwithstanding the foregoing, the total reduction in milestone payments
pursuant to this Section 7.1(b) shall not exceed [*****] ($[*****]) in the aggregate. Notwithstanding the foregoing, the timeframes
set forth in Table I of Schedule 7.1(a) shall be tolled during the pendency of any Interruption Event that directly causes a delay
in VBI’s ability to meet such timeframes.

 

(c)
With respect to the supply of the Brii Bio Adjuvant for use in Clinical Trials, Brii Bio shall provide such Brii Bio Adjuvant
to VBI at [*****].

 

7.2
Technology Transfer.

 

(a)
At any time prior to the initiation of the first Phase III Clinical Trial (subject to Brii Bio’s ability to initiate
an earlier transfer of Manufacturing Technology as set forth in Schedule 7.1(a) in the event that VBI is delayed by more than
six (6) months in meeting its final deliverable obligations set forth therein) for the Licensed Product in the Licensed Territory,
Brii Bio may elect to have VBI transfer manufacturing responsibility for clinical supply and commercial supply to a Third Party
manufacturer either in the VBI Territory or the Licensed Territory (to the extent permitted by Applicable Law) (the “Third
Party Manufacturer”); provided that, VBI shall have no obligation to commence such transfer until after the Collaboration
Clinical Trial has been initiated. Once Brii Bio has elected to have VBI initiate such transfer, then VBI will use Commercially
Reasonable Efforts to effect a transfer of the Manufacturing Technology in accordance with the requirements set forth in this
Section 7.2(a), including the timeframes set forth in the foregoing sentence. The Parties shall mutually agree upon such Third
Party Manufacturer through the JSC, provided that the selection of such Third Party Manufacturer shall be subject to Brii Bio’s
final-decision making authority in accordance with Section 4.4(a). Once such selection has been made, the Parties shall enter
into a three (3)-party Supply Agreement with such Third Party Manufacturer for commercial supply of Licensed Products solely to
Brii Bio; provided that, VBI’s rights under such Third Party Manufacturer supply agreement shall be limited to ensuring
that such Third Party Manufacturer (i) maintains the confidentiality of VBI’s Confidential Information, including any information
related to the VBI Technology, (ii) complies with VBI’s obligations under the [*****], and (iii) complies with applicable
Licensed Product specifications and Applicable Laws. VBI shall use Commercially Reasonable Efforts to fully enable such Third
Party Manufacturer to manufacture Licensed Products, including through the technology transfer requirements set forth in Section
7.2(b) below.

 

    	-24-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(b)
VBI shall promptly, but in any event within
thirty (30) days after the execution of such Third Party Manufacturer supply agreement, commence a transfer of the Manufacturing
Technology for the Licensed Product to the Third Party Manufacturer. VBI’s contribution to the costs relating to transfer
of Manufacturing Technology shall be limited to the provision of the services of VBI staff members. Any additional obligations
or costs required to effect transfer of Manufacturing Technology to the Third Party Manufacturer shall be borne by Brii Bio. For
the avoidance of doubt, nothing in this Section 7.2(b) shall require VBI to develop any new Manufacturing Technology applicable
to the Novel Composition for use by the Third Party Manufacturer and any such development will be conducted pursuant to a separate
agreement between the Parties, provided that, on a calendar year basis, VBI shall provide to the Third Party Manufacturer any
updates or improvements to the Manufacturing Technology relating to the Licensed Product that have been developed in the prior
calendar year. Brii Bio acknowledges that, as between the Parties, all right, title and interest to such Manufacturing Technology
belongs to VBI and that the Third Party Manufacturer will be permitted to use such Manufacturing Technology solely for the purpose
of manufacturing the Licensed Product for commercial supply to Brii Bio.

 

7.3
Commercial Supply. In the event that VBI is unable to transfer the Manufacturing
Technology to a Third Party Manufacturer despite using Commercially Reasonable Efforts to do so, then VBI shall manufacture and
supply Licensed Products to Brii Bio for commercial use in the Licensed Territory. Promptly following a determination that such
transfer will not be feasible, the Parties shall execute a supply agreement for such commercial supply containing supply and quality
terms and conditions consistent with the principles set forth on Schedule 7.3 hereto (the “Commercial Supply Agreement”)
and typical for such agreements.

 

    	-25-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

Article
8

 

COMMERCIALIZATION
AND PROMOTION

 

8.1
Commercialization of Product.

 

(a)
Brii Bio Responsibilities. Brii Bio shall have the exclusive right and responsibility for commercializing Licensed Products
in the Field in the Licensed Territory in accordance with the terms and conditions of this Agreement. Commercialization of Licensed
Products shall include, but not be limited to:

 

	 	(i)	establishing
    the commercialization and marketing strategy and tactics;
	 	 	 
	 	(ii)	establishing
    pricing and reimbursement policies;
	 	 	 
	 	(iii)	receiving,
    accepting and filling orders;
	 	 	 
	 	(iv)	bidding
    and listing; 
	 	 	 
	 	(v)	labeling;
    
	 	 	 
	 	(vi)	advertising
    and detailing; 
	 	 	 
	 	(vii)	storage
    and distribution to customers;
	 	 	 
	 	(viii)	controlling
    invoicing, processing orders and collecting accounts receivable for sales; and
	 	 	 
	 	(ix)	recording
    sales in its books of account for sales.

 

(b)
Commercialization Plan; Commercialization Reports. Within a reasonable time prior to anticipated launch of a Licensed Product,
Brii Bio shall prepare a high-level summary setting forth the material commercialization activities, including revenue targets,
pricing and unit forecasts, planned for such Licensed Product in the Field in the Licensed Territory. For each calendar year following
the First Commercial Sale of such Licensed Product, Brii Bio shall, within forty-five (45) days after the end of such calendar
year, provide to VBI a high-level report summarizing the commercialization activities performed by or on behalf of Brii Bio in
such calendar year to enable VBI to assess Brii Bio’s commercialization obligations set forth in this Section 8.1, including
the minimum sales obligation set forth in Section 8.1(d).

 

(c)
Diligence. Brii Bio shall use Commercially Reasonable Efforts to commercialize at least one (1) Licensed Product in the Field
in the Licensed Territory in accordance with the provisions of this Agreement and shall not, at any time during the Term of this
Agreement, commercialize a Competing Product.

 

    	-26-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(d)
Minimum Sales. Following receipt of Marketing Approval of a Licensed Product in a Region, Brii Bio shall commence commercialization
of such Licensed Product and, with respect to mainland China, shall sell or invoice at least [*****] ([*****]) doses of such Licensed
Product in mainland China within [*****] months of commercial launch of such Licensed Product, and thereafter, shall sell at least
[*****] ([*****]) doses annually. For the avoidance of doubt, if at any time during the Term VBI [*****]. Notwithstanding the
foregoing, the minimum sales obligation set forth in this Section 8.1(d) shall be tolled during the pendency of any Interruption
Event, and any failure of Brii Bio to meet such minimum sales requirement during the occurrence of a Interruption Event shall
not be deemed to be a breach of this Agreement by Brii Bio.

 

(e)
VBI Rights. Nothing in this Agreement shall limit VBI’s exclusive rights to commercialize the Licensed Product in the
VBI Territory.

 

8.2
Territory Compliance. VBI and its Affiliates (i) shall not, directly or indirectly,
commercialize any Licensed Product in the Licensed Territory, whether inside or outside of the Field, and (ii) shall promptly
cease selling or distributing any Licensed Product to any Third Party, or otherwise assisting any Third Party, who is commercializing
or attempting to commercialize or distribute any Licensed Product in the Licensed Territory. Brii Bio and its Affiliates, Distributors
and Sublicensees (A) shall not, directly or indirectly, commercialize the Licensed Product in the VBI Territory or outside the
Field in the Licensed Territory, and (B) shall promptly cease selling or distributing the Licensed Product to any Third Party,
or otherwise assisting any Third Party, who is commercializing or attempting to commercialize or distribute the Licensed Product
in the VBI Territory or outside the Field in the Licensed Territory.

 

8.3
Compliance with Laws. Each Party hereby agrees that it will comply in all material
respects with all Anti-Corruption Laws in the commercialization of Licensed Products in its respective territory.

 

8.4
Sci-B-Vac® Product.
During the Term, VBI shall not sell or offer to sell, nor shall it authorize any Third Party to sell or offer to sell, any
Sci-B-Vac® Product for prophylactic use in any Region of the Licensed Territory except Hong Kong.

 

    	-27-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

Article
9

 

FINANCIAL
TERMS

 

9.1
Equity Investment. In partial consideration of the rights granted by VBI to Brii
Bio hereunder, Brii Bio shall purchase two million, two hundred and ninety-five thousand, and eighty two (2,295,082) shares of
VBI Common Stock at a purchase price of three dollars and five cents ($3.05) per share, for an aggregate purchase price of seven
million Dollars ($7,000,000), pursuant to the Stock Purchase Agreement.

 

9.2
Up-Front Payment. In partial consideration of the rights granted by VBI to Brii
Bio hereunder, subject to the terms and conditions set forth in this Agreement, Brii Bio shall pay a one-time fee in the amount
of four million Dollars ($4,000,000) (the “Up-Front Payment”) on or before ten (10) days after the Effective
Date.

 

9.3
Regulatory Milestones.

 

(a)
In partial consideration of the rights granted by VBI to Brii Bio hereunder and subject to the terms and conditions set forth
in this Agreement, Brii Bio shall pay to VBI the regulatory milestone payments set forth below:

 

(b)

 

	Regulatory
    Milestone	 	 	Milestone
                                         Payment if Licensed Product is VBI-2601	 	 	 	Milestone
                                         Payment if Licensed Product is a Novel Composition	 
	[*****]	 	$	[*****]	 	 	$	[*****]	 
	[*****]	 	$	[*****]	 	 	$	[*****]	 

 

For
the purposes of this Section 9.3, “initiation” means the date the first patient is dosed with a Licensed Product in
the [*****]. Each milestone payment in this Section 9.3 shall be payable only upon the first achievement of such milestone and
no amounts shall be due for subsequent or repeated achievements of such milestone, whether for the same or a different Licensed
Product.

 

(c)
Brii Bio shall promptly, but in any event no later than ten (10) days following achievement of a regulatory milestone by Brii
Bio or any of its Affiliates, inform VBI of such achievement. Thereafter, VBI shall promptly invoice Brii Bio for the payment
set forth above with respect to such regulatory milestone, and Brii Bio shall pay such invoice within thirty (30) days of receipt.

 

    	-28-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

9.4
Sales Milestones.

 

(a)
In partial consideration of the rights granted by VBI to Brii Bio hereunder and subject to the terms and conditions set forth
in this Agreement, Brii Bio shall pay to VBI the following sales milestones:

 

	Annual
    Net Sales in the Licensed Territory	 	 	Milestone
                                         Payment	 
	$	[*****]	 	 	$	[*****]	 
	$	[*****]	 	 	$	[*****]	 
	$	[*****]	 	 	$	[*****]	 

 

Each
milestone payment in this Section 9.4 shall be payable only once upon the first achievement of such milestone and no amounts shall
be due for subsequent or repeated achievements of such milestone.

 

(a)
Brii Bio shall promptly, but in any event no later than ten (10) days following achievement of a sales milestone by Brii Bio
or any of its Affiliates, inform VBI of such achievement. Thereafter, VBI shall promptly invoice Brii Bio for the payment set
forth above with respect to such sales milestone, and Brii Bio shall pay such invoice within thirty (30) days of receipt.

 

9.5
Royalty Payments.

 

(a)
In partial consideration of the rights granted by VBI to Brii Bio hereunder and subject to the terms and conditions set forth
in this Agreement, Brii Bio shall pay to VBI a royalty of [*****] percent ([*****]%) of Net Sales of each Licensed Product in
each Region from the date of the First Commercial Sale of such Licensed Product in each Region until the later of:

 

(i)
expiration, invalidation or lapse of the last VBI Patent claiming such Licensed Product,

 

(ii)
ten (10) years from the date of First Commercial Sale of such Licensed Product in the applicable Region, or

 

(iii)
termination or expiration of VBI’s obligation to pay Third Party Royalties with respect to sales of such Licensed Product
(the “Royalty Term”).

 

    	-29-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

9.6
Royalty Reduction. The amount of royalties payable by Brii Bio pursuant to Section
9.5 shall be reduced in the following circumstances:

 

(a)
[*****]; and

 

(b)
[*****].

 

9.7
Third Party Licenses. 

 

(a)
[*****].

 

(b) [*****].

 

9.8
Royalty Payments and Reports. Within forty-five (45) days after the end of each
calendar quarter (or, for the last quarter in a calendar year, sixty (60) days after the end of such quarter), Brii Bio shall
make all royalty payments payable to VBI under this Agreement with respect to such quarter. Along with such payments, Brii Bio
shall also provide a report containing reasonably detailed information regarding the calculation of royalties due pursuant to
Article 9 including allowable deductions in the calculation of Net Sales of each Licensed Product on which royalties are paid
(the “Royalty Report”).

 

Article
10

 

PAYMENTS,
BOOKS AND RECORDS

 

10.1
Payment Method. All payments to VBI under this Agreement shall be made by bank
wire transfer in immediately available funds to an account in the name of VBI designated in writing by VBI. Payments hereunder
shall be considered to be made as of the day on which they are received by VBI’s designated bank.

 

10.2
Payment Currency: Currency Conversion.

 

(a)
United States Dollars. Unless otherwise expressly stated in this Agreement, all amounts specified to be payable under this
Agreement are in Dollars and shall be paid in Dollars.

 

(b)
Currency Conversion. For the purpose of computing the Net Sales for any Licensed Product sold in a currency other than Dollars
and for purposes of determining Net Sales and Development Costs, or other shared expenses under this Agreement incurred by a Party
in a currency other than Dollars, such Net Sales or costs amounts shall be converted into Dollars each quarter using an exchange
rate that is the arithmetic average of the daily exchange rates (obtained as described below) during such quarter. Each daily
exchange rate shall be obtained from The Wall Street Journal, Eastern United States Edition, or, if not so available, as
otherwise agreed by the Parties.

 

    	-30-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(c)
Blocked Currency. Notwithstanding the provisions of Section 10.2, if by Applicable Law or fiscal policy of a Region, conversion
into Dollars or transfer of funds of a convertible currency to the United States is restricted, forbidden or substantially delayed,
then amounts accrued in such Region shall be paid to VBI in such Region in local currency by deposit in a local bank designated
by VBI for a period no longer than one hundred and twenty (120) days, after which any payments due to VBI shall be paid in Dollars,
unless the Parties otherwise agree.

 

10.3
Taxes. 

 

(a)
Cooperation and Coordination. The Parties acknowledge and agree that it is their mutual objective and intent to minimize,
to the extent feasible, income and other taxes payable with respect to their collaborative efforts under this Agreement and that
they shall use their reasonable efforts to cooperate and coordinate with each other to achieve such objective.

 

(b)
Payment of Tax. A Party receiving a payment shall pay any and all taxes levied on such payment. If the taxing authorities
of any relevant jurisdiction assert that amounts are required to be withheld from the payments due to a Party hereunder, or the
tax laws in one (1) or more jurisdictions have changed so as to explicitly require such treatment, the Party made aware of such
assertion or change in law shall inform the other Party within thirty (30) days and shall consult with the other Party regarding
the consequences of such assertion or change. If applicable laws require that taxes be deducted and withheld from a payment, the
remitting Party shall (i) deduct those taxes from the payment; (ii) pay the taxes to the proper taxing authority; (iii) send evidence
of the obligation together with proof of payment to the other Party within sixty (60) days following that payment; and (iv) shall
provide such assistance as the other Party may reasonably require in obtaining any refund of such amounts to which the other Party
may be entitled, to the extent that such assistance does not cause the remitting Party to incur any liability in respect of the
taxes asserted to be due.

 

10.4
Records. Brii Bio shall keep, and cause its Affiliates and Sublicensees to keep,
complete, true and accurate books of accounts and records for the purpose of determining, in a manner consistent with GAAP, the
amounts payable to VBI pursuant to this Agreement. Such books and records shall be kept for such period of time required by law,
but no less than at least three (3) years following the end of the calendar quarter to which they pertain. Such records shall
be subject to inspection in accordance with Section 10.5.

 

10.5
Audits. Upon not less than sixty (60) days’ prior written notice, Brii
Bio shall permit an independent, certified public accountant selected by VBI and reasonably acceptable to Brii Bio, which acceptance
will not be unreasonably withheld or delayed (for the purposes of this Section 10.5, the “Auditor”), to audit
or inspect those books or records of Brii Bio, its Affiliates, or Sublicensees that relate to Net Sales and Royalty Reports for
the sole purpose of verifying the: (a) royalties payable hereunder in respect of Net Sales; (b) withholding taxes, if any, required
by Applicable Law to be deducted as a payment by Brii Bio in respect of such Net Sales; (c) exchange rates used in determining
the amount of Dollars. Such Auditor shall be under reasonable written obligations of confidentiality to the audited party and
shall disclose to VBI only the amount and accuracy of payments reported and actually paid or otherwise payable under this Agreement.
Notwithstanding the foregoing, provided that Brii Bio obtains an audit right for itself with respect to a Sublicensee’s
records that is consistent with the terms of this Section 10.5, as well as the right to share the results of such audit with VBI,
Brii Bio shall not be required to obtain from such Sublicensee a direct audit right for VBI. The Auditor shall send a copy of
the report to Brii Bio at the same time it is sent to VBI. Such inspections may be made no more than once each calendar year and
during normal business hours. VBI shall be responsible for the cost of any such audit, provided that if the Auditor determines
that Brii Bio has underpaid any amounts payable to VBI hereunder by ten percent (10%) or more, Brii Bio shall pay the costs and
expenses of such audit.

 

    	-31-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

10.6
Late Payments. In the event that any payment due under this Agreement is not
made when due, the payment shall accrue interest from the date due at a rate per annum equal to three percent (3%) above the U.S.
Prime Rate (as set forth in the Wall Street Journal, Eastern Edition) for the date on which payment was due, calculated daily
on the basis of a three hundred and sixty-five (365)-day year, or similar reputable data source; provided that, in no event shall
such rate exceed the maximum legal annual interest rate. The payment of such interest shall not limit the Party entitled to receive
such payment from exercising any other rights it may have as a consequence of the lateness of any payment.

 

Article
11

 

CONFIDENTIALITY

 

11.1
Confidential Information. Except to the extent expressly authorized by this Agreement
or otherwise agreed in writing by the Parties, the Parties agree that the receiving Party (the “Receiving Party”)
shall keep confidential and shall not publish or otherwise disclose or use for any purpose other than as provided for in this
Agreement any confidential or proprietary information and materials, patentable or otherwise, in any form (written, oral, photographic,
electronic, magnetic, or otherwise) which is disclosed to it by the other Party (the “Disclosing Party”) including,
but not limited to, all Know How, Inventions and any other technical, regulatory or business information of whatever nature (collectively,
“Confidential Information”). For purposes of this Agreement, (a) all VBI Know-How shall be Confidential Information
of VBI and (b) all Brii Bio Know-How shall be Confidential Information of Brii Bio.

 

    	-32-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

11.2
Exceptions. Notwithstanding Section 11.1 above, the obligations of confidentiality
and non-use shall not apply to Confidential Information that, in each case as demonstrated by competent evidence:

 

(a)
was already known to the Receiving Party or any of its Affiliates, other than under an obligation of confidentiality, at the
time of disclosure;

 

(b)
was generally available to the public or was otherwise part of the public domain at the time of its disclosure to the Receiving
Party;

 

(c)
became generally available to the public or otherwise part of the public domain after its disclosure by the Disclosing Party
and other than through any act or omission of the Receiving Party or any of its Affiliates in breach of this Agreement;

 

(d)
was subsequently lawfully disclosed to the Receiving Party or any of its Affiliates by a Person other than the Disclosing
Party, and who, to the best knowledge of the Receiving Party, did not directly or indirectly receive such information directly
or indirectly from the Disclosing Party under an obligation of confidence; or

 

(e)
was independently developed by the Receiving Party or its Affiliate without use of or reference to any information or materials
disclosed by the Disclosing Party.

 

11.3
Permitted Disclosures. Notwithstanding the provisions of Section 11.1, each Party
may disclose Confidential Information belonging to the other Party as expressly permitted by this Agreement or if and to the extent
such disclosure is reasonably necessary in the following instances:

 

(a)
filing or prosecuting Patents as permitted by this Agreement;

 

(b)
prosecuting or defending litigation as permitted by this Agreement;

 

(c)
submission to a Regulatory Authority in connection with a Marketing Approval of a Licensed Product;

 

(d)
complying with applicable court orders, Applicable Law or governmental regulations including the requirements of any securities
exchange;

 

(e)
to those of its employees, Affiliates, contractors or agents who have a need to know such Confidential Information in order
to enable the Receiving Party to carry out its obligations pursuant to this Agreement provided that such persons are subject to
obligations of confidentiality and non-use at least equivalent in scope to the obligations set forth in this Article 11;

 

    	-33-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(f)
to existing or potential acquirers or merger candidates; investment bankers; existing or potential investors, venture capital
firms or other financial institutions or investors for purposes of obtaining financing, each of whom prior to disclosure must
be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article 11; and
advisors; provided, however, that neither Party shall make such disclosure to a competitor of the other Party, without obtaining
the Disclosing Party’s prior consent in writing; and provided further, that each Party will remain responsible for any failure
by any of the foregoing individuals to treat such Confidential Information as required under Section 11.1 as if such individuals
were parties directly bound to the requirements of this Article 11.

 

Notwithstanding
the foregoing, in the event a Party is required to make a disclosure of the other Party’s Confidential Information, it shall,
except where impracticable, give reasonable advance notice to the other Party of such disclosure and use efforts to secure confidential
treatment of such information at least as diligent as such Party would use to protect its own confidential information, but in
no event less than reasonable efforts; provided, that any Confidential Information so disclosed shall still be subject
to the restrictions on use set forth in this Article 11. In any event, the Parties agree to take all reasonable action to avoid
disclosure of Confidential Information hereunder.

 

11.4
Confidentiality of this Agreement and its Terms. Except as otherwise provided
in this Article 11, each Party agrees not to disclose to any Third Party the existence of this Agreement or the terms of this
Agreement without the prior written consent of the other Party hereto, which Agreement and terms shall be deemed the Confidential
Information of both Parties.

 

11.5
Public Announcements and Filings. As soon as practicable following the Effective
Date hereof, the Parties shall each issue a press release announcing the existence of this Agreement which is approved in writing
by both Parties. For greater certainty, neither Party (nor its Affiliates) shall be obligated to consult with or obtain approval
from the other Party with respect to any filings to the SEC, the NASDAQ stock exchange or any other stock exchange or Governmental
Authority; provided that a disclosing Party shall give reasonable advance notice to the other Party of such disclosure and use
efforts to secure confidential treatment of such information at least as diligent as such Party would use to protect its own confidential
information.

 

11.6
Prior Non-Disclosure Agreements. As of the Effective Date, the terms of this
Article 11 shall supersede any prior non-disclosure, secrecy or confidentiality agreement between the Parties (or their Affiliates)
dealing with the subject of this Agreement, including without limitation the Confidentiality Agreement effective July 9, 2018.
Any information disclosed under such prior agreements shall be deemed disclosed under this Agreement.

 

    	-34-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

11.7
Use of Name. Each Party may use the name, insignia, symbol, trademark, trade
name or logotype of the other Party only (a) in connection with permitted disclosures relating to this Agreement and the activities
contemplated hereby, (b) as required by Applicable Law, or (c) as otherwise expressly permitted by this Agreement or agreed in
writing by such other Party.

 

11.8
Publication. At least thirty (30) days prior to publishing, publicly presenting,
and/or submitting for written or oral publication a manuscript, abstract or the like that includes information relating to any
Development Plan, or Joint Invention that has not been previously published, each Party shall provide to the other Party a draft
copy thereof for its review. The publishing Party shall consider in good faith any comments provided by the other Party during
such thirty (30) day period. In addition, the publishing Party shall, at the other Party’s reasonable request, remove therefrom
any Confidential Information of such other Party. If requested in writing by the non-publishing Party, the publishing Party shall
withhold material from submission for publication or presentation for an additional thirty (30) days to allow for the filing of
a Patent application or the taking of such other measures as may be required to establish and preserve proprietary rights in the
information in the material being submitted for publication or presentation. The contribution of each Party shall be noted in
all publications or presentations by acknowledgment or co-authorship, whichever is appropriate.

 

Article
12

 

INTELLECTUAL
PROPERTY

 

12.1
Ownership of Intellectual Property.

 

(a)
Inventions. Except as otherwise expressly set forth in this Agreement, ownership of Inventions, and any and all intellectual
property rights therein, will be determined based on the principles of inventorship in accordance with United States patent laws.

 

(b)
VBI Technology and Brii Bio Technology. Notwithstanding Section 12.1(a), (i) VBI and its Affiliates have, and shall retain
all right, title and interest in and to, the VBI Technology, and (ii) Brii Bio and its Affiliates have, and shall retain all right,
title and interest in and to, the Brii Bio Technology. Each Party shall execute such documents, including assignments, as may
be required to vest title in the owning Party in accordance with the foregoing.

 

(c)
Joint Technology. The Parties shall jointly own all right, title and interest in all Joint Technology and hereby agree that
each Party may only use such Joint Technology to the extent permitted by this Agreement. For the avoidance of doubt, VBI shall
have no right to practice the Joint Technology in the VBI Territory outside of the Field unless and until the Parties have negotiated
a license pursuant to Section 3.5. Each Party shall execute such documents, including assignments, as may be required to vest
title to all Joint Inventions and Joint Patents in both Parties.

 

    	-35-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(d)
Assignment Obligation. Each Party will cause all employees of such Party who perform activities for such Party under this
Agreement to be under an obligation to assign their rights in any Inventions and Know-How, whether or not patentable, resulting
therefrom to such Party. With respect to any activities of a Party under this Agreement that are contracted to a Person that is
not an employee, the Party retaining such contractor will include in the applicable contract an assignment to such Party of all
rights in Inventions and Know-How made by such contractor resulting from such activities.

 

12.2
Patent Prosecution and Maintenance.

 

(a)
VBI Patents.

 

(i)
Initial Right. VBI shall have the first right to prepare, file, prosecute and maintain all VBI Patents in mainland China
and shall bear the costs associated therewith. VBI shall retain patent counsel registered to practice before the Chinese patent
and trademark office and shall keep Brii Bio fully informed of progress with regard to the preparation, filing, prosecution and
maintenance of the VBI Patents in the Licensed Territory. Specifically, VBI shall: (A) provide Brii Bio with a draft of any filing
of a patent application at least ten (10) days prior to filing and VBI shall consider in good faith any comments or revisions
suggested by Brii Bio or its counsel; (B) consult with Brii Bio regarding filing strategy and Regions where VBI Patents should
be filed and maintained; (C) promptly provide Brii Bio with a copy of each patent application as filed, together with a notice
of its filing date and serial number; (D) provide periodic status reports to Brii Bio regarding the status of each patent application
or patent in each VBI Patent family in the Licensed Territory; (E) provide Brii Bio with a copy of any examiner’s report
that raise substantive patentability issues and consult with Brii Bio regarding responding to the same and shall consider in good
faith any comments, strategies, and the like proposed by Brii Bio; and (F) promptly notify Brii Bio of the issuance of a VBI Patent
in the Licensed Territory.

 

(ii)
Step-In Right. In the event that VBI elects not to prosecute or maintain any VBI Patent in mainland China, or register
a VBI Patent in Hong Kong or Macau, VBI shall provide reasonable prior written notice to Brii Bio of such intention (which notice
shall, to the extent possible, be given no later than one hundred and twenty (120) calendar days prior to the next deadline for
any action that must be taken with respect to such VBI Patent in the relevant patent office). In such case, at Brii Bio’s
sole discretion, upon written notice from Brii Bio, Brii Bio will have the right but not the obligation to assume responsibility
for prosecution and/or maintenance of any such VBI Patent in mainland China or registration of a VBI Patent in Hong Kong or Macau
at Brii Bio’s cost and expense, and shall pay any required fees to maintain such VBI Patents in the applicable Region. If
Brii Bio elects to assume such rights with respect to a VBI Patent, Brii Bio shall keep VBI reasonably informed in accordance
with the criteria set forth in Section 12.2(a)(i)(A) – (F) above.

 

    	-36-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(b)
Joint Patents.

 

(i)
Initial Responsibility. Brii Bio shall be responsible for the preparation, filing, prosecution and maintenance of Joint
Patents, subject to the rest of this Section 12.2(b). In carrying out its obligations pursuant to this Section 12.2(b), Brii Bio
shall retain patent counsel registered to practice before the U.S. Patent and Trademark Office, which patent counsel will be instructed
to copy both VBI and Brii Bio on all correspondence relating to the Joint Patents.

 

(ii)
Cooperation. For any Joint Patents, Brii Bio shall keep VBI fully informed of progress with regard to the preparation,
filing, prosecution and maintenance of the Joint Patents in and outside of the Licensed Territory. Brii Bio shall:

 

(1)
provide VBI with a draft of any first filing of a patent application at least ten days prior to filing and Brii Bio shall consider
in good faith any comments or revisions suggested by VBI or its counsel;

 

(2)
consult with VBI regarding filing strategy and jurisdictions where Joint Patents should be filed and maintained provided, however,
that unless otherwise agreed in writing, Joint Patents shall be filed in the United States, Europe, Canada and China;

 

(3)
promptly provide VBI with a copy of each patent application as filed, together with a notice of its filing date and serial number;

 

(4)
provide periodic status reports to VBI regarding the status of each patent application or patent in each Joint Patent family;

 

(5)
provide VBI with a copy of any examiner’s report that raise substantive patentability issues and consult with VBI regarding
responding to the same and shall consider in good faith any comments, strategies, and the like proposed by VBI; and

 

(6)
promptly notify VBI of the issuance of a Joint Patent.

 

(iii)
Option of VBI to Prosecute, Maintain and Enforce. In the event that Brii Bio desires to give up responsibility for the
prosecution or maintenance of any Joint Patent, Brii Bio shall provide reasonable prior written notice to VBI of such intention
(which notice shall, to the extent possible, be given no later than sixty (60) calendar days prior to the next deadline for any
action that must be taken with respect to such Joint Patent in the relevant patent office). In such case, at VBI’s sole
discretion, upon written notice from VBI, VBI may elect to assume responsibility for prosecution and/or maintenance of any such
Joint Patent, and VBI shall thereafter keep Brii Bio reasonably informed in accordance with the criteria set for in Section 12.2(b)(ii).

 

    	-37-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(iv)
Costs for Joint Patents. Brii Bio will bear the costs associated with preparation, filing, prosecution and maintenance
of Joint Patents except for the costs associated with filing, prosecution and maintenance in the VBI Territory, which will be
borne by VBI. The Party incurring costs associated with preparation, filing, prosecution and maintenance of Joint Patents of behalf
of the other Party will issue an invoice to the other Party on a quarterly basis (as applicable), setting out such Party’s
share of the costs incurred during the prior quarter and providing copies of supporting invoices or other documentation. Each
such invoice will be payable within thirty (30) days of receipt and the provisions of Article 8 shall apply to such payments.

 

(v)
Withdrawal of Support. In the event that a Party decides to cease paying the costs associated with the preparation, filing,
prosecution and maintenance of any Joint Patents in its respective territory, such Party shall advise the other Party of such
decision in writing. Upon receipt of such notice, the recipient Party may elect to abandon the Joint Patents identified in the
notice, or may elect to assume sole responsibility for the ongoing costs of such Joint Patent, in which event the Party wishing
to cease sharing in the costs shall forthwith execute an assignment of its entire right, title and interest in such Joint Patents
to the recipient Party, and the assigning Party shall cease being responsible for its share of the costs associated with any Joint
Patents listed on the assignment effective as of the date of the assignment. In the event that the Party relinquishing responsibility
for the costs of a Joint Patent has responsibility for prosecution and maintenance of such Joint Patent, that Party will be deemed
to have given up responsibility for such prosecution and maintenance as of the date of the notice referred to in this section.

 

(c)
Brii Bio Patents. Brii Bio shall have the sole right to prepare, file, prosecute and maintain the Brii Bio Patents on a worldwide
basis.

 

12.3
Infringement by Third Parties.

 

(a)
Notice. In the event that either VBI or Brii Bio becomes aware of any infringement or threatened infringement by a Third Party
of the VBI Patents or the Joint Patents, it will notify the other Party in writing to that effect. Any such notice shall include
any available evidence to support an allegation of infringement or threatened infringement by such Third Party.

 

    	-38-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(b)
Licensed Territory. Subject to this Section 12.3(b), Brii Bio shall have the first right (but not the obligation), as between
VBI and Brii Bio, to bring and control any action or proceeding with respect to infringement of any VBI Patent or Joint Patent
in the Licensed Territory. VBI shall have the right, at its own expense, to be represented in any such action by counsel of its
own choice, and VBI and its counsel will reasonably cooperate with Brii Bio and its counsel in strategizing, preparing and presenting
any such action or proceeding provided, however, that Brii Bio may not make any submissions in any such action challenging the
validity of a VBI Patent without the prior consent of VBI, such consent not to be unreasonably withheld. If Brii Bio fails to
bring an action or proceeding with respect to infringement of any VBI Patent or Joint Patent in the Licensed Territory within
sixty (60) days following the notice of alleged infringement or (ii) ten (10) days before the time limit, if any, set forth in
the appropriate laws and regulations for the filing of such actions, whichever comes first, then VBI shall have the right (but
not the obligation) to bring and control any such action, and Brii Bio shall have the right, at its own expense, to be represented
in any such action by counsel of its own choice. Except as otherwise agreed to by the Parties as part of a cost-sharing arrangement,
any recovery or damages realized as a result of such action or proceeding shall be used first to pay the legal costs of both Parties
associated with the enforcement action and second to compensate Brii Bio for losses directly associated the infringement. Any
additional recovery or damages shall be shared equally between the Parties. In the event that the legal costs associated with
an enforcement action exceed the amount recovered in such action, then Brii shall pay any such additional costs.

 

(c)
VBI Territory. VBI shall have the first right (but not the obligation) to bring and control any action or proceeding with
respect to infringement of any Joint Patent in the VBI Territory, and Brii Bio shall have the right, at its own expense, to be
represented in any such action by counsel of its own choice. If VBI fails to bring an action or proceeding within (i) sixty (60)
days following the notice of alleged infringement or (b) ten (10) days before the time limit, if any, set forth in the appropriate
laws and regulations for the filing of such actions, whichever comes first, Brii Bio shall have the right (but not the obligation)
to bring and control any such action, and VBI shall have the right, at its own expense, to be represented in any such action by
counsel of its own choice. Except as otherwise agreed to by the Parties as part of a cost-sharing arrangement, any recovery or
damages from an action or proceeding relating to Joint Patents shall be used first to pay the legal costs associated with the
enforcement action and second to compensate the Parties pro rata for their respective losses directly associated the infringement.
Any additional recovery or damages shall be shared equally between the Parties. In the event that the legal costs associated with
an enforcement action exceed the amount recovered in such action, VBI shall pay any such additional costs.

 

    	-39-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(d)
Cooperation. In the event a Party brings an infringement action in accordance with this Section 12.3, the other Party shall
cooperate fully, including, if required to bring such action, the furnishing of a power of attorney or being named as a party
to such action.

 

(e)
Brii Bio Patents. Brii Bio shall have the sole right to bring and control any action or proceeding with respect to infringement
of any Brii Bio Patent on a worldwide basis.

 

12.4
Infringement of Third Party Rights. Each Party shall promptly notify the other
in writing of any allegation by a Third Party that the activity of either of the Parties pursuant to this Agreement infringes
or may infringe the intellectual property rights of such Third Party. VBI shall have the sole right to control any defense of
any such claim involving alleged infringement of Third Party rights by VBI’s activities and Brii Bio shall have the right,
at its own expense, to be represented in any such action by counsel of its own choice. Subject to Article 14, Brii Bio shall have
the sole right to control any defense of any such claim involving alleged infringement of Third Party rights by Brii Bio’s
activities and VBI shall have the right, at its own expense, to be represented in any such action by counsel of its own choice.

 

12.5
Consent for Settlement. Neither Party shall enter into any settlement or compromise
of any action or proceeding under this Article 12 which would in any manner (a) limit the scope, validity or enforcement of any
of the VBI Patents or Joint Patents, (b) admit fault or wrongdoing on the part of the other Party, or (c) impose any obligations
or restriction on the other Party (whether financial or otherwise) without the prior written consent of such other Party.

 

12.6
Patent Term Extensions. The JSC shall make recommendations regarding patent term
extensions for Joint Patents, including supplementary protection certificates and any other extensions that are now or become
available in the future, wherever applicable; provided that Brii Bio shall have final decision making authority with respect to
any decisions related to patent term extensions for Joint Patents in the Licensed Territory, and VBI shall have final decision-making
authority with respect to any decisions related to patent term extensions for Joint Patents in the VBI Territory. Notwithstanding
the foregoing, the Parties shall coordinate their activities with respect to any patent term extension with respect to all Joint
Patents in order to secure the optimal protection for each Licensed Product available under Applicable Law.

 

12.7
Trademarks. VBI, or its Affiliates shall own and be responsible for all trademarks,
trade names, branding, logos and domain names related to Licensed Products and shall be responsible for selecting, registering,
enforcing, defending, and maintaining the same.

 

12.8
Maintenance of Patents. During the Term, each Party shall take all steps required to maintain in good standing any Patents
licensed to the other Party hereunder, including with respect to Brii Bio, any Patent covering the Brii Bio Adjuvant.

 

    	-40-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

Article
13

 

REPRESENTATIONS,
WARRANTIES AND COVENANTS

 

13.1
Mutual Representations, Warranties and Covenants. Each Party hereby represents
and warrants to the other Party, as of the Effective Date, and covenants (as applicable) as follows:

 

(a)
Duly Organized. Such Party is duly organized, validly existing and in good standing under the laws of its jurisdiction of
incorporation or formation, and has full corporate or other power and authority to enter into this Agreement and to carry out
the provisions hereof.

 

(b)
Due Authorization; Binding Agreement. This Agreement has been duly executed and delivered on behalf of such Party and constitutes
a legal, valid and binding obligation of such Party and is enforceable against it in accordance with the terms hereof subject
to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights and
judicial principles affecting the availability of specific performance and general principles of equity, whether enforceability
is considered a proceeding at law or equity.

  

(c)
Consents. Such Party has obtained, or is not required to obtain, the consent, approval, order or authorization of any Third
Party, or has completed, or is not required to complete any registration, qualification, designation, declaration, or filing with,
any Regulatory Authority or Governmental Authority, in connection with the execution and delivery of this Agreement and the performance
by such Party of its obligations under this Agreement.

 

(d)
No Conflicting Grant of Rights. The execution and delivery of this Agreement and the performance of such Party’s obligations
hereunder (a) do not conflict with or violate any requirement of Applicable Law or any provision of the articles of incorporation,
bylaws or any similar instrument of such Party, as applicable, in any material way and (b) do not conflict with, violate or breach,
or constitute a default or require any consent under, any contractual obligation or court or administrative order by which such
Party is bound.

 

(e)
Right to Grant Licenses. Such Party has the right to grant (or cause its Affiliates to grant) the licenses contemplated under
this Agreement and has not granted, assigned, transferred, or conveyed, and will not during the Term, grant, assign, transfer
or convey any right, title or interest in, (i) in the case of VBI, any of the VBI Technology or its interest in the Joint Technology
and (ii) in case of Brii Bio, its interest in the Brii Bio Technology or the Joint Technology, in any such case which grant, assignment,
transfer or conveyance would conflict with the rights granted to the other Party hereunder.

 

    	-41-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(f)
Employee/Contractor Agreements. All of such Party’s employees or contractors acting on its behalf pursuant to this Agreement
are and will be obligated under a binding written agreement to assign to such party or its designee all VBI Technology and Joint
Inventions (as applicable) and to comply with obligations of confidentiality and non-use consistent with those set forth in Article
11.

 

(g)
Debarment. Such Party is not debarred under the FDA, NMPA or similar Regulatory Authority in any other jurisdiction and it
does not, and will not during the Term, employ or use the services of any Person who is debarred, in connection with the development,
manufacture or commercialization of Licensed Products. In the event that either Party becomes aware of the debarment or threatened
debarment of any Person providing services to such Party, including the Party itself and its Affiliates, contractors, Sublicensees,
Distributors, which directly or indirectly relate to activities under this Agreement, the other Party shall be immediately notified
in writing.

 

(h)
Compliance. As of the Effective Date, each Party is in material compliance with all Applicable Laws with respect to the subject
matter of this agreement, and during the Term, each party covenants to the other that in the performance of its obligations under
this Agreement, such Party shall comply with, and shall cause its and its Affiliates’ employees and Sublicensees to comply,
with all Applicable Laws.

 

(i)
No Third Party Rights. Neither Brii Bio nor VBI is a party to or otherwise bound by any oral or written contract or agreement
that would result in any Third Party obtaining any interest in, or that would give to any Third Party any right to assert any
claim in or with respect to, any Joint Inventions or Joint Patents except as disclosed on Schedule 13 hereto.

 

13.2
Additional Representations, Warranties and Covenants of Brii Bio. Brii Bio represents and
warrants to VBI as of the Effective Date that, to Brii Bio’s knowledge, there are no Third Party intellectual property rights
that cover or claim the Brii Bio Adjuvant and that there are [*****].

 

13.3
Additional Representations, Warranties and Covenants of VBI. VBI represents and
warrants to Brii Bio as of the Effective Date, or covenants, as applicable, that:

 

(a)
Right to Grant License. Except for VBI’s obligations pursuant to the [*****], no royalties, license fees or other payments
are required to be paid to any Third Party in connection with the manufacture, use, sale or importation of Licensed Products in
the Field in the Licensed Territory.

 

(b)
Ownership. VBI is the sole and exclusive owner of, or Controls, the VBI Technology licensed by VBI to Brii Bio under this
Agreement.

 

    	-42-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(c)
VBI Patents. Schedule A is a true, complete and correct list of the VBI Patents existing as of the Effective Date. (i) The
VBI Patents are to the best of VBI’s knowledge, valid and enforceable, (ii) no Third Party has made any claim against VBI
or its Affiliates asserting the invalidity, unenforceability, or non-infringement of any VBI Patents (including, by way of example,
through the institution or written threat of institution of interference, nullity, opposition, inter partes or post-grant review
or similar invalidity proceedings before the United States Patent and Trademark Office or any analogous foreign Regulatory Authority),
(iii) the VBI Patents are being diligently prosecuted in the respective patent offices in in accordance with Applicable Law, and
(iv) the VBI Patents have been filed and maintained properly and correctly and all applicable fees have been paid on or before
the due date for such payments.

 

(d)
Non-Infringement by Third Parties. To VBI’s knowledge, no Third Party is infringing or misappropriating or threatening
to infringe or misappropriate any VBI Technology.

 

(e)
Non-Infringement of Third Party Rights. Neither VBI nor any of its Affiliates has received any written notice from any Person,
or has knowledge of, any actual or threatened claim or assertion that the use or practice of the VBI Patents, infringes or misappropriates
the intellectual property rights of a Third Party.

 

(f)
Claims; Judgements; Settlements. Except as disclosed in Schedule B, there are no claims, judgments or settlements against
or pending, or amounts with respect thereto, owed by VBI or any of its Affiliates, with respect to the VBI Technology licensed
by VBI to Brii Bio under this Agreement and VBI has not received written notice threatening any such claims, judgments or settlements.

 

(g)
Employee Agreements. All current and former employees and consultants of VBI and its Affiliates who are or have been substantively
involved in the design, review, evaluation or development of the VBI Patents have executed written contracts or are otherwise
obligated to assign their rights to VBI or its designee.

 

(h)
No Third Party Rights. VBI is not a party to or otherwise bound by any oral or written contract or agreement that will result
in any Third Party obtaining any interest in, or that would give to any Third Party any right to assert any claim in or with respect
to, any VBI Technology exclusively licensed to Brii Bio hereunder except as disclosed on Schedule 13 hereto.

 

(i)
Manufacture of Licensed Product. VBI shall manufacture, store and transfer the Licensed Product supplied pursuant to Section
7.1(a) (and Schedule 7.1(a)) in accordance with applicable Licensed Product specifications and all Applicable Laws, including
GMP.

 

    	-43-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(j)
No Other Technology. To VBI’s knowledge, the VBI Technology in existence as of the Effective Date comprises all of the
intellectual property rights used by or on behalf of VBI and its Affiliates in the research, development, and manufacturing of
the Licensed Compound and VBI-2601.

 

(k)
[*****]. VBI is not in breach of its obligations under [*****], and during the Term, VBI shall take all actions necessary
to maintain the [*****] in good standing, and shall not materially breach the [*****]. In the event that [*****] notifies VBI
during the Term that VBI is in material breach of the [*****], VBI shall promptly notify Brii Bio and, to the extent VBI fails
to cure such breach, Brii Bio shall have the right to do so.

 

13.4
Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, OR ANY OTHER AGREEMENT
CONTEMPLATED HEREUNDER, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED,
EITHER IN FACT OR BY OPERATION OF LAW OR OTHERWISE AND EACH PARTY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY
AND OF FITNESS FOR A PARTICULAR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OR ENFORCEABILITY OF PATENTS OR NON-INFRINGEMENT OF
ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THE PROSPECTS OR LIKELIHOOD OF DEVELOPMENT OR COMMERCIAL SUCCESS OF THE
LICENSED PRODUCT.

 

Article
14

 

INDEMNIFICATION

 

14.1
Indemnification of VBI. Brii Bio shall indemnify and hold harmless VBI and its
Affiliates, and its and their directors, officers, employees and agents of such entities (the “VBI Indemnitees”)
from and against any and all losses, liabilities, damages, penalties, fines, costs and expenses (including reasonable attorneys’
fees and other expenses of litigation) (“Losses”) from any claims, actions, suits or proceedings brought by
a Third Party (a “Third Party Claims”) incurred by any VBI Indemnitee, arising from, or occurring as a result
of: (a) the development, manufacture, use, handling, storage, sale or other disposition of Licensed Product by Brii Bio or its
Affiliates or Sublicensees in the Licensed Territory; (b) gross negligence or willful misconduct by or on behalf of Brii Bio or
its Affiliates in performing any activities in connection with this Agreement; and (c) any material breach of any representations,
warranties or covenants by Brii Bio under this Agreement; except, in each case ((a) – (c)), to the extent such Third Party
Claims fall within the scope of the indemnification obligations of VBI set forth in Section 14.2.

 

    	-44-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

14.2
Indemnification of Brii Bio. VBI shall indemnify and hold harmless each of Brii
Bio and its Affiliates and its and their directors, officers, employees and agents of such entities (the “Brii Bio Indemnitees”),
from and against any and all Losses from any Third Party Claim incurred by any Brii Bio Indemnitee arising from, or occurring
as a result of: (a) the development, manufacture, use, handling, storage, sale or other disposition of Licensed Product by VBI
or its Affiliates; (b) gross negligence or willful misconduct by or on behalf of VBI or its Affiliates in performing any activities
in connection with this Agreement; and (c) any material breach of any representations, warranties or covenants by VBI under this
Agreement; except, in each case ((a) – (c)) to the extent such Third Party Claims fall within the scope of the indemnification
obligations of Brii Bio set forth in Section 14.1.

 

14.3
Procedure. A Party that intends to claim indemnification under this Article 14
(the “Indemnitee”) shall promptly notify the indemnifying Party (the “Indemnitor”) in writing
of any Third Party Claim, in respect of which the Indemnitee intends to claim such indemnification. The Indemnitee shall provide
the Indemnitor with reasonable assistance, at the Indemnitor’s expense, in connection with the defense of the Third Party
Claim for which indemnity is being sought. The Indemnitee may participate in and monitor such defense with counsel of its own
choosing at its sole expense; provided, however, the Indemnitor shall have the right to assume and conduct the defense of the
Third Party Claim with counsel of its choice, which counsel shall be reasonably acceptable to Indemnitee. The Indemnitor shall
not settle any Third Party Claim without the prior written consent of the Indemnitee, not to be unreasonably withheld. So long
as the Indemnitor is actively defending the Third Party Claim in good faith, the Indemnitee shall not settle any such Third Party
Claim without the prior written consent of the Indemnitee. If the Indemnitor does not assume and conduct the defense of the Third
Party Claim as provided above, (a) the Indemnitee may defend against, and consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim in any manner the Indemnitee may deem reasonably appropriate (and the Indemnitee
need not consult with, or obtain any consent from, the Indemnitor in connection therewith), and (b) the Indemnitor will remain
responsible to indemnify the Indemnitee as provided in this Article 14. The failure to deliver written notice to the Indemnitor
within a reasonable time after the commencement of any action with respect to a Third Party Claim shall only relieve the Indemnitor
of its indemnification obligations under this Article 14 if and to the extent the Indemnitor is actually prejudiced thereby.

 

14.4
Insurance. Each Party, at its own expense, shall maintain product liability and
other appropriate insurance (including D&O insurance) in an amount consistent with industry standards, for a company in a
similar position to such Party, during the Term, which shall include, but not be limited to ten million Dollars ($10,000,000).
Each Party shall provide the other Party with written notice at least thirty (30) days prior to any cancellation, nonrenewal or
material change in the insurance described above. Each Party shall provide a certificate of insurance evidencing such coverage
to the other Party upon request. Each Party shall provide a certificate of insurance evidencing its D&O insurance annually.
It is understood that such insurance shall not be construed to create a limit of either Party’s liability with respect to
its indemnification obligations under this Article 14.

 

    	-45-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

Article
15

 

TERM
AND TERMINATION

 

15.1
Term. This Agreement shall commence on the Effective Date, and unless terminated
earlier as provided in this Article 15, shall continue in full force and effect on a Region-by-Region and Licensed Product-by-Licensed
Product basis until the last-to-expire Royalty Term in the last Region in the Licensed Territory (the “Term”).
Upon expiration (but not an earlier termination) of this Agreement in a Region of the Licensed Territory, VBI shall grant to Brii
Bio a perpetual, non-exclusive, fully paid-up, royalty free license under the VBI Technology in such Region to make, have made,
use, sell, offer for sale and import such Licensed Product in the Field in such Region.

 

15.2
Early Termination. Each Party shall have the right to terminate this Agreement
in its entirety before the end of the Term:

 

(a)
upon written notice by either Party if the other Party is in material breach of this Agreement and has not cured such breach
within sixty (60) days (or thirty (30) days for a breach payment obligations) after notice from the terminating Party requesting
cure of the breach. Any such termination shall become effective at the end of such sixty (60) or thirty (30) day period, as applicable,
unless the breaching Party has cured any such breach or default prior to the end of such period; provided that, such time periods
shall be tolled during the pendency of any good faith dispute that has been deferred to resolution pursuant to Article 16 with
respect to the validity of such allegation of breach; or

 

(b)
at any time if the other Party shall (i) file in any court or agency pursuant to any statute or regulation of any jurisdiction
a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee
of that Party or of its assets, (ii) propose an out-of-court restructuring of substantially all of VBI’s indebtedness outside
the ordinary course of business, (iii) be served with an involuntary petition against it, filed in any insolvency proceeding,
and such petition shall not be dismissed within sixty (60) days after the filing thereof, (iv) propose or be a party to any dissolution
or liquidation, (v) make an assignment for the benefit of its creditors, or (vi) admit in writing its inability generally to pay
its debts as they fall due in the general course.

 

    	-46-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

15.3
Other Brii Bio Termination Rights. 

 

(a)
Voluntary Termination. Brii Bio shall have the right in its sole and absolute discretion, to terminate this Agreement, either
with respect to a Region or in its entirety, upon one hundred and eighty (180) days prior written notice to VBI for convenience,
without cause, and for any or no reason.

 

(b)
Termination for Safety Reasons. Brii Bio may terminate this Agreement at any time during the Term immediately upon providing
written notice to VBI if a Data and Safety Monitoring Board or any Regulatory Authority in the Licensed Territory imposes a clinical
hold on any Clinical Trial for a Licensed Product for six (6) consecutive months.

 

15.4
Other VBI Termination Right. VBI shall have the right to terminate this Agreement
immediately upon written notice to Brii Bio if Brii Bio or any of its Affiliates, Distributors or Sublicensees directly, or indirectly
through any Third Party, commences any interference or opposition proceeding with respect to, challenges the validity or enforceability
of, or opposes any extension of or the grant of a supplementary protection certificate with respect to, any VBI Patent.

 

15.5
Effects of Termination.

 

(a)
VBI Technology. Upon any termination of this Agreement, the licenses granted by VBI to Brii Bio in the VBI Technology shall
automatically terminate.

 

(b)
Joint Patents, Joint Inventions and Joint Know How. Effective upon termination of this Agreement:

 

(i)
Brii Bio shall automatically be deemed to, and hereby does, grant to VBI, an exclusive, royalty free right and license under the
Brii Bio Technology that covers or claims the Brii Bio Adjuvant or the Novel Composition and Brii Bio’s interest in the
Joint Technology in the Field in the VBI Territory, which, for greater certainty, shall include a license to use the Brii Bio
Adjuvant in the Field; and

 

(ii)
VBI shall automatically be deemed to, and hereby does, grant to Brii Bio an exclusive, royalty free right and license under VBI’s
interest in the Joint Technology in the Field in the Licensed Territory, which, for greater certainty, shall include a license
to use the Brii Bio Adjuvant in the Field.

 

15.6
Clinical Trials Upon Termination. In the event there are any on-going Clinical
Trials of the Licensed Product in the Field in the Licensed Territory as of the date of termination hereof, the Parties shall
negotiate in good faith and adopt a plan to wind-down such Clinical Trials in an orderly fashion or, at VBI’s election,
promptly transition such development activities to VBI or its designee, with due regard for patient safety and the rights of any
subjects that are participants in any Clinical Trials and take any actions it deems reasonably necessary or appropriate to avoid
any human health or safety problems and in compliance with all Applicable Laws.

 

    	-47-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

15.7
Brii Bio Regulatory Filings (including Marketing Approval). Upon termination
of this Agreement, at VBI’s request and to the extent not already held by VBI, Brii Bio shall assign or cause to be assigned
to VBI or its designee (or to the extent not assignable in accordance with Applicable Law, Brii Bio shall take all reasonable
actions to make available to VBI or its designee the benefits of all Regulatory Documentation and Marketing Approvals for the
Licensed Products in the Licensed Territory) at no cost to VBI, unless such termination is the result of VBI’s material
breach of this Agreement pursuant to Section 15.2(a), in which case VBI shall bear the cost of such assignment.

 

15.8
Clinical Supply. Immediately upon termination of this Agreement, Brii Bio shall,
at its own cost, return to VBI any unused Licensed Product supplied by VBI for use in Clinical Trials hereunder.

 

15.9
Inventory. Upon termination of this Agreement, Brii Bio, its Affiliates, Distributors
and Sublicensees, shall have the option to continue, to the extent that Brii Bio, its Affiliates, Distributors and Sublicensees
have stocks of Licensed Product remaining, to fulfill orders received from customers for Licensed Products in the Field in the
Licensed Territory until up to thirty (30) days after VBI notifies Brii Bio in writing that VBI intends to commercialize such
Licensed Product or has secured an alternative Distributor or licensee for the Licensed Product, but in no event for more for
than six (6) months after the date of notice of termination. For Product sold by Brii Bio or its Affiliates, Distributors or Sublicensees
after the effective date of a termination Brii Bio shall continue to pay royalties on the amount of Net Sales pursuant to Article
9. Notwithstanding the foregoing, Brii Bio and its Affiliates, Distributors and Sublicensees shall cease such activities in the
Licensed Territory upon sixty (60) days written notice given by VBI at any time after the effective date of a termination requesting
that such activities (or portion thereof) cease. In the case where VBI has given notice to Brii Bio requesting the cessation of
activities pursuant to the provision of this Section, Brii Bio shall notify VBI of an estimate of the quantity of Licensed Product
and its shelf life remaining in the inventory of Brii Bio, its Affiliates, Distributors or Sublicensees and VBI shall have the
right to purchase any such quantities of Licensed Product from Brii Bio at a price mutually agreed by the Parties.

 

15.10
Transition. Brii Bio shall use Commercially Reasonable Efforts to cooperate with
VBI or its designee to effect a smooth and orderly transition in the development, sale and marketing, promotion and commercialization
of Licensed Product in the Licensed Territory following termination of this Agreement.

 

    	-48-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

15.11
Return of Confidential Information. Upon termination or expiration of this Agreement,
each Party shall promptly return to the other Party, or delete or destroy, all relevant records and materials in such Party’s
possession or control containing Confidential Information of the other Party; provided that such Party may keep one (1) copy of
such materials for archival purposes only subject to a continuing confidentiality obligations.

 

15.12
[*****] and [*****].
In the event of a termination of this agreement by Brii Bio pursuant to Section 15.2(a) or Section 15.2(b), then VBI shall use
Commercially Reasonable Efforts to facilitate a direct license for Brii Bio under the [*****].

  

Article
16

 

DISPUTE
RESOLUTION AND GOVERNING LAW

 

16.1
Dispute Resolution Process. The Parties recognize that disputes as to certain
matters may from time to time arise during the Term that relate to interpretation of a Party’s rights and/or obligations
hereunder or any alleged breach of this Agreement. If the Parties cannot resolve any such dispute within thirty (30) days after
written notice of a dispute from one (1) Party to another, either Party may, by written notice to the other Party, have such dispute
referred to the Senior Executives. The Senior Executives shall negotiate in good faith to resolve the dispute within thirty (30)
days. During such period of negotiations, any applicable time periods under this Agreement shall be tolled. If the Senior Executives
are unable to resolve the dispute within such time period then either Party may submit the dispute as follows:

 

(a)
for final resolution of matters not expressly referred to expert determination hereunder, by binding arbitration in accordance
with Section 16.2(b). Notwithstanding anything in this Article 16 to the contrary, VBI and Brii Bio shall each have the right
to apply to any court of competent jurisdiction for appropriate interim or provisional relief, as necessary to protect the rights
or property of that Party;

 

(b)
for final resolution of matters designated hereunder to be resolved by expert determination, by expert determination in accordance
with Section 16.3.

 

16.2
Arbitration.

 

(a)
If the parties are unable to resolve such dispute through the procedures described in Section 16.1, then, except in the case
of a dispute, controversy or claim that concerns (a) the validity or infringement of a patent, trademark or copyright, or (b)
any antitrust, anti-monopoly or competition law or regulation, whether or not statutory, the dispute shall be resolved by expedited
binding arbitration before a panel of three (3) independent and neutral experienced arbitrators, one chosen by VBI, one chosen
by Brii Bio and the third chosen by the foregoing two (2) arbitrators. Each Party shall select its arbitrator within ten (10)
days of one party notifying the other party that it is exercising its rights under this Section 16.2(a), and the two (2) arbitrators
shall select the third arbitrator within five (5) days of their selection. Any such arbitration proceeding shall be administered
by the Expedited Procedure Rules, irrespective of the amount in dispute, of International Court of Arbitration of the International
Chamber of Commerce, with limited discovery, in accordance with its then current rules governing commercial disputes; provided,
that, such rules shall be modified by this Section 16.1(b), to the extent any such modifications are necessary.

 

    	-49-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

(b)
Any arbitration shall be conducted in the
English language and applicable arbitration association shall use New York as the governing law for this Agreement and the parties’
obligations hereunder. Within ten (10) days after the arbitrators are selected, the Parties will each submit to the arbitrators,
and to one another, a written statement of their respective positions regarding the alleged dispute. The Parties will also provide
the arbitrators a copy of this Agreement, as may be amended at such time. Each party will have ten (10) days from receipt of the
other party’s submission to provide to the arbitrator a written response thereto. Neither party may have any communication
(either written or oral) with the arbitrators other than for the sole purpose of engaging the arbitrator at the outset or as expressly
permitted in this Section 16.1(b); provided, that the arbitrator will have the right to meet with the parties, either alone or
together, as necessary in the arbitrator’s opinion to make a determination. Based on the materials submitted, the arbitrators
will determine whether any discovery process is necessary, and, if it is, the parameters of such process with the intent of resolving
the arbitration as expeditiously as possible (e.g., limiting the number of depositions and the time discovery is permitted to
take). The Parties and arbitrators shall employ procedures designed to resolve the conflict by arbitration within twelve (12)
months of the dispute being referred for arbitration.

 

16.3
Expert Determination. For
final resolution of matters designated hereunder to be resolved by expert determination, the Parties hereby agree that such decision
shall be conducted expeditiously by an independent expert selected unanimously by the Parties. Either Party may initiate the expert
determination by giving written notice to the other Party. If the Parties are unable to agree upon an expert within ten (10) days
after receipt of the notice of request for an expert determination, then, the International Centre for Expertise of the International
Chamber of Commerce (ICC) shall appoint such expert. The expert, once appointed, shall have no ex parte communications with either
Party concerning the expert determination or the underlying dispute. The Parties agree to cooperate fully in the expeditious conduct
of such expert determination and to provide the expert with access to all facilities, books, records, documents, information and
personnel necessary to make a fully informed decision in an expeditious manner. Before issuing a final decision, the expert shall
issue a draft report and allow the parties to the dispute to comment on it. The expert shall endeavor to resolve the dispute within
thirty (30) days (but no later than sixty (60) days) after his or her appointment, taking into account the circumstances requiring
an expeditious resolution of the matter in dispute. The expert’s decision shall be final and binding on the Parties. The
costs of the expert determination shall be shared by the Parties, regardless of the outcome of the determination.

 

    	-50-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

16.4
Governing Law; Litigation; Exclusive Venue. This Agreement and all questions
regarding its existence, validity, interpretation, breach or performance, shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, United States, without reference to its conflicts of law principles. Any dispute
shall be finally settled in a United States Federal Court of competent jurisdiction (or state court if no Federal Court has jurisdiction)
located in the State of New York, United States, and the Parties hereby attorney to the jurisdiction of such courts.

 

Article
17

 

GENERAL
PROVISIONS

 

17.1
Force Majeure. Neither Party shall be held liable or responsible to the other
Party or be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term
of this Agreement when such failure or delay is caused by or results from events beyond the reasonable control of the non-performing
Party, including fires, floods, earthquakes, extreme weather, embargoes, shortages, epidemics, quarantines, war, acts of war (whether
war be declared or not) or terrorism, insurrections, riots, civil commotion, strikes, lockouts or other labor disturbances, acts
of God or acts, omissions or delays in acting by any Governmental Authority (each of the foregoing, a “Force Majeure
Event”). The non-performing Party shall notify the other Party of such force majeure within ten (10) days after such
occurrence by giving written notice to the other Party stating the nature of the event, its anticipated duration, and any action
being taken to avoid or minimize its effect. The suspension of performance shall be of no greater scope and no longer duration
than is necessary and the non-performing Party shall use commercially reasonable efforts to remedy its inability to perform; provided,
however, that in the event the suspension of performance continues for sixty (60) days after the date of the occurrence,
the Parties shall meet to discuss in good faith how to proceed in order to accomplish the goals outlined in this Agreement.

 

17.2
Waiver of Breach. No delay or waiver by either Party of any condition or term
in any one (1) or more instances shall be construed as a further or continuing waiver of such condition or term or of another
condition or term.

 

17.3
Further Assurances. Each Party agrees to execute, acknowledge and deliver such
further instruments, and to perform all such other acts, as may be necessary or appropriate in order to carry out the purposes
and intent of this Agreement.

 

    	-51-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

17.4
Amendment. No amendment or modification of any provision of this Agreement shall
be effective unless in writing and signed by both Parties hereto.

 

17.5
Severability. In the event any provision of this Agreement should be held invalid,
illegal or unenforceable, the Parties shall negotiate, in good faith a valid, legal and enforceable substitute provision that
most nearly reflects the original intent of the Parties. All other provisions of this Agreement shall remain in full force and
effect in such jurisdiction.

 

17.6
Entire Agreement. This Agreement (including the Schedules attached hereto) constitutes
the entire agreement between the Parties relating to the subject matter hereof and supersedes all previous agreements and understandings,
negotiations, writings and commitments, either oral or written, in respect to the subject matter hereof. Each of the Parties acknowledges
and agrees that, in entering into this Agreement, it does not rely on, and shall have no remedy in respect of, any statement,
representation, warranty or understanding (whether negligently or innocently made) of any Person (whether party to this Agreement
or not) other than as expressly set out in this Agreement.

 

17.7
Notices. Any notice or communication required or permitted under this Agreement
shall be in writing in the English language, delivered personally, sent by email (and promptly confirmed by personal delivery,
registered mail or overnight courier), sent by courier or sent by registered mail, postage prepaid to the following addresses
of the Parties (or such other address for a Party as may be at any time thereafter specified by like notice):

 

	To
                                         VBI:

         

        VBI
        Vaccines Inc.

        2241-222
        Third Street

        Boston,
        MA 0212

        Attention:
        Chief Executive Officer

        Email:
	 	To
                                         Brii Bio:

         

        Brii
        Biosciences Limited

        Vistra
        (Cayman) Limited

        PO
        Box 3119

        Grand
        Pavilion Hibiscus Way

        802
        West Bay Road Grand Cayman KYI-1205

        Chapel
        Hill, NC 27517

        Attention:
        Zhi Hong

        Email:

 

Any
such notice shall be deemed to have been given: (a) when delivered if personally delivered; (b) on the next Business Day if sent
by email; and/or (c) on the fifth (5th) Business Day following the date of mailing if sent by mail or courier. Notices
hereunder will not be deemed sufficient if provided only between or among each Party’s representatives on the Joint Steering
Committee.

 

    	-52-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

17.8
Assignment. This Agreement shall not be assigned or otherwise transferred, nor
may any right or obligations hereunder be assigned or transferred, by either Party without the prior written consent of the other
Party; except that either Party may assign or otherwise transfer this Agreement without the consent of the other Party to an Affiliate
or to an entity that acquires all or substantially all of the business or assets of the assigning Party relating to the subject
matter of this Agreement, whether by merger, acquisition or otherwise, provided that the acquiring Person assumes this Agreement
in writing or by operation of law. Subject to the foregoing, this Agreement shall inure to the benefit of each Party, its successors
and permitted assigns. Any assignment of this Agreement in contravention of this Section 17.8 shall be null and void.

 

17.9
Relationship of the Parties. The Parties shall be independent contractors of
one another and nothing in this Agreement or any action which may be taken pursuant to its terms is intended, or shall be deemed,
to establish a partnership, joint venture or agency between the Parties. Neither Party shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall be binding on the other Party. All persons employed
by a Party shall be employees of such Party and not of the other Party and all costs and obligations incurred by reason of any
such employment shall be for the account and expense of such Party.

 

17.10
Headings. The heading of the Articles and Sections of this Agreement are included
for convenience of reference and shall not affect its meaning or interpretation.

 

17.11
Survival. The following provisions shall survive any termination of this Agreement:
10.5, 12.1, 12.2(b), 12.2(c), 12.5, 15.5, 15.6, 15.7, 15.8, 15.9, 15.10, 15.11 and Articles 1 (as applicable), 11, 14, 16 and
17.

 

17.12
Counterparts. This Agreement may be executed in two (2) counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same instrument. Executed signature
pages of this Agreement may be scanned and delivered electronically and such signatures shall be deemed to bind each Party hereto
as if they were original signatures.

 

17.13
Interpretation. Except where the context expressly requires otherwise, (a) the
use of any gender herein shall be deemed to encompass references to either or both genders, and the use of the singular shall
be deemed to include the plural (and vice versa), (b) the words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”, (c) the word “will” shall be construed
to have the same meaning and effect as the word “shall”, (d) any definition of or reference to any agreement, instrument
or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set
forth herein), (e) any reference herein to any person or entity shall be construed to include the person’s or entity’s
successors and assigns, (f) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (g) all references
herein to Sections, or Schedules shall be construed to refer to Sections, or Schedules of this Agreement, and references to this
Agreement include all Schedules hereto, (h) the word “notice” means notice in writing (whether or not specifically
stated) and shall include notices, consents, approvals and other written communications contemplated under this Agreement, (i)
provisions that require that a Party, the Parties or any committee hereunder “agree,” “consent” or “approve”
or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter,
approved minutes or otherwise, including by e-mail, (j) unless stated otherwise, references to any specific law, rule or regulation,
or article, section or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement
or successor law, rule or regulation thereof, (k) the term “or” shall be interpreted in the inclusive sense commonly
associated with the term “and/or”, and (l) references to any Sections include Sections and subsections that are part
of the related Section (e.g., a section numbered “Section 2.2” would be part of “Section 2”, and
references to “Section 2.2” would also refer to material contained in the subsection described as “Section 2.2(a)”).

 

[Signature
Page Follows]

 

    	-53-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

IN
WITNESS WHEREOF, the Parties have executed this Collaboration and License Agreement as of the Effective Date.

 

	VBI
    VACCINES INC.	 
	 	 	 
	By:	/s/ Jeff Baxter	 
	Name: 	Jeff Baxter	 
	Title:	Chief
    Executive Officer 	 
	 	 	 
	BRII
    BIOSCIENCES LIMITED	 
	 	 	 
	By:	/s/ Zhi Hong	 
	Name:	Zhi Hong	 
	Title:	Chief
    Executive Officer 	 

 

    	-54-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

Schedule
A

 

VBI
Patents

 

US
Provisional Patent Application 62/760439 filed November 13, 2018.

 

    	-55-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

Schedule
B

 

Claims;
Judgments; Settlements

 

1.
Civil Action 9750-09-18 Stern (minor) et al v. Ministry of Health

 

2.
Class Action 09-18 Anonymous ID 340395698 et al v. SciVac Company Ltd

 

    	-56-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

Schedule
C

 

Development
Plan 

 

The
Parties hereby agree on the following initial development plan and budget for Licensed Compound(s) (the “Development Plan”).

 

[*****]

 

    	-57-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

Schedule
7.1(a)

 

[*****]

 

    	-58-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

Schedule
7.3

 

[*****]

 

    	-59-

    	THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”

    

 

Schedule
13

 

Disclosures

 

All
of the assets of VBI and its subsidiaries are subject to a security agreement entered into pursuant Amended and Restated Credit
Agreement and Guaranty between Variation Biotechnologies (US), Inc. et al and Perceptive Credit Holdings, LP, dated December 6,
2016 as amended on September 28, 2017 and July 17, 2018.

 

    	-60-

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