Document:

Exhibit 10.1

 

BOARD OBSERVER AND STANDSTILL AGREEMENT

 

This Board Observer and Standstill Agreement, dated December 5, 2018 (this “Agreement”), is by and between Richter Capital LLC, a Delaware limited liability company, and David L. Richter (collectively, “Richter Group” or the “Investors,” and individually a “member” of the Richter Group) and Hill International, Inc., a Delaware corporation (the “Company”).

 

In consideration of and reliance upon the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1.                                Board Matters.

 

(a)                                 The Company agrees that the Company will appoint David L. Richter (“Mr. Richter”) as an observer (“Observer”) to the Board of Directors of the Company (“Board”) effective as of January 15, 2019.  As an Observer, with respect to meetings of the full Board (whether by telephone or in-person), Mr. Richter will (i) receive copies of all notices and written information furnished to the full Board, simultaneously with the distribution of such notices and written information to the full Board to the extent practicable, (ii) be permitted to be present at and participate in all meetings of the full Board and the Board’s Audit Committee (whether by telephone or in person), and (iii) be permitted to request certain information directly related to an agenda item at any Board or Audit Committee meeting which he attends as an Observer, subject to the determination of the Chairman of the Board (“Chairman”), in his/her sole discretion, that any such requested information is both reasonably available and directly related to any such agenda item. Notwithstanding the foregoing, the Board shall be entitled to withhold any information and exclude Mr. Richter from any meeting, or any portion thereof, if the Board determines, in its sole discretion, that Mr. Richter’s access to such information or presence at such meeting could jeopardize the Company’s attorney-client privilege or result in a breach by the Company of its obligations under any agreement, arrangement or understanding or a violation of any applicable law, or as otherwise may be appropriate as determined by the Board.  In addition, if the Board is evaluating or taking any action with respect to which Mr. Richter, or the Richter Group or any of its Affiliates, has an actual, perceived or potential conflict of interest, then the Company may withhold from Mr. Richter written materials and other information relating to such action and may exclude Mr. Richter from any portion of a meeting in which such action is discussed.

 

(b)                                 Upon becoming an Observer (or any Replacement pursuant to Section 1(e)), Mr. Richter shall comply with all written policies, procedures, processes, codes, rules, standards and guidelines applicable to Board members, and of which he has been provided written copies in advance (or which have been filed with the Securities and Exchange Commission (the “SEC”) or posted on the Company’s website), including but not limited to the Company’s corporate governance guidelines, code of business conduct, and insider trading policy, and shall preserve the confidentiality of Company business and information, including discussions or matters considered in meetings of the Board or Board committees, subject to the confidentiality provisions in Section 2.

 

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(c)                                  The Company shall indemnify and hold Observer (or any Replacement pursuant to Section 1(e)) harmless from and against, and agrees promptly to defend Observer (or any Replacement pursuant to Section 1(e)) from and reimburse him for, any and all losses, damages, costs, expenses, liabilities, obligations and claims of any kind (including, without limitation, reasonable attorneys’ fees and other legal costs and expenses) which Observer (or any Replacement pursuant to Section 1(e)) may suffer or incur, or become subject to, as a result of or in connection with his role as an observer of the Board, other than as a result of, in connection with or following a material breach of this Agreement or any gross negligence or willful misconduct by any member of the Richter Group, provided that the Company shall not be obliged to pay legal expenses and fees to more than one law firm in connection with the defense of similar claims arising out of the same alleged acts or omissions giving rise to such claims notwithstanding that such claims are alleged or brought by one or more parties against Observer.

 

(d)                                 To the extent permitted by law and the Company’s existing insurance coverage, Observer (or any Replacement pursuant to Section 1(e)) shall be covered by the same indemnification and insurance provisions and coverage as are applicable to the individuals that are currently directors of the Company.

 

(e)                                  Mr. Richter shall not be entitled to receive any compensation for serving as an Observer but shall be entitled to reimbursement of reasonable out-of-pocket expenses incurred in attending Board meetings or in connection with any activity performed at the request of or with the approval of the Board or the Company.

 

(f)                                   If, from the date hereof until the expiration of the Standstill Period, Mr. Richter resigns as an Observer or is rendered unable to, or refuses to, serve as an Observer, the Richter Group shall be entitled to designate a replacement for Mr. Richter that must be reviewed and recommended by the Company’s Governance and Nominating Committee and approved by the Board. If such proposed designee is not approved by such committee and the Board, the Richter Group shall be entitled to continue designating a replacement until such proposed designee is approved by such committee and the Board (a “Replacement”).

 

(g)                                  Either the Company or Mr. Richter may terminate this Agreement, including the status of Mr. Richter (or any Replacement) as an Observer, at any time; provided, however, that the Company may not terminate this Agreement during the 90-day period from the date that is 15 days prior to the last day on which stockholder nominations to the Board for any annual meeting of stockholders are permitted.  Notwithstanding the foregoing, the provisions of Sections 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14 shall survive any termination of this Agreement.  Any termination by Mr. Richter shall be deemed to be on behalf of the Richter Group.

 

2.                                Confidentiality.

 

For a one-year period after Mr. Richter is no longer serving as an Observer, except with the prior written consent of the Company and except as otherwise required by law, Mr. Richter shall, and shall cause each of his Affiliates to (a) hold in strict confidence and trust all non-public information relating to the Company or its subsidiaries or their respective assets or operations that is provided to Mr. Richter by the Company or any officer or director thereof (the “Confidential Information”), (b) not release or disclose in any manner whatsoever to any other

 

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Person any Confidential Information, (c) use the Confidential Information solely in connection with his observer rights hereunder and not for any other purpose and (d) not use any Confidential Information in violation of any applicable laws, including, without limitation, any applicable U.S. federal or state securities laws; provided that (i) the foregoing provisions shall not apply where Mr. Richter or any of his Affiliates is compelled to disclose Confidential Information by judicial or administrative process or, in the reasonable opinion of his counsel, by other requirements of law (provided that, if legally permissible, upon learning that the disclosure of any such Confidential Information is sought in or by a court or governmental body of competent jurisdiction or through other means, prompt written notice is given to the Company to allow the Company to undertake appropriate action to prevent or limit the disclosure of, or to obtain a protective order for, such Confidential Information), and (ii) the term “Confidential Information” shall not include information which has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement with a member of the Richter Group.  Following the termination of this Agreement, Mr. Richter shall promptly (i) return to the Company all physical materials containing or consisting of such Confidential Information and all hard copies thereof, (ii) destroy all electronically stored Confidential Information, in each case in the possession or control of the Richter Group.

 

3.                                Standstill.

 

The Richter Group agrees that, from the date of this Agreement until the expiration of the Standstill Period, neither it nor any of its Affiliates or Associates or Family Members will, and it will cause each of its Affiliates and Associates and Family Members not to, directly or indirectly, in any manner, acting alone or in concert with others, take any of the following actions or advise, recommend, request, encourage, solicit, influence or induce any other person to take any of the following actions, or announce any intention to take any of the following actions:

 

(a)                                 submit any stockholder proposal pursuant to Rule 14a-8 promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise, or any notice of nomination or other business for consideration, or nominate any candidate for election to the Board;

 

(b)                                 engage, directly or indirectly, in any “solicitation” (as defined in Rule 14a-1 of Regulation 14A) of proxies (or written consents) or otherwise become a “participant in a solicitation” (as such term is defined in Instruction 3 of Schedule 14A of Regulation 14A under the Exchange Act) in opposition to the recommendation or proposal of the Board, or recommend or request or induce or attempt to induce or seek to advise, encourage or influence any other person with respect to the voting of any voting stock of the Company (including any withholding from voting) or grant a proxy with respect to the voting of any voting stock of the Company to any person other than to the Board or persons appointed as proxies by the Board;

 

(c)                                  seek to call, or to request the call of, a special meeting of the Company’s stockholders;

 

(d)                                 make a request for a list of the Company’s stockholders or for any books and records of the Company;

 

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(e)                                  form, join in or in any other way participate in a “partnership, limited partnership, syndicate or other group” within the meaning of Section 13(d)(3) of the Exchange Act with respect to the voting stock of the Company (other than a “group” that consists solely of all or some of the persons parties to this Agreement or any of their respective Affiliates or Associates);

 

(f)                                   deposit any shares of voting stock of the Company in a voting trust or similar arrangement or subject any shares of voting stock of the Company to any voting agreement or pooling arrangement, other than any such voting trust, arrangement or agreement solely among the Investors and otherwise in accordance with this Agreement;

 

(g)                                  except as specifically provided in Section 1 of this Agreement, seek to place a representative or other Affiliate, Associate or Observer on the Board or seek the removal of any member of the Board or a change in the size or composition of the Board or the committees of the Board;

 

(h)                                 acquire or agree, offer, seek or propose to acquire, or cause to be acquired, ownership (including beneficial ownership) of any of the assets or business of the Company or any rights or options to acquire any such assets or business from any person;

 

(i)                                     other than at the express written request of the Board, seek, propose, or make any statement with respect to, or solicit, negotiate with, or provide any information to any person with respect to, a merger, consolidation, acquisition of control or other business combination, tender or exchange offer, purchase, sale or transfer of assets or securities, dissolution, liquidation, reorganization, change in structure or composition of the Board, change in the executive officers of the Company, change to the Company’s organization documents, change in capital structure, recapitalization, dividend or distribution or change in dividend or distribution policy, share repurchase or similar transaction involving the Company, its subsidiaries or its business, whether or not any such transaction involves a change of control of the Company; provided, however, nothing herein shall limit the ability of the Investors to disclose, publicly or otherwise, how they intend to vote with respect to any announced tender offer, exchange offer, merger, consolidation, business combination or other change-of-control transaction that is being submitted for the approval of shareholders, and the reasons therefor, so long as any such activity is otherwise in compliance with the requirements of this Agreement;

 

(j)                                    disclose publicly, or privately in a manner that could reasonably be expected to become public, any intention, plan or arrangement inconsistent with the foregoing or publicly request or advance any proposal to amend, modify or waive the terms of this Agreement; provided that the Investors may make confidential requests to the Board to amend, modify or waive any provision of this Section 3, which the Board may accept or reject in its sole discretion, so long as any such request is not publicly disclosed by the Investors and is made by the Investors in a manner that does not require the public disclosure of such request by the Company, the Investors or any other person;

 

(k)                                 institute, solicit, assist or join any litigation, arbitration or other proceeding against or involving the Company or any of its current or former directors or officers (including derivative actions), other than to enforce the provisions of this Agreement;

 

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(l)                                     take any action challenging the validity or enforceability of any provisions of this Section 3;

 

(m)                             enter into any negotiations, discussions, agreement, arrangement or understanding with any person concerning any of the foregoing (other than this Agreement) or encourage or solicit any person to undertake any of the foregoing activities;

 

(n)                                 make any public announcement or statement involving the Company or any of its officers, directors or Affiliates; or

 

(o)                                 communicate with any employee of the Company about Company-related matters without the prior consent of the Chairman, as determined in his sole discretion.

 

Notwithstanding the foregoing, nothing in this Agreement shall prohibit or restrict the Richter Group from: (A) communicating privately with the Board, Chief Executive Officer, Chief Financial Officer, the Chief Administrative Officer of the Company regarding any matter, so long as such communications are not intended to, and would not reasonably be expected to, require any public disclosure of such communications, (B) communicating privately with stockholders of the Company and others in a manner that does not otherwise violate this Section 3, (C) taking any action necessary to comply with any law, rule or regulation or any action required by any governmental or regulatory authority or stock exchange that has, or may have, jurisdiction over the Investors or any of their respective Affiliates or Associates, provided that a breach by Investor of this Agreement is not the cause of the applicable requirement, or (D) voting any shares beneficially owned by any member of the Richter Group in any way they deem appropriate.

 

As used in this Agreement:

 

(i)                                     the terms “Affiliate” and “Associate” shall have the respective meanings set forth in Rule 12b-2 promulgated by the SEC under the Exchange Act and shall include persons who become Affiliates or Associates of any person subsequent to the date of this Agreement;

 

(ii)                                  the terms “beneficial owner,” “beneficially owns” and “beneficial ownership” shall have the same meanings as set forth in Rule 13d-3 promulgated by the SEC under the Exchange Act;

 

(iii)                               the term “client” shall mean any person, company, or entity that entered into a business agreement or contract with the Company within the two year period preceding the beginning of the Standstill Period (as defined below);

 

(iv)                              the term “Family Members” shall mean, with respect to an Investor, the spouse of such Investor and the children (including by adoption) of such Investor;

 

(v)                                 the terms “person” or “persons” shall mean any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization or other entity of any kind or nature;

 

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(vi)                              the term “potential client” shall mean any person, company, or entity with which an employee of the Company has discussed potentially doing business with, or has received a new business proposal from, within the two year period preceding the beginning of the Standstill Period (as defined below); and

 

(vii)                           the term “Standstill Period” shall mean the period commencing on the date of this Agreement and ending on the date that Mr. Richter (or any Replacement pursuant to Section 1(e)) is no longer serving as an Observer, provided that, if Mr. Richter (or a Replacement) resigns as an Observer or if Mr. Richter or the Richter Group terminates this Agreement, the Standstill Period shall end on the date that is 180 days following the date that Mr. Richter (or a Replacement) is no longer serving as an Observer.

 

4.                                Non-Competition; Non-Solicitation.

 

(a)                                 Mr. Richter agrees that during the period he (or any Replacement pursuant to Section 1 (e)) is serving as an Observer and for a period of 180 days following the date that Mr. Richter (or a Replacement) is no longer serving as an Observer, Mr. Richter will not:

 

(i)                                     directly or indirectly contact or solicit any (i) any clients of the Company that were clients during Mr. Richter’s service as an Observer and employment with the Company or (ii) any potential client of the Company, for the purpose of soliciting such client or potential client to receive, purchase, lease, or license a product or service that is the same as, similar to, or in competition with those products and/or services made, rendered, offered, or under development by the Company; or

 

(ii)                                  directly or indirectly interfere with or attempt to disrupt the relationship, contractual or otherwise, between the Company and any of the Company’s employees or independent contractors, or solicit, induce, or assist or attempt to solicit, induce or assist the Company’s employees or independent contractors to terminate or alter their relationships with the Company, and/or to become self-employed, employed, or to serve as a consultant to others in any organization.

 

(b)                                 Mr. Richter agrees that during the period he (or any Replacement pursuant to Section 1 (e)) is serving as an Observer and for a period of 90 days following the date that Mr. Richter (or a Replacement) is no longer serving as an Observer, Mr. Richter will not directly or indirectly engage in any activity or business as a consultant, independent contractor, agent, employee, officer, partner, director, or otherwise, alone or in association with any other person, corporation, or other entity, for any organization operating within the United States or any other country where the Company markets its services or otherwise does business if that organization is (i) engaged in direct or indirect competition with the Company, (ii) conducting a business of the type and character engaged in by the Company, (iii) developing products or services in competition with those of the Company, or (iv) at any time during the two year period preceding the beginning of the Standstill Period, a customer of the Company.  For purposes of this section, the Company is engaged in the business of providing program management, project management, construction management, and other consulting services in various markets.  The Parties agree that nothing in this Agreement shall preclude Executive from serving as a director

 

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of a company that is not engaged in direct or indirect competition with the Company as defined in this paragraph.

 

5.                                Public Announcement.  Promptly after the execution hereof, the Company shall announce this Agreement and the material terms hereof by means of a press release in the form attached hereto as Exhibit A (the “Press Release”).  Neither the Company nor the Richter Group shall make any public announcement or statement that contradicts or disagrees with the statements made in the Press Release, except as required by law or the rules of any stock exchange or with the prior written consent of the other party.

 

6.                                Representations and Warranties of All Parties.  Each of the parties represents and warrants to the other party that: (i) such party has all requisite company power and authority to execute and deliver this Agreement and to perform its obligations hereunder; (ii) this Agreement has been duly and validly authorized, executed and delivered by it and is a valid and binding obligation of such party, enforceable against such party in accordance with its terms; (iii) this Agreement will not result in a violation of any terms or conditions of any agreements to which such person is a party or by which such party may otherwise be bound or of any law, rule, license, regulation, judgment, order or decree governing or affecting such party; and (iv) there is currently no pending or outstanding litigation between the Richter Group and the Company or affiliates thereof.

 

7.                                Remedies; Forum and Governing Law.  The parties hereto recognize and agree that if for any reason any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or injury would be caused for which money damages would not be an adequate remedy.  Accordingly, each party agrees that in addition to other remedies the other party shall be entitled to at law or equity, the other party shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement exclusively in the Court of Chancery or other federal or state courts of the State of Delaware.  In the event that any action shall be brought in equity to enforce the provisions of this Agreement, no party shall allege, and each party hereby waives the defense, that there is an adequate remedy at law.  Furthermore, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of the Court of Chancery or other federal or state courts of the State of Delaware in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) agrees that it shall not bring any action relating to this Agreement or the transactions contemplated by this Agreement in any court other than the Court of Chancery or other federal or state courts of the State of Delaware, and each of the parties irrevocably waives the right to trial by jury, (d) agrees to waive any bonding requirement under any applicable law, in the case any other party seeks to enforce the terms by way of equitable relief and (e) irrevocably consents to service of process by a reputable overnight mail delivery service, signature requested, to the address of such party’s principal place of business or as otherwise provided by applicable law.  THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH STATE.

 

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8.                                No Waiver.  Any waiver by any party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement.  The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

 

9.                                Entire Agreement; Prior Agreement.  This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and may be amended only by an agreement in writing executed by the parties hereto.

 

10.                         Notices.  All notices, consents, requests, instructions, approvals and other communications provided for herein and all legal process in regard hereto shall be in writing and shall be deemed validly given, made or served, if (a) given by both telecopy and electronic mail, when such telecopy and electronic mail is transmitted to the telecopy number set forth below and the appropriate confirmation is received and sent to the electronic mail address set forth below or (b) if given by any other means, when actually received during normal business hours at the address specified in this subsection:

 

If to the Company:

 

Hill International, Inc.

One Commerce Square

2005 Market Street, 17th Floor

Philadelphia, Pennsylvania 19103

Email: WilliamDengler@hillintl.com

Attention: Executive Vice President & Chief Administrative Officer

 

If to the Richter Group:

 

Richter Capital LLC

274 Carter Road

Princeton, New Jersey 08540

Email: david@richtercap.com

Attention: David L. Richter, Chairman and Chief Executive Officer

 

11.                         Severability.  If at any time subsequent to the date hereof, any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon the legality or enforceability of any other provision of this Agreement.

 

12.                         Counterparts.  This Agreement may be executed in two or more counterparts (including by facsimile or PDF) which together shall constitute a single agreement.

 

13.                         Successors and Assigns.  This Agreement shall not be assignable or assigned, directly or indirectly, by operation of law or otherwise, by any of the parties to this Agreement.

 

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14.                         No Third Party Beneficiaries.  This Agreement is solely for the benefit of the parties hereto and is not enforceable by any other persons.

 

15.                         Interpretation and Construction.  Each of the parties hereto acknowledges that it has been represented by counsel of its choice throughout all negotiations that have preceded the execution of this Agreement, and that it has executed the same with the advice of said independent counsel.  Each party and its counsel cooperated and participated in the drafting and preparation of this Agreement and the documents referred to herein, and any and all drafts relating thereto exchanged among the parties shall be deemed the work product of all of the parties and may not be construed against any party by reason of its drafting or preparation.  Accordingly, any rule of law or any legal decision that would require interpretation of any ambiguities in this Agreement against any party that drafted or prepared it is of no application and is hereby expressly waived by each of the parties hereto, and any controversy over interpretations of this Agreement shall be decided without regards to events of drafting or preparation.  The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  The term “including” shall be deemed to mean “including without limitation” in all instances and all pronouns shall be deemed to include the corresponding masculine, feminine or neuter forms.

 

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or caused the same to be executed by its duly authorized representative as of the date first above written.

 

	
 
    	
HILL   INTERNATIONAL, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   William H. Dengler, Jr.
    
	
 
    	
Name:
    	
William   H. Dengler, Jr.
    
	
 
    	
Title:
    	
EVP &   Chief Administrative Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
RICHTER   CAPITAL LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   David L. Richter
    
	
 
    	
Name:
    	
David   L. Richter
    
	
 
    	
Title:
    	
Chairman   and Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Signed:
    	
/s/   David L. Richter
    
	
 
    	
Name:
    	
DAVID   L. RICHTER
    

 

9EXHIBIT 4.2

 

NOTICE OF GRANT OF
[INCENTIVE/NON-QUALIFIED] STOCK OPTION AWARD

 

AVID BIOSERVICES, INC.

2018 OMNIBUS INCENTIVE PLAN

 

FOR GOOD AND VALUABLE CONSIDERATION, Avid
Bioservices, Inc. (the “Company”) hereby grants, pursuant to the provisions of the Company’s 2018 Omnibus
Incentive Plan (the “Plan”), to the Grantee designated in this Notice of Grant of [Incentive/Non-Qualified]
Stock Option Award (the “Notice”) an option to purchase the number of shares of Common Stock of the Company
set forth in the Notice (the “Shares”), subject to certain restrictions as outlined below in this Notice and
the additional provisions set forth in the attached Terms and Conditions of Stock Option Award (“Terms”), and
together with the Notice, the “Agreement”). The terms and conditions of the Plan are incorporated by reference
in their entirety into this Agreement. When used in this Agreement, the terms which are defined in the Plan shall have the meanings
given to them in the Plan, as modified herein (if applicable).

 

	Grantee: [__________]	Type
of Option: [Incentive/Non-Qualified] Stock Option
	Exercise
    Price per Share: $____	Date
    of Grant: ____________
	Total Number of 

Shares Granted: _______	Expiration
    Date: ____________
	Vesting Schedule:

                                                                                The Stock Option will vest and become exercisable in accordance
        with the following schedule:

	Vesting
        Date	Number
    of Shares Vested and Exercisable
	
        

        

        

        [Insert schedule – time based or performance
based] 

         

        Only a whole number of Shares will become vested and exercisable
        as of any given vesting date. If the number of Shares determined as of a vesting date is a fractional number, the number vesting
        will be rounded down to the nearest whole number with any fractional portion carried forward. No Shares shall become earned and
        vested following Grantee’s Separation from Service, except as expressly provided in the Terms below, as applicable, or as
        otherwise provided pursuant to the terms of the Plan. Refer to Section 15.3 of the Plan in the event of the occurrence of a Change
        in Control.

         

        In no event may this
        STOCK Option be exercised after the Expiration Date as provided above.

 

Grantee acknowledges and agrees that by clicking the “ACCEPT”
button on the corresponding on-line grant acceptance response page, it will act as Grantee’s electronic signature to this
Agreement and will constitute Grantee’s acceptance of and agreement with all of the terms and conditions of the Award, as
set forth in the Agreement and the Plan.

 

	 	Avid Bioservices, Inc.

 

/s/                                    

Daniel R. Hart

Chief Financial Officer

 

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TERMS AND CONDITIONS
OF STOCK OPTION AWARD

 

		1.	Grant of Stock Option.

 

(a)          The Stock Option Award (the “Award”) granted by Avid Bioservices, Inc. (the “Company”)
to the Grantee specified in the Notice of Grant of [Incentive/Non-Qualified] Stock Option Award (the “Notice”)
to which these Terms and Conditions of Stock Option Award (the “Terms”) are attached, is subject to the terms
and conditions of the Plan, the Notice, and these Terms. The terms and conditions of the Plan are incorporated by reference in
their entirety into these Terms. Together, the Notice and these Terms constitute the “Agreement.” A Prospectus
describing the Plan has been delivered to the Grantee. The Plan itself is available upon request. When used in this Agreement,
the terms which are defined in the Plan shall have the meanings given to them in the Plan, as modified herein (if applicable).

 

(b)          The Board has approved an award of a Stock Option to the Grantee with respect to a number of Shares of Common Stock as set
forth in the Notice, conditioned upon the Grantee’s acceptance of the provisions set forth in the Notice and these Terms.

 

(c)          If designated in the Notice as an Incentive Stock Option (“ISO”), this Stock Option is intended to qualify
as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that the Stock Option fails to
meet the requirements of an ISO under Section 422 of the Code, this Stock Option shall be treated as a Non-qualified Stock Option
(“NSO”).

 

(d)          The
Company intends that this Stock Option not be considered to provide for the deferral of compensation under Section 409A of the
Code and that this Agreement shall be so administered and construed. Further, the Company may modify the Plan and this Award to
the extent necessary to fulfill this intent.

 

	 	2.	Exercise of Stock Option.

 

(a)          Right
to Exercise. This Stock Option shall be exercisable, in whole or in part, during its term in accordance with the Vesting Schedule
set out in the Notice and with the applicable provisions of the Plan and this Agreement. No Shares shall be issued pursuant to
the exercise of the Stock Option unless the issuance and exercise comply with applicable laws. Assuming such compliance, for income
tax purposes the Shares shall be considered transferred to the Grantee on the date on which the Stock Option is exercised with
respect to such Shares. Until such time as the Stock Option has been duly exercised and Shares have been delivered, the Grantee
shall not be entitled to exercise any voting rights with respect to such Shares and shall not be entitled to receive dividends
or other distributions with respect thereto.

 

(b)          Method
of Exercise. The Grantee may exercise the Stock Option by delivering an exercise notice in a form approved by the Company (the
“Exercise Notice”) which shall state the election to exercise the Stock Option, the number of Shares with respect
to which the Stock Option is being exercised, and such other representations and agreements as may be required by the Company.
The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Shares exercised, in the manner provided
in Section 3 below. This Stock Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise
Notice accompanied by the aggregate Exercise Price.

 

		3.	Method of Payment. If the Grantee elects to exercise the Stock Option by submitting an Exercise Notice under Section
2(b) of this Agreement, payment of the aggregate Exercise Price shall be made by any of the following, or a combination thereof,
at the election of the Grantee:

 

(a)          cash
or certified check;

 

(b)          under
the “Cashless Exercise” provision in Section 11.3 of the Plan;

 

 

 

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(c)          surrender
of other shares of Stock owned by the Grantee which have a Fair Market Value on the date of surrender equal to the aggregate Exercise
Price of the exercised Shares and any applicable withholding; or

 

(d)          any
other consideration that the Board deems appropriate and in compliance with applicable law.

 

		4.	Non-Transferability of Stock Option. This Stock Option may not be transferred in any manner otherwise than by will or
by the laws of descent or distribution and may be exercised during the lifetime of the Grantee only by the Grantee. The terms of
the Plan and this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Grantee.

 

		5.	Term of Stock Option. This Stock Option may be exercised only within the term set out in the Notice, and may be exercised
during such term only in accordance with the Plan and the terms of this Agreement.
	 	 	 
	 	6.	Exercise Following Separation from Service.

 

 (a)          Following a Separation from Service, other than due to Grantee’s death or permanent disability, any non-vested portion of the Stock Option expires immediately upon such Separation from Service and any vested portion of the Stock Option remains exercisable for three (3) months following such Separation from Service.

 

 (b)          Following a Separation from Service due to Grantee’s death or permanent disability, any non-vested portion of the Stock Option expires immediately upon such Separation from Service and any vested portion of the Stock Option remains exercisable for twelve (12) months following such Separation from Service.

 

		7.	Withholding.

 

(a)          Regardless
of any action the Company takes with respect to any or all income tax, payroll tax or other tax-related withholding (“Tax-Related
Items”), the Grantee acknowledges that the ultimate liability for all Tax-Related Items owed by the Grantee is and remains
the Grantee’s responsibility and that the Company (i) makes no representations or undertakings regarding the treatment of
any Tax-Related Items in connection with any aspect of the Award, including the grant, vesting or exercise of the Stock Option
or the subsequent sale of Shares acquired upon exercise; and (ii) does not commit to structure the terms of the grant or any aspect
of the Stock Option to reduce or eliminate the Grantee’s liability for Tax-Related Items.

 

(b)          Prior
to exercise of the Stock Option, the Grantee shall pay or make adequate arrangements satisfactory to the Company to satisfy all
minimum withholding obligations of the Company. In this regard, the Grantee authorizes the Company to withhold all applicable minimum
Tax-Related Items legally payable by the Grantee from the Grantee’s wages or other cash compensation paid to the Grantee
by the Company or from proceeds of the sale of the Shares. Alternatively, or in addition, to the extent permissible under applicable
law, the Company may (i) sell or arrange for the sale of Shares that the Grantee acquires to meet the minimum withholding obligation
for Tax-Related Items, and/or (ii) withhold Shares otherwise issuable upon exercise of the Stock Option, provided that the Company
only withholds the amount of Shares necessary to satisfy the minimum withholding amount. Finally, the Grantee shall pay to the
Company any amount of Tax-Related Items that the Company may be required to withhold as a result of the Grantee’s participation
in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue and deliver Shares upon
exercise of the Stock Option if the Grantee fails to comply with the Grantee’s obligations in connection with the Tax-Related
Items as described in this Section 6.

 

 

 

    	 	3	 

     

    

 

(c)          If
the Grantee makes any disposition of Shares delivered pursuant to the exercise of an ISO under the circumstances described in
Section 421(b) of the Code (relating to certain disqualifying dispositions) or any successor provision of the Code, the Grantee
shall notify the Company of such disposition within ten days of such disposition.

 

		8.	Grantee Representations. The Grantee hereby represents to the Company that the Grantee has read and fully understands
the provisions of this Agreement, the Prospectus and the Plan, and the Grantee’s decision to participate in the Plan is completely
voluntary. Further, the Grantee acknowledges that the Grantee is relying solely on his or her own advisors with respect to the
tax consequences of this Award.

 

		9.	Regulatory Limitations on Exercises. Notwithstanding the other provisions of this Agreement, the Board shall have the
sole discretion to impose such conditions, restrictions and limitations (including suspending the exercise of the Stock Option
and the tolling of any applicable exercise period during such suspension) on the issuance of Stock with respect to this Stock Option
unless and until the Board determines that such issuance complies with (i) any applicable registration requirements under the Securities
Act or the Board has determined that an exemption therefrom is available, (ii) any applicable listing requirement of any stock
exchange on which the Stock is listed, (iii) any applicable Company policy or administrative rules, and (iv) any other applicable
provision of state, federal or foreign law, including foreign securities laws where applicable.

 

		10.	Miscellaneous.

 

(a)          Notices.
Any notice which either party hereto may be required or permitted to give to the other shall be in writing and may be delivered
personally, by intraoffice mail, by fax, by electronic mail or other electronic means, or via a postal service, postage prepaid,
to such electronic mail or postal address and directed to such person as the Company may notify the Grantee from time to time;
and to the Grantee at the Grantee’s electronic mail or postal address as shown on the records of the Company from time to
time, or at such other electronic mail or postal address as the Grantee, by notice to the Company, may designate in writing from
time to time.

 

(b)          Waiver.
The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of
any other or subsequent breach.

 

(c)          Entire
Agreement. This Agreement and the Plan constitute the entire agreement between the parties with respect to the subject matter
hereof. Any prior agreements, commitments or negotiations concerning the Award are superseded.

 

(d)          Binding
Effect; Successors. This Agreement shall inure to the benefit of and be binding upon the parties hereto and to the extent not
prohibited herein, their respective heirs, successors, assigns and representatives. Nothing in this Agreement, express or implied,
is intended to confer on any person other than the parties hereto and as provided above, their respective heirs, successors, assigns
and representatives any rights, remedies, obligations or liabilities.

 

(e)          Governing
Law. This Agreement shall be interpreted, construed and administered in accordance with the laws of the State of California
as they apply to contracts made, delivered and performed in the State of California. Any dispute arising hereunder shall be resolved
by binding arbitration before the American Arbitration Association under its Commercial Arbitration Rules before a single arbitrator.
The parties will mutually determine the arbitrator from a list of arbitrators obtained from the American Arbitration Association
office located in Orange County, California. If the parties are unable to agree on the arbitrator, the arbitrator will be selected
by the American Arbitration Association with a preference for selecting a retired federal district judge or state superior court
judge as the arbitrator.

 

(f)          Venue.
Any arbitration, legal or equitable action or any proceeding arising directly, indirectly, or otherwise in connection with, out
of, related to or from the Agreement, or any provision hereof, shall exclusively be filed and adjudicated in Orange County, California
and no other venue.

 

 

 

    	 	4	 

     

    

 

(g)          Headings.
The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.

 

(h)          Conflicts;
Amendment. The provisions of the Plan are incorporated in this Agreement in their entirety. In the event of any conflict between
the provisions of this Agreement and the Plan, the provisions of the Plan shall control. This Agreement may be amended at any time
by the Committee, provided that no amendment may, without the consent of the Grantee, materially impair the Grantee’s rights
with respect to the Award. The Committee shall have full authority and discretion, subject only to the terms of the Plan, to decide
all matters relating to the administration or interpretation of the Plan, the Award, and the Agreement, and all such action by
the Committee shall be final, conclusive, and binding upon the Company and the Grantee.

 

(i)          No
Right to Continued Employment. Nothing in this Agreement shall confer upon the Grantee any right to continue in the employ
or service of the Company or affect the right of the Company to terminate the Grantee’s employment or service at any time.

 

(j)          Further
Assurances. The Grantee agrees, upon demand of the Company or the Committee, to do all acts and execute, deliver and perform
all additional documents, instruments and agreements which may be reasonably required by the Company or the Committee, as the case
may be, to implement the provisions and purposes of this Agreement and the Plan.

 

(k)          Recovery
of Compensation. In accordance with Section 3.3 of the Plan, the Award is subject to the requirements of (i) Section 954 of
the Dodd-Frank Wall Street Reform and Consumer Protection Act (regarding recovery of erroneously awarded compensation) and any
implementing rules and regulations thereunder, (ii) any policies adopted by the Company to implement such requirements, and (iii)
the Company’s Clawback Policy, as in effect from time to time, all to the extent determined by the Committee to be applicable
to the Grantee.

 

(l)          Severability.
The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable,
in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

 

(m)          Restrictive
Covenants. If the Grantee is subject to any employment-related covenants (including covenants regarding non-competition, non-solicitation
of customers/employees and preservation of confidential information) under any agreement with the Company or any Subsidiary, the
vesting and receipt of benefits under this Award is specifically conditioned on the Grantee’s compliance with such covenants.
To the extent allowed by and consistent with applicable law and any applicable limitations period, if it is determined at any
time that the Grantee has materially breached any such covenants, the Company will be entitled to (i) cause any unvested portion
of the Award to be immediately canceled without any payment of consideration by the Company and (ii) recover from the Grantee
in its sole discretion some or all of the shares of Stock (or proceeds received by the Grantee from such shares of Stock) paid
to the Grantee pursuant to this Agreement. The Grantee recognizes that if the Grantee breaches any such covenants, the losses
to the Company and/or its Subsidiaries may amount to the full value of any shares of Stock paid to the Grantee pursuant to this
Agreement.

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