SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
(Rule 13d-101)
information
to be included in statements filed pursuant
to rules 13d-1(a) and amendments thereto
filed
pursuant to rule 13d-2(a)[1]
VBI Vaccines, inc. |
(Name of Issuer) Common Stock |
(Title of Class of Securities) 91822J103 |
(CUSIP Number) Perceptive Advisors, LLC, 51 Astor Place, 10th Floor, New York, NY 10003, (646) 205-5300 |
(Name, Address and Telephone Number of Person Authorized to Receive Notice and Communications) December 6, 2016 |
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. x
Note: Schedules filed in paper format shall include a signed original and five copies of the Schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent.
1 The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
CUSIP No. 91822J103 | 13D | Page 2 of 9 |
1. | names
of reporting persons i.r.s. identification no. of above persons (entities only) PERCEPTIVE ADVISORS LLC |
2. | check the appropriate box if a group* |
(a) x | |
(b) o | |
3. | sec use only |
4. | sources
of funds OO (Funds from Investment Advisory Clients). |
5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) o |
6. | citizenship
or place of organization DELAWARE |
number
of shares |
7. | sole voting power | 0 |
beneficially owned by |
8. | shared voting power | 8,602,257 |
each reporting |
9. | sole dispositive power | 0 |
person with | 10. | shared dispositive power | 8,602,257 |
11. | aggregate amount beneficially owned by each reporting person 8,602,257 |
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES * o |
13. | percent of class represented by amount in row 11 20.5% |
14. | type
of reporting person* IA |
CUSIP No. 91822J103 | 13D | Page 3 of 9 |
1. | names
of reporting persons i.r.s. identification no. of above persons (entities only) JOSEPH EDELMAN |
2. | check the appropriate box if a group* |
(a) x | |
(b) o | |
3. | sec use only |
4. | sources
of funds OO |
5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) o |
6. | citizenship
or place of organization UNITED STATES OF AMERICA |
number
of shares |
7. | sole voting power | 0 |
beneficially owned by |
8. | shared voting power | 8,602,257 |
each reporting |
9. | sole dispositive power | 0 |
person with | 10. | shared dispositive power | 8,602,257 |
11. | aggregate amount beneficially owned by each reporting person 8,602,257 |
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES * o |
13. | percent of class represented by amount in row 11 20.5% |
14. | type
of reporting person* IN |
CUSIP No. 91822J103 | 13D | Page 4 of 9 |
1. | names
of reporting persons i.r.s. identification no. of above persons (entities only) Perceptive Life Sciences Master Fund, Ltd |
2. | check the appropriate box if a group* |
(a) x | |
(b) o | |
3. | sec use only |
4. | sources
of funds WC |
5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) o |
6. | citizenship
or place of organization CAYMAN ISLANDS |
number
of shares |
7. | sole voting power | 0 |
beneficially owned by |
8. | shared voting power | 6,213,314 |
each reporting |
9. | sole dispositive power | 0 |
person with | 10. | shared dispositive power | 6,213,314 |
11. | aggregate amount beneficially owned by each reporting person 6,213,314 |
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES * o |
13. | percent of class represented by amount in row 11 15.5% |
14. | type
of reporting person* CO |
CUSIP No. 91822J103 | 13D | Page 5 of 9 |
1. | names
of reporting persons i.r.s. identification no. of above persons (entities only) Perceptive Credit Holdings, LP |
2. | check the appropriate box if a group* |
(a) x | |
(b) o | |
3. | sec use only |
4. | sources
of funds WC |
5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) o |
6. | citizenship
or place of organization DELAWARE |
number
of shares |
7. | sole voting power | 0 |
beneficially owned by |
8. | shared voting power | 2,068,824 |
each reporting |
9. | sole dispositive power | 0 |
person with | 10. | shared dispositive power | 2,068,824 |
11. | aggregate amount beneficially owned by each reporting person 2,068,824 |
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES * o |
13. | percent of class represented by amount in row 11 4.9% |
14. | type
of reporting person* PN |
CUSIP No. 91822J103 | 13D | Page 6 of 9 |
ITEM 1 | Security and Issuer |
This Schedule 13D relates to the common stock, par value $0.001 (the “Common Stock”), of VBI Vaccines, Inc. (the “Issuer”). The address of the principal executive offices of the Issuer is 222 Third Street, Suite 2241, Cambridge, MA 02142.
ITEM 2 | Identity and Background |
(a) | The names of the persons filing this Schedule 13D (the “Schedule”) are Perceptive Advisors, LLC, a Delaware limited liability company (the “Investment Manager”), Perceptive Life Sciences Master Fund, Ltd., a Cayman Islands company (the “Fund”), Perceptive Credit Holdings, LP, a Delaware limited partnership (the “Credit Fund’) and Joseph Edelman, the managing member of the Investment Manager and the control person of the general partner of the Credit Fund. Such reporting persons are collectively referred to herein as the “Reporting Persons.” |
The Investment Manager, in its capacity as investment manager of the Fund and the Credit Fund and investment manager to a managed account (the “Managed Account”), has sole power to vote and dispose of the shares of Common Stock held by the Fund and the Managed Account. Each of the Investment Manager and Joseph Edelman disclaims any economic interest in or beneficial ownership of the shares of Common Stock covered by this Schedule.
(b) | The business address of the Reporting Persons is 51 Astor Place 10th Floor, New York, NY 10003. |
(c) | This Schedule is filed on behalf of the Investment Manager, the Fund, the Credit Fund and Joseph Edelman. The Fund and the Managed Account are the record and direct beneficial owner of the shares of Common Stock reported herein. The Credit Fund is the direct beneficial owner of warrants (the “Warrants”) to purchase shares of Common Stock. The Investment Manager is the investment manager to the Fund, the Credit Fund and the Managed Account. Mr. Edelman is the managing member of the Investment Manager and the control person of the general partner of the Credit Fund. The principal business of the Investment Manager is purchasing, holding and selling securities for investment purposes. The principal business of the Fund, the Credit Fund and the Managed Account is to invest in securities. |
(d) | During the past five years none of the Reporting Persons has been convicted in a criminal proceeding. |
(e) | During the past five years none of the Reporting Persons has been a party to a civil proceeding as a result of which it is subject to a judgment, decree or final order enjoining it from or mandating activities subject to federal or state securities laws, or finding it in violation of such laws. |
(f) | Perceptive Advisors LLC and Perceptive Credit Holdings, LP are organized under the laws of Delaware, USA. Perceptive Life Sciences Master Fund, Ltd is organized under the laws of the Cayman Islands. Mr. Edelman is a citizen of the United States of America. |
ITEM 3 Source and Amount of Funds or Other Consideration
The Fund and the Managed Account purchased the shares of Common Stock in a private transaction utilizing its respective working capital. The Credit Fund purchased the Warrants in a private transaction utilizing its respective working capital.
CUSIP No. 91822J103 | 13D | Page 7 of 9 |
ITEM 4 | Purpose of Transaction |
Except with respect to the Credit Fund, the Reporting Persons purchased shares of Common Stock of the Issuer in a private placement transaction that was in the ordinary course of business. The Reporting Persons had previously purchased shares of Common Stock of the Issuer in previous private placement transactions. The Credit Fund received the Warrants from the Issuer in connection with a loan made by the Credit Fund to a subsidiary of the Issuer. Additionally, the Credit Fund had previously received Warrants from the Issuer in connection with a loan made by the Credit Fund to a subsidiary of the Issuer. The shares of Common Stock and the Warrants are held for investment purposes.
Each Reporting Person expects to continuously review such persons investment in the Issuer and, depending on various factors including but not limited to, the price of the shares of Common Stock, the terms and conditions of the transaction, prevailing market conditions and such other considerations as such Reporting Person deems relevant, may at any time or from time to time, and subject to any required regulatory approvals, acquire additional shares of Common Stock, preferred stock or other securities convertible into or exercisable or exchangeable for Common Stock from time to time on the open market, in privately- negotiated transactions, directly from the Issuer, or upon the exercise or conversion of securities convertible into or exercisable or exchangeable for Common Stock.
Each Reporting Person also may, at any time, subject to compliance with applicable securities laws and regulatory requirements dispose or distribute some or all of its of his Common Stock or such other securities as it or he owns or may subsequently acquire depending on various factors, including but not limited to, the price of the shares, the terms and conditions of the transaction and prevailing market conditions, as well as the liquidity and diversification objectives.
Consistent with their investment intent, each Reporting Person may from time to time discuss with the Issuer’s management, directors, other shareholders and others, the Issuer’s performance, business, strategic direction, capital structure, product development program, prospects and management, as well as various ways of maximizing stockholder value, which may or may not include extraordinary transactions. Each Reporting Person intends to participate in and influence the affairs of the Issuer through the exercise of its voting rights with respect to their shares of Issuer Common Stock. In addition, an employee of the Investment Manager serves on the board of directors of the Issuer. Furthermore, the Credit Fund is a lender to the Issuer.
Except as indicated herein, no Reporting Person, as a stockholder of the Issuer, has any plans or proposals that relates or would result in any of the transactions or other matters specified in clauses (a) though (j) of Item 4 of Schedule 13D. Each Reporting Person may, at any time and from time to time, review or reconsider its or his position and/or change its or his purpose and/or formulate plans or proposals with respect thereto.
Sole Voting Power | Shared Voting Power | Sole Dispositive Power | Shared Dispositive Power | |||||||||||||
Perceptive Advisors LLC | 0 | 8,602,824 | 0 | 6,533,433 | ||||||||||||
Perceptive Life Sciences Master Fund, Ltd | 0 | 6,213,314 | 0 | 6,213,314 | ||||||||||||
Perceptive Credit Holdings LP | 0 | 2,068,824 | 0 | 2,068,824 | ||||||||||||
Joseph Edelman | 0 | 8,602,824 | 0 | 8,602,824 |
ITEM 5 Interest in Securities of the Issuer
(a)-(b) Joseph Edelman and the Investment Manager may be deemed for purposes of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, to be the beneficial owners of an aggregate of 8,602,824 shares of Common Stock as of December 6, 2016, which represent 20.5% of the Issuer’s outstanding shares of Common Stock. Such 8,602,257 shares of Common Stock are comprised of (1) 6,213,314 shares of Common Stock held by the Fund; (ii) 320,119 shares of Common Stock held by the Managed Account; and (iii) 2,068,824 shares of Common Stock held as Warrants by the Credit Fund. The Fund and the Credit Fund may be deemed for purposes of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, to be the beneficial owners of the number of shares of Common Stock set forth on the cover pages hereto.
The percentage calculation was based on 39,979,644 shares outstanding which is the total number of shares outstanding as of December 6, 2016 based on a representation provided by the Chief Financial Officer of the Issuer.
CUSIP No. 91822J103 | 13D | Page 8 of 9 |
(c) Except as set forth below, there have been no transactions in the shares of the Common Stock by any of the Reporting Persons in the last 60 days.
Date | Shares Purchased | Price | ||||||
December 6, 2016 | 3,475,000 | 3.05 | ||||||
December 6, 2016 | 363,771 (Warrants) | 4.13 | ||||||
December 6, 2016 | 1,341,282 (Warrants) | 3.355 |
(d)-(e) Not applicable
ITEM 6 | Contracts, Arrangements, Understandings or Relationships with respect to Securities of the Issuer. |
Pursuant to a Share Purchase Agreement dated December 5, 2016 between the Issuer, the Managed Account and the Fund, the Managed Account and the Fund purchased a total of 3,475,00 shares of Common Stock of the Issuer at $3.05 per share. Pursuant to a Second Closing Effective Date Warrant dated December 6, 2016 between the Issuer and the Credit Fund, the Credit Fund received in connection with a loan made by the Credit Fund to a subsidiary of the Issuer: (i) 363,771 Warrants with an exercise price $4.13 per share of Common Stock and (ii) 1,341,282 Warrants with an exercise price of 3.355 per share of Common Stock. Pursuant to an Amended and Restated Credit Agreement and Guaranty between a subsidiary of the Issuer and the Credit Fund, the Credit Fund agreed to loan $15,000,000 to a subsidiary of the Issuer.
ITEM 7 | Material to the Filed at Exhibits |
Exhibit 1: | Joint Filing Agreement |
Exhibit 2: | Share Purchase Agreement |
Exhibit 3: | Second Closing Effective Date Warrant |
Exhibit 4: | Amended and Restated Credit Agreement and Guaranty |
CUSIP No. 91822J103 | 13D | Page 9 of 9 |
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
December 9, 2016 | ||
Date | ||
PERCEPTIVE ADVISORS LLC | ||
/s/ Joseph Edelman | ||
Signature | ||
Joseph Edelman/Managing Member | ||
Name/Title | ||
December 9, 2016 | ||
Date | ||
PERCEPTIVE LIFE SCIENCES MASTER FUND, LTD | ||
/s/ Joseph Edelman | ||
Signature | ||
Joseph Edelman/Managing Member | ||
Name/Title | ||
PERCEPTIVE CREDIT HOLDINGS, LP | ||
December 9, 2016 | ||
Date | ||
/s/ Joseph Edelman | ||
Signature | ||
Joseph Edelman/Managing Member | ||
Name/Title | ||
December 9, 2016 | ||
Date | ||
/s/ Joseph Edelman | ||
Signature | ||
Joseph Edelman | ||
Name/Title |
The original statement shall be signed by each person on whose behalf the statement is filed or his authorized representative. If the statement is signed on behalf of a person by his authorized representative other than an executive officer or general partner of the filing person, evidence of the representative's authority to sign on behalf of such person shall be filed with the statement, provided, however, that a power of attorney for this purpose which is already on file with the Commission may be incorporated by reference. The name and any title of each person who signs the statement shall be typed or printed beneath his signature.
NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties for whom copies are to be sent.
EXHIBIT 1
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k) promulgated under the Securities Exchange Act of 1934, as amended, the persons named below agree to the joint filing on behalf of each of them a Statement on Schedule 13D (including amendments thereto) with regard to the shares of Common Stock of VBI Vaccines, Inc., and further agree that this Joint Filing Agreement be included as an Exhibit to such joint filings. In evidence thereof, the undersigned, being duly authorized, hereby execute this Agreement as of December 9, 2016.
December 9, 2016 | ||
Date | ||
PERCEPTIVE ADVISORS LLC | ||
/s/ Joseph Edelman | ||
Signature | ||
Joseph Edelman/Managing Member | ||
Name/Title | ||
December 9, 2016 | ||
Date | ||
PERCEPTIVE LIFE SCIENCES MASTER FUND, LTD | ||
/s/ Joseph Edelman | ||
Signature | ||
Joseph Edelman/Managing Member | ||
Name/Title | ||
PERCEPTIVE CREDIT HOLDINGS, LP | ||
December 9, 2016 | ||
Date | ||
/s/ Joseph Edelman | ||
Signature | ||
Joseph Edelman/Managing Member | ||
Name/Title | ||
December 9, 2016 | ||
Date | ||
/s/ Joseph Edelman | ||
Signature | ||
Joseph Edelman | ||
Name/Title |
EXHIBIT 2
EXECUTION VERSION SHARE PURCHASE AGREEMENT AMONG VBI VACCINES INC. AND THE INVESTORS PARTY HERETO
EXECUTION VERSION TABLE OF CONTENTS Page Article I DEFINITIONS ................................................................................................................. 1_ 1.1_ Definitions ...................................................................................................................... 1_ Article II PURCHASE AND SALE ............................................................................................... 5_ 2.1_ (a) Closing ...................................................................................................................... 5_ 2.2_ Pre-Closing and Closing Deliveries; Irrevocable Subscription. ..................................... 5_ Article III REPRESENTATIONS AND WARRANTIES ............................................................. 6_ 3.1_ Representations and Warranties of the Company .......................................................... 6_ 3.2_ Representations and Warranties of the Investors ......................................................... 10_ Article IV OTHER AGREEMENTS OF THE PARTIES ............................................................ 17_ 4.1_ Transfer Restrictions. ................................................................................................... 17_ Article V CONDITIONS .............................................................................................................. 19_ 5.1_ Conditions Precedent to the Obligations of the Investors ............................................ 19_ 5.2_ Conditions Precedent to the Obligations of the Company ........................................... 19_ Article VI INDEMNIFICATION ................................................................................................. 20_ 6.1_ Indemnification of Investors ........................................................................................ 20_ 6.2_ Conduct of Indemnification Proceedings ..................................................................... 21_ Article VII MISCELLANEOUS................................................................................................... 21_ 7.1_ Termination .................................................................................................................. 21_ 7.2_ Fees and Expenses ........................................................................................................ 21_ 7.3_ Entire Agreement; Further Assurances ........................................................................ 21_ 7.4_ Notices.......................................................................................................................... 22_ 7.5_ Amendments; Waivers ................................................................................................. 22_ 7.6_ Construction ................................................................................................................. 22_ 7.7_ Successors and Assigns ................................................................................................ 22_ 7.8_ No Third-Party Beneficiaries ....................................................................................... 22_ 7.9_ Governing Law; Venue; Waiver of Jury Trial ............................................................. 22_ 7.10_ Survival ........................................................................................................................ 23_ 7.11_ Execution...................................................................................................................... 23_ 7.12_ Severability................................................................................................................... 23_ 7.13_ Independent Nature of Investors' Obligations and Rights ........................................... 23_ 7.14_ Representations ............................................................................................................ 24_ EXHIBITS EXHIBIT A-1 EXHIBIT A-2 EXHIBIT A-3 APPENDIX 1 TO EXHIBIT A-3 EXHIBIT B
EXECUTION VERSION SHARE PURCHASE AGREEMENT THIS SHARE PURCHASE AGREEMENT, dated as of December 5, 2016 (this "Agreement"), is by and among VBI Vaccines Inc., a corporation organized under the laws of British Columbia, Canada (the "Company"), and each investor identified on the signature pages hereto (each, an "Investor" and collectively, the "Investors"). RECITALS A. The Company and each Investor are executing and delivering this Agreement in reliance upon the exemptions from registration afforded by, in the case of U.S. Investors, Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506(b) of Regulation D ("Regulation D"), as promulgated by the United States Securities and Exchange Commission (the "SEC") thereunder, and, in the case of non-U.S. Investors, Regulation S ("Regulation S"), as promulgated by the SEC under the Securities Act. B. Each Investor, severally and not jointly, wishes to purchase, and the Company wishes to sell, upon the terms and subject to the conditions stated in this Agreement, that aggregate number of the Company's common shares, no par value per share ("Common Shares"), determined in accordance with Section 2.2(c) (the aggregate amount of Common Shares purchased by all Investors together, the "Purchased Shares"). 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 the Investors, intending to be legally bound hereby, agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated: "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 144 under the Securities Act. "Agreement" has the meaning set forth in the Preamble. "Business Day" means a day except (i) a Saturday, (ii) a Sunday, (iii) any day on which the SEC or banks in the City of New York are authorized or required by law to be closed or (iv) a statutory or civic holiday in Vancouver, British Columbia. "Closing" means the closing of the purchase and sale of the Purchased Shares pursuant to Section 2.1. "Closing Date" means the date on which all of the conditions set forth in Article V (other than those to be satisfied at the Closing) shall have been satisfied or waived.
EXECUTION VERSION "Commission" means the U.S. Securities and Exchange Commission. "Common Shares" has the meaning set forth in the Recitals. "Company" has the meaning set forth in the Preamble. "Company Financial Statements" has the meaning set forth in Section 3.1(g). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "FINRA" has the meaning set forth in Section 3.2(d). "GAAP" means United States generally accepted accounting principles. "IFRS" means International Financial Reporting Standards, as adopted by the International Accounting Standards Board, consistently applied during the periods involved. "Indebtedness" means, with respect to any Person, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which is classified as a capital lease, and (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by such Person, even though such Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness. "Indemnified Person" has the meaning set forth in Section 6.2. "Investment Amount" has the meaning set forth in Section 2.2(a). "Investor" has the meaning set forth in the Preamble. "Investor Party" has the meaning set forth in Section 6.1. "Lien" means any lien, charge, claim, security interest, pledge encumbrance, right of first refusal, preemptive right or other restriction. 2
EXECUTION VERSION "Material Adverse Effect" means any condition, circumstance, or situation that may result in, or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of this Agreement or any of the Transaction Documents, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company's ability to perform its obligations hereunder or under any of the Transaction Documents in any material respect on a timely basis; provided, however, that with respect to the immediately preceding clause (ii), none of the following shall be deemed in themselves to constitute, and none of the following shall be taken into account in determining whether there has been, a Material Adverse Effect: (a) any change generally affecting the economy, financial markets or political, economic or regulatory conditions in the United States, the State of Israel or any other geographic region in which the Company and its subsidiaries conduct business (except, in each case, to the extent that the Company or such subsidiary is disproportionately adversely affected relative to other participants in the industries in which the Company or such subsidiary participate), (b) general financial, credit or capital market conditions, including interest rates or exchange rates, or any changes therein, (c) conditions (or changes therein) in any industry or industries in which the Company operates (including seasonal fluctuations) to the extent that such conditions do not disproportionately have a greater adverse impact on the Company and its subsidiaries, taken as a whole, relative to other companies operating in such industry or industries, (d) the announcement or pendency of this Agreement and the transactions contemplated hereby or (e) changes in applicable law, GAAP or IFRS (or, in each case, any interpretations thereof). "Material Contract" means any contract of the Company that has been filed or was required to have been filed pursuant to Item 601(b)(10) of Regulation S-K or Section 12.2 of National Instrument 51-102 - Ongoing Requirements for Issuers and Insiders, as applicable. "NI 45-106" has the meaning set forth in Section 3.2(f). "Person" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, a government or any department or agency thereof and any other legal entity. "PCMLTFA" has the meaning set forth in Section 3.2(v). "Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, a partial proceeding, such as a deposition), whether commenced or threatened in writing. "Public Disclosure Record" means the Registration Statement on Form F-4 filed by the Company with the Commission (Registration No. 333-208761) as declared effective by the Commission on April 8, 2016 and all documents and information filed by the Company under applicable securities laws on the System for Electronic Document Analysis Retrieval (SEDAR) and on the Electronic Data Gathering, Analysis, and Retrieval system (EDGAR), during the period commencing on the effective date of such Registration Statement and ending on the Closing Date. 3
EXECUTION VERSION "Purchase Price" means $3.05 per Common Share. "Purchased Shares" has the meaning set forth in the Recitals. "Regulation D" has the meaning set forth in the Recitals. "Representatives" has the meaning set forth in Section 7.14. "Required Approvals" has the meaning set forth in Section 3.1(o). "Rule 144" means Rule 144 promulgated by the SEC under the Securities Act. "SEC" has the meaning set forth in the Recitals. "Securities Act" has the meaning set forth in the Recitals. "Short Sales" means and includes, without limitation, all "short sales" as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps, derivatives and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker-dealers or foreign regulated brokers. "Subsidiary" means any corporation, association or other business entity of which the entity in question: (i) owns or controls fifty percent (50%) or more of the outstanding equity securities either directly or through an unbroken chain of entities as to each of which fifty percent (50%) or more of the outstanding equity securities is owned directly or indirectly by its parent (provided, that there shall not be included any such entity the equity securities of which are owned or controlled in a fiduciary capacity); (ii) in the case of partnerships, serves as a general partner; (iii) in the case of a limited liability company, serves as a manager or a managing member; (iv) otherwise has the ability to elect a majority of the directors, trustees, managers, or managing members thereof; or (v) under GAAP or IFRS, as applicable, consolidates in its financial statements. "Trading Day" means (i) a day on which the Common Shares are traded on the Trading Market or (ii) if the Common Shares are not listed or quoted on the Trading Market, a day on which the Common Shares are quoted in the over-the-counter market as reported by the Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Shares are not listed or quoted as set forth in the immediately preceding clauses (i) or (ii), then Trading Day shall mean a Business Day. "Trading Market" means the NASDAQ Capital Market. "Transaction" has the meaning set forth in Section 3.2(o). "Transaction Documents" means this Agreement, including the schedules and exhibits attached hereto, and each of the other agreements or instruments entered into or executed by the parties hereto in connection with the transactions contemplated by this Agreement. 4
EXECUTION VERSION "Transfer Agent" means Computershare Investor Services Inc. or any successor transfer agent for the Company. "TSX" means the Toronto Stock Exchange. ARTICLE II PURCHASE AND SALE 2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at the Closing, the Company shall issue and sell to each Investor, and such Investor shall, severally and not jointly with any other Investor, purchase from the Company, such number of Purchased Shares determined in accordance with Section 2.2(c). The date and time of the Closing shall be 10:00 a.m., New York City Time, on the Closing Date. The Closing shall take place by electronic communication and delivery of the items to be delivered at Closing by facsimile or other electronic transmission. 2.2 Pre-Closing and Closing Deliveries; Irrevocable Subscription. (a) Prior to the Closing, each Investor shall deliver to a Company account, pursuant to the wire instructions which are provided as Exhibit B hereto (the "Company Account"), the aggregate amount such Investor desires to invest in Purchased Shares, as set forth on such Investor's signature page to this Agreement, in U.S. dollars and in immediately available funds (the "Investment Amount"), which Investment Amount shall be returned to the Investor by the Company solely in the event of a termination of this Agreement pursuant to Section 7.1. (b) At or prior to the Closing, each Investor shall also deliver or cause to be delivered to the Company the following: (i) a completed and executed Investor signature page to this Agreement; (ii) a completed Investor Questionnaire in the form attached hereto as Exhibit A-1; (iii) a completed and executed copy of the Investor Certificate attached hereto as Exhibit A-2; and (iv) a completed and executed copy of the Canadian Investor Certificate attached hereto as Exhibit A-3. (c) At the Closing, the Company shall deliver or cause to be delivered to each Investor a copy of the Company's instructions to its Transfer Agent, instructing the Transfer Agent to issue in book entry form, inclusive of such restrictive and other legends as set forth in Section 4.1, a number of Purchased Shares equal to such Investor's Investment Amount divided by the Purchase Price (rounded down to the nearest whole share), registered in the name of such Investor. The Company shall, promptly following Closing, return to each Investor the balance of 5
EXECUTION VERSION such Investor's Investment Amount, if any, that would have otherwise been used to acquire a fractional Common Share. (d) Each Investor acknowledges and agrees that such Investor's delivery of each item required to be delivered by such Investor pursuant to Section 2.2(a) and Section 2.2(b) is irrevocable prior to Closing, unless and until this Agreement is terminated in accordance with Section 7.1. ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1 Representations and Warranties of the Company. The Company hereby represents and warrants to the Investors as follows: (a) Subsidiaries. The Company owns, directly or indirectly, all of the capital stock or comparable equity interests of each Subsidiary free and clear of any Lien (other than as required pursuant to that certain Amended and Restated Credit Agreement and Guaranty, dated as of the date hereof, by and among the Company; Variation Biotechnologies (US), Inc.; Perceptive Credit Holdings, LP; and the Guarantors thereto (as defined therein) (the "Credit Agreement") and the restrictions on transfer arising under applicable securities laws), and all issued and outstanding shares of capital stock or comparable equity interest of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. (b) Organization and Qualification. The Company and each Subsidiary is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, as applicable, with the requisite power and legal 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 of any of the provisions of its certificate or articles of incorporation, bylaws or other organizational or charter documents, as applicable. The Company and each Subsidiary is duly qualified to do 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, would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect and no Proceeding has been instituted seeking to revoke, limit or curtail such power or 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 each of the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery by the Company of each of the Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company, and no further consent or action is required by the Company, its Board of Directors or its shareholders. Each of the Transaction Documents to which it is a party has been (or upon delivery will be) duly executed by the Company and is, or when delivered in accordance with the terms hereof, will constitute, the valid and binding obligation of the 6
EXECUTION VERSION 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. (d) No Conflicts. The execution, delivery and performance by the Company of the Transaction Documents to which it is a party, the issuance and sale of the Purchased Shares and the consummation by the Company 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, as applicable, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement (including any Material Contract), 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, except to the extent that such conflict, default, termination, amendment, acceleration or cancellation right would not have or reasonably be expected to result in a Material Adverse Effect, or (iii) 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 any Subsidiary is subject or by which any material property or asset of the Company or any Subsidiary is bound or affected, except to the extent that such violation would not have or reasonably be expected to result in a Material Adverse Effect. (e) The Purchased Shares. The Purchased Shares 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 (other than restrictions on transfer arising under applicable securities laws) and will not be subject to preemptive or similar rights of shareholders (other than those imposed by the Investors). (f) Capitalization. All outstanding shares of capital stock of the Company and of each Subsidiary are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance in all material respects with all applicable securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase any capital stock of the Company or such Subsidiary. (g) Securities Laws Matters; Financial Statements. The Company has filed all documents required to be filed by it in accordance with applicable securities laws with the TSX and all other applicable regulatory authorities. All such documents and information comprising the Public Disclosure Record, as of their respective dates (or, if amended, as of the date of such amendment), (1) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and (2) complied in all material respects with the requirements of applicable securities laws, and any amendments to the Public Disclosure Record required to be made have been filed on a timely basis with the applicable 7
EXECUTION VERSION regulatory authorities and the TSX. The Company has not filed any confidential material change report with any applicable regulatory authorities or the TSX that at the date of this Agreement remains confidential. The Company's audited consolidated financial statements as at and for the fiscal years ended December 31, 2015 and 2014 (including the notes thereto), as included in the Public Disclosure Record (collectively, the "Company Financial Statements"), were prepared in accordance with IFRS consistently applied (except (i) as otherwise indicated in such financial statements and the notes thereto or, in the case of audited statements, in the related report of the Company's independent auditors, or (ii) in the case of unaudited interim statements, are subject to normal period-end adjustments (none of which are material, individually or in the aggregate) and may omit notes which are not required by applicable laws in the unaudited statements) and present fairly in all material respects the consolidated financial condition, results of operations, changes in financial position of the Company and its Subsidiaries as of the dates thereof and for the periods indicated therein (subject, in the case of any unaudited interim financial statements, to normal period-end adjustments, none of which are material, individually or in the aggregate) and reflect reserves required by IFRS or GAAP, as applicable, in respect of all material contingent liabilities, if any, of the Company and its Subsidiaries on a consolidated basis. Other than the Company changing its accounting principles from IFRS to GAAP commencing with the first quarter of 2016, there has been no material change in the Company's accounting policies, except as described in the notes to the Company Financial Statements, since December 31, 2015. All Material Contracts to which the Company or any Subsidiary is a party or to which the property or assets of the Company or any Subsidiary are subject are included as part of or identified in the Public Disclosure Record. (h) Absence of Litigation. Except as disclosed in the Public Disclosure Record, there is no action, suit, claim, or Proceeding pending, or, to the Company's knowledge, threatened, before or by any court, public board, government agency, self-regulatory organization or body that adversely affect or challenge the legality, validity or enforceability of any of the Transaction Documents or that would, individually or in the aggregate, have or be reasonably likely to result in a Material Adverse Effect. (i) Compliance. Except as would not, individually or in the aggregate, have or be reasonably likely to result in a Material Adverse Effect, (i) neither the Company nor any Subsidiary 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 written 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 (including any Material Contract) 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) neither the Company nor any Subsidiary is in violation of any order of any court, arbitrator or governmental body, or (iii) neither the Company nor any Subsidiary is or has been in violation of any statute, rule or regulation of any governmental authority. (j) Title to Assets. Neither the Company nor any Subsidiary owns real property. The Company and each Subsidiary has good and marketable title in all personal property owned by them that is material to the business of the Company and each Subsidiary, in each case free and clear of all Liens, except for Liens that do not, individually or in the aggregate, have or are reasonably likely to result in a Material Adverse Effect. Any real property 8
EXECUTION VERSION and facilities held under lease by the Company or any Subsidiary is held by it under valid, subsisting and enforceable leases of which the Company and each Subsidiary is in material compliance. (k) Intellectual Property. The Company and its subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. Except for matters described in the Public Disclosure Record, or matters which would not be reasonably likely to have a Material Adverse Effect, the Company and its Subsidiaries do not have any knowledge of any violation or infringement by the Company or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, and, to the knowledge of the Company, there is no claim, action or Proceeding being made or brought against, or to the Company's knowledge, being threatened against, the Company or its subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other violation or infringement; and the Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. 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 would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (l) Insurance. The Company and each Subsidiary is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses and locations in which the Company and each Subsidiary is engaged. 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. (m) Internal Accounting Controls. The Company and each Subsidiary 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 generally accepted accounting principles 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. (n) Indebtedness. Except as disclosed in the Public Disclosure Record, neither the Company nor any Subsidiary (i) has any outstanding Indebtedness, (ii) is in violation of any term of and is not in default under any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect or (iii) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the reasonable judgment of the Company's officers, would have or is expected to result in a Material Adverse Effect. 9
EXECUTION VERSION (o) 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, provincial or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents (including the issuance of the Purchased Shares), other than (i) filings required by applicable securities laws, (ii) the filing of a Notice of Sale of Securities on Form D with the SEC under Regulation D, (iii) the filing with the securities commissions in the applicable jurisdictions in Canada, within 10 days from the date of the sale of the Purchased Shares, of a Form 45-106F1 or Form 45-106F6, as applicable, prepared and executed in accordance with applicable securities laws and accompanied by the prescribed fees, if any, (iv) the filing of any requisite notices and/or application(s) to the applicable Trading Market, any national securities exchange or the TSX for the issuance and sale of the Purchased Shares and the listing of the Purchased Shares for trading or quotation, as the case may be, thereon in the time and manner required thereby and (v) those that have been made or obtained prior to the date of this Agreement (collectively, the "Required Approvals"). (p) Certain Fees. Except with respect to compensation payable to Laidlaw & Company (UK) Ltd. and any of the Company's officers, directors and employees, 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 Investors 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 3.1 that may be due in connection with the transactions contemplated by the Transaction Documents. (q) Private Placement. Assuming the accuracy of the Investors' representations and warranties set forth in Section 3.2 and their compliance with their agreements contained in this Agreement, no registration under the Securities Act is required for the offer and sale of the Purchased Shares by the Company to the Investors pursuant to the terms of this Agreement. (r) No General Solicitation. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Purchased Shares by any form of general solicitation or general advertising. 3.2 Representations and Warranties of the Investors. Each Investor hereby, as to itself only and for no other Investor, represents and warrants to the Company as follows: (a) Organization; Authority. Such Investor, if such Investor is not a natural person, is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate, limited liability company, partnership or other 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 purchase by such Investor of the Purchased Shares hereunder and the consummation of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership or other action on the part of such Investor. This Agreement and the Transaction Documents to which such Investor is a party or has or will execute have 10
EXECUTION VERSION been duly executed and delivered by such Investor and constitute the valid and binding obligations of such Investor, enforceable against it in accordance with their 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) Legal Capacity. If the Investor is an individual, the Investor is of the full age of majority in the jurisdiction in which this Agreement is executed and is legally competent to execute, deliver and be bound by this Agreement, to perform all of its obligations hereunder and to undertake all actions required of the Investor hereunder. (c) No Public Sale or Distribution. Such Investor is acquiring the Purchased Shares in the ordinary course of business for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered under the Securities Act or under an exemption from such registration and in compliance with applicable securities laws, and such Investor does not have a present arrangement to effect any distribution of any of the Purchased Shares to or through any person or entity. (d) Non-U.S. Person. If such Investor's address as set forth on such Investor's signature page to this Agreement is not a U.S. address, then such investor represents and warrants that he, she or it is not a "U.S. person" as defined in Rule 902 of Regulation S. (e) Accredited Investor; Investor Status. Such Investor is an "accredited investor" as defined in Rule 501(a) under the Securities Act or a "qualified institutional buyer" as defined in Rule 144A(a) under the Securities Act. Such Investor is not a registered broker dealer registered under Section 15(a) of the Exchange Act, or a member of the Financial Industry Regulatory Authority, Inc. ("FINRA") or an entity engaged in the business of being a broker dealer. Except as otherwise disclosed in writing to the Company in such Investor's Questionnaire, such Investor is not affiliated with any broker dealer registered under Section 15(a) of the Exchange Act, or a member of the FINRA or an entity engaged in the business of being a broker dealer. (f) Canadian Prospectus Exemption. Such Investor is purchasing the Purchased Shares with the benefit of the prospectus exemption provided by Section 2.3 of National Instrument 45-106 - Prospectus Exemptions ("NI 45-106") (that is, such Investor is purchasing as principal and is an "accredited investor" within the meaning of Section 1.1 of NI 45-106); and is either purchasing the Purchased Shares as principal for its own account, or is deemed to be purchasing the Purchased Shares as principal for its own account in accordance with applicable securities laws. (g) Creation of Accredited Investor Status. If the Investor is an "accredited investor" in reliance on paragraph (m) of the definition of "accredited investor" in section 1.1 of NI 45-106, the Investor was not created or used solely to purchase or hold securities as an accredited investor under that paragraph (m). 11
EXECUTION VERSION (h) Insider Status. Such Investor either (A) is not an "insider" of the Company or a "registrant" (each as defined under applicable British Columbia securities laws) or (B) has identified itself to the Company as either an "insider" or a "registrant" (each as defined under applicable British Columbia securities laws). (i) Purchasers in Jurisdictions other than the U.S. and Canada. If the Investor, or any beneficial person for whom the Investor is acting, is a resident of or otherwise subject to the securities legislation of a jurisdiction other than the U.S. and Canada: (i) it is knowledgeable of, or has been independently advised so as to, the applicable securities legislation in the jurisdiction of its residence which would apply to this Agreement. The delivery of this Agreement and the purchase of the Purchased Shares by such Investor does not contravene the applicable laws (including applicable securities legislation) in the jurisdiction in which it is resident or to which it is subject and does not trigger any obligation to prepare and file a prospectus, registration statement or similar document, or any other report with respect to such purchase, or any registration or other obligation or reporting requirement on the part of the Company, and it will provide such evidence of compliance with all such matters as the Company may request; and (ii) the Investor certifies that it is not resident in British Columbia and acknowledges that (a) no securities commission or similar regulatory authority has reviewed or passed on the merits of the Purchased Shares; (b) there is no government or other insurance covering the Purchased Shares; (c) there are risks associated with the purchase of the Purchased Shares; (d) there are restrictions on the Investor's ability to resell the Purchased Shares and it is the responsibility of the Investor to find out what those restrictions are and to comply with them before selling the Purchased Shares; and (e) the Company has advised the Investor that the Company is relying on an exemption from the requirements to provide the Investor with a prospectus and to sell the Purchased Shares through a person registered to sell securities under the Securities Act (British Columbia) and, as a consequence of acquiring securities pursuant to this exemption, certain protections, rights and remedies provided by the Securities Act (British Columbia), including statutory rights of rescission or damages, will not be available to the Investor; (j) General Solicitation. Such Investor is not purchasing the Purchased Shares as a result of any advertisement, article, notice or other communication regarding the Purchased Shares published in any newspaper, magazine or similar media, broadcast over television or radio, disseminated over the Internet or presented at any seminar or any other general solicitation or general advertisement. Neither such Investor, nor any Person acting on behalf of such Investor, has offered or sold, and does not presently intend to offer and sell at any future time, any Purchased Shares by any form of general solicitation or general advertising. (k) Experience of Such Investor; Risk of Loss. Such Investor 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 Purchased Shares, and has so evaluated the merits and risks of such investment. Such Investor understands that it must bear the economic risk of its investment in the Purchased Shares indefinitely, and is able to bear such risk and is able to afford a complete loss of such investment. Such Investor has the ability to 12
EXECUTION VERSION bear the economic risks of its prospective investment in the Purchased Shares and can afford the complete loss of such investment. (l) Access to Information. Such Investor acknowledges that it has reviewed this Agreement and the Public Disclosure Record and has been afforded: (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the Company and the terms and conditions of the offering of the Purchased Shares and the merits and risks of investing in the Purchased Shares; (ii) access to information (other than material non-public information) about the Company and each Subsidiary and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (m) No Governmental Review. Such Investor understands that no U.S. federal or state agency, provincial securities commissions or similar regulatory authority in Canada or any other government or governmental agency has passed on or made any recommendation or endorsement of the Purchased Shares or the fairness or suitability of the investment in the Purchased Shares nor have such authorities passed upon or endorsed the merits of the offering of the Purchased Shares. Such Investor acknowledges that there is no government or other insurance covering the Purchased Shares. (n) No Conflicts. The execution, delivery and performance by such Investor of this Agreement and the consummation by such Investor of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of such Investor or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Investor is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including securities laws) applicable to such Investor, except in the case of clauses (ii) and (iii) above, for such that are not material and do not otherwise affect the ability of such Investor to consummate the transactions contemplated hereby or perform its obligations hereunder. (o) Prohibited Transactions; Confidentiality. Such Investor has not, directly or indirectly, and no Person acting on behalf of or pursuant to any understanding with such Investor has, engaged in any purchases or sales in any of the Company's securities, including derivatives thereof, including, without limitation, any Short Sales involving any of the Company's securities (a "Transaction"), since the time that such Investor was first contacted by the Company or any other Person regarding an investment in the Company. Such Investor covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with such Investor will engage, directly or indirectly, in any Transactions in the securities of the Company prior to the time the transactions contemplated by this Agreement are publicly disclosed. (p) No Legal, Tax or Investment Advice. Such Investor understands and agrees that nothing in this Agreement or any other materials presented by or on behalf of the 13
EXECUTION VERSION Company to such Investor in connection with the purchase of the Purchased Shares constitutes legal, tax or investment advice. Such Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Purchased Shares and has made its own assessment and has satisfied itself concerning the relevant tax and other economic considerations relevant to its investment in the Purchased Shares. (q) Reliance on Exemptions. Such Investor understands that the Purchased Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of applicable securities laws, including the requirements to provide the Investor with a prospectus and to sell securities through a person registered to sell securities under applicable Canadian securities laws, and that the Company is relying upon the truth and accuracy of, and such Investor's compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Investor set forth herein and in the other Transaction Documents in order to determine the availability of such exemptions and the eligibility of such Investor to acquire the Purchased Shares. As a result of acquiring the Purchased Shares pursuant to such exemptions: (i) such Investor may be restricted from using some of the protections, rights and remedies otherwise available under applicable Canadian securities laws, including statutory rights of rescission or damages in the event of a misrepresentation; (ii) such Investor may not receive information that would otherwise be required to be provided to it under applicable Canadian securities laws; and (iii) the Company is relieved from certain obligations that would otherwise apply under applicable Canadian securities laws. (r) Residency. Such Investor is a resident of that jurisdiction specified on such Investor's signature page to this Agreement. (s) Transfer or Resale. Such Investor understands that: (i) the Purchased Shares have not been and are not being registered under the Securities Act, any U.S. state securities laws or the laws of any foreign country or other jurisdiction, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder or (B) such Investor shall have delivered to the Company an opinion of counsel, in a form reasonably acceptable to the Company, to the effect that such Purchased Shares to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration; (ii) any sale of the Purchased Shares made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Purchased Shares under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder or any other limited exemptions and requirements under applicable Canadian securities laws; and (iii) neither the Company nor any other Person is under any obligation to register the Purchased Shares under the Securities Act, any state securities laws 14
EXECUTION VERSION or any foreign securities laws or to comply with the terms and conditions of any exemption thereunder. (t) U.S. Legends. Such Investor understands that the certificates or other instruments representing the Purchased Shares, except as set forth below, shall bear any legend as required by the "blue sky" laws of any state and restrictive legends in substantially the following forms (and a stop-transfer order may be placed against transfer of such stock certificates): THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (I) AS PART OF THEIR DISTRIBUTION AT ANY TIME OR (II) OTHERWISE UNTIL SIX MONTHS AFTER THE LATER OF THE COMMENCEMENT OF THE OFFERING THEREOF AND THE CLOSING DATE, EXCEPT IN EITHER CASE IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT. NO HEDGING TRANSACTION CAN BE CONDUCTED WITH REGARD TO THE SECURITIES EXCEPT AS PERMITTED BY THE SECURITIES ACT. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S PROMULGATED UNDER THE SECURITIES ACT. THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS 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 COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. Such Investor understands that the legends set forth above shall be removed and the Company shall issue a certificate or other instrument without such legend to the holder of the Purchased Shares upon which it is stamped, if, unless otherwise required by state securities laws, (i) such Purchased Shares (x) are registered for resale pursuant to an effective registration statement under the Securities Act and (y) are resold pursuant to such registration statement or (ii) in connection with a sale, assignment or other transfer pursuant to Rule 144, such holder provides 15
EXECUTION VERSION the Company with an opinion of a law firm reasonably acceptable to the Company, in a form reasonably acceptable to the Company, to the effect that such sale, assignment or transfer may be made in compliance with Rule 144. (u) Canadian Legends. (i) Until the date that is four months and one day following the Closing Date, any physical certificates representing the Purchased Shares must bear a legend substantially in the following form: UNLESS PERMITTED UNDER APPLICABLE CANADIAN PROVINCIAL SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE OCTOBER 21, 2016. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (THE "TSX"); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF THE TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT 'GOOD DELIVERY' IN SETTLEMENT OF TRANSACTIONS ON THE TSX. (ii) In the event that the Purchased Shares are entered into a direct registration or other electronic book entry system, or if the Investor did not directly receive a certificate representing the Purchased Shares, the Company has hereby provided the Investor with written notice pursuant to section 2.5(2)(3.1) of National Instrument 45-102 - Resale of Securities that: UNLESS PERMITTED UNDER APPLICABLE CANADIAN PROVINCIAL SECURITIES LEGISLATION, THE HOLDER OF COMMON SHARES MUST NOT TRADE THE COMMON SHARES BEFORE OCTOBER 21, 2016." (v) Not Proceeds of Crime. The funds representing the Investment Amount which will be advanced by such Investor hereunder will not represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), as may be amended from time to time (the "PCMLTFA") and such Investor acknowledges that the Company may in the future be required by law to disclose such Investor's name and other information relating to this Agreement and such Investor's subscription hereunder, on a confidential basis, pursuant to the PCMLTFA. To the best of its knowledge: (i) none of the funds representing the Investment Amount to be provided by such Investor: (A) have been or will be derived from or related to any activity that is deemed criminal under the laws of Canada, the United States or any other jurisdiction, or (B) are being tendered on behalf of a person or entity who has not been identified to such Investor; and (ii) such Investor shall promptly notify 16
EXECUTION VERSION the Company if such Investor discovers that any of such representations cease to be true, and to provide the Company with appropriate information in connection therewith. ARTICLE IV OTHER AGREEMENTS OF THE PARTIES 4.1 Transfer Restrictions. (a) The Investors covenant that the Purchased Shares will be disposed of only pursuant to an effective registration statement or prospectus under, and in compliance with the requirements of, the Securities Act and applicable Canadian securities laws or pursuant to an available exemption from the registration or prospectus requirements of the Securities Act or applicable Canadian securities laws, as applicable, and in compliance with applicable state securities laws. In connection with any transfer of Purchased Shares other than pursuant to an effective registration statement, prospectus or to the Company, the Company may require the transferor to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration under the Securities Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to register on the books of the Company and with its Transfer Agent, without any such legal opinion, except to the extent that the Transfer Agent requests such legal opinion, any transfer of Purchased Shares by an Investor to an Affiliate of such Investor, provided that such transfer does not involve a "sale" within the meaning of Section 2(a)(3) of the Securities Act and provided that such Affiliate does not request any removal of any existing legends on any certificate evidencing the Purchased Shares. (b) The Investors agree to the imprinting, until no longer required by this Section 4.1, of the legends, in substantially the following form, on any certificate or other instrument evidencing any of the Purchased Shares: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (I) AS PART OF THEIR DISTRIBUTION AT ANY TIME OR (II) OTHERWISE UNTIL SIX MONTHS AFTER THE LATER OF THE COMMENCEMENT OF THE OFFERING THEREOF AND THE CLOSING DATE, EXCEPT IN EITHER CASE IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT. NO HEDGING TRANSACTION CAN BE CONDUCTED WITH REGARD TO THE SECURITIES EXCEPT AS PERMITTED BY THE SECURITIES ACT. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S PROMULGATED UNDER THE SECURITIES ACT. 17
EXECUTION VERSION THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS 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 COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. (c) The Investors agree that any physical certificates evidencing the Purchased Shares will be endorsed with, or the ownership statement issued under a direct registration system or other electronic book-entry system will bear, a legend setting out resale restrictions under applicable Canadian securities laws in substantially the following form: UNLESS PERMITTED UNDER APPLICABLE CANADIAN PROVINCIAL SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE MARCH 6, 2017. Additionally, the Investors agree that any physical certificates representing the Purchased Shares will be endorsed with a legend setting out resale restrictions pursuant to policies of the TSX in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (THE "TSX"); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF THE TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT 'GOOD DELIVERY' IN SETTLEMENT OF TRANSACTIONS ON THE TSX. Certificates or another instrument evidencing the Purchased Shares shall not be required to contain such legend or any other legend (i) following any sale of such Purchased Shares pursuant to an effective registration statement or prospectus under the Securities Act or Canadian securities laws, as applicable, (ii) pursuant to Rule 144 if the holder provides the Company with a legal opinion (and the documents upon which the legal opinion is based) reasonably acceptable to the Company to the effect that the Purchased Shares can be sold under Rule 144 or (iii) if the holder provides the Company with a legal opinion (and the documents upon which the legal opinion is based) reasonably acceptable to the Company to the effect that the legend is not required under applicable requirements of the Securities Act (including controlling judicial 18
EXECUTION VERSION interpretations and pronouncements issued by the Staff of the SEC). The Company may not make any notation on its records or give instructions to the Transfer Agent that expand the restrictions on transfer set forth in this Section 4.1. ARTICLE V CONDITIONS 5.1 Conditions Precedent to the Obligations of the Investors. The obligation of each Investor to acquire Purchased Shares at the Closing is subject to the satisfaction, unless waived in writing by such Investor, at or before the Closing, of each of the following conditions: (a) Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of the Closing Date (except for those representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such specified date). (b) Performance. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing. (c) Approvals. The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Purchased Shares (including all Required Approvals), all of which shall be and remain so long as necessary in full force and effect. (d) Transaction Documents. The Company shall have executed each of the Transaction Documents to which it is a party and delivered the same to the Investors. (e) No Injunction. No Proceeding shall have been filed and no statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered or promulgated by any court or governmental authority of competent jurisdiction that prohibits or seeks to prohibit or otherwise challenges the consummation of any of the transactions contemplated by the Transaction Documents. (f) Closing Deliveries. The Company shall have delivered or caused to be delivered, all of the items required by Section 2.2(c). 5.2 Conditions Precedent to the Obligations of the Company. The obligation of the Company to sell the Purchased Shares at the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions: (a) Representations and Warranties. The representations and warranties of the Investors contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of the Closing Date (except for those representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such specified date). 19
EXECUTION VERSION (b) Performance. The Investors shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Investors at or prior to the Closing. (c) Approvals. The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Purchased Shares (including all Required Approvals), all of which shall be and remain so long as necessary in full force and effect. (d) Deliverables. The Investors shall have executed each of the Transaction Documents to which it is a party and delivered the same to the Company. The Investors shall have delivered to the Company those items required by Section 2.2(a) and Section 2.2(b). (e) No Injunction. No Proceeding shall have been filed and no statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered or promulgated by any court or governmental authority of competent jurisdiction that prohibits or seeks to prohibit or otherwise challenges the consummation of any of the transactions contemplated by the Transaction Documents. (f) Closing Deliveries. The Investors shall have delivered or caused to be delivered, all of the items required by Section 2.2(b). ARTICLE VI INDEMNIFICATION 6.1 Indemnification of Investors. The Company will indemnify and hold each Investor 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 Investor (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 person (each, an "Investor 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 reasonable costs of investigation that any such Investor Party may suffer or incur, as a result of or relating to third party claims against such Investor relating to any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents, provided that that such a claim for indemnification relating to any breach of any of the representations or warranties made by the Company in this Agreement is made within six months from the Closing. The Company will not be liable to any Investor Party under this Agreement to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Investor Party's breach of any of the representations, warranties, covenants or agreements made by such Investor Party in this Agreement or in the other Transaction Documents. 20
EXECUTION VERSION 6.2 Conduct of Indemnification Proceedings. Promptly after receipt by any Person (the "Indemnified Person") of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 6.1, such Indemnified Person shall promptly notify the Company in writing, and the Company shall assume the defense thereof, and shall assume the payment of all fees and expenses; provided, however , that the failure of any Indemnified Person so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that the Company is actually prejudiced by such failure to notify. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Company and the Indemnified Person shall have mutually agreed to the retention of such counsel; (ii) the Company shall have failed promptly to assume the defense of such proceeding and to employ counsel reasonably satisfactory to such Indemnified Person in such proceeding; or (iii) in the reasonable judgment of counsel to such Indemnified Person, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them in such proceeding; provided, that, in the case of the foregoing clauses (i) through (iii), the Company shall not pay for more than one counsel for all Indemnified Persons. The Company shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, delayed or conditioned. Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, delayed or conditioned, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such proceeding. ARTICLE VII MISCELLANEOUS 7.1 Termination. This Agreement may be terminated at any time prior to Closing upon notice by the Company to the Investors of such termination. 7.2 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, stamp taxes and other taxes and duties levied in connection with the sale and issuance of the applicable Purchased Shares. 7.3 Entire Agreement; Further Assurances. The Transaction Documents, together with the Exhibits, Annexes and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof 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. At or after the Closing, and without further consideration, the Company and the Investors will execute and deliver to the Investors such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents. 21
EXECUTION VERSION 7.4 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 or email at the facsimile number or email address specified in this Section 7.4 prior to 6:30 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 or email at the facsimile number or email address specified in this Section 7.4 on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The addresses, facsimile numbers and email addresses for such notices and communications are those set forth on the signature pages hereof, or such other address or facsimile number as may be designated in writing hereafter, in the same manner, by any such Person. 7.5 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Investors holding or having the right to acquire a majority of the Purchased Shares at the time of such amendment or, in the case of a waiver, by the party against whom enforcement of any such waiver 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. 7.6 Construction. 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. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. 7.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. None of the parties may assign this Agreement or any of its respective rights or obligations hereunder without the prior written consent of the other parties; provided, however this Agreement may be assigned by the Company or any Investor to any corporation or association into which the Company or any Investor, as applicable, may be merged or converted or with which it may be consolidated, or any corporation, association or other similar entity resulting from any merger, conversion or consolidation to which the Company or the Investor shall be a party, as applicable, without the execution or filing of any paper with any party hereto or any further act on the part of any of the parties to this Agreement except where an instrument of transfer or assignment is required by law to effect such succession, anything herein to the contrary notwithstanding. 7.8 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. 7.9 Governing Law; Venue; Waiver of Jury Trial. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE 22
EXECUTION VERSION STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT 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 BROUGHT BY THE COMPANY OR ANY INVESTOR HEREUNDER, 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 WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF 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 MANNER PERMITTED BY LAW. THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY. 7.10 Survival. Unless this Agreement is terminated under Section 7.1, the representations and warranties, agreements and covenants contained herein shall survive indefinitely. Notwithstanding any termination of this Agreement pursuant to Section 7.1, the provisions of Article VII shall survive indefinitely. 7.11 Execution. This Agreement may be executed in counterparts, all of which when taken together shall be considered one and the same agreement. In the event that any signature is delivered by facsimile transmission or email attachment, 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 email-attached signature page were an original thereof. 7.12 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. 7.13 Independent Nature of Investors' Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Documents. The decision of each Investor to purchase Common Shares pursuant to this Agreement has been made by such 23
EXECUTION VERSION Investor independently of any other Investor and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company which may have been made or given by any other Investor or by any agent or employee of any other Investor, and no Investor or any of its agents or employees shall have any liability to any other Investor (or any other person) relating to or arising from any such information, materials, statements or opinions. Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Document. Each Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no other Investor will be acting as agent of such Investor in connection with monitoring its investment hereunder. Each Investor 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 Investor to be joined as an additional party in any Proceeding for such purpose. 7.14 Representations. Each Investor agrees that, except for the representations and warranties contained in Section 3.1, the Company makes no other representations or warranties, and the Company hereby disclaims any other representations or warranties made by itself or any of its directors, officers employees, investment bankers, financial advisors, attorneys, accountants, agents and other representatives (collectively, "Representatives"), with respect to the execution and delivery of this Agreement and the other Transaction Documents, notwithstanding the delivery or disclosure to any other party or any other party's Representatives of any document or other information with respect to any one or more of the foregoing. Without limiting the generality of the foregoing, and notwithstanding any otherwise express representations and warranties made by the Company in this Agreement, each of the Investors agrees that neither the Company nor any of its Subsidiaries makes or has made any representation or warranty with respect to (i) any projections, forecasts, estimates, plans or budgets or future revenues, expenses or expenditures, future results of operations (or any component thereof), future cash flows (or any component thereof) or future financial condition (or any component thereof) of the Company or any of its Subsidiaries or the future business, operations or affairs of the Company or any of its Subsidiaries heretofore or hereafter delivered to or made available to it, or (ii) any other information, statements or documents heretofore or hereafter delivered to or made available to it with respect to the Company or any of its Subsidiaries or the business, operations or affairs of the Company or any of its Subsidiaries, except to the extent and as expressly covered by a representation and warranty made in this Agreement. [SIGNATURE PAGES FOLLOW] 24
IN WITNESS WHEREOF, the parties hereto have executed or caused this Share Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. VBI Vaccines Inc. By: Name: Jeff Baxter Title: Chief Executive Officer Address for Notice: 222 Third Street, Suite 2241 Cambridge, MA 02142 Facsimile No.: 888.391.2579 Email: JBaxter@vbivaccines.com Attn: Jeff Baxter, CEO With a copy to: Mitchell Silberberg & Knupp LLP 11377 W. Olympic Blvd. Los Angeles, CA 90064 Facsimile No.: 310.312.3100 Email: kxf@msk.com Attn: Kevin Friedmann, Esq. COMPANY SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT 7821751.6/46910-00004 8374187.2/46910-00004
EXHIBIT 3
Execution Version SECOND CLOSING EFFECTIVE DATE WARRANT THIS WARRANT AGREEMENT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW. Warrant Certificate No.: _ Original Issue Date: December 6, 2016 FOR VALUE RECEIVED, VBI VACCINES INC., a British Columbia corporation (the "Company"), hereby certifies that PERCEPTIVE CREDIT HOLDINGS, LP or its permitted transferees and assigns (the "Holder") is entitled to purchase from the Company up to 1,705,053 duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (defined below). Up to 363,771 shares of such Common Stock (the "Tranche A Warrant Shares") may be purchased hereunder at a per share purchase price of $4.13 (the "Tranche A Exercise Price"), and up to 1,341,282 shares of such Common Stock (the "Tranche B Warrant Shares") may be purchased hereunder at a per share purchase price of $3.355 (the "Tranche B Exercise Price"), in all cases subject to the terms, conditions and adjustments set forth below in this Warrant (defined below). Certain capitalized terms used herein are defined in Section 1 hereof. 1. Definitions. As used in this Warrant, the following terms have the following meanings: "Acknowledgement" has the meaning set forth in Section 3(e). "Aggregate Exercise Price" means, with respect to any exercise of this Warrant, an amount equal to the product of (i) the number of Tranche A Warrant Shares or Tranche B Warrant Shares, as the case may be, in respect of which this Warrant is then being exercised pursuant to Section 3 hereof, multiplied by (ii) the applicable Exercise Price in effect as of the Exercise Date. "Assignment" has the meaning set forth in Section 7. "Board" means the board of directors of the Company. 1 ny-1263898
"Business Day" means any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York or Toronto, Ontario. "Cashless Method" means, as the context may require, one or both of the Exercise Price payment methods described in clauses (ii) and (iii) of Section 3(b). "Commission" means the Securities and Exchange Commission or any other federal agency administering the Securities Act and the Exchange Act at the time. "Common Stock" means the common stock, par value $0.0001 per share, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the date hereof. "Company" has the meaning set forth in the preamble. "Convertible Securities" means any securities, whether debt, equity or other securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options. "Covered Persons" has the meaning set forth in Section 3(i). "Credit Agreement" means the Amended and Restated Credit Agreement and Guaranty, dated as the date hereof among Variation Biotechnologies (US), Inc., as borrower, Perceptive Credit Holdings, LP, as lender, the Company, as guarantor and the other guarantors party thereto. "Demand Registration" has the meaning set forth in Section 6(a)(ii). "Disqualification Events" has the meaning set forth in Section 3(i). "Exercise Date" means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., New York time, on a Business Day, including, without limitation, the receipt by the Company of a Subscription Agreement, the Warrant and the Aggregate Exercise Price. "Exercise Period" has the meaning set forth in Section 2. "Exercise Price" means, as the context may require, either the Tranche A Exercise Price or the Tranche B Exercise Price. "Fair Market Value" means, as of any particular date: (i) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (ii) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest 2 ny-1263898
asked prices for the Common Stock on all such exchanges at the end of such day; (iii) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on Nasdaq, the OTC Bulletin Board, the "pink sheets" or similar quotation system or association for such day; or (iv) if there have been no sales of the Common Stock on Nasdaq, the OTC Bulletin Board, the "pink sheets" or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on Nasdaq, the OTC Bulletin Board, the "pink sheets" or similar quotation system or association at the end of such day, in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which "Fair Market Value" is being determined; provided, that if the Common Stock is listed on any domestic securities exchange, the term "Business Day" as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on Nasdaq, the OTC Bulletin Board, the "pink sheets" or similar quotation system or association, the "Fair Market Value" of the Common Stock shall be the fair market value per share as determined jointly by the Board and the Holder, subject to Section 3(j) hereof. "Holder" has the meaning set forth in the preamble. "Indemnified Liabilities" has the meaning set forth in Section 18(b). "Indemnitees" has the meaning set forth in Section 18(b). "Inspectors" has the meaning set forth in Section 6(c)(viii). "Long-Form Registration" has the meaning set forth in Section 6(a)(i). "Nasdaq" means The Nasdaq Stock Market, Inc. "Options" means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities. "Original Issue Date" means the date hereof. "OTC Bulletin Board" means the National Association of Securities Dealers, Inc. OTC Bulletin Board. "Person" means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof. "Piggyback Registration" has the meaning set forth in Section 6(b)(i). 3 ny-1263898
"Prospectus" means the prospectus or prospectuses included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus or prospectuses. "Records" has the meaning set forth in Section 6(c)(viii). "Registrable Securities" means (x) any shares of Common Stock held by any Person or issuable upon conversion, exercise or exchange of any securities owned by any Person at any time (including Warrant Shares exercisable upon exercise of this Warrant), and (y) any shares of Common Stock issued or issuable with respect to any shares described in subsection (x) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization (it being understood that for purposes of this Warrant, a Person shall be deemed to be a holder of Registrable Securities whenever such Person has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has actually been effected). As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a Registration Statement covering such securities has been declared effective by the Commission and such securities have been disposed of pursuant to such effective Registration Statement, (ii) such securities are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met, (iii) such securities are otherwise transferred and such securities may be resold without subsequent registration under the Securities Act, or (iv) such securities shall have ceased to be outstanding. "Registration Statement" means any registration statement of the Company which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all materials incorporated by reference in such Registration Statement. "Securities Act" means the Securities Act of 1933, as amended. "Short-Form Registration" has the meaning set forth in Section 6(a)(ii). "Solicitor" has the meaning set forth in Section 3(i). "Subscription Agreement" means a subscription agreement in substantially the form attached hereto as Exhibit A. "Tranche A Exercise Price" has the meaning set forth in the preamble. "Tranche B Exercise Price" has the meaning set forth in the preamble. 4 ny-1263898
"Tranche A Warrant Shares" has the meaning set forth in the preamble. "Tranche B Warrant Shares" has the meaning set forth in the preamble. "Warrant" means this Warrant Agreement and all warrants issued upon division or combination of, or in substitution for, this Warrant. "Warrant Shares" means the Tranche A Warrant Shares or Tranche B Warrant Shares, as the case may be, or other capital stock of the Company, purchasable upon exercise of this Warrant in accordance with its terms. 2. Term of Warrant. Subject to the terms and conditions hereof, at any time or from time to time after the date hereof up to and including 5:00 p.m., New York time, on the fifth (5th) anniversary of the Original Issue Date or, if such day is not a Business Day, on the next preceding Business Day (the "Exercise Period"), the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder (subject to adjustment as provided herein). 3. Exercise of Warrant. (a) Exercise Procedure. This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon: (i) surrender of this Warrant (if, but only if, this Warrant is being exercised in full) to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with one or more Subscription Agreements, duly completed (including specifying the number and type of Warrant Shares to be purchased) and executed; and (ii) payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b). (b) Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as expressed in one or more Subscription Agreements, by the following methods: (i) by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price; (ii) by instructing the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price; 5 ny-1263898
(iii) by surrendering to the Company (x) Warrant Shares previously acquired by the Holder with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price and/or (y) other securities or debt obligations of the Company (including loans outstanding under the Credit Agreement) having a value as of the Exercise Date equal to the Aggregate Exercise Price (which value in the case of debt securities or obligations shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred stock shall be the liquidation value thereof plus accumulated and unpaid dividends and in the case of shares of Common Stock shall be the Fair Market Value thereof); or (iv) any combination of the foregoing; provided; however; that the Holder may only use the Cashless Method to pay any Exercise Price for up to (but not in excess of) 1,705,053 Warrant Shares (whether Tranche A Warrant Shares or Tranche B Warrant Shares, as the case may be), subject to proportionate adjustment for any stock split, dividend, distribution, subdivision, recapitalization or combination. In the event of any withholding of Warrant Shares or surrender of other equity securities pursuant to clause (ii), (iii) or (iv) above where the number of shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld or surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value per Warrant Share as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above; provided that all such valuations shall be subject to Section 3(j). (c) Delivery of Stock Certificates. Upon receipt by the Company of a Subscription Agreement, surrender of this Warrant (if, but only if, this Warrant is being exercised in full) and payment of the Aggregate Exercise Price (in accordance with Section 3(a) hereof), the Company shall, as promptly as practicable, and in any event within three (3) Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Subscription Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 7 below, such other Person's name as shall be designated in the Subscription Agreement. This Warrant shall be deemed to have been exercised (in whole or in part, as the case may be) and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date. 6 ny-1263898
(d) Fractional Shares. The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date. (e) Acknowledgement; Partial Exercise. Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 3(c) hereof, deliver to the Holder within a reasonable time an acknowledgement in substantially the form attached hereto as Exhibit B (each, an "Acknowledgement") indicating the number and type of Warrant Shares which remain issuable upon exercise of this Warrant, if any. (f) Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With respect to the exercise of this Warrant, the Company hereby represents, covenants and agrees: (i) This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued. (ii) All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges. (iii) The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance). (iv) Without in any way limiting Section 6 hereof, the Company shall use its best efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise. (v) The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable 7 ny-1263898
withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, if any, or has established to the satisfaction of the Company that such tax has been paid. (g) Conditional Exercise. Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock, sale of assets or otherwise), such exercise may at the election of the Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction. (h) Reservation of Shares. During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the lowest applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the lowest Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. (i) No "Bad Actor" Disqualification. The Company has exercised reasonable care, in accordance with Commission rules and guidance, to determine whether any Covered Person (as defined below) is subject to any of the "bad actor" disqualifications described in Rule 506(d)(1)(i) through (viii) under the Securities Act ("Disqualification Events"). To the Company's knowledge, no Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with all disclosure obligations under Rule 506(e) under the Securities Act. "Covered Persons" are those persons specified in Rule 506(d)(1) under the Securities Act, including the Company, any predecessor or affiliate of the Company, any director, executive officer, other officer participating in the offering, general partner or managing member of the Company, any beneficial owner of 20% or more of the Company's outstanding voting equity securities, calculated on the basis of voting power, any promoter (as defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of the exercise of this Warrant, and any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any securities of the Company (a "Solicitor"), any general partner or managing member of any Solicitor, and any director, executive officer or other officer participating in the offering of any Solicitor or general partner or managing member of any such Solicitor. (j) Dispute Resolution. In the case of any dispute as to the determination of any closing sales price or other valuation of any Registrable Securities, the calculation of any 8 ny-1263898
Exercise Price or Aggregate Exercise Price, the determination of Fair Market Value or any other computation or valuation required to be made hereunder or in connection herewith, in the event the Holder, on the one hand, and the Company, on the other hand, are unable to settle such dispute within five (5) Business Days, then either party may elect to submit the disputed matter(s) for resolution by Grant Thornton (New York office) or another public accounting firm as may be mutually agreed upon by the Holder and the Board. Such accounting firm's determination of such disputed matter(s) shall be binding upon all parties absent demonstrable error, and the Company and the Holder shall each pay one half of the fees and costs of such firm. 4. Adjustment to Exercise Price and Number of Warrant Shares. The Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 4. (a) Dividends and Distributions of Non-Company Securities. If, at any time or from time to time after the Original Issue Date, the Company makes or declares, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of the Company (other than a dividend or distribution of shares of Common Stock or Options or Convertible Securities in each case in respect of Common Stock), cash or other property, then, and in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant, in addition to the number of Warrant Shares receivable thereupon, the kind and amount of securities of the Company, cash or other property which the Holder would have been entitled to receive had the Warrant been exercised in full into Warrant Shares on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the Exercise Date, retained such securities, cash or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section 4 with respect to the rights of the Holder; provided that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as the Holder would have received if the Warrant had been exercised in full into Warrant Shares on the date of such event. (b) Adjustment to Exercise Price and Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock. If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Company payable in shares of Common Stock or in Options or Convertible Securities (in each case in respect of Common Stock), or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, each Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding 9 ny-1263898
shares of Common Stock into a smaller number of shares, each Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 4(b) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective. (c) Adjustment to Exercise Price and Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger. In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all assets of the Company and its Subsidiaries (taken as a whole) to another Person, (v) Change of Control (as defined in the Credit Agreement), (vi) sale of all or substantially all assets and properties of the Company and its Subsidiaries, or (vii) other similar transaction, in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) cash, stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale, Change of Control or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the amount of cash or the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale, Change of Control or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale, Change of Control or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without taking into account any limitations or restrictions on the exercisability of this Warrant); and, in such case, appropriate adjustment (in form and substance satisfactory to the Holder) shall be made with respect to the Holder's rights under this Warrant to insure that the provisions of this Section 4 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any cash, shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant (including, in the case of any consolidation, merger, sale, Change of Control or similar transaction in which the successor or purchasing Person is other than the Company, an immediate adjustment in the Exercise Price to the value per share for the Common Stock reflected by the terms of such consolidation, merger, sale, Change of Control or similar transaction, and a corresponding immediate adjustment to the number of Warrant Shares acquirable upon exercise of this Warrant without regard to any limitations or restrictions on exercise, if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger, sale, Change of Control or similar transaction). The provisions of this Section 4(c) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, Changes of Control or similar transactions. The Company shall not effect any such reorganization, reclassification, 10 ny-1263898
consolidation, merger, sale, Change of Control or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale, Change of Control or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant and satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other transaction contemplated by the provisions of this Section 4(c), the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 2 instead of giving effect to the provisions contained in this Section 4(c) with respect to this Warrant. (d) Certain Events. If any event of the type contemplated by the provisions of this Section 4 but not expressly provided for by such provisions occurs, then the Board shall make an appropriate adjustment in the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 4; provided that no such adjustment pursuant to this Section 4(d) shall increase the Exercise Price or decrease the number of Warrant Shares issuable as otherwise determined pursuant to this Section 4. (e) Certificate as to Adjustment. (i) As promptly as reasonably practicable following any adjustment of the Exercise Price, but in any event not later than three (3) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof. (ii) As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than three (3) Business Days thereafter, the Company shall furnish to the Holder a certificate (in substantially the form of Exhibit B) of an executive officer certifying the Exercise Price then in effect and the number and type of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant. (f) Notices. In the event: (i) that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or 11 ny-1263898
(ii) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company's assets to another Person; or (iii) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company; then, and in each such case, the Company shall send or cause to be sent to the Holder at least ten (10) Business days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares. 5. Purchase Rights. In addition to (and not in limitation or in lieu of) any adjustments pursuant to Section 4 above, if at any time the Company grants, issues or sells any shares of Common Stock, Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock (the "Purchase Rights"), then the Holder shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder would have acquired if the Holder had held the number of Warrant Shares acquirable upon complete exercise of this Warrant immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. 6. Registration Rights. (a) Demand Registration. (i) At any time after the one hundred eightieth (180) day following the Original Issue Date, the Holder may request registration under the Securities Act of all or any portion of the Warrant Shares on Form S-1 or any successor form thereto (each a "Long-Form Registration"). Each request for a Long-Form Registration shall specify the approximate number of Warrant Shares required to be registered. Upon receipt of such request, the Company shall promptly (but in no event later than five days following receipt thereof) deliver notice of such 12 ny-1263898
request to all other holders of Registrable Securities having "piggy back" rights or equivalent, if any, who shall then have ten days from the date such notice is given to notify the Company in writing of their desire to be included in such registration. The Company shall cause a Registration Statement on Form S-1 (or any successor form) to be filed within 30 days after the date on which the initial request is given and shall use its best efforts to cause such Registration Statement to be declared effective by the Commission as soon as practicable thereafter. The Company shall not be required to effect a Long-Form Registration more than five times by the Holder; provided that a Registration Statement shall not count as a Long-Form Registration requested under this Section 6(a)(i)(i) unless and until it has become effective and the Holder is able to register and sell at least 35% of the Warrant Shares requested to be included in such registration. (ii) The Company shall use its best efforts to qualify and remain qualified to register securities under the Securities Act pursuant to a Registration Statement on Form S-3 or any successor form thereto. At such time as the Company shall have qualified for the use of a Registration Statement on Form S-3, the Holder shall have the right to request an unlimited number of registrations of Warrant Shares on Form S-3 or any similar short-form registration (each a "Short-Form Registration" and, together with each Long-Form Registration, a "Demand Registration"). Each request for a Short-Form Registration shall specify the approximate number of Warrant Shares requested to be registered. Upon receipt of any such request, the Company shall promptly (but in no event later than five days following receipt thereof) deliver notice of such request to all other holders of Registrable Securities having "piggy back" rights or equivalent, if any, who shall then have ten days from the date such notice is given to notify the Company in writing of their desire to be included in such registration. The Company shall cause a Registration Statement on Form S-3 (or any successor form) to be filed within 30 days after the date on which the initial request is given and shall use its best efforts to cause such Registration Statement to be declared effective by the Commission as soon as practicable thereafter. (iii) The Company shall not be obligated to effect any Long-Form Registration within 90 days after the effective date of a previous Long-Form Registration or a previous Piggyback Registration in which the Holder was permitted to register, and actually sold, at least 35% of the shares of Registrable Securities requested to be included therein. The Company may postpone for up to 60 days the filing or effectiveness of a Registration Statement for a Demand Registration if the Company's Board determines in its reasonable good faith judgment that such Demand Registration would (i) materially interfere with a significant acquisition, corporate organization or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act. The Company may delay a Demand Registration hereunder only two times in any period of twelve consecutive months. 13 ny-1263898
(iv) If the Holder elects to distribute Warrant Shares covered by its request in an underwritten offering, it shall so advise the Company as a part of its request made pursuant to Section 6(a)(i)(i) or Section 6(a)(ii). The Holder shall select the investment banking firm or firms to act as the managing underwriter or underwriters in connection with such offering. (v) The Company shall not include in any Demand Registration any securities which are not Registrable Securities without the prior written consent of the Holder, which consent shall not be unreasonably withheld or delayed. If a Demand Registration involves an underwritten offering and the managing underwriter of the requested Demand Registration advises the Company in writing that in its opinion the number of shares of Common Stock proposed to be included in the Demand Registration, including all Registrable Securities and all other shares of Common Stock proposed to be included in such underwritten offering, exceeds the number of shares of Common Stock which can be sold in such underwritten offering and/or the number of shares of Common Stock proposed to be included in such registration would adversely affect the price per share of the Registrable Securities proposed to be sold in such underwritten offering, the Company shall include in such Demand Registration (A) first, all of the Warrant Shares requested to be included in such registration by the Holder, and (B) second, any other Registrable Securities the Company may permit to be included in such registration, allocated pro rata among the respective holders thereof on the basis of the number of Registrable Securities owned by each such holder. (b) Piggyback Registration. (i) Whenever the Company proposes to register any shares of its Common Stock under the Securities Act (other than a registration effected solely to implement an employee benefit plan or a transaction to which Rule 145 of the Securities Act is applicable, or a Registration Statement on Form S-4, S-8 or any successor form thereto or another form not available for registering the Registrable Securities for sale to the public), whether for its own account or for the account of one or more stockholders of the Company and the form of Registration Statement to be used may be used for any registration of Warrant Shares (a "Piggyback Registration"), the Company shall give prompt written notice (in any event no later than twenty (20) days prior to the filing of such Registration Statement) to the Holder of its intention to effect such a registration and, subject to Section 6(b)(ii) and Section 6(b)(iii), shall include in such registration all Warrant Shares with respect to which the Company has received written requests for inclusion from the Holder within ten days after the Company's notice has been given to the Holder. (ii) If a Piggyback Registration is initiated as a primary underwritten offering on behalf of the Company and the managing underwriter advises the Company and the Holder (if the Holder has elected to include Warrant Shares in such Piggyback Registration) in writing that in its opinion the number of shares of Common Stock proposed to be included in such registration, including all Registrable Securities and all other shares of Common Stock proposed to be included in such underwritten offering, exceeds the number of shares of Common Stock 14 ny-1263898
which can be sold in such offering and/or that the number of shares of Common Stock proposed to be included in any such registration would adversely affect the price per share of the Common Stock to be sold in such offering, the Company shall include in such registration (A) first, the number of shares of Common Stock that the Company proposes to sell; (B) second, the number of shares of Common Stock requested to be included therein by the Holder; and (C) third, the number of shares of Common Stock requested to be included therein by holders of Common Stock (other than Warrant Shares held by the Holder); provided, that in any event the Holder shall be entitled to register at least 35% of the securities to be included in any such registration. (iii) If a Piggyback Registration is initiated as an underwritten offering on behalf of one or more holders of Common Stock other than Warrant Shares, and the managing underwriter advises the Company in writing that in its opinion the number of shares of Common Stock proposed to be included in such registration, including all Warrant Shares and all other shares of Common Stock proposed to be included in such underwritten offering, exceeds the number of shares of Common Stock which can be sold in such offering and/or that the number of shares of Common Stock proposed to be included in any such registration would adversely affect the price per share of the Common Stock to be sold in such offering, the Company shall, subject to the proviso below, include in such registration (i) first, the number of shares of Common Stock requested to be included therein by the Holder (on a fully diluted, as converted basis); and (ii) second, the number of shares of Common Stock requested to be included therein by other holders of Common Stock, allocated among such holders in such manner as they may agree. (iv) If any Piggyback Registration is initiated as a primary underwritten offering on behalf of the Company, the Company shall select the investment banking firm or firms to act as the managing underwriter or underwriters in connection with such offering. (c) Registration Procedures. If and whenever the Holder requests that any Warrant Shares be registered pursuant to the provisions of this Warrant, the Company shall use its best efforts to effect the registration and the sale of such Warrant Shares in accordance with the intended method of disposition thereof, and pursuant thereto the Company shall as soon as practicable: (i) subject to Section 6(a)(i) and Section 6(a)(ii), prepare and file with the Commission a Registration Statement with respect to such Warrant Shares and use its best efforts to cause such Registration Statement to become effective; (ii) prepare and file with the Commission such amendments, post-effective amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for a period of not less than thirty (30) days, or if earlier, until all of such Warrant Shares have been disposed of and to comply with the provisions of the Securities Act with respect to the disposition of such Warrant Shares in accordance with the intended methods of disposition set forth in such Registration Statement; 15 ny-1263898
(iii) at least fifteen (15) Business Days before filing such Registration Statement, Prospectus or amendments or supplements thereto, furnish to counsel of the Holder copies of such documents proposed to be filed, which documents shall be subject to the review, comment and approval of such counsel; (iv) notify the Holder, promptly after the Company receives notice thereof, of the time when such Registration Statement has been declared effective or a supplement to any Prospectus forming a part of such Registration Statement has been filed; (v) furnish to the Holder such number of copies of the Prospectus included in such Registration Statement (including each preliminary Prospectus) and any supplement thereto (in each case including all exhibits and documents incorporated by reference therein) and such other documents as the Holder may request in order to facilitate the disposition of the Warrant Shares; (vi) use its best efforts to register or qualify such Warrant Shares under such other securities or "blue sky" laws of such jurisdictions as any selling holder requests and do any and all other acts and things which may be necessary or advisable to enable the Holder to consummate the disposition; provided that the Company shall not be required to qualify generally to do business, subject itself to general taxation or consent to general service of process in any jurisdiction where it would not otherwise be required to do so but for this Section 6(c)(vi); (vii) notify the Holder, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such holder, the Company shall prepare a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of such Warrant Shares, such Prospectus shall not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; (viii) make available for inspection by the Holder, any underwriter participating in any disposition pursuant to such Registration Statement and any attorney, accountant or other agent retained by the Holder or any such underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records"), and cause the Company's officers, directors and employees to supply all information requested by any such Inspector in connection with such Registration Statement; (ix) use its best efforts to cause such Warrant Shares to be listed on each securities exchange on which the Common Stock is then listed or, if the Common Stock is not then listed, on a national securities exchange selected by the Holder; 16 ny-1263898
(x) in connection with an underwritten offering, enter into such customary agreements (including underwriting and lock-up agreements in customary form) and take all such other customary actions as the Holder or the managing underwriter of such offering request in order to expedite or facilitate the disposition of such Warrant Shares (including, without limitation, making appropriate officers of the Company available to participate in "road show" and other customary marketing activities (including one-on-one meetings with prospective purchasers of the Warrant Shares); (xi) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission and make available to its stockholders an earnings statement (in a form that satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder) no later than thirty (30) days after the end of the 12-month period beginning with the first day of the Company's first full fiscal quarter after the effective date of such Registration Statement, which earnings statement shall cover said 12-month period, and which requirement will be deemed to be satisfied if the Company timely files complete and accurate information on Forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise complies with Rule 158 under the Securities Act; (xii) furnish to the Holder and each underwriter, if any, with (i) a legal opinion of the Company's outside counsel, dated the effective date of such Registration Statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), in form and substance as is customarily given in opinions of the Company's counsel to underwriters in underwritten public offerings; and (ii) a "comfort" letter signed by the Company's independent certified public accountants in form and substance as is customarily given in accountants' letters to underwriters in underwritten public offerings; (xiii) without limiting Section 6(c)(vi) above, use its best efforts to cause such Warrant Shares to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Holder to consummate the disposition of such Warrant Shares in accordance with their intended method of distribution thereof; (xiv) notify the Holder promptly of any request by the Commission for the amending or supplementing of such Registration Statement or Prospectus or for additional information; (xv) advise the Holder, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued; and 17 ny-1263898
(xvi) otherwise use its best efforts to take all other steps necessary to effect the registration of such Warrant Shares contemplated hereby. 7. Transfer of Warrant. Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder are freely transferable, in whole or in part, by the Holder without charge to the Holder, upon delivery to the Company of a written request for assignment in the form attached hereto as Exhibit C (each, an "Assignment") by the Holder and surrender of this Warrant to the Company at its then principal executive offices, together with funds sufficient to pay any transfer taxes described in Section 3(f)(v) in connection with the making of such transfer. If requested by the Company, the Holder will also provide an opinion of counsel satisfactory to the Company to the effect that the transfer or assignment is in compliance with (or is exempt from) applicable federal and state securities laws. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled. 8. Holder Not Deemed a Stockholder; Limitations on Liability. Except as otherwise specifically provided herein (including Section 4(a)), prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 8, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders. 9. Replacement on Loss; Division and Combination. (a) Replacement of Warrant on Loss. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant 18 ny-1263898
so lost, stolen, mutilated or destroyed; provided that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. (b) Division and Combination of Warrant. Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment which may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of this Warrant or Warrants to the Company at its then principal executive offices, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the respective Holders or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment which may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice. 10. No Impairment. The Company shall not, by amendment of its Certificate of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or circumvent or seek to avoid or circumvent the observance or performance of any of the terms to be observed or performed by it hereunder, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the Holder in order to protect the exercise rights of the Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant. 11. Compliance with the Securities Act. The parties hereto agree as follows: (a) General. The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of Sections 11 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act and applicable Canadian securities laws. This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form: "THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS 19 ny-1263898
DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW." (b) Canadian Legends. Until the date that is four months and one day following the date hereof, this Warrant and all Warrant Shares issued upon exercise of this Warrant shall be stamped or imprinted with a legend in substantially the following form: "UNLESS PERMITTED UNDER APPLICABLE CANADIAN PROVINCIAL SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE APRIL 7, 2017." Until the date that is four months and one day following the date hereof, all Warrant Shares issued upon exercise of this Warrant shall be stamped or imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (THE "TSX"); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF THE TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT 'GOOD DELIVERY' IN SETTLEMENT OF TRANSACTIONS ON THE TSX." In the event that this Warrant or any Warrant Shares issued upon exercise of this Warrant are included in a direct registration or other electronic book entry system, or if the Holder does not directly receive a certificate representing the Warrant Shares, the Company has hereby provided the Holder with written notice pursuant to section 2.5(2)(3.1) of National Instrument 45-102 - Resale of Securities that: "UNLESS PERMITTED UNDER APPLICABLE CANADIAN PROVINCIAL SECURITIES LEGISLATION, THE HOLDER OF COMMON SHARES MUST NOT TRADE] THE COMMON SHARES BEFORE APRIL 7, 2017." (c) Removal of Legends. Upon the Holder's request at any time following April 7, 2017, THE Company shall promptly (but in any event within five (5) Business Days following such requires), at its sole cost and expense, issue a replacement Warrant or replace Warrant Shares, as the case may be, deleting the legends required pursuant to clause (b) above. 12. Representations of the Holder. In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows: (a) The Holder is an "accredited investor" as defined in Rule 501 of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a current view towards, or for resale in connection with, the public sale or distribution of this 20 ny-1263898
Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act. (b) The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. (c) The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company. 13. Warrant Register. The Company shall keep and properly maintain at its principal executive offices books for the registration of the Warrant and any transfers thereof. The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant. 14. Notices. All notices and other communications provided hereunder shall be in writing or by facsimile and addressed, delivered or transmitted, if to the Company or the Holder, to the applicable party at its address or facsimile number set forth on the signature pages hereto, or at such other address or facsimile number as may be designated by such party in a notice to the other party. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when the confirmation of transmission thereof is received by the transmitter. Unless otherwise indicated, all references to the time of a day shall refer to New York City time. 15. Cumulative Remedies. The rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise. 16. Equitable Relief. Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate 21 ny-1263898
remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction. 17. Finder's Fee. Each party represents to the other party that it is not and will not be obligated for any finder's fee or commission in connection with the transactions contemplated by this Warrant. The Holder agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder's fee (and the costs and expenses of defending against such liability or asserted liability) for which the Holder or any of its officers, employees or representatives is responsible. The Company agrees to indemnify and hold harmless the Holder from any liability for any commission or compensation in the nature of a finder's fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible. 18. Expenses; Indemnification. (a) The Company will reimburse the reasonable fees and expenses of the Holder, including reasonable legal fees and expenses, with respect to the negotiation, execution and delivery of this Warrant as provided in Section 11.3 of the Credit Agreement. (b) In further consideration of the Holder's acquiring the Warrant hereunder and in addition to all of the Company's other obligations hereunder, the Company will defend, protect, indemnify and hold harmless the Holder and each other holder of the Warrant and all of their shareholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons' agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated hereby) (collectively, the "Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or arising out of, or relating to (i) any misrepresentation or breach of any representation or warranty made by the Company in this Warrant or any other certificate, instrument or document contemplated hereby or thereby, (ii) any breach of any covenant, agreement or obligation of the Company contained in this Warrant or any other certificate, instrument or document contemplated hereby or thereby, or (iii) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from (A) the execution, delivery, performance or enforcement of this Warrant or any other certificate, instrument or document contemplated hereby or thereby, or (B) the status of the Holder or holder of the Warrant as an investor in the Company pursuant to the transactions contemplated hereby. To the extent that the foregoing undertaking by the Company may be 22 ny-1263898
unenforceable for any reason, the Company will make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. 19. Entire Agreement. This Warrant constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. 20. Successor and Assigns. This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder. 21. No Third-Party Beneficiaries. This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant. 22. Headings. The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant. 23. Amendment and Modification; Waiver. Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 24. Severability. If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction. 25. Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of New York. 23 ny-1263898
26. Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of New York, in either case sitting in the Borough of Manhattan, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party's address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. 27. Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby. 28. Counterparts. This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant. 29. No Strict Construction. This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. 30. Judgment Currency. Section 11.15 of the Credit Agreement is herein incorporated by reference as if set forth in full herein, mutatis mutandi, and any defined terms used in such Section 11.15 that are not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement. [SIGNATURE PAGE FOLLOWS] 24 ny-1263898
IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original Issue Date. VBI VACCINES INC. By: ___________________________ Name: Title: [Signature Page to Second Closing Effective Date Warrant]
Exhibit 4
ANNEX A TO THIRD AMENDMENT AMENDED AND RESTATED CREDIT AGREEMENT AND GUARANTY dated as of December 6, 2016 by and among VARIATION BIOTECHNOLOGIES (US), INC., as the Borrower, THE GUARANTORS PARTY HERETO, and PERCEPTIVE CREDIT HOLDINGS, LP, as the Lender ny-1263415
TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS .......................................... 1 Section 1.1 Defined Terms............................................................................................................................1 Section 1.2 Use of Defined Terms ..............................................................................................................18 Section 1.3 Cross-References .....................................................................................................................18 Section 1.4 Accounting and Financial Determinations ...............................................................................18 ARTICLE II COMMITMENT, BORROWING PROCEDURES AND EFFECTS OF AMENDMENT AND RESTATEMENT .................................................... 19 Section 2.1 Commitment ............................................................................................................................19 Section 2.2 Borrowing Procedures .............................................................................................................19 Section 2.3 Funding ....................................................................................................................................19 Section 2.4 Reduction of the Commitment Amounts.................................................................................19 Section 2.5 Continued Effectiveness of Existing Loan Documents .............................................................19 ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES ................. 20 Section 3.1 Repayments and Prepayments; Application ............................................................................20 Section 3.2 Repayments and Prepayments ................................................................................................20 Section 3.3 Application ...............................................................................................................................21 Section 3.4 Interest Rate ............................................................................................................................21 Section 3.5 Default Rate .............................................................................................................................21 Section 3.6 Payment Dates .........................................................................................................................21 Section 3.7 Exit Fee.....................................................................................................................................22 Section 3.8 Other Fees and Expenses .........................................................................................................22 ARTICLE IV LIBO RATE AND OTHER PROVISIONS ............................................... 22 Section 4.1 Increased Costs, Etc .................................................................................................................22 Section 4.2 Increased Capital Costs ............................................................................................................22 Section 4.3 Taxes ........................................................................................................................................23 Section 4.4 Payments, Computations; Proceeds of Collateral, Etc.............................................................24 Section 4.5 Setoff........................................................................................................................................24 Section 4.6 LIBO Rate Not Determinable....................................................................................................25 ARTICLE V CONDITIONS TO EFFECTIVENESS ...................................................... 25 Section 5.1 Effectiveness of this Agreement ..............................................................................................25 Section 5.2 Additional Loan ........................................................................................................................28 ARTICLE VI REPRESENTATIONS AND WARRANTIES ........................................... 29 Section 6.1 Organization, Etc......................................................................................................................29 Section 6.2 Due Authorization, Non-Contravention, Etc ............................................................................29 Section 6.3 Government Approval, Regulation, Etc ...................................................................................29 Section 6.4 Validity, Etc ..............................................................................................................................30 Section 6.5 Financial Information ...............................................................................................................30 Section 6.6 No Material Adverse Change ...................................................................................................30 Section 6.7 Litigation, Labor Matters and Environmental Matters ............................................................30 i ny-1263415
TABLE OF CONTENTS Page Section 6.8 Subsidiaries 30 Section 6.9 Ownership of Properties 30 Section 6.10 Taxes 31 Section 6.11 Pension Plans, Etc 31 Section 6.12 Accuracy of Information 31 Section 6.13 Regulations U and X 31 Section 6.14 Solvency 31 Section 6.15 Intellectual Property 31 Section 6.16 Material Agreements 33 Section 6.17 Permits 34 Section 6.18 Regulatory Matters 34 Section 6.19 Transactions with Affiliates 35 Section 6.20 Investment Company Act 36 Section 6.21 OFAC 36 Section 6.22 Anti-Corruption 36 Section 6.23 Deposit and Disbursement Accounts 36 Section 6.24 Registration Rights 36 Section 6.25 Royalty and Other Payments 36 Section 6.26 Insurance 37 ARTICLE VII AFFIRMATIVE COVENANTS 37 Section 7.1 Financial Information, Reports, Notices, Etc 37 Section 7.2 Maintenance of Existence; Compliance with Contracts, Laws, Etc 39 Section 7.3 Maintenance of Properties 39 Section 7.4 Insurance 39 Section 7.5 Books and Records 40 Section 7.6 Environmental Law 40 Section 7.7 Use of Proceeds 40 Section 7.8 Future Guarantors, Security, Etc 40 Section 7.9 Obtaining of Permits, Etc 41 Section 7.10 Product Licenses 41 Section 7.11 Maintenance of Regulatory Authorizations, Contracts, Intellectual Property, Etc 41 Section 7.12 Inbound Licenses 42 Section 7.13 Cash Management 42 Section 7.14 Modification of Organic Documents 43 Section 7.15 Inconsistent Agreements 43 Section 7.16 Restriction of Amendments to Certain Documents 43 Section 7.17 Excluded Subsidiary 43 Section 7.18 Required Milestones 43 Section 7.19 Minimum Liquidity 43 Section 7.20 Post-Closing Items 44 ARTICLE VIII NEGATIVE COVENANTS 44 Section 8.1 Business Activities 44 Section 8.2 Indebtedness 44 Section 8.3 Liens 45 Section 8.4 [INTENTIONALLY OMITTED 46 Section 8.5 Investments 46 ii ny-1263415
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