Document:

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase
Agreement (this “Agreement”) is dated as of December __, 2014, between Electronic Cigarettes International Group,
Ltd., a Nevada corporation (the “Company”), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).

 

WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended
(the “Securities Act”), and Rule 506 of Regulation D promulgated thereunder, the Company desires to issue and
sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the
Company as more fully described in this Agreement.

 

NOW, THEREFORE, IN
CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1         Definitions.
In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have
the meanings given to such terms in the Notes (as defined herein), and (b) the following terms have the meanings set forth in this
Section 1.1:

 

“Acquiring
Person” shall have the meaning ascribed to such term in Section 4.7.

 

“Action”
shall have the meaning ascribed to such term in Section 3.1(j).

 

“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Board
of Directors” means the board of directors of the Company.

 

“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to
close.

 

“Closing
Dates” means the Trading Day(s) on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto in connection with a Closing, and all conditions precedent to (i) the Purchasers’ obligations to pay the
Subscription Amount as to such Closing and (ii) the Company’s obligations to deliver the Securities as to such Closing, in
each case, have been satisfied or waived.

 

“Closing”
means one or more closings of the purchase and sale of the Securities pursuant to Section 2.1.

 

    	 

    	 

    

 

“Closing
Statement” means the Closing Statement in the form on Annex A attached hereto.

 

“Commission”
means the United States Securities and Exchange Commission.

 

“Common
Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.

 

“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument
that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

 

“Conversion
Price” shall have the meaning ascribed to such term in the Notes.

 

“Conversion
Shares” shall have the meaning ascribed to such term in the Notes.

 

“Disclosure
Schedules” shall have the meaning ascribed to such term in Section 3.1.

 

“Evaluation
Date” shall have the meaning ascribed to such term in Section 3.1(r).

 

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

 

“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company
pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors
or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise
or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended
since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or
conversion price of such securities, (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority
of the disinterested directors of the Company, provided that any such issuance shall only be to a Person (or to the equityholders
of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic
with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but
shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an
entity whose primary business is investing in securities and (d) an offering of at least $15,000,000 of Common Stock and/or Common
Stock equivalents in the aggregate to one or more institutional investors in one or more related closings.

 

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“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended.

 

“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).

 

“Indebtedness”
shall have the meaning ascribed to such term in Section 3.1(aa).

 

“Intellectual
Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).

 

“Legend
Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).

 

“Liens”
means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

 

“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(m).

 

“Maximum
Rate” shall have the meaning ascribed to such term in Section 5.17.

 

“Notes”
means the 5% Original Issue Discount Convertible Promissory Notes due, subject to the terms therein, 12 months from their date
of issuance, issued by the Company to the Purchasers hereunder, in the form of Exhibit A attached hereto.

 

“Participation
Maximum” shall have the meaning ascribed to such term in Section 4.12(a).

 

“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Pre-Notice”
shall have the meaning ascribed to such term in Section 4.12(b).

 

“Principal
Amount” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature
pages hereto next to the heading “Principal Amount,” in United States Dollars, which shall equal such Purchaser’s
Subscription Amount as to the Closing.

 

“Pro
Rata Portion” shall have the meaning ascribed to such term in Section 4.12(e).

 

“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.

 

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“Public
Information Failure” shall have the meaning ascribed to such term in Section 4.3(b).

 

“Public
Information Failure Payments” shall have the meaning ascribed to such term in Section 4.3(b).

 

“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.10.

 

“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

“Required
Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable
in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon conversion in full of all Notes
(including Underlying Shares issuable as payment of interest on the Notes), ignoring any conversion or exercise limits set forth
therein.

 

“Robinson
Brog” means Robinson Brog Leinwand Greene Genovese & Gluck P.C., with offices located at 875 Third Avenue, New York,
New York 10022.

 

“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“Rule
424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.

 

“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities”
means the Notes and the Underlying Shares.

 

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

 

“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall
not be deemed to include the location and/or reservation of borrowable shares of Common Stock). 

 

“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for Notes purchased hereunder as specified below
such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.

 

“Subsequent
Financing” shall have the meaning ascribed to such term in Section 4.12(a).

 

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“Subsequent
Financing Notice” shall have the meaning ascribed to such term in Section 4.12(b).

 

“Subsidiary”
means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct
or indirect subsidiary of the Company formed or acquired after the date hereof.

 

“Trading
Day” means a day on which the principal Trading Market is open for trading.

 

“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange, the OTC Bulletin Board or the “pink sheets” (or any successors to any of the foregoing).

 

“Transaction
Documents” means this Agreement, the Notes, all exhibits and schedules thereto and hereto and any other documents or
agreements executed in connection with the transactions contemplated hereunder.

 

“Transfer
Agent” means Nevada Agency and Transfer Company, the current transfer agent of the Company, with a mailing address of
50 West Liberty Street, Suite 880, Reno, Nevada 89501 and a telephone number of (775) 322-0626, and any successor transfer agent
of the Company.

 

“Transfer
Agent Instruction Letter” means the letter from the Company to the Transfer Agent which instructs the Transfer Agent
to issue Underlying Shares pursuant to the Transaction Documents, in the form of Exhibit B attached hereto.

 

“Underlying
Shares” means the shares of Common Stock issued and issuable upon conversion or redemption of the Notes and issued and
issuable in lieu of the cash payment of interest on the Notes in accordance with the terms of the Notes.

 

“Variable
Rate Transaction” shall have the meaning ascribed to such term in Section 4.13(b).

 

“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed
or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common
Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in
all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith
by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid by the Company.

 

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ARTICLE II.

PURCHASE AND SALE

 

2.1         Purchase.
The Purchasers will purchase an aggregate of up to $3,000,000 in Subscription Amount corresponding to an aggregate of up to $3,157,894.74
in Principal Amount of Notes at two Closings. The first Closing will occur upon execution of this Agreement and the second closing
will occur fourteen (14) days following the first Closing. The Company must file a Schedule 14A with the Commission to increase
the number of authorized but unissued shares of Common Stock so that at least 200% of the Required Minimum are available for issuance
upon conversion of this Note and payment of interest on this Note at such time, calculated on a monthly basis. The Schedule 14A
must be filed within seven (7) Business Days after the first Closing or the Purchaser is not obligated to make the subsequent purchases.

 

2.2         Closing.
On each Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution
and delivery of this Agreement by the parties hereto, the Company agrees to sell, and each Purchaser, severally and not jointly,
agrees to purchase, such Purchaser’s Closing Subscription Amount as set forth on the signature page hereto executed by such
Purchaser (an aggregate of up to $3,00,000 in Subscription Amount corresponding to an aggregate of up to $$3,157,894.74 in Principal
Amount of Notes.) At each Closing, each Purchaser shall deliver to the Company, via wire transfer or a certified check, immediately
available funds equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such
Purchaser, and the Company shall deliver to each Purchaser its respective shares of Notes, as determined pursuant to Section 2.3(a),
and the Company and each Purchaser shall deliver the other items set forth in Section 2.3 deliverable at the Closing. Upon satisfaction
of the covenants and conditions set forth in Sections 2.3 and 2.4 for the Closing, each Closing shall occur at the offices of Robinson
Brog or such other location as the parties shall mutually agree.

 

2.3         Deliveries.

 

(a)          On
or prior to each Closing Date (except as noted), the Company shall deliver or cause to be delivered to each Purchaser the following:

 

(i)          this
Agreement duly executed by the Company;

 

(ii)         the
Transfer Agent Instruction Letter duly executed by the Company and the Transfer Agent; and

 

(iii)        a
Note with a principal amount equal to such Purchaser’s Principal Amount, registered in the name of such Purchaser.

 

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(b)          On
or prior to each Closing Date, each Purchaser shall deliver or cause to be delivered to the Company, as applicable, the following:

 

(i)          this
Agreement duly executed by such Purchaser; and

 

(ii)         such
Purchaser’s Subscription Amount by wire transfer to the account specified in writing by the Company.

 

2.4         Closing
Conditions.

 

(a)          The
obligations of the Company hereunder in connection with each Closing are subject to the following conditions being met:

 

(i)          the
accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein
(unless as of a specific date therein in which case they shall be accurate as of such date);

 

(ii)         all
obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been
performed; and

 

(iii)        the
delivery by each Purchaser of the items set forth in Section 2.3(b) of this Agreement.

 

(b)          The
respective obligations of the Purchasers hereunder in connection with each Closing are subject to the following conditions being
met:

 

(i)          the
accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained
herein (unless as of a specific date therein);

 

(ii)         all
obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;
and

 

(iii)        the
delivery by the Company of the items set forth in Section 2.3(a) of this Agreement.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1         Representations
and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed
a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding
section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

 

(a)          Subsidiaries.
All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly
or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the
issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references
to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

 

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(b)          Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects
or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect
on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document
(any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c)          Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated
by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company
and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith
or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which
it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance
with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.

 

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(d)          No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to
which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby
and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any
of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing
a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which
any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict
with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court
or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations),
or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii)
and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(e)          Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i)
the filings required pursuant to Section 4.6 of this Agreement, (ii) the notice and/or application(s) to each applicable Trading
Market for the issuance and sale of the Securities and the listing of the Conversion Shares for trading thereon in the time and
manner required thereby and (iii) the filing of Form D with the Commission and such filings as are required to be made under applicable
state securities laws (collectively, the “Required Approvals”).

 

(f)          Issuance
of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other
than restrictions on transfer provided for in the Transaction Documents. The Underlying Shares, when issued in accordance with
the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed
by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its
duly authorized capital stock a number of shares of Common Stock for issuance of the Underlying Shares at least equal to 15,000,000
on the date hereof.

 

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(g)          Capitalization.
The capitalization of the Company is as set forth on Schedule 3.1(g), which Schedule 3.1(g) shall also include the
number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof. Except
as disclosed on Schedule 3.1(g), the Company has not issued any capital stock since its most recently filed periodic report
under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans,
the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant
to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report
under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right
to participate in the transactions contemplated by the Transaction Documents as a result of the purchase and sale of the Securities.
Other than as set forth on Schedule 3.1(g), there are no outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common
Stock or Common Stock Equivalents. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued,
fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding
shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval
or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.
There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

(h)          SEC
Reports; Financial Statements. Except as disclosed on Schedule 3.1(h), the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis
or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities
Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in
the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission
with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

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(i)          Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there has
been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property
to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v)
the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any request for confidential treatment of information. Except
for the issuance of the Securities contemplated by this Agreement ), no event, liability, fact, circumstance, occurrence
or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries
or their respective businesses, properties, operations, assets or financial condition, that would be required to be disclosed by
the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly
disclosed at least 1 Trading Day prior to the date that this representation is made.

 

(j)          Litigation.
Other than as disclosed in the SEC Reports, there is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county,
local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity
or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have
or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer
thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities
laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated,
any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission
has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or
any Subsidiary under the Exchange Act or the Securities Act.

 

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(k)          Labor
Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’
employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure
or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant
in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of
its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance
with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

(l)          Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any
court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation
of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material Adverse Effect.

 

(m)          Regulatory
Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation
or modification of any Material Permit.

 

(n)          Title
to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them
and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries,
in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens
for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP
and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by
the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the
Subsidiaries are in compliance.

 

    	12

    	 

    

 

(o)          Intellectual
Property. Other than as disclosed in the SEC Reports, the Company and the Subsidiaries have, or have rights to use, all patents,
patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses
and other intellectual property rights and similar rights as described in the SEC Reports as necessary or required for use in connection
with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual
Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that
any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be
abandoned, within two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has received, since the
date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any
knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as could not have or
reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights
are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company
and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their
intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.

 

(p)          Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. Neither the
Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without
a significant increase in cost.

 

(q)          Transactions
With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company or
any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party
to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or
personal property to or from providing for the borrowing of money from or lending of money to, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case
in excess of $120,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan
of the Company.

 

    	13

    	 

    

 

(r)          Sarbanes-Oxley;
Internal Accounting Controls. The Company and the Subsidiaries are in compliance with any and all applicable requirements of
the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated
by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The
Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of
the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).
The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange
Act) that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting
of the Company and its Subsidiaries.

 

(s)          Certain
Fees. Other than as set forth on Schedule 3.1(s), no brokerage or finder’s fees or commissions are or will be
payable by the Company or any Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have
no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

 

(t)          Private
Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated
hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

 

    	14

    	 

    

 

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

 

(v)         Registration
Rights. Other than as disclosed on Schedule 3.1(v), no Person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company or any Subsidiaries.

 

(w)          Listing
and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating
such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance requirements.

 

(x)          Application
of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and
the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation
as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.

 

(y)          Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel
with any information that it believes constitutes or might constitute material, non-public information. The Company understands
and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.
All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their
respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and
correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were made, not misleading. The press releases disseminated
by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees
that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other
than those specifically set forth in Section 3.2 hereof.

 

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(z)          No
Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2,
neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering
of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require
the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any
Trading Market on which any of the securities of the Company are listed or designated. 

 

(aa)        Solvency.
Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder: (i) the fair saleable value of the Company’s assets exceeds
the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry
on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular
capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability
thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate
all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).
The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Schedule 3.1(aa)
sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which
the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” means (x)
any liabilities for borrowed money or amounts owed in excess of $250,000 (other than trade accounts payable incurred in the ordinary
course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether
or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties
by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business;
and (z) the present value of any lease payments in excess of $250,000 due under leases required to be capitalized in accordance
with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

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(bb)       Tax
Status.   Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in
a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local
income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due
on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of
all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or
of any Subsidiary know of no basis for any such claim.

 

(cc)        No
General Solicitation. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities
by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchasers
and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

(dd)       Foreign
Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent
or other person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns
from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person
acting on its behalf of which the Company is aware) which is in violation of law or (iv) violated in any material respect any provision
of FCPA.

 

(ee)        Accountants.
The Company’s independent registered public accounting firm is set forth on Schedule 3.1(ee) of the Disclosure Schedules.
To the knowledge and belief of the Company, such accounting firm: (i) is a registered public accounting firm as required by the
Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s
Annual Report for the fiscal year ended December 31, 2014.

 

(ff)         No
Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and
the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s ability
to perform any of its obligations under any of the Transaction Documents.

 

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(gg)       Acknowledgment
Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated
thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given
by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to
each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based
solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

(hh)       Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding
(except for Sections 3.2(f) and 4.15 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers
has been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities
for any specified term, (ii) past or future open market or other transactions by any Purchaser, specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement
transactions, may negatively impact the market price of the Company’s publicly-traded securities, (iii) any Purchaser, and
counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, may presently
have a “short” position in the Common Stock and (iv) each Purchaser shall not be deemed to have any affiliation with
or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands
and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods that the value of the Underlying Shares deliverable
with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing
stockholders' equity interests in the Company at and after the time that the hedging activities are being conducted.  The
Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.

 

(ii)         Regulation
M Compliance.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate
the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of,
any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement
agent in connection with the placement of the Securities.

 

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(jj)         Stock
Option Plans. Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance
with the terms of the Company’s stock option plan and (ii) with an exercise price at least equal to the fair market value
of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The Company has not knowingly granted, and there is no and has
been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock
options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their
financial results or prospects.

 

(kk)        Office
of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director, officer, agent,
employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

 

(ll)          U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real
property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the
Company shall so certify upon Purchaser’s request.

 

(mm)      Bank
Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act
of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the
“Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly
or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or
more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither
the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank
or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

(nn)        Money
Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with
applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money
Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body
or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge
of the Company or any Subsidiary, threatened.

 

3.2         Representations
and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as
of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):

 

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(a)          Organization;
Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability
company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary
corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.

 

(b)          Own
Account. Such Purchaser understands that the Securities are “restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account
and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act
or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such Purchaser’s right to sell the Securities in compliance with applicable
federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

 

(c)          Purchaser
Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on
which it converts any Notes it will be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7)
or (a)(8) under the Securities Act.

 

(d)          Experience
of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(e)          General
Solicitation. Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented
at any seminar or any other general solicitation or general advertisement.

 

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(f)          Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not directly
or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases
or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser
first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material
terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing,
in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions
of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio
managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered
by this Agreement. Other than to other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all
disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding
the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any
actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect
Short Sales or similar transactions in the future.

 

The Company acknowledges and agrees that
the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1         Transfer
Restrictions.

 

(a)          The
Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company
an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the
terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement.

 

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(b)          The
Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following
form:

 

[NEITHER] THIS SECURITY [NOR
THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND THE SECURITIES
ISSUABLE UPON CONVERSION OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER
OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

The Company
acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees
or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel
of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.

 

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(c)          Certificates
evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while
a registration statement covering the resale of the Underlying Shares is effective under the Securities Act, (ii) following any
sale of such Underlying Shares pursuant to Rule 144, (iii) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall
cause its counsel to issue a legal opinion to the Transfer Agent promptly after any of the events described in (i)-(iii) in the
preceding sentence if required by the Transfer Agent to effect the removal of the legend hereunder (with a copy to the applicable
Purchaser and its broker). If all or any portion of the Notes is converted at a time when there is an effective registration statement
to cover the resale of the Underlying Shares, or if such Underlying Shares may be sold under Rule 144 or if such legend is not
otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued
by the staff of the Commission) then such Underlying Shares shall be issued free of all legends. The Company agrees that following
such time as such legend is no longer required under this Section 4.1(c), it will, no later than three (3) Trading Days following
the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Underlying Shares, as applicable,
issued with a restrictive legend (such third Trading Day, the “Legend Removal Date”), deliver or cause to be
delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends. The Company
may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section 4. Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer
Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System
as directed by such Purchaser.

 

(d)          In
addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated
damages and not as a penalty, for each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the date such Securities
are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $10 per Trading
Day (increasing to $20 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each Trading Day after
the Legend Removal Date until such certificate is delivered without a legend. Nothing herein shall limit such Purchaser’s
right to pursue actual damages for the Company’s failure to deliver certificates representing any Securities as required
by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or injunctive relief.

 

4.2         Acknowledgment
of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares
of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations
under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction
Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless
of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect
that such issuance may have on the ownership of the other stockholders of the Company.

 

4.3         Furnishing
of Information; Public Information.

 

(a)          Until
the earliest of the time that no Purchaser owns Securities, the Company covenants to maintain the registration of the Common Stock
under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even
if the Company is not then subject to the reporting requirements of the Exchange Act.

 

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(b)          At
any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of
the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) (a “Public Information Failure”) then, in addition to such Purchaser’s other
available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason
of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to two percent (2.0%) of the aggregate
Subscription Amount of such Purchaser’s Securities on the day of a Public Information Failure and on every thirtieth (30th)
day (pro rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information
Failure is cured and (b) such time that such public information is no longer required  for the Purchasers to transfer the
Underlying Shares pursuant to Rule 144.  The payments to which a Purchaser shall be entitled pursuant to this Section 4.3(b)
are referred to herein as “Public Information Failure Payments.”  Public Information Failure Payments
shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments
are incurred and (ii) the third (3rd) Business Day after the event or failure giving rise to the Public Information
Failure Payments is cured.  In the event the Company fails to make Public Information Failure Payments in a
timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for
partial months) until paid in full. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Public
Information Failure, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief.

 

4.4         Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior
to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

 

4.5         Conversion
Procedures. The form of Notice of Conversion included in the Notes sets forth the totality of the procedures required
of the Purchasers in order to convert the Notes. Without limiting the preceding sentences, no ink-original Notice of Conversion
shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form
be required in order to convert the Notes. Except as provided in Section 4.1(c), no additional legal opinion, other information
or instructions shall be required of the Purchasers to convert their Notes. The Company shall honor conversions of the Notes and
shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

 

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4.6         Securities
Laws Disclosure; Publicity. The Company shall (a) by 9:30 a.m. (New York City time) on the second Trading Day immediately following
the Closing, issue a press release disclosing the material terms of the transactions contemplated hereby and (b) file a Current
Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the
Exchange Act. From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly
disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or
any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction
Documents. The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make
any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without
the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except to the extent such disclosure is required by law
or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted
under this clause (b).

 

4.7         Shareholder
Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or under any other agreement between the Company and the Purchasers.

 

4.8         Non-Public
Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents,
the Company covenants and agrees that neither it, nor any other Person acting on its behalf, will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto
such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use of such information.
The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in
securities of the Company.

 

4.9         Use
of Proceeds. The Company shall use the net proceeds hereunder as set forth on Schedule 4.9 attached hereto, and shall
not use such proceeds: (a) for the satisfaction of any portion of the Company’s debt (other than payment of trade payables
in the ordinary course of the Company’s business and prior practices), (b) for the redemption of any Common Stock or Common
Stock Equivalents, (c) for the settlement of any outstanding litigation or (d) in violation of FCPA or OFAC regulations.

 

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4.10       Indemnification
of Purchasers. Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the
Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not
an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless
such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence,
willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may
be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall
have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time
to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the
Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not
be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s
prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a
loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties,
covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification
required by this Section 4.10 shall be made by periodic payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any
cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject
to pursuant to law.

 

4.11       Reservation
and Listing of Securities.

 

(a)         The
Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents
in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.

 

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(b)         If,
on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than 200% of the Required
Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate
or articles of incorporation to increase the number of authorized but unissued shares of Common Stock so that at least 200% of
the Required Minimum shares of Common Stock are available for issuance upon conversion of this Note and payment of interest on
this Note at such time at such time, as soon as possible and in any event not later than the 75th day after such date.

 

(c)         The
Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading
Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum
on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing
or quotation on such Trading Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing or
quotation and (iv) maintain the listing or quotation of such Common Stock on any date at least equal to the Required Minimum on
such date on such Trading Market or another Trading Market.

 

4.12       Participation
in Future Financing.

 

(a)         Subject
to any existing obligations of the Company, from the date hereof until the date that is the 12-month anniversary of the Closing,
upon any issuance by the Company or any of its Subsidiaries of Common Stock, Common Stock Equivalents or debt for cash consideration,
Indebtedness or a combination of units hereof, other than any issuance that is through a public underwritten offering or to an
investor or a group of investors that already own Common Stock or Common Stock Equivalents (a “Subsequent Financing”),
each Purchaser shall have the right to participate in the Subsequent Financing in an amount up to 100% of such Purchaser’s
Subscription Amount (the “Participation Maximum”) on the same terms, conditions and price provided for in the
Subsequent Financing.

 

(b)         At
least five (5) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser
if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”).
Upon the request of a Purchaser within two (2) Trading Days after the Pre-Notice, and only upon a request by such Purchaser, for
a Subsequent Financing Notice, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver a
Subsequent Financing Notice to such Purchaser. The Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the Person or Persons through or
with whom such Subsequent Financing is proposed to be effected and shall include a term sheet or similar document relating thereto
as an attachment.

 

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(c)         Any
Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company no later than two (2)
Trading Days after delivery of such Subsequent Financing Notice that such Purchaser is willing to participate in the Subsequent
Financing, the amount of such Purchaser’s participation, and representing and warranting that such Purchaser has such funds
ready, willing, and available for investment on the terms set forth in the Subsequent Financing Notice.

 

(d)         If
notifications by the Purchasers of their willingness to participate in the Subsequent Financing (or to cause their designees to
participate) is, in the aggregate, less than the total amount of the Subsequent Financing, then the Company may effect the remaining
portion of such Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing Notice.

 

(e)         If
the Company receives responses to a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate amount
of the Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata Portion (as defined below) of the
Participation Maximum.  “Pro Rata Portion” means the ratio of (x) the Subscription Amount of Securities
purchased by a Purchaser participating under this Section 4.12 and (y) the sum of the aggregate Subscription Amounts of Securities
purchased by all Purchasers participating under this Section 4.12.

 

(f)         The
Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of
participation set forth above in this Section 4.12, if the Subsequent Financing subject to the initial Subsequent Financing Notice
is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within thirty (30) Trading Days after
the date of the initial Subsequent Financing Notice.

 

(g)         The
Company and each Purchaser agree that if any Purchaser elects to participate in the Subsequent Financing, the transaction documents
related to the Subsequent Financing shall not include any term or provision whereby such Purchaser shall be required to agree
to any restrictions on trading as to any of the Securities purchased hereunder or be required to consent to any amendment to or
termination of, or grant any waiver, release or the like under or in connection with, this Agreement, without the prior written
consent of such Purchaser.

 

(h)         Notwithstanding
anything to the contrary in this Section 4.12 and unless otherwise agreed to by such Purchaser, the Company shall either confirm
in writing to such Purchaser that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly
disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that such Purchaser
will not be in possession of any material, non-public information, by the tenth (10th) Business Day following delivery of the
Subsequent Financing Notice. If by such tenth (10th) Business Day, no public disclosure regarding a transaction with respect to
the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction has been received by such
Purchaser, such transaction shall be deemed to have been abandoned and such Purchaser shall not be deemed to be in possession
of any material, non-public information with respect to the Company or any of its Subsidiaries.  

 

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(i)         Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of an Exempt Issuance.

 

4.13       Equal
Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration
is also offered to all of the parties to this Agreement. Further, the Company shall not make any payment of principal or interest
on the Notes in amounts which are disproportionate to the respective principal amounts outstanding on the Notes at any applicable
time. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated
separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed
as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

 

4.14       Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither
it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will (i) execute any Short Sales, of any of
the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the
transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in
Section 4.6 and (ii) execute any Short Sales of the Common Stock from the date hereof until the earlier of (x) the 12 month anniversary
of the date hereof and (y) the date that the Notes are no longer outstanding (provided that this provision shall not prohibit any
sales made where a corresponding Notice of Conversion is tendered to the Company and the shares received upon such conversion are
used to close out such sale) (a “Prohibited Short Sale”).  Each Purchaser, severally and not jointly with
the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed
by the Company pursuant to the initial press release as described in Section 4.6, such Purchaser will maintain the confidentiality
of the existence and terms of this transaction and the information included in the Transaction Documents and the Disclosure Schedules.
Notwithstanding the foregoing, and notwithstanding anything contained in this Agreement to the contrary, the Company expressly
acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in
effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the initial press release as described in Section 4.6, (ii) except for a Prohibited Short
Sale, no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance
with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in Section 4.6 and (iii) no Purchaser shall have any duty of confidentiality
to the Company or its Subsidiaries after the issuance of the initial press release as described in Section 4.6.  Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions
made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only
apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the
Securities covered by this Agreement.

 

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4.15         Form
D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers
at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide
evidence of such actions promptly upon request of any Purchaser.

 

ARTICLE V.

MISCELLANEOUS

 

5.1         Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before December 31, 2014; provided, however, that such termination will not affect
the right of any party to sue for any breach by any other party (or parties).

 

5.2         Fees
and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent
fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company
and any conversion notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery
of any Securities to the Purchasers.

 

5.3         Entire
Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.4         Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing,
if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.

 

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5.5         Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchasers holding at least 67% in interest of the Securities then outstanding
or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay
or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

5.6         Headings.
The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

 

5.7         Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of
each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to
whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

5.8         No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.10.

 

5.9         Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action
or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding
is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence
an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the
Company under Section 4.10, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for
its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.

 

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5.10         Survival.
The representations and warranties contained herein shall survive the Closings and the delivery of the Securities.

 

5.11         Execution.
This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.

 

5.12         Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

 

5.13         Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of)
any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser
may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand
or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the
case of a rescission of a conversion of the Notes, the applicable Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded conversion notice concurrently with the return to such Purchaser of the aggregate conversion price
paid to the Company for such shares and the restoration of such Purchaser’s right to acquire such shares pursuant to such
Purchaser’s Notes (including, issuance of a replacement share certificate evidencing such restored right).

 

    	32

    	 

    

 

5.14         Replacement
of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or
in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory
to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

 

5.15         Remedies.
In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.

 

5.16         Payment
Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document
or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from,
disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

5.17         Usury.
To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and
will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any
time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Purchaser in order to enforce
any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction
Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments
in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”),
and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated
with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents
is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract
rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date thereof
forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such
excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company,
the manner of handling such excess to be at such Purchaser’s election.

 

    	33

    	 

    

 

5.18         Independent
Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several
and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance
or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers
are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser
to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own separate
legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience only, each
Purchaser and its respective counsel have chosen to communicate with the Company through Robinson Brog. The Company has elected
to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by any of the Purchasers.

 

5.19         Liquidated
Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages
or other amounts are due and payable shall have been canceled.

 

5.20         Saturdays,
Sundays, Holidays, etc.   If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken
or such right may be exercised on the next succeeding Business Day.

 

5.21         Construction.
The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.

 

5.22         WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES
EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY
AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY. 

 

    	34

    	 

    

 

(Signature Pages Follow)

 

    	35

    	 

    

 

IN WITNESS WHEREOF,
the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories
as of the date first indicated above.

 

	
        ELECTRONIC CIGARETTES
        

        INTERNATIONAL GROUP,
        LTD.
	 	
        Address for Notice:

         

	 	 	 
	By:	 	 	Fax:
	 	Name:	 	 
	 	Title:	 	 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

    	36

    	 

    

 

[PURCHASER
SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF,
the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as
of the date first indicated above.

 

	Name of Purchaser: 	 

 

	Signature of Authorized Signatory of Purchaser: 	 

 

	Name of Authorized Signatory: 	 

 

	Title of Authorized Signatory: 	 

 

	Email Address of Authorized Signatory: 	 

 

	Facsimile Number of Authorized Signatory: 	 

 

Address for Notice to Purchaser:

 

Address for Delivery of Securities to Purchaser (if not same
as address for notice):

 

First Closing Subscription Amount:

 

Second Closing Subscription Amount:

 

EIN Number: _______________________

 

[SIGNATURE PAGES CONTINUE]

 

    	37

    	 

    

 

Annex A 

 

CLOSING STATEMENT

 

Pursuant to the attached Securities Purchase
Agreement, dated as of the date hereto, the purchasers shall purchase Notes from Electronic Cigarettes International Group, Ltd.
(the “Company”). All funds will be wired into an account maintained by the Company. All funds will be disbursed
in accordance with this Closing Statement.

 

Disbursement
Date:   December ___, 2014

 

 

	
        I. PURCHASE PRICE 
	 
	 	 
	Gross Proceeds to be Received	$
	 	 
	
        II.    DISBURSEMENTS

        
	 
	 	 
	 	$
	 	$
	 	$
	 	 
	Total Amount Disbursed:	$
	 	 
	 	 
	WIRE INSTRUCTIONS:	 
	 	 

 

To: _____________________________________

 

Duly executed this ___ day of December, 2014:

 

Electronic Cigarettes International Group, Ltd.

 

	By: 	 	 
	Name:
	Title:

 

    	38Exhibit
10.1

LICENCE AGREEMENT

 

Effective as of 31 July 2003 (“the Effective Date”)

 

Between

 

YEDA RESEARCH AND DEVELOPMENT COMPANY LIMITED

	  
	
a company duly registered under the laws of Israel of P.O. Box 95, Rehovot 76100, Israel

 

(hereinafter “Yeda”)

of the one part;

 

and

	  
	
BiondVax Pharmaceuticals Ltd.

	 
	
a company duly registered under the laws of Israel of 54 Bialik Avenue, Ramat Hasharon 47205, Israel, Israel

 

(hereinafter the “Company”)

of the other part.

	  	  	  
	
P R E A M B L E :

	  	  	  
	
WHEREAS:

	
(A)

	
in the course of research conducted at the Weizmann Institute of Science (“the Institute”), under the supervision of Professor Ruth Arnon (“Prof. Arnon”) of the Department of Immunology, Prof. Arnon together with certain other scientists of the Institute (all of the aforementioned persons, collectively, “the Scientists”) arrived at an invention comprising a peptide-based vaccine for influenza (“the Invention”), all as more fully described in the patent applications listed in Appendix A(1) hereto (“the Existing Patent Applications”); and created and/or generated the know-how and other information relating to the Invention and the formulation and development thereof as described in Appendix A(2) hereto (which may be modified by mutual agreement of the parties from time to time) (“the Know-How”); and

 

    	  

    	 

    
 

-2-

	  	  	  
	  	
(B)

	
by operation of Israeli law and/or under the terms of employment of the Scientists at the Institute and pursuant to an agreement between the Institute, Yeda and the Scientists, all right, title and interest in and to the Invention, the Know-How and all Patents (as hereinafter defined) in respect of the Invention and the Know-How,’ vest and shall vest exclusively in Yeda; and 

	  	  	  
	  	
(C)

	
subject to and in accordance with the terms of this  Agreement, the Company wishes to receive, and Yeda is willing to grant to the Company, a worldwide exclusive licence under the Patents and the Know-How, for the manufacture, development and sale of influenza vaccines and any other product that cannot be manufactured, used, leased, sold, transferred or imported, in whole or in part, without infringing on one or more claims under the Patents (“Products”), all subject to and in accordance with the terms and conditions of this Agreement below; and 

	  	  	  
	  	
(D)

	
the Company hereby declares that, as at the Effective Date and until the date of signature of this Agreement, the Company was wholly-owned by Dr. Ron Babecoff (I.D. No. 068780410) of 54 Bialik Avenue, Ramat Hasharon 47205, Israel; Isaac Devash (I.D. No. 27038108) of 18 Belinson Street, Holon 58320 Israel and Rami Epstein (I.D. No. 57825473), of 70 Jabotinsky Street, Givatayim 53320, Israel (“the Founders”),

 

NOW THEREFORE` IT IS AGREED BETWEEN THE PARTIES HERETO AS FOLLOWS:

	  	  	  
	
1.

	
PREAMBLE, APPENDIX AND INTERPRETATION

	  	  
	
1.1.

	
The Preamble and Appendix hereto form an integral part of this Agreement.

 

    	  

    	 

    
 

-3-

	  	  	  	  	  
	
1.2.

	
In this Agreement the terms below shall bear the meanings assigned to them below, unless the context shall indicate a contrary intention:

	  	  
	
1.2.1.

	  	
“Affiliated Entity”

	
-

	
shall mean, with respect to any company, corporation, other entity or person (hereinafter, collectively, “entity”), an entity which directly or indirectly, is controlled by, or controls, or, is under common control with, such entity. For the purposes of this definition, “control” shall mean the ability, directly or indirectly, to direct the activities of the relevant entity (save for an ability flowing solely from the fulfillment of the office of director or another office) and shall include, without limitation, the holding, directly or indirectly, of more than 30% (thirty percent) of the issued share capital or of the voting power of the relevant entity or the holding, directly or indirectly, of a right to appoint more than 30% (thirty percent) of the directors of such entity or of a right to appoint the chief executive officer of such entity;

	  	  	  	  	  
	
1.2.2.

	  	
“Development Program”

	
-

	
shall mean, with respect, to any Product or Products, a development program specifying the activities and timetable necessary to develop such Products to commercialisation, including the performance of toxicological tests, pharmacological and efficacy tests, pre-clinical tests and clinical trials and the steps required for obtaining regulatory approvals from the U.S. Food and Drug Administration (“the FDA”) or equivalent regulating authorities in other countries and the development of procedures and facilities for commercial production of such Products, sales projections and proposed marketing efforts;

 

    	  

    	 

    
 

-4-

	  	  	  	  	  
	
1.2.3.

	  	
“Exchange Rate”

	
-

	
shall mean, with respect to any amount to be calculated, or which is paid or received in a currency other than US Dollars, the rate reported in the Wall Street Journal for the purchase of US Dollars with such currency except if such currency is New Israel Sheqels, in which case such rate shall be the Bank Hapoalim Rate as defined below, on the last Business Day prior to the date of calculation, payment or receipt, as the case may be; for the purpose of the above, “Business Day” shall be a day, other than a Saturday, Sunday or other day on which the principal banks located in New York are not open for business during normal banking hours; and “Bank Hapoalim Rate” shall mean the average of the selling and buying exchange rates of New Israel Sheqels (in respect of cheques and remittances) and the US Dollar prevailing at Bank Hapoalim B.M. at the end of business on the date of calculation, payment or receipt, as the case may be;

	  	  	  	  	  
	
1.2.4.

	  	
“Initial Investment”

	
-

	
shall mean the investment of an aggregate amount of at least US $3,000,000 (three million United States Dollars) net in the issued and irredeemable share capital of the Company, whether in one transaction or multiple transactions, to be expended solely for the purpose of advancing the research and development of the Products;

	  	  	  	  	  
	
1.2.5.

	  	
“Initial investment Date”

	
-

	
March 31, 2005 or, if earlier, the date upon which the Company shall have received the Initial Investment;

	  	  	  	  	  
	
1.2.6.

	  	
“Licence”

	
-

	
shall mean an exclusive worldwide licence under the Patents and the Know-How for the development, manufacture (by the Company or by a Subcontractor on the Company’s behalf), use, marketing, safe, distribution and importing of the Products, subject to the provisions of clause 2.1 below and the other terms and conditions of this Agreement;

 

    	  

    	 

    
 

-5-

	  	  	  	  	  
	
1.2.7

	  	
“Licensed Information”

	
-

	
shall mean: (a) the Invention; and (b) the Know-How;

	  	  	  	  	  
	
1.2.8

	  	
“Net Sales”

	
-

	
shall mean the total amount invoiced by the Company and the total amount invoiced by each Sublicensee in connection with the sale of Products (for the removal of doubt, whether such sales are made before or after the receipt of FDA New Drug Approval or equivalent approval for the relevant Product in any country); provided that, with respect to sales which are not at arms-length and either are not in the ordinary course of business or according to then current market conditions for such a sale, the term “Net Sales” shall mean the total amount that would have been due in an arm’s length sale made in the ordinary course of business and according to the then current market conditions for such sale or, in the absence of such current market conditions, according to market conditions for the sale of products similar to the Products, in all cases after deduction of:

	  	  	  	  	  	  
	  	  	  	  	
(i)

	
excises, customs, duties and sales taxes (including value added taxes), or other similar governmental charges to the extent applicable to such sale and included in the invoice in respect of such sale;

	  	  	  	  	  	  
	  	  	  	  	
(ii)

	
normal and customary trade, cash and quantity discounts, rebates, chargebacks, credits or allowances, if any, actually granted or imposed on account of the sale of the Products; or on account of price adjustments, including retroactive price adjustments or reductions imposed by public authorities, recalls, refunds, rejections or returns of Products previously sold;

 

    	  

    	 

    
 

 

-6-

	  	  	  	  	  	  
	  	  	  	  	
(iii)

	
bad debts, provided that they are recorded as such in the Company’s books in accordance with acceptable accounting principles and practices; and

	  	  	  	  	  	  
	  	  	  	  	
(iv)

	
normal and customary transportation and delivery charges actually incurred, including shipping insurance, to the extent that such items are separately itemised in the invoice;

	  	  	  	  	  	  
	  	  	  	  	
and provided further that, with respect to sales by the Company and/or a Sublicensee, as applicable, to any Affiliated Entity of the Company or Sublicensee, as the case may be, the term, “Net Sales” shall mean the higher of: (a) “Net Sales”, as defined above, with respect to sales which are not at arm’s length and either are not in the ordinary course of business or according to current market conditions; and (b) the total amount invoiced by such Affiliated Entity on resale to an independent third party purchaser after the deductions specified in subparagraphs (i), (ii), (iii) and (iv) above, to the extent applicable. For the removal of doubt, it is recorded that royalties shall not be paid on both the sale and resale of the same Product by the Company, a Sublicensee and/or an Affiliated Entity of the Company or Sublicensee (as the case may be)—but shall only be paid on the sale or resale (as the case may be) which has the highest “Net Sales” value as set forth in this clause 1.2.8 above. For the further removal, of doubt, Sublicensing Receipts shall not form part of the “Net Sales”. Notwithstanding the aforegoing, with respect to sales during the period until the end of the calendar quarter during which the Company reaches an aggregate cumulative gross income (turnover) of US $3,000,000 (three million United States Dollars), all references in the above definition of Net Sales to “invoiced” shall be replaced by “received” and the deductions specified in subparagraphs (i), (ii) and (iv) above shall only apply if and to the extent that amounts corresponding thereto are actually received, and, with respect to the deduction specified in subparagraph (ii) above, subsequently refunded; and, for the removal of doubt, the deduction specified in subparagraph (iii) above shall apply only after the Company reaches an aggregate cumulative gross income (turnover) of US $3,000,000 (three million United States Dollars);

 

    	  

    	 

    
 

 

-7-

	  	  	  	  	  
	
1.2.9.

	  	
“Patents”

	
-

	
shall mean: (i) the Existing Patent Applications and all corresponding patents which may be granted thereon in all jurisdictions; and (ii) all other patent applications or applications for certificates of invention covering portions of the Licensed Information and all patents or certificates of invention which may be granted thereon; as well as all continuations, continuations-in-part, patents of addition, divisions, refiles, renewals, reissues and extensions of any of the aforegoing patents.

 

    	  

    	 

    
 

-8-

	 	 	 	 	 
	  	  	  	  	
For the purposes of this Agreement, the term “Patent” shall also mean “Orphan Drug” status (within the meaning of such term under the US Orphan Drug Act), Supplementary Protection, Certificate (within the meaning of such term under Council Regulation (EU) No. 1768/92) or any other similar statutory protection;

	  	  	  	  	  
	
1.2.10.

	  	
“Subcontracting Agreement” and “Subcontractor”

	
-

	
 

“Subcontracting Agreement” shall mean a bona fide subcontracting agreement pursuant to which a contractor is engaged on a pure commissioned work basis for the sole purpose of manufacturing or developing any of the Products (or part thereof) on the Company’s behalf, for monetary, consideration only; and the term “Subcontractor” shall be construed accordingly;

	  	  	  	  	  
	
1.2.11.

	  	
“Sublicence” and “Sublicensee”

	
-

	
“Sublicence” shall mean any right granted, licence given, or agreement entered into, by the Company to or with any other person or entity, permitting any use of the Licensed Information and/or the Patents (or any part thereof) for the development, manufacture and/or sale of Products (whether or not such grant of rights, licence given or agreement entered into is described as a sublicence or as an agreement with respect to the development and/or manufacture and/or sale and/or distribution and/or marketing of Products or otherwise); provided, however, that a Subcontracting Agreement shall not be deemed to be a “Sublicence”; and the term “Sublicensee” shall be construed accordingly;

    	  

    	 

    
 

-9-

	  	  	  	  	  
	
1.2.12.

	  	
“Sublicensing Receipts”

	
-

	
shall mean consideration, whether monetary or otherwise, received (for the removal of doubt, whether received before or after the receipt of FDA New Drug Approval or equivalent approval for any Product in any country) by the Company for or from the grant of Sublicences and/or pursuant thereto, or in connection with the grant of an option for a Sublicence, except for:

	  	  	  	  	  	  
	  	  	  	  	
(i)

	
amounts received by the Company which constitute royalties based on sales of the Products by Sublicensees;

	  	  	  	  	  	  
	  	  	  	  	
(ii)

	
amounts received from a Sublicensee and actually expended by the Company (as evidenced by invoices, receipts or other appropriate documents) in respect of future research and development activities to be performed at the Company or on behalf of such Sublicensee, provided that:

	  	  	  	  	  	  
	  	  	  	  	  	
(a)

	
such research and development, activities are performed pursuant to a research and development program and research and development budget, a copy of which is furnished to Yeda;

	  	  	  	  	  	  	  
	  	  	  	  	  	
(b)

	
the amounts attributed to overheads in the said research and development budget do not, in the aggregate, exceed an amount equal to 35% (thirty-five percent) of the total research and development budget,

    	  

    	 

    
 

-10-

	  	  	  	  	  
	  	  	  	  	
it being agreed, for the removal of doubt, that any amounts received by the Company as aforesaid which are not actually expended by the Company in the conduct of such research and development activities shall be deemed to be Sublicensing Receipts;

	  	  	  	  	  
	  	  	
the terms: “the Effective Date”, “Yeda”, “the Company”, “the Institute”, “Prof. Arnon”, “the Scientists”, “the Invention”, “the Existing Patent Applications”, “the Know-How” “Products” and “the Founders”

	
-

	
shall bear the definitions assigned to them respectively in the heading or the preamble hereto, as the case may be.

	  	  	  	  	  
	
1.3.

	
In this Agreement:

	  	  
	  	  	  	  	  
	
1.3.1.

	  	
words importing the singular shall include the plural and vice-versa and words importing any gender shall include all other genders and references to persons shall include partnerships, corporations and unincorporated associations;

	  	  	  
	
1.3.2.

	  	
any reference in this Agreement to the term “patent” shall also include any re-issues, divisions, continuations or extensions thereof (including measures having equivalent effect); and

	  	  	  
	
1.3.3.

	  	
any reference in this Agreement to the term “sale” shall include the sale, lease, rental or other disposal of any Product;

	  	  	  
	
1.3.4.

	  	
“including” and “includes” means including, without limiting the generality of any description preceding such terms.

 

    	  

    	 

    
 

 

-11-

	  	  	  	  
	
2.

	
LICENCE

	  	  	  	  
	
2.1.

	  	
Yeda hereby grants the Licence to the Company, and the Company hereby accepts the Licence from Yeda, during the period, for the consideration and subject to the terms and conditions set out in this Agreement. For the removal of doubt, no licence is granted hereunder with regard to the Licensed information and/or the Patents and/or any portion of any of the aforegoing, with respect to any exploitation or activities (including the activities referred to in clause 1.2.6 above) relating to any product or services, other than Products.

	  	  	  	  
	
2.2.

	  	
The Company hereby acknowledges that it is aware that the invention constitutes. Background Information (as such term is defined in Annex II of the EU Consortium Agreement entitled “A multi-disciplinary approach to the development of eptiope-based vaccines”, Proposal No. PL 970294 (the “EU Agreement”)), that it had reviewed the documents relating to the EU Agreement and that it is aware that Yeda has procured that the parties to the said EU Consortium Agreement have been notified of this Agreement by the Institute pursuant to section 16 of the EU Agreement .

	  	  	  	  
	  	  	
For the removal of doubt, nothing contained in this Agreement shall prevent Yeda or the Institute from using the Licensed Information and the Patents for non-commercial academic research or other scholarly purposes.

	  	  	  	  
	
2.3.

	  	
The Licence, shall remain in force in each country with respect to each Product (if not previously terminated in accordance with the provisions of this Agreement) until:

	  	  	  	  
	
2.3.1.

	  	
in the case in which there is any Patent covering such Product in such country, the date of expiry in such country of the last of the Patents covering such Product; or

	  	  	  	  
	
2.3.2.

	  	
in the case in which: (i) there is no Patent covering such Product in such country; and (ii) there is any Know-How that is identifiable and secret (i.e. is not in the public domain) relating to such Product, the date of expiry of a period of 15 (fifteen) years commencing on the date, of First Commercial Sale (as defined below) by the Company or a Sublicensee of such Product, provided that and for so long as such Know-How remains secret and of value.

 

    	  

    	 

    
 

 

-12-

	  	  	  
	  	
For the purposes of clause 2.3.2 above, “First Commercial Sale” of any Product shall mean the first commercial sale of such Product in either the U.S.A. or any country in Europe after FDA New Drug Approval or equivalent approval in any European country has been obtained for such Product. The Company shall notify Yeda in writing immediately upon the making of such First Commercial Sale referred to above, specifying its date, the country in which such sale took place and the type of Product sold.

	  	  	  
	
2.4.

	
A Sublicence under the Licence may be granted by the Company only with the prior written consent of Yeda, which shall not be unreasonably withheld (Yeda’s response to a request for such consent shall be in writing and such response shall not be delayed unreasonably, and in the event that Yeda refuses to grant such consent, Yeda shall also specify the reasons therefor), and provided that: (i) the proposed Sublicence is for monetary consideration only, (ii) the proposed Sublicence is to be granted in a bona Fide arm’s length commercial transaction, (iii) the terms of the proposed Sublicence are submitted to Yeda prior to the signature thereof; and (iv) the proposed Sublicence is made by written agreement, the provisions of which are consistent with the terms of the Licence and contain, inter alia, the following terms and conditions:

	  	  	  
	
2.4.1.

	  	
the Sublicence shall expire automatically on the termination of the Licence for any reason;

	  	  	  
	
2.4.2.

	  	
the Sublicensee shall be bound by provisions substantially similar to those in clause 7 below relating to confidentiality binding the Company (the obligations of the Sublicensee so arising being addressed also to Yeda directly);

	  	  	  
	
2.4.3.

	  	
all terms necessary to enable performance by the Company of its obligations hereunder;

	  	  	  
	
2.4.4.

	  	
that any act or omission by the Sublicensee which would have constituted a breach of this Agreement by the Company had it been the act or omission of the Company, shall constitute a breach of the Sublicence agreement with the Company entitling the Company to terminate the Sublicence, and the Company hereby undertakes to inform Yeda forthwith upon receipt of knowledge by the Company of such breach and, at the request of Yeda, and at the Company’s cost and expense, to exercise such right of termination;

 

    	  

    	 

    
 

 

-13-

	  	  	  
	
2.4.5.

	  	
that the Sublicence shall not be assignable, otherwise transferable or further sublicenseable;

	  	  	  
	
2.4.6.

	  	
that: (i) a copy of the agreement granting the Sublicence shall be made available to Yeda, promptly upon its execution; (ii) all amendments to any such Sublicence agreement shall be subject to Yeda’s prior written consent; and (iii) the Company shall submit to Yeda copies of all such amendments (as approved by Yeda), promptly upon execution thereof; and

	  	  	  
	
2.4.7.

	  	
that the Sublicensee shall keep complete, accurate and correct books of account and records consistent with sound business and accounting principles and practices and in such form and in such details as to enable the determination of the amounts due to Yeda by the Company under this Agreement; and that the Sublicensee shall retain the aforegoing books of account for 6 (six) years after the end of each calendar year during the period  of the Sublicence, and, if the Sublicence is terminated for any reason whatsoever, for 6 (six) years after the end of the calendar year in which such termination becomes effective;

	  	  	  
	
2.4.8.

	  	
that the Sublicensee shall grant to Yeda the right, at reasonable times and upon reasonable notice to the Sublicensee, to send representatives of Yeda, the identities of such representatives to be subject to the Sublicensee’s consent (which shall not be unreasonably withheld and the Sublicensee’s response to a request for such consent not to be unreasonably delayed) in order to examine those records of the Sublicensee as may be necessary in order to determine the correctness or completeness of any payment made by the Company to Yeda under this Agreement, provided that prior to such examination such representatives shall execute a written undertaking of confidentiality in customary form (which undertaking, for the removal of doubt, shall not prevent or restrict the disclosure or furnishing to Yeda by such representatives of all relevant information arising from such inspection), all without derogating from clauses 4.4 and 4.5 below.

	  	  	  
	
2.5.

	
For the removal of doubt, the Company shall not be entitled to grant, directly or indirectly, to any person or entity any right of whatsoever nature to exploit or use in any way the Licensed Information or the Patents or to develop, manufacture and/or sell the Products or any part of any of the aforegoing, save by way of Sublicence and subject to the conditions of this clause 2 relating to any such grant or by way of Subcontracting Agreement.

 

    	  

    	 

    
 

 

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2.6.

	  	
Nothing contained in this Agreement shall be deemed to be a representation or warranty, express or implied, by Yeda that the Existing Patent Applications or any of them or any patent applications relating to the Licensed Information or any portion thereof will be granted or that patents obtained on any of the said patent applications are or will be valid or will afford proper protection or that the Licensed information or any other portion of the Licensed Information is or will be commercially exploitable or of any other value or that the exploitation of the Patents or the Licensed Information will not infringe the rights of any third party.

	  	  	  	  
	
3.

	
TITLE

	  	  	  	  
	  	
Subject only to the Licence, all right, title and interest in and to the Licensed Information and the Patents and all right, title and interest in and to any drawings, plans, diagrams, specifications, other documents, models, or any other physical matter in any way containing, representing or embodying any of the aforegoing, vest and shall vest in Yeda.

	  	  	  	  
	
4.

	
ROYALTIES

	  	  	  	  
	
4.1.

	  	
In consideration for the grant of the Licence, the Company shall pay Yeda:

	  	  	  	  
	
4.1.1.

	  	  	
a royalty of 3% (three percent) of Net Sales by or on behalf of the Company or any Sublicensees; provided that:

 

in the event that there are any sales of a Product that are not, at the time of such sales, covered by a Patent in such country, then the royalty rate referred to in this clause 4.1.1 above shall, with respect to Net Sales of such Product made in such country during the period such Product is not so covered by a Patent as aforesaid, be reduced to 2% (two percent), such royalties, for the removal of doubt, being payable at such lower rate in respect of the use of the Know-How under this Agreement; and

 

    	  

    	 

    
 

 

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4.1.2.

	
the percentage of Sublicensing Receipts received by the Company stipulated below:

	  	  	  
	  	
(i)

	
with respect to those Sublicensing Receipts received pursuant to or in connection with a Sublicence or an option for a Sublicence executed prior to the end of Phase I clinical trials in respect of any Product in any country (being the subject matter of such Sublicence)—45%;

	  	  	  
	  	
(ii)

	
with respect to those Sublicensing Receipts received pursuant to or in connection with a Sublicence or an option for a Sublicence executed after the end of Phase I clinical trials in respect of any Product in any country (being the subject matter of such Sublicence) and before the end of Phase II clinical trials in respect of such Product:

	  	  	  
	  	  	
35%—of the first $20,000,000 (twenty million United States Dollars) of Sublicensing Receipts received as aforesaid; and

	  	  	  
	  	  	
25%—of all Sublicensing Receipts received as aforesaid over $20,000,000 (twenty million United States Dollars) in aggregate;

	  	  	  
	  	
(iii)

	
with respect to those Sublicensing Receipts received pursuant to or in connection with a Sublicence or an option for a Sublicence executed after the end of Phase II clinical trials in respect of any Product in any country (being the subject matter of such Sublicence):

	  	  	  
	  	  	
20%—of the first $20,000,000 (twenty million United States Dollars) of Sublicensing Receipts received as aforesaid; and

	  	  	  
	  	  	
15%—of all Sublicensing Receipts over $20,000,000 (twenty million United States Dollars) in aggregate;

	  	  	  
	  	  	
it being agreed that for the purposes of calculating the percentage of Sublicensing Receipts payable by the Company pursuant to this paragraph (iii), all Sublicensing Receipts received pursuant to or in connection with a Sublicence or an option for a Sublicence executed prior to the end of Phase II clinical trials in respect of such Product shall be deemed to be included in the total amount of Sublicensing Receipts referred to above.

 

    	  

    	 

    
 

 

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For the removal of doubt, the Company undertakes that all sales (within the meaning of such term in clause 1.3.3 above) of Products by the Company and each Sublicensee, other than the disposal or use of any Product for the sole purpose of carrying out clinical trials with respect to such Product, shall be for cash consideration only.

	  	  	  
	  	
For the further removal of doubt, it is recorded that the Company shall not be obligated to pay Yeda royalties or other payments pursuant to this clause 4.1 above with respect to (i) the use or disposal of any Product, without consideration, for the sole purposes of carrying out clinical trials in respect of such Product; or (ii) any Product in any country after the expiry of the Licence in such country with respect to such Product.

	  	  	  
	
4.2.

	
in calculating Net Sales and Sublicensing Receipts, all amounts shall be expressed in US Dollars and any amount received or invoiced in a currency other than US Dollars shall be translated into US Dollars, for the purposes of calculation, in accordance with the Exchange Rate between the US Dollar and such currency on the date of such receipt or invoice, as the case may be. For the removal of doubt, in calculating amounts received by the Company, whether by way of Net Sales or Sublicensing Receipts, any amount deducted or withheld in connection with any such payment on account of taxes on net income (including income taxes, capital gains tax, taxes on profits or taxes of a similar nature) payable by the Company in any jurisdiction, shall be deemed, notwithstanding such deduction or withholding, to have been received by the Company. In the event that the Sublicensing Receipts comprise, in whole or in part, of non-cash consideration (including shares or other securities of the Sublicensee or any other entity), then the Company agrees, promptly upon Yeda’s request, to execute and deliver such documents and instruments and do any other acts as may be necessary, so that Yeda receives the percentage share of such non-cash consideration as provided in clause 4.1.2 above.

	  	  	  
	
4.3.

	  	  
	
4.3.1.

	  	
Amounts payable to Yeda in terms of this clause 4 shall be paid to Yeda in US Dollars (i) in the case of Net Sales, on a quarterly basis and no later than 30 (thirty) days after the end of each calendar quarter, commencing with the first calendar quarter in which any Net Sales are made or royalties are received by the Company; or (ii) in the case of Sublicensing Receipts, no later than 7 (seven) days after any such Sublicensing Receipts are received by the Company from any Sublicensees.

 

    	  

    	 

    
 

 

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4.3.2.

	  	
The Company shall submit to Yeda: (i) no later than 7 (seven) days after any Sublicensing Receipts are received, an interim written report setting out amounts owing to Yeda in respect of such Sublicensing Receipts; and (ii) no later than 30 (thirty) days after the end of each calendar quarter, commencing with the first calendar quarter in which any Net Sales are made or Sublicensing Receipts are received by the Company, a full and detailed report, in a form acceptable to Yeda, certified as being correct by the chief financial officer of the Company, setting out all amounts owing to Yeda in respect of such previous calendar quarter to which the report refers, and with full details of:

	  	  	  	  	  
	
4.3.2.1.

	  	  	
(i)

	
the sales made by the Company and Sublicensees, including a breakdown of Net Sales according to country, identity of seller, currency of sales, dates of invoices, number and type of Products sold;

	  	  	  	  	  
	  	  	  	
(ii)

	
the Sublicensing Receipts, including a breakdown of Sublicensing Receipts according to identity of Sublicensees, countries, the currency of the payment and date of receipt thereof;

	  	  	  	  	  
	  	  	  	
(iii)

	
deductions applicable, as provided in the definition of “Net Sales”;

	  	  	  	  	  
	  	  	  	
(iv)

	
the aggregate cumulative gross income (turnover) of the Company—until the end of the calendar quarter during which the Company reaches an aggregate cumulative gross income (turnover) of US $3,000,000 (three million United States Dollars); and

	  	  	  	  	  
	
4.3.2.2.

	  	  	
any other matter necessary to enable the determination of the amounts of royalties payable hereunder.

	  	  	  	  	  
	
4.4.

	
The Company shall keep and, without derogating from the provisions of clause 2.4.7 above, shall do its utmost to cause Sublicensees to keep complete, accurate and correct books of account and records consistent with sound business and accounting principles and practices and in such form and in such details as to enable the determination of the amounts due to Yeda in terms hereof. The Company shall supply Yeda at the end of each calendar year, commencing with the first calendar year in which any amount is payable by the Company to Yeda under this clause 4, a report signed by the Company’s independent auditors in respect of the amounts due to Yeda pursuant to this clause 4 in respect of the year covered by the said report and containing details in accordance with clause 4.3 above in respect of the quarterly reports. The Company shall retain and, without derogating from the provisions of clause 2.4.7 above, shall require and do its utmost to cause its Sublicensees to retain, the aforegoing books of account for 6 (six) years after the end of each calendar year during the period of this Agreement, and, if this Agreement is terminated for any reason whatsoever, for 6 (six) years after the end of the calendar year in which such termination becomes effective.

 

    	  

    	 

    
 

 

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4.5.

	
At Yeda’s expense, Yeda shall be entitled, subject to clause 2.4.8 above with respect to Sublicensees, to appoint representatives to inspect, at reasonable times, and to make copies of the Company’s and Sublicensees books of accounts, records and other documentation (including technical data and lab books) to the extent relevant or necessary for the ascertainment or verification of the amounts due to Yeda under this clause 4, provided however that Yeda shall give the Company or Sublicensee (as the case may be) reasonable notice of such inspection, and that such inspection shall not occur more than once annually and further provided that prior to such examination such representatives shall execute a written undertaking of confidentiality in customary form (which undertaking, for the removal of doubt, shall not prevent or restrict the disclosure or furnishing to Yeda by such representatives of all relevant information arising from such inspection). The Company shall take all steps necessary so that all such books of account, records and other documentation of the Company are available for inspection as aforesaid at a single location. In the event that any inspection as aforesaid reveals any underpayment by the Company to Yeda in respect of any year of the Agreement in an amount exceeding 5% (five percent) of the amount actually paid by the Company to Yeda in respect of such year then the Company shall (in addition to paying Yeda the shortfall together with interest thereon in accordance with clause 10.4 below), bear the costs of such inspection. The provisions of this clause 4.5 shall survive the termination of this Agreement for whatsoever reason.

 

    	  

    	 

    
 

 

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5.

	
PATENTS; PATENT INFRINGEMENTS

	  	  
	
5.1.

	  	  	  
	
5.1.1.

	  	  	
Subject to clauses 5.3 and 5.4 below, Yeda shall prosecute the Existing Patent Applications using the outside patent counsel retained by Yeda for such purpose prior to the execution of this Agreement, unless otherwise agreed by Yeda and the Company in writing, and shall maintain at the applicable patent office any patents issuing from the Existing Patent Applications. The Company and Yeda shall consult with one another and cooperate fully with regard to the prosecution of the Existing Patent Applications and in the maintenance of such patents.

	  	  	  	  
	
5.1.2.

	  	  	
At the initiative of either Yeda or the Company, Yeda and the Company shall consult with one another regarding the filing of patent applications (such term herein to include any provisional patent applications, applications for continuations, continuations-in-part, divisions, patents of addition, amendments or renewals, as well as any other applications or filings for similar statutory protection) in respect of any portion of the Licensed Information and/or corresponding to and/or in respect of the Existing Patent Applications, including the jurisdictions in which such applications should be filed, the timing of the filing of such applications and the contents thereof. Following such consultations, and subject to clauses 5.3 and 5.4 below, Yeda shall retain outside patent counsel to prepare, file and prosecute patent applications as aforesaid in such jurisdiction or jurisdictions as shall be determined by Yeda and the Company in consultation as aforesaid. Subject to clauses 5.3 and 5.4 below, Yeda shall also maintain at the applicable patent office any patents granted as a result of any of the above patent applications. The parties agree that their joint policy will be to seek comprehensive patent protection for the Licensed Information licensed to the Company hereunder. The Company and Yeda shall cooperate fully in the preparation, filing, prosecution and maintenance of such patent applications and patents.

	  	  	  	  
	
5.2.

	  	
All applications to be filed in accordance with the provisions of clause 5.1.2 above, shall be filed in Yeda’s name or, should the law of the relevant jurisdiction so require, in the name of the relevant inventors and then assigned to Yeda.

 

    	  

    	 

    
 

 

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5.3.

	  	  	  
	
5.3.1.

	  	
Subject to the provisions of clause 5.3.2 below, the Company shall bear and be liable to pay all costs and fees incurred in the preparation, filing, prosecution and the like of the Existing Patent Applications and of all patent applications filed in accordance with the provisions of clause 5.1 above (including patent applications corresponding to the Existing Patent Applications), and the maintenance at the appropriate patent office and the like of all patents issuing from the Existing Patent Applications and all patent applications referred to above. As of the date of signing of this Agreement, the costs and fees incurred by Yeda on account of the Existing Patent Applications amount to US$70,241 (Seventy Thousand, Two Hundred and Forty One United States Dollars) (US$60,035 + VAT) (“the Prior Patent Expenses”).

	  	  	  	  
	
5.3.2.

	  	
Notwithstanding the aforegoing:

	  	  	  	  
	  	  	
(i)

	
Yeda shall bear and pay all costs and fees incurred in the preparation, filing, prosecution and the like of applications for the amendment of the Existing Patent Applications in the US and in the European Patent Office (but excluding national patent offices); provided that the results achieved as a consequence of the performance of the research referred to in clause 11.1 below shall justify the filing of such applications for amendment; and

	  	  	  	  
	  	  	
(ii)

	
until the Initial Investment Date, subject to clause 5.3.3 below, Yeda shall, on behalf of the Company, fund all of the costs and fees referred to in clause 5.3.1 above; provided that, on the Initial lnvestment Date, the Company shall reimburse Yeda the aggregate amount of the costs and fees incurred by Yeda prior to the Initial Investment Date and which are payable by the Company pursuant to clause 5.3.1 above (including the Prior Patent Expenses).

	  	  	  	  
	
5.3.3.

	  	
Until the date of receipt by Yeda of the reimbursement of all costs and fees funded by Yeda as provided in clause 5.3.2(ii) above, Yeda shall be entitled, in its sole discretion, to discontinue the prosecution and/or maintenance of, and/or to abandon (as the case may be), in any country or worldwide, any of the Existing Patent Applications and/or any of the patent applications referred to above, and/or any patents issuing on the aforegoing patent applications, subject to Yeda having given the Company at least 30 (thirty) days’ prior written notice of Yeda’s decision as aforesaid; provided that in the event that within the 30 (thirty) day period referred to above, Yeda receives: (i) a written request to continue the patent activities referred to in Yeda’s prior written notice as aforesaid (“the relevant patent activities”); and (ii) security satisfactory to Yeda for the payment of the costs and fees relating to the relevant patent activities, then Yeda shall continue to perform the relevant patent activities, at the Company’s expense, for so long as the relevant patent activities are covered by the security for costs provided by the Company.

 

    	  

    	 

    
 

 

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5.3.4.

	  	  	
Unless otherwise instructed by Yeda in writing, with effect from the Initial Investment Date, the Company shall pay directly to Yeda’s relevant outside patent counsel amounts payable by the Company pursuant to clauses 5.3.1 above and 5.4 below.

	  	  	  	  
	
5.4.

	  	
Without derogating from the provisions of clause 5.3 above (including, in particular, clause 5.3.3), in the event that, following the consultations between Yeda and the Company regarding the filing, prosecuting and/or maintenance (as applicable) of patent applications and/or patents pursuant to clause 5.1.1 and 5.1.2 above, the Company shall not wish to file and/or continue to prosecute a patent application and/or maintain a patent in any country in relation to the Licensed Information or any part thereof (including any of the Existing Patent Applications), then Yeda, in its discretion, may elect to file and/or continue to prosecute such patent application and/or maintain such patent in such country at its own cost and expense. Yeda shall notify the Company in writing of Yeda’s election to file and/or continue to prosecute such patent application and/or maintain such patent in such country as aforesaid, at Yeda’s expense (such notice, “the Yeda Notice”) and, in the event that:

	  	  	  	  
	
5.4.1.

	  	  	
the Company notifies Yeda in writing that it does not wish to bear any costs or expenses whatsoever relating to the filing and/or continued prosecution and/or maintenance of such patent application or patent (as the case may be) in such country as aforesaid; or

 

    	  

    	 

    
 

 

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5.4.2.

	  	  	the Company shall not, by the date being the later of: (a) the date of expiry of a period of 30 (thirty) days after receipt of the Yeda Notice; or (b) the date of expiry of a period of 7 (seven) days after the Initial Investment Date:
	  	  	  	 	  
	  	  	 	
(i)

	
reimburse Yeda for all out-of-pocket costs and fees incurred by Yeda until the date of the Yeda Notice or the Initial Investment Date (whichever occurs later), in connection with the said patent application (in the preparation and/or filing and/or prosecution of such application) and/or such patent; and

	  	  	  	 	  
	  	  	 	
(ii)

	
undertake in writing to Yeda to bear all additional and future expenses relating to such patent application and/or patent,

	  	  	  	 	  
	  	  	
then Yeda shall be entitled, at any time after: (1) receipt by Yeda of the notice from the Company referred to in clause 5.4.1 above; or (2) the later date as aforesaid in clause 5.4.2 above (as the case may be); to terminate the Licence granted to the Company under this Agreement only in respect of such patent application and/or patent in such country, and to take whatever action it deems fit (in its sole discretion) with respect thereto.

	  	  	  	 	  
	
5.5.

	  	
Should the Company: (i) determine that a third party is infringing one or more of the Patents; or (ii) be sued on the grounds that the manufacture, use or sale of a Product by it or by a Sublicensee under any of the Patents or using the Licensed Information or any portion thereof infringes upon the patent rights of a third party, then the Company shall, after first having consulted Yeda, be entitled to sue for such infringement or defend such action (as the case may be), and Yeda may elect, at its own initiative, to join as a party to such action or consent to such joinder (such consent by Yeda may, for the removal of doubt, be conditional upon, inter alia, the provision by the Company of security, satisfactory to Yeda, for the payment of the expenses or costs referred to in paragraph (a) below) and Yeda shall cooperate and shall use its reasonable efforts to cause the Scientists to cooperate with the Company in prosecuting or defending such litigation, provided that: (a) any expenses or costs or other liabilities incurred in connection with such litigation (including attorneys’ fees, costs and other sums awarded to the counterparty in such action) shall be borne by the Company, who shall indemnify Yeda against any such expenses or costs or other liabilities, the above without derogating from the provisions of clause 9 below; (b) in the event that Yeda shall be named as a party in any such litigation then Yeda shall be entitled to select its own legal counsel in such litigation at its own expense; provided that, in the event of a conflict of interests, actual or potential, the fees and costs of legal counsel selected by Yeda as aforesaid shall be borne by the Company, and if Yeda elects not to select its own counsel and no conflict of interests exists, the selection of the legal counsel representing the Company and Yeda In such litigation shall be subject to the prior written approval of Yeda, which approval shall not be withheld unreasonably; (c) no settlement, consent order, consent judgment or other voluntary final disposition of such action may be entered into without the prior written consent of Yeda; and (d) if an action is brought against the Company alleging the invalidity of any of the Patents, Yeda shall have the right to take over the sole defence of the action and the parties shall fully cooperate with one another in connection with any such action. Any award and/or recovery in any litigation as aforesaid relating to an infringement shall first be applied to cover fees and costs (including Yeda’s counsel as aforesaid) and thereafter shall be divided between Yeda and the Company in accordance with the provisions of clause 4.1.2 above which shall apply to the amount of such award and/or recovery, mutatis mutandis, as if the amount of such award and/or recovery was “Sublicensing Receipts”, unless and to the extent that the amount of the award and/or recovery comprises royalties oh sales of any Products, in which case the aggregate amount invoiced in respect of such sales shall be deemed to be “Net Sales” and the provisions of clause 4.1.1 above shall apply in respect thereof, mutatis mutandis. For the removal of doubt, Yeda shall not itself be obliged to take any action to sue for any infringement or to defend any action as referred to in this clause 5.5 above.

 

    	  

    	 

    
 

 

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5.6.

	  	
If the Company fails to take action to abate any alleged infringement of a Patent, or to defend any action as aforesaid, within 60 (sixty) days of a request by Yeda to do so (or within a shorter period, if required to preserve the legal rights of Yeda under applicable law), then Yeda shall have the right (but not the obligation) to take such action at its expense and the Company shall cooperate in such action at the Company’s expense and, if required under applicable law or contract, to be named as a party to any such action. Yeda shall have full control of such action and shall have full authority to settle such action on such terms as Yeda shall determine. Any recovery in any such litigation shall be for the account of Yeda only.

	  	  	  	  
	
5.7.

	  	
If the Company initiates any action pursuant to clause 5.5 above or becomes aware of any action initiated by any third party concerning any alleged infringement, or discovers any allegation by a third party of infringement resulting from the Patents, then the Company shall so notify Yeda promptly in writing, giving full particulars thereof. The Company shall promptly keep Yeda informed and provide copies to Yeda of all documents regarding all such actions or proceedings instituted by or against the Company as contemplated under any of the provisions of clause 5.5 above.

 

    	  

    	 

    
 

 

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5.8.

	  	
In the event that the parties are unable to reach agreement after any consultation referred to in this clause 5 above, the matter in dispute shall be referred to the chairman of the board of directors of each of the parties, who shall endeavour, in good faith, to resolve such dispute.

	  	  	  	  
	
6.

	
DEVELOPMENT AND COMMERCIALIZATION

	  	  	  	  
	
6.1.

	  	
The Company has submitted an initial Development Program for the development of Products to Yeda, for its approval. The Development Program, as approved by Yeda, is attached hereto as Appendix B (“the initial Development Program”).

	  	  	  	  
	
6.2.

	  	
The Company undertakes, at its own expense, to take all necessary steps to commercialise the Products and, without derogating from the generality of the aforegoing, to use its best efforts to expedite the commencement of the commercial sale of the Products. For such purpose and without derogating from the generality of the aforegoing, the Company shall carry out and/or have a third party carry out on its behalf the performance of those trials (including phases I, II, and III clinical trials), tests and other works and activities, all as detailed in the Initial Development Program, in accordance with the timetable specified therein. The Company also undertakes to perform all such other tests, works and activities as are detailed in all further Development Programs (if any) submitted and approved pursuant to clause 6.5 below, in accordance with the respective timetables included therein, as may be amended by the Company from time to time, subject to Yeda’s prior written consent which should not be withheld unreasonably. The Company further undertakes to continue with commercialisation of the Products diligently throughout the period of the Licence.

	  	  	  	  
	
6.3.

	  	
The Company shall provide Yeda on June 30 and December 31 of each calendar year with written progress reports (“Progress Reports”) which shall include detailed descriptions of the progress and results, if any, of: (i) the tests and trials conducted and all other actions taken by the Company pursuant to the Initial Development Program or any other Development Program delivered and approved pursuant to clause 6.5 below; (ii) manufacturing, sublicensing, marketing and. sales during the preceding 6 (six) months; (iii) the Company’s plans in respect of the testing, undertaking of trials or commercialisation of Products for the following 6 (six) months; (iv) projections of sales and marketing efforts; and (v) the amount of money raised, if any, by the Company by way of the issuance of any irredeemable share capital during the preceding 6 (six) months.

 

    	  

    	 

    
 

 

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6.4.

	  	
For the removal of doubt, without derogating from the remaining provisions of this clause 6 or of clause 10.2 below, nothing contained in this Agreement shall be construed as a warranty by the Company that any Development Program to be carried out by it as aforesaid will actually achieve its aims and the Company makes no warranties whatsoever as to any results to be achieved in consequence of the carrying out of any such Development Program.

	  	  	  	  
	
6.5.

	  	
Without derogating from the obligations of the Company pursuant to this clause 6 above or from the provisions of clause 10.2 below, in the event that the Company shall wish to develop and/or commercialise Products in addition to those specified in the Initial Development Program, the Company shall submit to Yeda, for its written approval (not to be unreasonably withheld), a further Development Program in respect of such additional Products and the provisions of this clause 6 shall apply also with respect to such further Development Program and to the development and commercialisation of such additional Products, mutatis mutandis.

	  	  	  	  
	
6.6.

	  	
The Company shall mark, and cause all its Sublicensees to mark, all Products that are manufactured or sold under this Agreement with the number or numbers of each Patent applicable to such Product.

	  	  	  	  
	
7.

	
CONFIDENTIALITY

	  	  	  	  
	
7.1.

	  	
The Company shall maintain in confidence all information or data relating to the Patents, the Licensed Information, this Agreement and the terms hereof, (hereinafter, collectively referred to as “the Confidential Information”), except and to the extent that: (i) the Company can prove that any such information or data is in the public domain at the date of the signing hereof or becomes part of the public domain thereafter (other than through a violation by the Company or a Sublicensee of this obligation of confidentiality); and (ii) any such information or data was known to any of the Promoters prior to the disclosure thereof by Yeda or becomes available to the Company on a non-confidential basis from a source (other than Yeda or the Institute) which is not prohibited from disclosing such Confidential Information to the Company, as evidenced by written records; and except with regard to that portion, if any, of the Confidential Information expressly released by Yeda from this obligation of confidentiality by notice in writing to the Company to such effect. Notwithstanding the aforegoing, the Company may disclose to its personnel and Sublicensees the Confidential Information to the extent necessary for the exercise by it of its rights hereunder or in the fulfilment of its obligations hereunder, provided that it shall bind such personnel and such Sublicensees with a similar undertaking of confidentiality in writing. The Company shall be responsible and liable to Yeda for any breach by its personnel or any Sublicensee of such undertakings of confidentiality as if such breach were a breach by the Company itself.

 

    	  

    	 

    
 

 

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7.2.

	  	
In addition to and without derogating from the aforegoing, the Company undertakes not to make mention of the names of Yeda, the institute, or any scientists or other employee of the institute (including the Scientists) or any employee of Yeda in any manner or for any purpose whatsoever in relation to this Agreement, its subject matter and any matter arising from this Agreement or otherwise, unless the prior written approval of Yeda has been obtained.

	  	  	  	  
	
7.3.

	  	
Notwithstanding the provisions of clauses 7.1 and 7.2 above, the Company shall not be prevented from mentioning the names of Yeda, the Institute, and/or any scientists or other employees of the Institute (including the Scientists) or any employees of Yeda, or from disclosing any Confidential Information if, and to the extent that, such mention or disclosure is (a) to competent authorities for the purposes of obtaining approval or permission for the exercise of the Licence; or (b) in the fulfillment of any legal duty owed to any competent authority (including a duty to make regulatory filings); or (c) to any third party if, and to the extent that, such disclosure is necessary for the purposes of executing this Agreement, or in order to raise funds for the Company, subject to such third party being bound by a written undertaking of confidentiality in terms similar to the terms of clauses 7.1 and 7.2 above, and provided that such undertaking of confidentiality shall include a provision stipulating, for the removal of doubt, that Yeda shall have an independent right of action against such third party in the event of an infringement of any of the terms of such undertaking of confidentiality. Notwithstanding the aforegoing, any mention or disclosure as aforesaid in a private placement memorandum or a public offering registration statement shall be subject to the consent of Yeda, which consent shall not be withheld unreasonably.

 

    	  

    	 

    
 

 

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7.4.

	  	
No termination of this Agreement, for whatever reason, shall release the Company from any of its obligations under this clause 7 and such obligations shall survive any termination as aforesaid.

	  	  	  	  
	
7.5.

	  	
Yeda shall maintain in confidence all information received by it from  the Company which has been designated by the Company in writing and in advance as confidential, except and to the extent that: (i) any such information or data is in the public domain at the date of the signing hereof or becomes part of the public domain thereafter (other than through a violation by Yeda of this obligation of confidentiality) or is released by the Company from this obligation of confidentiality by notice in writing; (ii) any such information or data was known to Yeda or to the Institute prior to the disclosure by the Company or becomes available to Yeda on a non-confidential basis from a source (other than the Company) which is not prohibited from disclosing such Confidential Information to Yeda, as evidenced by written records; (iii) Yeda is required to disclose such information in order to fulfill its obligations under this Agreement (including in connection with the filing and prosecution of patent applications in accordance with the provisions of clause 5 above); or (iv) Yeda is required to disclose such information in fulfillment of any legal duty owed to any competent authority. For the removal of doubt, the provisions of this clause 7.5 shall not apply in respect of any information independently developed at the Institute without reference to the confidential information received from the Company as evidenced by written records.

	  	  	  	  
	
7.6.

	  	
For the removal of doubt, Yeda shall have the right to allow the scientists of the Institute, to publish articles relating to the Licensed Information in scientific journals or posters or to give lectures or seminars to third parties relating to the Licensed Information, on the condition that, to the extent that the information to be published or disclosed is information which is not in the public domain, a draft copy of the said contemplated publication or disclosure shall have been furnished to the Company at least 45 (forty-five) days before the making of any such publication or disclosure and the Company shall have failed to notify Yeda in writing, within 30 (thirty) days from receipt of the said draft publication or disclosure, of its opposition to the making of the contemplated publication or disclosure. Should the Company notify Yeda in writing within 30 (thirty) days from the receipt of the draft contemplated publication or disclosure that it opposes the making of such publication or disclosure because it includes material (which has been specified in said notice) in respect of which there are reasonable grounds (which have also been specified in said notice) requiring the preventing or postponement, as the case may be, of such publication or disclosure so as not adversely to affect the Company’s interests under the Licence (either because such information is: (i) patentable subject-matter for which patent protection pursuant to clause 5.1 above should be sought; or (ii) not patentable but is secret, substantial and identifiable and the publication thereof shall adversely affect the Company’s interests under the Licence), then Yeda shall not permit such publication or disclosure unless there shall first have been filed an appropriate patent application in respect of the material to be published or disclosed as aforesaid, or if this cannot reasonably be undertaken, then Yeda shall not permit such publication or disclosure unless the material specified in the Company’s notice as aforesaid has been deleted therefrom. The Company acknowledges that it is aware of the importance to the researchers of publishing their work and, accordingly, the Company will use its best efforts not to oppose such publications.

 

    	  

    	 

    
 

 

-28-

	  	  	  	  
	
7.7.

	  	
Yeda’s obligations under this clause 7 shall terminate upon termination of this Agreement.

	  	  	  
	
8.

	
NO ASSIGNMENT

	  	  	  
	
8.1.

	  	
The Company may not assign or encumber all or any of its rights or obligations under this Agreement or arising therefrom, without the prior written consent of Yeda, which shall not be unreasonably withheld. Any consideration received by the Company in respect of an assignment to which Yeda consents as aforesaid or an assignment in accordance with the provisions of clause 8.2 below, shall be deemed to be Sublicensing Receipts and the provisions of clause 4 above shall apply with respect thereto, mutatis mutandis. For the purposes of this clause 8.1, the merger of the Company with another entity in the event that the Company is not the surviving entity shall be deemed to be an assignment; a merger of the Company with another entity in the event that the Company is the surviving entity shall not be deemed to be an assignment.

	  	  	  
	
8.2.

	  	
Notwithstanding the aforegoing, the Company shall be entitled to assign this Agreement and the rights and obligations of the Company to another entity as a result of a merger of the Company with such entity in the case that the Company is not the surviving entity, without the prior written consent of Yeda, provided that: (i) no material breach of the Company’s obligations under this Agreement shall have occurred prior to the date of assignment and remain unremedied at the date thereof, or if such material breach has occurred, Yeda shall not have waived, in writing, its rights to terminate this Agreement on account of such breach; (ii) the third party assignee shall confirm to Yeda in writing that it accepts all the obligations of the Company hereunder; (iii) such third party assignee shall not be entitled to further assign this Agreement without Yeda’s prior written consent; (iv) by the date of such assignment an aggregate net amount of at least US $1,000,000 (one million United States Dollars) shall have been invested in the redeemable share capital of the Company; (v) the assignee has good financial standing; and (vi) the terms of the assignment are bona fide, at arm’s length and are in accordance with market conditions.(vii) Yeda is notified by the Company in writing of such assignment and of details thereof at 30 (thirty) days prior thereto.

 

    	  

    	 

    
 

 

-29-

	  	  	  
	
9.

	
EXCLUSION OF LIABILITY AND INDEMNlFICATION

	  	  	  	  
	
9.1.

	  	
Yeda, the Institute and the directors, officers and employees of Yeda and/or of the Institute and its representatives and employees (hereinafter collectively “the Indemnitees”) shall not be liable for any claims, demands, liabilities, costs, losses, damages or expenses (including legal costs and attorneys’ fees) of whatever kind or nature caused to or suffered by any person or entity (including the Company or any Sublicensee, its investors and founders) that directly or indirectly arise out of or result from or are encountered in connection with this Agreement or the exercise of the Licence and/or the EU Agreement, including directly or indirectly arising out of or resulting from or encountered in connection with the development, manufacture, sale or use of any of the Products by the Company, any Sublicensee or any person acting in the name of or on behalf of any of the aforegoing, or acquiring, directly or indirectly, any of the Products from any of the aforegoing, or directly or indirectly arising out of or resulting from or encountered in connection with the exploitation or use by the Company or any Sublicensee of the Licensed Information or any part thereof, including any data or information given, if given, in accordance with this Agreement.

	  	  	  	  
	
9.2.

	  	
In the event that any of the Indemnitees should suffer any damages, claim, demand, liability, loss, cost or expense (including legal costs and attorneys’ fees) as aforesaid in clause 9.1, or shall be requested or obliged to pay to any person or entity any amount whatsoever as Compensation for any damages, demand, claim, liability, cost, loss or expense as aforesaid, then the Company shall indemnify and hold harmless such Indemnitees from and against any and all such damages, claim, demand, liability, loss, cost or expense (including documented attorney’s fees and legal costs) of whatever kind or nature as aforesaid. Without limiting the generality of the aforegoing, the Company’s indemnification as aforesaid and the exclusion of liability in clause 9.1 above shall extend to product liability claims and to damages, claims, demands, liabilities, losses, costs and expenses attributable to death, personal injury or property damage or to penalties imposed on account of the violation of any law, regulation or governmental requirement.

 

    	  

    	 

    
 

 

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9.3.

	  	
The Company shall at its own expense insure its liability pursuant to clause 9.2 above during the period beginning immediately prior to the commencement of clinical trials and continuing during the entire period that the Licence is in force in any country, plus an additional period of 7 (seven) years. Such insurance shall be in reasonable amounts and on reasonable terms in the circumstances, having regard, in particular, to the stage of development of the Products and to the nature of the Products, and shall be subscribed for from a reputable insurance company. The named insured under such insurances shall be the Company, Yeda and the Institute and the beneficiaries thereof shall include also the respective employees, officers and directors of Yeda and the Institute. The policy or policies so issued shall include a “cross-liability” provision pursuant to which the insurance is deemed to be separate insurance for each named insured (without right of subrogation as against any of the insured under the policy, or any of their representatives, employees, officers, directors or anyone in their name) and shall further provide that the insurer will be obliged to notify each insured in writing at least 30 (thirty) days in advance of the expiry or cancellation of the policy or policies. The Company hereby undertakes to comply punctually with all obligations imposed upon it under such policy or policies and in particular, without limiting the generality of the aforegoing, to pay in full and punctually all premiums and other payments for which it is liable pursuant to such policy or policies. The Company shall be obliged to submit to Yeda copies of the aforesaid insurance policy or policies within 14 (fourteen) days of the date of issue of each such policy.

	  	  	  	  
	
9.4.

	  	
The provisions of this clause 9 shall survive the termination of this Agreement for whatsoever reason.

 

    	  

    	 

    
 

 

-31-

	  	  	  	  
	
10.

	
TERM AND TERMINATION

	  	  	  	  
	
10.1.

	  	
Unless otherwise agreed to in writing, this Agreement shall terminate upon the occurrence of the later of the following:

	  	  	  	  
	
10.1.1.

	  	  	
the date of expiry of the last of the Patents; or

	  	  	  	  
	
10.1.2.

	  	  	
in the case in which only one Product is developed and/or commercialised under this Agreement, the expiry of a period of 15 (fifteen) years from the date of First Commercial Sale of such Product as provided in clause 2.3.2 above; or in the case in which more than one Product is developed and/or commercialised hereunder, the expiry of a period of 20 (twenty) years during which there shall not have been a First Commercial Sale of any such Products in the U.S.A. or any country in Europe.

	  	  	  	  
	
10.2.

	  	
Notwithstanding anything to the contrary contained in this Agreement:

	  	  	  	  
	
10.2.1.

	  	  	
Yeda shall be entitled, at its option: (i) to modify the Licence hereunder so that it is non-exclusive only (any such amendment of this Agreement by Yeda as aforesaid being effective immediately, the Company’s consent thereto (written or otherwise) not being required, notwithstanding the provisions of clause 15.2 below); or (ii) to terminate this Agreement (including the Licence hereunder) by giving the Company 30 (thirty) days’ written notice, if:

	  	  	  	  	  
	  	  	  	
(a)

	
Phase I clinical trials shall not have commenced with respect to any Product within 42 (forty-two) months of the Effective Date; or

	  	  	  	  	  
	  	  	  	
(b)

	
commercial sale of at least one Product shall not have commenced in at least one country within 6 (six) months of the obtaining of FDA New Drug Approval or equivalent approval for the commercial marketing of such Product (as the case may be) in such country (except as a result of force majeure or other factors beyond the control of the Company) and taking into consideration the seasonal nature of the Products; or

	  	  	  	  	  
	  	  	  	
(c)

	
commercial sale of any Product having commenced, there shall be a period of 1 (one) year or more during which no sales of any Product shall take place (except as a result of force majeure or other factors beyond the control of the Company).

 

    	  

    	 

    
 

 

-32-

	 	 	 	 	 
	
10.2.2.

	 	 	
Without derogating from the aforegoing, Yeda shall be entitled to terminate this Agreement (unless previously terminated in accordance with the provisions of this Agreement), by written notice to the Company (effective immediately), if: (i) the Company shall not have paid Yeda the Prior Patent Expenses as referred to in clause 5.3.1 above on or by March 31, 2005; or (ii) the Company shall not have received the Initial Investment by March 31, 2005.

	 	 	 	 	 
	
10.2.3.

	 	 	
Without derogating from the aforegoing, Yeda shall be entitled to terminate this Agreement (unless previously terminated in accordance with the provisions of this Agreement), by written notice to the Company (effective immediately), if the Company contests the validity of any of the Patents.

	 	 	 	 	 
	
10.3.

	 	
Without derogating from the parties’ rights hereunder or by law to any other or additional remedy or relief, it is agreed that either Yeda or the Company may terminate this Agreement and the Licence hereunder by serving a written notice to that effect on the other upon or after: (i) the commitment of a material breach hereof by the other party, which material breach cannot be cured or, if curable, which has not been cured by the party in breach within 30 (thirty) days (or in the case of failure by the Company to pay any amount due from the Company to Yeda pursuant to or in connection with this Agreement on or before the due date of payment, 10 (ten) days) after receipt of a written notice from the other party in respect of such breach, or (ii) the granting of a winding-up order in respect of the other party, or upon an order being granted against the other party for the appointment of a receiver, or if such other party passes a resolution for its voluntary winding-up, or if a temporary or permanent liquidator or receiver is appointed in respect of such other party, or if a temporary or permanent attachment order is granted on such other party’s assets, or a substantial portion thereof, or if such other party shall seek protection under any laws or regulations, the effect of which is to suspend or impair the rights of any or all of its creditors, or to impose a moratorium on such creditors, or if anything analogous to any of the aforegoing in this clause 10.3(ii) above under the laws of any jurisdiction occurs in respect of such other party; provided that, in the case that any such order or act is initiated by any third party, the right of termination shall apply only if such order or act is not cancelled within 120 (one hundred and twenty) days of the grant of such order or the performance of such act.

 

    	  

    	 

    
 

 

-33-

	  	  	  	  	  
	
10.4.

	  	
Any amount payable hereunder by one of the parties to the other; that has not been paid by its due date of payment, shall bear interest from its due date of payment until the date of actual payment, at the maximum rate prevailing from time to time during the period of arrears at Citibank, New York main office branch in respect of unapproved overdrafts In US Dollar current accounts.

	  	  	  	  	  
	
10.5.

	  	
Upon the termination of this Agreement for whatever reason, all rights in and to the Licensed information and the Patents shall revert to Yeda and the Company shall not be entitled to make any further use thereof and the Company shall deliver to Yeda all drawings, plans, diagrams, specifications, other documentation, models or any other physical matter in the Company’s possession in any way containing, representing or embodying the Licensed Information.

	  	  	  	  	  
	
10.6.

	  	
Upon the termination of this Agreement other than pursuant to clause 10.1 above, the Company shall grant to Yeda a non-­exclusive, irrevocable, perpetual, paid-up, worldwide licence in respect of the Company’s Information. In this clause 10.6 above, the term “the Company’s Information” shall mean any invention, product, material, method, process, technique, know-how, data, information or other result relating to the Licensed Information and/or the Products which does not form part of the Licensed Information, discovered or occurring in the course of or arising from the performance by the Company of the development work pursuant to clause 6 above, including any regulatory filing or approval, filed or obtained by the Company in respect of the Products.

	  	  	  	  	  
	
10.7.

	  	
The termination of this Agreement for any reason shall not relieve the Company of any obligations which shall have accrued prior to such termination.

	  	  	  	  	  
	
10.8.

	  	
In the event that this Agreement shall be terminated, other than by way of termination by Yeda pursuant to clause 10.2. or 10.3 above, and that, at any time within 5 (five) years following such termination, Yeda shall grant to a third party a licence or other rights in respect of the Company’s Information or any part thereof (alone or together with any part of the Licensed Information) and Yeda shall receive thereafter in respect of such licence or rights consideration, then, subject to the Company having complied and continuing to comply with all its obligations under this Agreement which remain in existence following termination of this Agreement as aforesaid (including the provisions of clause 10.5 above, Yeda shall pay to the Company 25% (twenty-five percent) of the Net Proceeds actually received by Yeda in respect of such a licence or rights, until such time as the Company shall have received, in aggregate, the full amount of research funds actually expended by the Company in order to develop the Company’s Information as evidenced in writing by the Company’s independent CPA. Yeda shall pay to the Company amounts, if any, payable under this clause 10.8 above, within 90 (ninety) days of receipt of the relevant Net Proceeds.

 

    	  

    	 

    
 

 

-34-

	  	  	  	  	  
	  	  	
For the purpose of this clause 10.8, “Net Proceeds” means royalties or other consideration of any kind actually received by Yeda in respect of such licence (excluding funds for research and/or development at the Institute or payments for the supply of services) after deduction of all costs, fees and expenses incurred by Yeda in connection with such licence (including, patent related costs and all attorneys’ fees and expenses and other costs and expenses in connection with the negotiation, conclusion and administration of such licence).

	  	  	  	  	  
	
11.

	
RESEARCH

	  	  	  	  	  
	
11.1.

	  	
The Company shall, within 7 (seven) days of the Initial Investment Date, pay Yeda the sum of US $15,000 (fifteen thousand United States Dollars), in respect of the research being performed at the Institute, under the supervision of Prof. Arnon, with respect to the Invention, in accordance with the research program attached hereto marked Appendix C.

	  	  	  	  	  
	
11.2.

	  	
In the event that the Company is interested in the performance of additional research at the Institute under the supervision of Prof. Arnon with respect to the Invention, then the Company shall give Yeda written notice to such effect (“the Company Notice”) and, subject to Prof. Arnon being willing and able to undertake such research and, subject further to the relevant Institute regulations in force at the time, the parties shall enter into negotiations, in good faith, in order to reach agreement with respect to the amendments to this Agreement which would be required in order to incorporate terms and conditions relating to the performance of such research, the research plan and budget, reporting obligations and other customary terms relating to such research. In the event that the parties shall reach agreement as aforesaid, this Agreement will be amended accordingly and the Licence granted hereunder shall apply to any use of inventions, discoveries or results arrived at by Prof. Arnon pursuant to or as a consequence of such research (“the Research Results”), mutatis mutandis (the right, title and interest in and to the Research Results vesting in Yeda), but in respect only of the Products, subject to the amendments agreed by the parties as aforesaid and subject to such consequential amendments as may be required in order to apply the Licence to the Research Results. For the avoidance of any doubt, nothing contained in this clause 11 shall oblige any of the parties to execute any amended or supplementary agreement with regard to the aforegoing. In the event that the parties fail, for any reason whatsoever, to reach agreement as aforesaid within a period of 120 (one hundred and twenty) days from the date of delivery of the Company Notice to Yeda, then none of the parties shall be required to continue the negotiations regarding the performance of such research as aforesaid.

 

    	  

    	 

    
 

 

-35-

	  	  	  	  	  
	
11.3.

	  	
Nothing contained in this clause 11 shall derogate from the ability of the Company to retain Prof. Arnon for the purposes of providing consultancy services to the Company, pursuant to a written consultancy agreement which has been pre-approved by Yeda and the Institute in writing. Furthermore, for as long as. Dr. Ben Yedidia serves as a consultant to Prof. Arnon laboratory at the Institute, nothing contained in this clause 11 shall derogate from the ability of the Company to employ Dr. Ben Yedidia as an employee of the Company, pursuant to a written employment agreement, which has been pre-approved by Yeda and the Institute in writing.

 

    	  

    	 

    
 

 

-36-

	  	  	  	  	  
	
12.

	
NOTICES

	  	  	  	  	  
	  	
Any notice or other communication required to be given by one party to the other under this Agreement shall be in writing and shall be deemed to have been served: (i) if personally delivered, when actually delivered; or (ii) if sent by facsimile, the next business day after receipt of confirmation of transmission; or (iii) 10 (ten) days after being mailed by certified or registered mail, postage prepaid (for the purposes of proving such service—it being sufficient to prove that such notice was properly addressed and posted) to the respective addresses of the parties set out below, or to such other address or addresses as any of the parties hereto may from time to time in writing designate to the other party hereto pursuant to this clause 12:

 

	
12.1.

	
to Yeda at:

	
P.O. Box 95

	  	  	
Rehovot 76100

	  	  	
Attention:     the CEO

	  	  	
Facsimile:    (08) 9470739

	  	  	  
	
12.2.

	
to the Company at:

	
54 Bialik Avenue,

	  	  	
Ramat Hasharon 47205,

	  	  	
Israel

	  	  	
Attention:      Ron Babecoff

	  	  	
Facsimile:     (03) 5491529

 

	  	  	  	  	  
	
13.

	
VALUE ADDED TAX

	  	  	  	  	  
	  	
The Company shall pay to Yeda all amounts of Value Added Tax imposed on Yeda in connection with the transactions under this Agreement. All amounts referred to in this Agreement shall be exclusive of Value Added Tax.

	  	  	  	  	  
	
14.

	
GOVERNING LAW AND JURISDICTION

	  	  	  	  	  
	  	
This Agreement shall be governed in all respects by the laws of Israel and the parties hereby submit to the exclusive jurisdiction of the competent Israeli courts, except that Yeda may bring suit against the Company in any other jurisdiction outside Israel in which the Company has assets or a place of business.

	  	  	  	  	  
	
15.

	
MISCELLANEOUS

	  	  	  	  	  
	
15.1.

	  	
The headings in this Agreement are intended solely for convenience or reference and shall be given no effect in the interpretation of this Agreement.

	  	  	  	  	  
	
15.2.

	  	
This Agreement constitutes the entire agreement between the parties hereto in respect of the subject-matter hereof, and supersedes all prior agreements or understandings between the parties relating to the subject-matter hereof (including the Memorandum of Understanding between the parties dated April 4, 2003, the Non-Disclosure Agreement dated October 30, 2002, the Licence Agreement between the parties signed on July 31, 2004 and the letter dated 20 September 2004 (except, for the removal of doubt, the undertakings by the Founders to Yeda and vice-versa in the said letter, which shall remain in effect) and, subject to clause 10.2.1 above, this Agreement may be amended only by a written document signed by both parties hereto. No party has, in entering into this Agreement, relied on any warranty, representation or undertaking, except as may be expressly set out herein.

 

    	  

    	 

    
 

 

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15.3.

	  	
This Agreement may be executed in any number of counterparts (including counterparts transmitted by telecopier or fax), each of which shall be deemed to be an original, but all of which taken together shall be deemed to constitute one and the same instrument.

	  	  	  	  	  
	
15.4.

	  	
No waiver by any party hereto, whether express or implied, of its rights under any provision of this Agreement shall constitute a waiver of such party’s rights under such provisions at any other time or a waiver of such party’s rights under any other provision of this Agreement. No failure by any party hereto to take any action against any breach of this Agreement or default by another party hereto shall constitute a waiver of the former party’s rights to enforce any provision of this Agreement or to take action against such breach or default or any subsequent breach or default by such other party.

	  	  	  	  	  
	
15.5.

	  	
If any provision of this Agreement is held to be unenforceable under applicable law, then such provision shall be modified as set out below and the balance of this Agreement shall be interpreted as if such provision were so modified and shall be enforceable in accordance with its terms. The parties shall negotiate in good faith in order to agree on the terms of an alternative provision which complies with applicable law and achieves, to the greatest extent possible, the same effect as would have been achieved by the invalid or unenforceable provision.

	  	  	  	  	  
	
15.6.

	  	
Nothing contained in this Agreement shall be construed to place the parties in relationship of partners or parties to a joint venture or to constitute either party an agent, employee or legal representative of the other party and neither party shall have power or authority to act on behalf of the other party or to bind the other party in any manner whatsoever.

	  	  	  	  	  
	
15.7.

	  	
All payments to be made to Yeda hereunder shall be made in US Dollars by banker’s cheque or by bank transfer to Yeda’s bank account, the details of which are as follows: Bank Hapoalim B.M. Rehovot branch #615, account no. 37852; swift: POALILIT.

	  	  	  	  	  
	
15.8.

	  	
All payments to be made to Yeda hereunder shall be made free and clear of and without any deduction for or on account of any set-off, counterclaim or tax.

 

    	  

    	 

    
 

 

-38-

	 	 
	15.9. 	Each party agrees to execute, acknowledge and deliver such further documents and instruments and do any other acts, from time to time, as may be reasonably necessary, to effectuate the purposes of this Agreement.
	 	 
	15.10.	None of the provisions of this Agreement shall be for the benefit of, or enforceable by, any person who is not a party to this Agreement.

          

IN WITNESS WHEREOF the parties hereto have set their signatures as of this 16th day of March 2005.      

	  	  	  	  	  	  	  	  	  
	
for

	
YEDA RESEARCH AND DEVELOPMENT COMPANY LIMITED

	  	
for

	
BiondVax Pharmaceuticals Ltd.

	  
	  	  	  	  	  	  	  	  	  
	
By: 

	
/s/ Dr. Isaac Shariv

	  	  	
By: 

	
/s/ Dr. Ron Babecoff

	  
	
Title:

	
C.E.O.

	  	  	
Title:

	
President & CEO

	  
	  	  	  	  	  	  	  	  	  
	
By:

	
/s/ Prof. Haim Garty

	  	  	  	  	  	  
	
Title: 

	
Chairman

	  	  	  	  	  	  

 

    	  

    	 

    
 

 

APPENDIX A(1)

 

The Existing Patent Applications

 

    	  

    	 

    
 

 

PATENT CARD

 

9822

Title: PEPTIDE-BASED VACCINE FOR INFLUENZA

Inventors: ARNON Ruth, BEN-YEDIDIA Tamar, LEVI Raphael

 

	
Country

	
Application

	
Publication

	
Grant

	
Status

	
ISRAEL

	
30/11/1998 - 127331

	    -	   -	
Abandoned

	
PATENT COOPERATION TREATY

	
28/11/1999 - PCT/IL99/00640

	
08/06/2000 - WO 00/32228

	    -	
Published

	
AUSTRALIA

	
28/11/1999 - 14066/00

	    -	
05/02/2004 - 766883

	
Granted

	
CANADA

	
28/11/1999 - 2,352,454

	    -	   -	
Pending

	
EUROPEAN PATENT OFFICE

	
28/11/1999 - 99972929.6

	
26/09/2001 - 1 135 159

	    -	
Published

	
HONG KONG

	
09/03/2002 - 02102105.6

	
21/06/2002 - 1040620A

	    -	
Published

	
ISRAEL

	
28/11/1999 - 143367

	    -	   -	
Pending

	
JAPAN

	
28/11/1999 - 2000-584919

	
24/09/2002 - 2002-531415

	    -	
Published

	
KOREA

	
28/11/1999 - 10-2001-7006639

	    -	   -	
Pending

	
MEXICO

	
28/11/1999 - PA/A/2001/005398

	    -	   -	
Examination

	
NEW ZEALAND

	
28/11/1999 - 511918

	    -	
08/12/2003 - 511918

	
Granted

	
U.S.A

	
28/11/1999 - 09/856,920

	    -	
25/05/2004 - 6,740,325

	
Granted

	
U.S.A

	
28/11/1999 - 10/846,548

	
06/01/2005 - US-2005-0002954

	    -	
Published

 

March 2005

 

    	  

    	 

    
 

 

APPENDIX A(2) 

 

Know-How

 

The “Know-How” comprises: (i) information and data relating to the development, formulation, preparation, manufacturing and storage of the peptide-based synthetic influenza vaccine, as developed by the Scientists (headed by Prof. Arnon), and relating to the influenza epitopes, Plasmids pLS408 containing influenza epitope nucleotides and Salmonella strains expressing influenza epitopes in their flagella; and (ii) information and data relating to the following:

 

	1.	Synthesis of nucleotides corresponding to selected influenza epitopes.
	 	 
	2.	Identification, synthesis and expression of relevant influenza epitopes, inducing the response of the various arms of the human immune system.
	 	 
	3.	Insertion of influenza epitopes into plasmid pLS408 and into Salmonella for expression of influenza epitopes in the flagellin of Salmonella vaccine strains.
	 	 
	4.	Selecting the Salmonella strains expressing the epitopes for the influenza vaccine.
	 	 
	5.	Cultivation of recombinant Salmonella vaccine strains.
	 	 
	6.	Flagella harvesting technique: cleavage of the flagella form the Salmonella and purification of recombinant flagella.
	  	 
	7.	Flagella conservation methods and suspension environment.
	 	 
	8.	Vaccine administration technique (intranasal drop).
	 	 
	9.	Analytical methods for evaluation of vaccine efficacy including measurements of virus and immunoglobulin titers.
	 	 
	10.	Usage of humanized mice chimera for evaluation of the human immune system response to various epitopes.

 

    	  

    	 

    
 

 

APPENDIX B

 

Initial Development Plan 

 

The Company’s development plan is divided into two parts:

	 	 	 
	 	1.	Developing the influenza vaccine from proven concept in animals to proven concept in humans by conducting pre-clinical studies and challenge clinical trial phase I and II.
	 	 	 
	 	2.	Conducting large scale clinical trial phase III and registration of the new vaccine at the FDA, European heath authorities and other relevant authorities

 

This Initial development plan deals with the first part of the new vaccine development as the second part depends on the outcome of the initial stage and will take place only in 3 to 4 years from now.

 

The table below presents a schematic description of the activities; timetable and timeframes that our team intends to execute, in order to prove the safety and efficacy of the new influenza vaccine:

 

 

 

 

    	1

    	 

    
 

 

Pre-clinical development

 

Pre-clinical activities will commence with the epitope mix selection for the design of multi-racial vaccine (the actual epitope selection covers the Caucasian HLA immune system). This phase is relatively short and includes, mostly, a bibliographical search. It will start prior to the investment and will take two weeks.

 

The second step is the optimization and formulation development & testing of the selected investigational vaccine epitope mix. The Company will rent laboratory space and a laboratory technician at an existing biotech company in preference XTL (suggested by Prof. Ruth Arnon). According to our plan, this stage will take about 9 to 10 months. Anat Eitan will supervise the whole process from the Company’s side.

 

In parallel, the Company will outsource the analytical, validation methods and the development of purification techniques (these elements are well known and controlled in the industry) to laboratories specialized in biological products development that operates in respect with the international GLP (good laboratory practice) standards. These methods and techniques will be used by the manufacturer of the investigational vaccine.

 

Identification and selection of an experienced and recognized manufacturer who has a recombinant manufacturing capabilities and who operates according to the international GMP (good manufacturing practise) standards will begin at an early stage in parallel to the fund rising (we already started initial discussions with BTG). The Company will evaluate the possibility to perform the development of the analytical and validation methods as well as the purification techniques by the selected manufacturer.

 

Production of the investigational vaccine experimental lot will begin at the end of the third quarter of operation. The experimental lot will enter into a stability program testing the activity and stability of the vaccine over time. The stability program will run all along the development process. The manufacturer will release (QC/QA) the experimental lot according to the analytical and validations methods.

 

Acute and sub-acute toxicology tests of the experimental vaccine will be tested by a specialized laboratory (probably in the UK). These tests will take place soon after the first batch is manufactured and released by the manufacturer.

 

The Company will evaluate the existing nasal spray devices and will preferentially try to use one of them. In case it will not be possible, we will outsource the development of such a device. The device provider will be selected at an early stage in parallel to fund raising and in compliance with pharmaceutical requirements for biological regulations.

 

    	2

    	 

    
 

 

The pre-clinical development stage will end with the design of the clinical trial and the selection of a CRO company that will conduct the clinical trials. These pre-clinical activities will take about 15 months.

 

Clinical trials

 

As for the clinical trials, The Company will use the services of first class CRO (Contract Research Organisations) and top FDA experts to aid in the preparation and filing the IND with the FDA. We intend to collaborate with the NIAID (national institute of allergy and infectious diseases, USA) as they have interest in development of influenza vaccines and they control a special clinical network that they use to run clinical trials. This has been done in the past with other companies / vaccines including influenza vaccines.

 

The first approach to the FDA and the NIAID is planned soon after the Company completes the development of the investigational vaccine. We will employ FDA experts and personal contacts of the Company Advisory Board to optimize and facilitate the work with these institutions.

 

The design of the clinical trial (protocol and CRF) will be done during the preclinical phase by FDA regulatory and clinical advisors including Anat Eitan  and members of the Advisory Board. We will contract FDA experts and will cooperate with the FDA officials as well as with the CRO company right from the beginning of this process.

 

The BLA application will be submited to the FDA authorities in the beginning of the second quarter of the second year of operation and we expect its approval within 3 months.

 

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The clinical trials are planned to begin at the end of the second quarter of the second year of operation. In light of prior FDA approval to conduct challenged clinical trial phase I & II for another investigational influenza vaccine (FIuINsure: Intranasal administrated, trivalent recombinant submit influenza vaccine developed by ID Biomedical) we have great reason to believe that the FDA will also authorize the Company to conduct challenge clinical trial phase I & II. Challenge clinical trials involve vaccinating volunteers with the experimental vaccine and a month later infecting them with none influenza virus strain. Under natural conditions only 20% - 30% of the population is infected by the influenza virus. In order to show significant results there is a need to perform trials on a large group of people. The advantage of using challenge clinical trials is that we reduce significantly the clinical trial time and costs by working with smaller groups of people. In challenge clinical trials 100% of the people in the  group are deliberately infected with the virus. By conducting challenge clinical trials we can finish the two trials (phase I & II) including the data analysis within 6 to 9 months. The time required for completing this clinical phase, including the design, preparation and approval of the trials is 15 months, thus if successful (investigational vaccine is safe and efficient) we will have an influenza vaccine which is proven concept in humans in 30 months.

 

The second part of the initial development plan is conducting large scale clinical trial phase III and registration of the new vaccine with the FDA and European heath authorities. This part is not included in the Initial Development Plan for the reasons mentioned above.

  

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APPENDIX C

 

RESEARCH PLAN – Prof. Ruth Arnon

 

Vaccination of human/mouse radiation chimera with recombinant flagella expressing murine epitopes.

 

	
Aim: 

	
influenza

 

To check whether vaccination with the mouse epitopes vaccine (triple vaccine) provides protection in the humanized mice and compare it with the efficacy of the human influenza epitopes (tetra vaccine) in immunized chimeric mice transplanted with human peripheral blood mononuclear cells (PBMC).

 

Experimental Procedure:

 

	

1.

	
Preparation of chimera mice:

 

Balb/c mice are exposed to a split lethal total body irradiation of 4Gy followed by 3Gy 3 days later. Then, they are reconstituted with SCID mice bone marrow and transplanted with human PBMC from different caucasian donors.

 

	

2.

	
Vaccination experiment:

      

Groups of chimera mice (12 mice per group) will be immunized with the following:

	  	  
	
1.

	
The mouse epitopes “triple vaccine” followed by infection with influenza virus.

	  	  
	
2.

	
The human epitopes “tetra vaccine” followed by infection with influenza virus (as a positive control).

	  	  
	
3.

	
Non immunized mice, infected with influenza virus (as a negative control).

	  	  
	
4.

	
Another negative control group will include conditioned but not transplanted mice immunized with the “triple vaccine” followed by infection with the influenza virus.

 

    	1

    	 

    
 

 

The “triple vaccine” contains flagella expressing a T helper and a CTL epitope from influenza virus, that are recognised by the mouse MHC molecules as well as a B cell epitope. (Th epitope: NP55-69, CTL epitope: NP147-158, B-cell epitope: HA91-108) 

 

The “tetra vaccine” contains flagella expressing a T helper and two CTL epitopes from influenza virus, that are recognised by the human HLA molecules as well as the B cell epitope. (Th epitope: HA307-319, CTL epitope: NP335-350, CTL epitope: NP380-393, B-cell epitope: HA91-108).

 

Vaccination will be performed 10 days after transplantation of the chimeric mice, by one intranasal administration, followed by intranasal infection with the influenza virus 7 days later.

 

The virus titer in the lungs of the mice will be examined in embryonated eggs and the humoral response of the chimera will be evaluated by ELISA.

 

The analysis of these data will enable us to evaluate the efficacy of the murine vaccine in comparison to the human vaccine and the protection conferred by vaccination.

 

    	2

    	 

    

 

 

	 	 	YEDA
                                         RESEARCH AND DEVELOPMENT CO. LTD.

                                               TECHNOLOGY TRANSFER FROM THE WEIZMANN INSTITUTE OF SCIENCE

	 	 	
	 	 		
December 4, 2006

	 	 	 	 
	 	 	  	
Ref.:09-2084-06-97

No.:81966

	 	 	 	 
	 	 	
Facsimile: 08-9302531

	 
	 	 	 	 
	 	 	
Dr. Ron Babecoff, President & CEO

	 
	 	 	
Biondvax Pharmaceuticals Ltd.

	 
	 	 	
14 Einstein Street (4th Floor)

	 
	 	 	
Weizmann Science Park

	 
	 	 	
Ness-Ziona, Israel

	 

 

Dear Ron,

	 	  	  
	 	
  Re:

	
Research and Licence Agreement by and between Yeda and BiondVax, dated: July 31, 2003 (the “R&L Agreement”) - Extension of milestone (Amendment of clause 10.2.l(a) (Prof. Arnon’s Research regarding vaccine for influenza)

 

We hereby acknowledge and confirm that the milestone described in clause 10.2.1(a) to the above captioned R&L Agreement will be extended by an additional 8 months.

 

Accordingly, clause 10.2.1(a) to the R&L Agreement will be amended, as follows: ‘

 

“Phase I clinical trails shall not have commenced with respect to any Product within 50 (Fifty) months of the Effective Date”

 

Upon execution of this letter by both Parties, the above amended wording of clause 10.2.l(a) will replace and be in lieu of the current wording.

 

All other terms and conditions contained in the R&L Agreement shall remain unchanged and of full force and effect.

	 	 	 	 
	  	  	
Yours sincerely,

	 
	 	 	 	 
	 	 	

	 
	 	 	Yeda Research and Development Co. Ltd.	 
	 	 
	
 We confirm that we have read the above letter and hereby agree to the terms thereof

	 
	 	 	 	 
	 	 	/s/ Dr. Ron Babecoff	 
	 	 	
BiondVax Pharmaceuticals Ltd.

	 

 

 

    	  

    	 

    
 

 

From: Einat Zisman [mailto:einat.zisman@weizmann.ac.il]

Sent: Wednesday, November 01, 2006 4:01 PM

To: Ron Babecoff

Cc: Gil Granot-Mayer; Amir Naiberg

Subject: Re: BiondVax

 

Shalom Ron,

 

Further to our discussion earlier today, Yeda agrees to extend the milestone described in clause 10.2.1 (A) by 8 months, i.e., to a total of 50 (42+8=50) months from the effective date.

 

Current text:

10.2.1 (a) “Phase I clinical trials shall not have commenced with respect to any Product within 42 (forty-two) months of the Effective Date;”

 

To clarify, Phase I trials are the first-stage of testing in human subjects. Therefore, “commencement of Phase I clinical trials” means the enrollment of the first patient in the study according to the pre-approved protocol (IND). The date in which this patient receives the vaccine according to the study approved protocol is the “phase I commencement date”.

 

We will send you a formal letter, as well as check the matter of signatures later on.

 

Kind regards,

Einat

 

Einat Zisman Ph.D., MBA

Chief Business Officer

Yeda R&D Co. Ltd. - Technology Transfer from the Weizmann Institute of Science

Tel: 972-8-9470617

Fax: 972-8-9470739

SMS: 972-8-936-6874

	einat.zisman@weizmann.ac.il 	http://www.YedaRnD.com

       

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