Download SECURITIES AND EXCHANGE COMMISSION Washington, D.C.

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 5, 2016
Derma Sciences, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation)
1-31070
(Commission
File Number)
23-2328753
(IRS employer
identification number)
214 Carnegie Center, Suite 300
Princeton, NJ 08540
(609) 514-4744
(Address including zip code and telephone
number, of principal executive offices)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions ( see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.01
Completion of Acquisition or Disposition of Assets
On August 5, 2016, Derma Sciences, Inc. (the “Company”), and DP Merger Sub One, LLC, its wholly owned subsidiary, completed
the previously announced acquisition of BioD, LLC (“ BioD ”), for $21.3 million in cash and stock (“ Closing Payment ”), subject to
certain adjustments, as well as potential product regulatory milestone payments in the aggregate estimated to be up to $30.0 million
and earn outs based on incremental net sales growth of up to $26.5 million, all pursuant to the terms of the merger agreement dated
July 27, 2016 (the “ Merger Agreement ”) described in the Company’s Current Report on Form 8-K, filed with the Securities and
Exchange Commission (the “ SEC ”) on July 29, 2016. In connection with the Closing Payment, the Company paid $13,845,256 in
cash and issued an aggregate of 1,788,125 shares (“ Merger Shares ”) of the Company’s common stock, at a value of $4.1692 per
share, representing the 10-day VWAP for the period immediately preceding execution of the Merger Agreement. The holders of the
Merger Shares do not have resale registration rights and the Merger Shares are subject to a lock-up period expiring on February 5,
2017. In addition, any shares of common stock that may be issued in connection with the payment of any earn out provisions will be
subject to a 30 day lock-up period from the date of any such issuance.
Prior to its acquisition by the Company, BioD was a privately held company engaged in the development and commercialization of
novel proprietary regenerative medicine products derived from placental/birth tissues for use in a broad range of clinical applications,
including orthopedic, spine and ophthalmic channels. In addition, the Company was a party to a license, market development and
commercialization agreement with BioDLogics, LLC, a wholly owned subsidiary of BioD, relating to certain human placental based
products. Following the acquisition, BioD will operate as a wholly owned subsidiary of the Company.
On August 5, 2016, the Company also completed a private placement (the “Private Placement”) to certain former BioD equity holders
(the “ Placement Investors ”), of an aggregate of 551,665 shares (the “ Placement Shares”) of the Company’s common stock at a price
of $4.1692 per share for gross proceeds of $2.3 million, pursuant to the terms and conditions of a Stock Purchase Agreement, dated as
of July 27, 2016 (the “ Stock Purchase Agreement ”). The Company has an obligation to file a resale registration statement on behalf
of the Placement Investors for the Placement Shares by October 24, 2016 and to use its best efforts to have such resale registration
statement declared effective by November 23, 2016.
The foregoing descriptions of the Merger Agreement and the Stock Purchase Agreement do not purport to be complete and are
qualified in their entirety by reference to the Merger Agreement and the form of Stock Purchase Agreement, as the case may be,
copies of which are attached hereto as Exhibits 2.1 and 10.1, respectively. The Company is seeking confidential treatment for certain
portions of the Merger Agreement pursuant to a Confidential Treatment Request submitted to the SEC pursuant to Rule 24b-2 under
the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).
Item 3.02
Unregistered Sales of Equity Securities
The information under Item 2.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02. The issuance of
the Merger Shares and the Placement Shares were made pursuant to an exemption from registration under Section 4(a)(2) of the
Securities Act of 1933, as amended (the “ Securities Act ”). The Merger Shares and the Placement Shares are restricted from transfer,
except pursuant to an effective registration statement under the Securities Act or an available exemption from such registration.
The foregoing description of the Stock Purchase Agreement does not purport to be complete and is qualified in its entirety by
reference to the form of Stock Purchase Agreement, a copy of which is attached hereto as Exhibit 10.1.
Item 9.01
Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
The financial statements required by this Item, with respect to the acquisition described in Item 2.01 herein, will be filed as an
amendment to this report as soon as practicable, and in any event not later than 71 days after the date on which this Current Report on
Form 8-K is required to be filed pursuant to Item 2.01 of Form 8-K.
(b) Pro Forma Financial Information
The pro forma financial information required by this Item, with respect to the acquisition described in Item 2.01 herein, will be filed as
an amendment to this report as soon as practicable, and in any event not later than 71 days after the date on which this Current Report
on Form 8-K is required to be filed pursuant to Item 2.01 of Form 8-K.
(d) Exhibits
The following exhibit are included with this report:
Exhibit
Number
Description
2.1*
Agreement and Plan of Merger, dated July 27, 2016.†
10.1
Form of Stock Purchase Agreement, dated July 27, 2016.
*
All schedules (and similar attachments) to the Merger Agreement have been omitted pursuant to Item 601(b)(2) of Regulation
S-K. The Company hereby agrees to furnish a supplemental copy of any omitted schedule to the SEC.
†
Portions of this exhibit have been redacted and are subject to a Confidential Treatment Request filed with the Secretary of the
SEC pursuant to Rule 24b-2 under the Exchange Act.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DERMA SCIENCES, INC.
By:
August 11, 2016
/s/ John E. Yetter
John E. Yetter, CPA
Executive Vice President, Finance and Chief
Financial Officer
EXHIBIT INDEX
Exhibit
Number
Description
2.1*
Agreement and Plan of Merger, dated July 27, 2016.†
10.1
Form of Stock Purchase Agreement, dated July 27, 2016.
*
All schedules (and similar attachments) to the Merger Agreement have been omitted pursuant to Item 601(b)(2) of Regulation
S-K. The Company hereby agrees to furnish a supplemental copy of any omitted schedule to the SEC.
†
Portions of this exhibit have been redacted and are subject to a Confidential Treatment Request filed with the Secretary of the
SEC pursuant to Rule 24b-2 under the Exchange Act.
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
By and Among
DERMA SCIENCES, INC.,
DP MERGER SUB ONE, LLC,
BIOD, LLC,
And
CYNTHIA WEATHERLY
July 27, 2016
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
TABLE OF CONTENTS
Page
Article I THE MERGER
The Merger
1.1
Closing; Effective Time
1.2
Effect of the Merger
1.3
Certificate of Formation; Limited Liability Company Agreement
1.4
Managers and Officers
1.5
ARTICLE II CONVERSION OF UNITS; MERGER CONSIDERATION
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
2.11
2.12
2.13
2.14
2.15
Conversion of Interests
Merger Consideration
Unit Table
Payments at Closing
Closing Payment
Per Share Signing Value
Withholding
Working Capital Adjustments
Reserved **** Collections Adjustment
Base Accounts Receivable Collections Adjustment
Earn Out
Product Payments
Post-Closing Operation of the Company
Representative; Binding Action; Lock-Up
Certain Adjustments
Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Organization and Good Standing
3.1
Authority
3.2
Capitalization; Subsidiaries; Indebtedness
3.3
No Conflict
3.4
Financial Statements
3.5
Absence of Certain Developments
3.6
Title to Assets
3.7
Tax Matters
3.8
Contracts and Commitments
3.9
Intellectual Property Rights
3.10
FDA and Other Regulatory Matters
3.11
Health Care Law Matters
3.12
Litigation
3.13
Brokerage
3.14
Environmental and Safety Matters
3.15
Insurance
3.16
Labor and Employment Matters
3.17
Employee Benefit Plans
3.18
Compliance with Laws; Permits
3.19
Related Party Transactions
3.20
Real Property
3.21
Absence of Undisclosed Liabilities
3.22
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL
Accounts Receivable
Customers and Suppliers
Certain Payments
Bank Accounts
BD Acquisition Group
Full Disclosure
No Other Representations and Warranties
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Article IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Organization, Power and Authority
4.1
Authorization; No Breach
4.2
No Conflict
4.3
Brokerage
4.4
Merger Sub
4.5
Litigation
4.6
Availability of Funds
4.7
Capitalization
4.8
Issuance of Parent Shares
4.9
SEC Filings
4.10
Independent Investigation
4.11
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Article V CERTAIN COVENANTS
Certain Actions to Close Transactions
5.1
Conduct of Business Before the Closing
5.2
Access to Information
5.3
No Solicitation of Other Bids
5.4
Notice of Certain Events
5.5
General
5.6
Tax Matters
5.7
Indemnification of Officers and Managers of the Company
5.8
Board Observer
5.9
Conduct of Business by Parent Before the Closing
5.10
****
5.11
Repurchase Rights
5.12
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Article VI CONDITIONS TO CLOSING
Conditions to Each Party’s Obligation to Effect the Merger
6.1
Conditions to Obligations of Parent and Merger Sub
6.2
Conditions to Obligations of the Company
6.3
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Article VII TERMINATION
Termination
7.1
Effect of Termination
7.2
56
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Article VIII INDEMNIFICATION
Survival
8.1
General Indemnification
8.2
Exclusive Remedy
8.3
Indemnification Procedures
8.4
Payments
8.5
Merger Consideration Adjustment Treatment
8.6
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3.23
3.24
3.25
3.26
3.27
3.28
3.29
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
Article IX Definitions
Definitions
9.1
Other Definitional Provisions
9.2
62
62
73
Article X Miscellaneous
Expenses
10.1
Remedies
10.2
Consent to Amendments; Waivers
10.3
Successors and Assigns
10.4
Press Releases and Communications
10.5
Severability
10.6
Counterparts
10.7
Entire Agreement
10.8
No Third Party Beneficiaries
10.9
Schedules and Exhibits
10.10
Governing Law
10.11
Dispute Resolution.
10.12
Notices
10.13
No Strict Construction
10.14
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SCHEDULES, ANNEXES, AND EXHIBITS
Schedules
Disclosure Schedules
Annexes
Annex A
**** Products
Exhibits
Exhibit A
Exhibit B
Exhibit C
Unit Table
Parent Shares/Cash Allocation Procedures
Base Accounts Receivable
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER,
this (“Agreement”), dated as of July 27, 2016, is entered into by and among Derma Sciences, Inc., a
Delaware corporation (“ Parent ”), DP Merger Sub One, LLC, a Delaware limited liability company of which Parent is the sole
member (“ Merger Sub ”), BioD, LLC, a Delaware limited liability company (the “ Company ”), and Cynthia Weatherly, as
Representative. BD Acquisition Group, LLC, a Delaware limited liability company (“ BD Acquisition Group”), joins in this
Agreement solely for the purposes set forth in Section 5.12. Capitalized terms used in this Agreement and not otherwise defined have
the meanings given to them in Article IX below.
RECITALS
A. Parent, Merger Sub, the Company and Representative wish to effect a business combination through a merger of Merger Sub with
and into the Company, on the terms and conditions set forth in this Agreement and in accordance with the applicable provisions of the
Delaware Limited Liability Company Act (the “ Act ”).
B. The Board of Managers of the Company has unanimously adopted and approved this Agreement, approved the Merger and the
other transactions contemplated by this Agreement, and determined that this Agreement, the Merger and the other transactions
contemplated by this Agreement are advisable to and in the best interest of the Equity Owners.
C. As a condition and inducement to Parent and Merger Sub entering into this Agreement, the holders of at least 65% of the Voting
Interests (as defined in the Company LLC Agreement) have entered into on or before the date hereof an irrevocable written consent to
approve and adopt this Agreement and approve the Merger and the other transactions contemplated by this Agreement, and all
applicable notice periods under applicable Law have been complied with or waived in connection therewith.
D. The board of directors of Parent, Parent, as the sole member of Merger Sub, and the board of managers of Merger Sub have each
unanimously adopted and approved this Agreement, approved the Merger and the other transactions contemplated by this Agreement,
and determined that this Agreement, the Merger and the other transactions contemplated by this Agreement are in their best interests.
E. Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection
with the Merger, and also to prescribe various conditions to the Merger.
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows:
Article I
THE MERGER
1.1
The Merger. Upon the terms and subject to the conditions of this Agreement and in accordance with the Act, at the Effective
Time, (a) Merger Sub will merge with and into the Company (the “ Merger ”), and (b) the separate limited liability company existence
of Merger Sub will cease and the Company will continue its limited liability company existence under the Act as the surviving limited
liability company of the Merger (the “ Surviving Company ”).
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
1.2
Closing; Effective Time.
(a) Upon the terms and subject to the conditions set forth herein, including the satisfaction or waiver of the conditions set forth
in Article VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or
waiver of such conditions), the transactions contemplated hereby will close (the “ Closing ”) and all deliveries to be made at the
time of Closing will occur electronically at 9:00 a.m. Eastern Time on the third Business Day after the last of the conditions to
Closing set forth in Article VI have been satisfied or waived or at such other time or on such other date as Parent and
Representative may mutually agree upon in writing. The date of the Closing is referred to as the “ Closing Date .” The Closing
will be deemed effective at 11:59 p.m. Eastern Time on the Closing Date for tax and accounting purposes.
(b) As soon as practicable on the Closing Date, the Company and Parent will cause a certificate of merger (the “ Certificate of
Merger ”) to be executed, acknowledged, and filed with the Secretary of State of the State of Delaware as provided in accordance
with the relevant provision of the Act. The Merger will become effective (i) at the time the Certificate of Merger is duly filed
with the Secretary of State of the State of Delaware or (ii) at such later date or time as the Company and Parent may agree and
specify in the Certificate of Merger (the time specified in (i) or (ii), as applicable, being the “ Effective Time ”).
1.3
Effect of the Merger. The Merger will have the effects set forth herein and in the applicable provisions of the Act. Without
limiting the generality of the foregoing, and subject thereto, from and after the Effective Time, all property, rights, privileges,
immunities, powers, franchises, licenses and authority of the Company and Merger Sub will vest in the Surviving Company, and all
debts, liabilities, obligations, restrictions and duties of each of the Company and Merger Sub will become the debts, liabilities,
obligations, restrictions and duties of the Surviving Company.
1.4
Certificate of Formation; Limited Liability Company Agreement.
(a) The certificate of formation of the Company as in effect immediately before the Effective Time, with such amendments
thereto as are included in the Certificate of Merger, will be the certificate of formation of the Surviving Company until thereafter
amended in accordance with applicable Law.
(b) The limited liability company agreement of Merger Sub in effect immediately before the Effective Time, but amended to
reflect “BioD, LLC” rather than “DP Merger Sub One, LLC” as the name of the Surviving Company, will be the limited liability
company agreement of the Surviving Company until thereafter amended in accordance with the terms thereof and as provided by
applicable Law.
1.5
Managers and Officers. The managers and officers of Merger Sub in office immediately before the Effective Time will be the
managers and officers of the Surviving Company at the Effective Time and thereafter until duly removed or until successors are duly
elected or appointed and qualified, except that Russ Olsen will be added as both an additional manager and the Chief Executive
Officer of the Surviving Company as of the Effective Time.
Article II
Conversion of Units; Merger Consideration
2.1
Conversion of Interests. At the Effective Time, by virtue of the Merger and without any action on the part of any party:
(a) Each Equity Interest of Merger Sub issued and outstanding immediately before the Effective Time will be converted into
and become one newly issued limited liability company membership interest of the Surviving Company, so that, after the
Effective Time, Parent will be the holder of all of the issued and outstanding Equity Interests of the Surviving Company.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(b) Each Unit issued and outstanding immediately before the Effective Time will be converted into and represent the right to
receive an amount equal to the Per Unit Share of each payment of Merger Consideration that is payable to Former Equity
Owners (whether at the Closing or at any time or times thereafter), under the terms of and subject to the procedures and
limitations set forth in this Article II. From and after the Effective Time, each holder of any Units will have no rights with
respect thereto, other than to receive amounts with respect thereto pursuant to the immediately preceding sentence.
2.2
Merger Consideration. The aggregate consideration to be paid by Parent in connection with the Merger (the “ Merger
Consideration ”), a portion of which may be paid in Parent Shares as provided in Section 2.5 , will be equal to the sum of:
(a) an amount equal to $21,300,309 (the “Base Merger Consideration”), as reduced by the net amount, if any, of the Estimated
Adjustment provided for in Section 2.8(a)(ii) and the Post-Closing Working Capital Adjustment provided for in
Section 2.8(b)(iv); plus
(b)
the amount, if any of the First Earn Out Consideration; plus
(c)
the amount, if any, of the Second Earn Out Consideration; plus
(d)
the amount, if any, of any Product Payments made pursuant to Section 2.12; plus
(e)
the amount of the Company Transaction Expenses; minus
(f)
the amount, if any, of the Reserved **** Collections Adjustment provided for in Section 2.9; and minus
(g)
the amount, if any, of the Base Accounts Receivable Collections Adjustment provided for in Section 2.10.
2.3
Unit Table. Attached as Exhibit A is a spreadsheet (the “Unit Table”), prepared by the Company, setting forth the name and
address (as reflected on the Company’s records), of each Equity Owner and, in addition, as to each such Equity Owner, the following
information (in each case as of the date of this Agreement and assuming no change in holdings of Equity Owners through the
Effective Time): (a) the number of Class A Units, Class B Units, and/or Class C Units (as such terms are defined in the Company LLC
Agreement) held by the Equity Owner; and (b) the Equity Owner’s resulting Sharing Ratio. For the avoidance of doubt, the parties
acknowledge that the Sharing Ratios are expressed as percentages and that the sum of all Sharing Ratios added together equals 100%.
At the Effective Time, each Equity Owner will become a Former Equity Owner. Payments to be made to Former Equity Owners pro
rata pursuant to this Agreement will be made in proportion to their respective Sharing Ratios.
2.4
Payments at Closing.
(a) Not less than two Business Days before the Closing, the Company will deliver to Parent a spreadsheet, in the form of
Schedule 2.4, setting forth in detail (1) an updated version of the Unit Table showing all of the information noted in Section 2.3
as to each Equity Owner as of immediately before the Effective Time; (2) as to each such Equity Owner, whether that Equity
Owner is an Accredited Investor or a Non-Accredited Investor; (3) as to each Accredited Investor, whether that Accredited
Investor has made a “Stock Election,” a “Cash Election,” a “Mixed Election,” or “No Election” and each Accredited Investor’s
“Cash-Election Percentage” and/or “PS-Election Percentage” (as each such term is defined in the Parent/Shares Cash Allocation
Procedures set out in Exhibit B); and (4) the amounts of Company Transaction Expenses that will be outstanding at Closing as
well as the names and addresses of all Persons who will be entitled to receive Company Transaction Expenses upon the
occurrence of the Closing (the “ Closing Payment Spreadsheet ”).
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(b) At Closing, Parent will pay the Closing Payment in a mixture of (x) Parent Shares with an aggregate value of $7,455,108
(rounded downward to the nearest multiple of a whole number of Parent Shares, the “ Closing Payment Parent Shares ”), and (y)
cash equal to the remainder of the Closing Payment (in the aggregate, the “ Closing Payment Cash ”), all of which, Closing
Payment Parent Shares and Closing Payment Cash, will be paid as follows:
(i) To the Company’s transfer agent (the “Transfer Agent”) to be held as issued and outstanding Parent Shares reserved
solely for purposes of holding and making distributions thereof in accordance with the terms of this Agreement, a portion of
the Closing Payment Parent Shares (all of which will be legended as contemplated by Section 2.5(d) and as contemplated by
Section 2.5(e)) (collectively, the “ Escrowed Shares ”):
(A) Parent Shares with an aggregate value of $700,000 (the “General Escrow PS Amount”);
(B) Parent Shares with an aggregate value of $237,596 (the “Reserved **** Collections Escrow PS Amount ”); and
(C) Parent Shares with an aggregate value of $175,000 (the “Base Accounts Receivable Collections Escrow PS Amount
”);
(ii) To the Former Equity Owners receiving Parent Shares, the remainder of the Closing Payment Parent Shares after
reduction by the Escrowed Shares (all of which will be legended as contemplated by Section 2.5(d));
(iii) To the Persons indicated, an amount in the aggregate equal to the Closing Payment Cash, as follows:
(A) to the Escrow Agent, the following amounts, in cash, each to be held and disbursed by the Escrow Agent in
accordance with the terms of the Escrow Agreement:
(I) $1,300,000 (the “General Escrow Cash Amount” and, together with the General Escrow PS Amount, the “
General Escrow Amount ”);
(II) $441,250 (the “Reserved **** Collections Escrow Cash Amount” and, together with the Reserved ****
Collections Escrow PS Amount, the “ Reserved **** Collections Escrow Amount ”);
(III) $325,000 (the “Base Accounts Receivable Collections Escrow Cash Amount,” and, together with the Base
Accounts Receivable Collections Escrow PS Amount, the “ Base Accounts Receivable Collections Escrow Amount”
);
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(B) to Representative, $10,000, in cash, (the “Expense Fund Amount”) in order to establish the Former Equity Owner
Expense Fund; and
(C) to the Paying Agent, for disbursement to the Former Equity Owners, the portion of the Closing Payment Cash
remaining after the payments provided for in Section 2.4(b)(iii)(A) and (B) above (the “ Net Closing Cash ”).
(c) At Closing, Parent will pay to each Person set forth on the Closing Payment Spreadsheet, an amount, in cash, equal to the
Company Transaction Expenses set forth opposite such Person’s name.
(d) Parent will effect the transfer of the Closing Payment Parent Shares provided for in Section 2.4(b)(ii), which shall be
represented by book entry positions, through the Transfer Agent. Parent will instruct the Transfer Agent to: (i) reserve for
issuance at the Effective Time a number of Parent Shares equal to the Parent Share Limit; (ii) reflect on its records the Parent
Shares being issued to each Former Equity Owner receiving Parent Shares (other than Escrowed Shares) as a part of the Closing
Payment; and (iii) send notice to the Former Equity Owners receiving Parent Shares of such Parent Shares being issued as a part
of the Closing Payment promptly following the Closing Date, pursuant to mailing instructions provided by such Former Equity
Owner or the Representative. The Transfer Agent shall set up separate accounts for each category of Escrowed Shares with all
such Escrowed Shares held as provided in Section 2.4(b)(i).
(e) Parent will make the payments provided for in Section 2.4(b)(iii)(A) by wire transfer of immediately available funds
pursuant to wire transfer instructions to be provided by Escrow Agent. Parent will make the payments provided for in Sections
2.4(b)(iii)(B) and 2.4(c) by wire transfer of immediately available funds pursuant to wire transfer instructions to be provided
by Representative concurrently with the Closing Payment Spreadsheet. Parent will pay the Net Closing Cash provided for in
Section 2.4(b)(iii)(C) and will deliver the Closing Payment Parent Shares in accordance with Section 2.5 .
2.5
Closing Payment.
(a)
Parent will make the Closing Payment in accordance with and subject to the following limitations:
(i) The maximum aggregate number of Parent Shares to be used by Parent to pay consideration to all Former Equity
Owners (whether as part of the Closing Payment, as part of any Escrowed Shares, or as part of any later payment of Merger
Consideration) will not exceed the Parent Share Limit;
(ii) That portion of the Closing Payment to be paid to any Non-Accredited Investor will be paid entirely in cash out of that
portion of the Net Closing Cash referred to in Section 2.4(b)(iii)(C);
(iii) Subject to the limitations set forth in Sections 2.5(a)(i) and (ii), that portion of the Closing Payment to be paid to any
Accredited Investor will be paid in such combination of (A) Parent Shares and (B) cash as is determined pursuant to the
Parent Shares/Cash Allocation Procedures.
For the avoidance of doubt, if and to the extent any portion of the Closing Payment to be made to any Former Equity Owner is
withheld as contemplated by Section 2.7 , unless otherwise determined by Parent, that withholding will be deducted from the
Net Closing Cash and any amount so withheld will be treated as having been paid to the Former Equity Owner for all purposes
of this Agreement.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(b) Parent will deliver that portion of the Closing Payment Parent Shares that is to be paid to each Former Equity Owner
through the Transfer Agent so that the Parent Shares so delivered will be held in the name of the Former Equity Owner
immediately after the Closing; except that in the case of any Former Equity Owner who has not delivered to Parent, by not later
than two Business Days before the Closing, an accredited investor letter in such form as Parent may reasonably require, the
completion of the transfer of the Parent Shares to the Former Equity Owner will be delayed by the Transfer Agent until Parent
has received such an accredited investor letter from the Former Equity Owner after the Closing.
(c)
Parent will deliver the Escrowed Shares to the Transfer Agent to be held as contemplated in Section 2.4(b)(i).
(d) Each book-entry confirmation representing any of the Closing Payment Parent Shares (including the Escrowed Shares) will
be subject to stop transfer instructions and will be stamped or otherwise imprinted with a legend substantially in the following
form:
“THE SECURITIES REPRESENTED BY CONFIRMATION HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE OFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER.”
(e) Each book-entry confirmation representing any of the Escrowed Shares will be subject to stop transfer instructions and will
be stamped or otherwise imprinted with a legend (the “ Escrow Legend ”) substantially in the following form:
“THE SALE OR OTHER TRANSFER OF THESE SECURITIES REPRESENTED BY CONFIRMATION,
WHETHER VOLUNTARY OR BY OPERATION OF LAW, IS SUBJECT TO CERTAIN RESTRICTIONS, AS
WELL AS A POTENTIAL OBLIGATION TO SURRENDER THE SECURITIES, BY ACTION OF THE
REPRESENTATIVE, IN CERTAIN CIRCUMSTANCES, ALL AS SET FORTH IN AN AGREEMENT AND PLAN
OF MERGER BETWEEN DERMA SCIENCES, INC., DB MERGER SUB ONE, LLC, BIOD, LLC, AND CYNTHIA
WEATHERLY AS REPRESENTATIVE, DATED JULY 27, 2016. A COPY OF SUCH AGREEMENT MAY BE
OBTAINED FROM THE SECRETARY OF DERMA SCIENCES, INC.”
(f) Parent will pay that portion of the Net Closing Cash that is to be paid to each Former Equity Owner in accordance with the
Closing Payment Spreadsheet and by wire transfer of immediately available funds pursuant to wire transfer instructions to be
provided by Representative concurrently with the Closing Payment Spreadsheet; except that in the case of any Former Equity
Owner who has not delivered to Parent a duly executed and valid Form W-9 (or Form W-8BEN in the case of a non-resident
alien individuals or foreign entities) (any such duly executed and Valid Form W-9 or Form W-8BEN, as the case may be, a “
Valid Form W-9 or W-8BEN ”) or with respect to which wire transfer instructions have not been so delivered, Parent will retain
the cash that would otherwise have been paid to that Former Equity Owner, to be held until Parent has received a duly executed
and Valid Form W-9 or W-8BEN or wire transfer instructions, as the case may be, and then paid by Parent to the Former Equity
Owner.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(g) No interest will be paid to or accrued in favor of any Former Equity Owner with respect to payments of any Merger
Consideration that is paid at any time after the Closing Date in accordance with any provision of this Section 2.5 .
(h) Any portion of the Closing Payment that remains unclaimed by the Former Equity Owners after the first anniversary of the
Closing Date will be returned to Parent, upon demand, and any such Former Equity Owner who has not delivered a Valid Form
W-9 or W-8BEN or an accredited investor letter, as the case may be, on or before that first anniversary, may thereafter look only
to Parent for payment of the Closing Payment. Notwithstanding the foregoing, Parent will not be liable to any Former Equity
Owner for any amounts paid to a Government Entity pursuant to applicable abandoned property, escheat or similar applicable
Laws. Any amounts remaining unclaimed by Former Equity Owners by the second anniversary of the Closing Date (or such
earlier date, immediately before such time when the amounts would otherwise escheat to or become property of any Government
Entity) will become, to the extent permitted by applicable Laws, the property of Parent free and clear of any claims or interest of
any Person previously entitled thereto.
(i) Parent Shares/Cash Allocation Procedures. Attached as Exhibit B are the procedures (the “Parent Shares/Cash
Allocation Procedures ”) to be used to determine, as to that portion of the Closing Payment (and as to that portion of any Earn
Out Payment or Product Payment) that is to be made to any Accredited Investor, the part thereof that will be paid in Parent
Shares, on the one hand, and the part thereof that will be paid in cash, on the other hand.
2.6
Per Share Signing Value. The per share value of Parent Shares used to make any portion of the Closing Payment will be
equal to the volume weighted average price per share for all transactions in Parent Shares reported on The NASDAQ Stock Market
LLC during the ten most recent consecutive trading days ending immediately before the date of this Agreement (the “ Per Share
Signing Value ”).
2.7
Withholding. Notwithstanding any provision contained herein to the contrary, each of the Paying Agent, the Escrow Agent,
the Surviving Company, Representative and Parent will be entitled to deduct and withhold from the consideration otherwise payable
to any Person pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of such
payment under any provision of applicable Law. If the Paying Agent, the Escrow Agent, the Surviving Company, Representative or
Parent, as the case may be, so withholds amounts, such amounts will be treated for all purposes of this Agreement as having been paid
to such Person in respect of which the Paying Agent, the Escrow Agent, the Surviving Company, Representative or Parent, as the case
may be, made such deduction and withholding.
2.8
Working Capital Adjustments. The Base Merger Consideration will be subject to adjustment as follows:
(a)
Pre-Closing Working Capital Adjustment.
(i)
Pre-Closing Statement. At least three Business Days before the Closing Date, the Company will deliver to Parent
(A) a balance sheet of the Company as of June 30, 2016, and (B) an estimate of the Closing Working Capital (the “ Estimated
Closing Working Capital ”), together with all worksheets, working papers, line item details for accounts, schedules and other
data reasonably requested by Parent to support such estimate (collectively, the “ Pre-Closing Statement ”). The Company
represents that the Estimated Closing Working Capital included in the Pre-Closing Statement has been determined, and that
the Pre-Closing Statement has been prepared, in accordance with GAAP.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(ii)
Estimated Adjustment. As the adjustment contemplated by Section 2.2, the Base Merger Consideration will be
decreased by the amount, if any, by which the Estimated Closing Working Capital falls short of the $**** amount shown as
the consolidated working capital of the BioD Companies in the June 30, 2016 Financial Statements (any such shortfall, the “
Estimated Adjustment ”). The Base Merger Consideration, as determined for purposes of the Closing after the adjustment set
forth in this Section 2.8(a)(ii) , is referred to herein as the “ Closing Payment .”
(b)
Post-Closing Working Capital Adjustment.
(i)
Closing Statement. As promptly as practicable, but in any event within 45 days after the Closing Date, Parent will
deliver to Representative (i) an unaudited balance sheet of the Company as of the Closing Date and (ii) its calculation of the
Closing Working Capital, together with all worksheets, working papers, line item details for accounts, schedules and other data
reasonably requested by Representative to support such calculation (collectively, the “ Closing Statement ”). The Closing
Statement will be prepared in accordance with GAAP.
(ii)
Dispute. Within 45 days following delivery of the Closing Statement by Parent, if Representative has any objection to
Parent’s calculation of the Closing Working Capital or any other items set forth in the Closing Statement, Representative will
deliver to Parent a written statement setting forth her objections to the Closing Statement (an “ Objections Statement ”), which
statement will identify in reasonable detail any and all items and amounts to which Representative objects (such items and
amounts so specified in reasonable detail in the Objections Statement, the “ Disputed Items ”). If Representative does not
deliver an Objections Statement to Parent within such 45 day period, the Closing Statement as prepared by Parent will be final,
binding and non-appealable by the parties. If Representative delivers an Objections Statement, Representative and Parent will
negotiate in good faith to resolve any Disputed Items. If Representative and Parent are not able to reach a final resolution with
respect to any Disputed Item within 30 days after the delivery of the Objections Statement to Parent, Representative and Parent
will jointly engage PricewaterhouseCoopers (or, if PricewaterhouseCoopers is either Parent’s accountants or the Company’s
accounts, then such impartial nationally recognized firm of independent certified public accountants, other than Parent’s
accountants or the Company’s accountants, appointed by mutual agreement of Parent and the Representative) (in either case,
the “ Accounting Firm ”) to resolve any unresolved Disputed Items. If the parties so engage the Accounting Firm, each party
will submit to the Accounting Firm, not later than 30 days after the date on which the Accounting Firm is engaged, a written
statement with its position on each Disputed Item (which, in the case of Parent, will be consistent with the position taken in the
Closing Statement and, in the case of Representative, will be consistent with the position taken in the Objections Statement),
together with such supporting documentation as may be reasonably requested by the Accounting Firm. Representative and
Parent will each be entitled to meet with the Accounting Firm and will each use their respective commercially reasonable
efforts to cause the Accounting Firm to resolve such dispute as soon as practicable, but in any event within 30 days after the
date on which the Accounting Firm receives the statements prepared by Representative and Parent. The Accounting Firm will
determine the amount of the Closing Working Capital based in accordance with GAAP and its final determination will be, in
the aggregate, neither more favorable to Parent than the position taken by Parent in the Closing Statement, nor more favorable
to Representative than the position taken by Representative in the Objections Statement. The Accounting Firm will provide a
calculation of the Closing Working Capital to both parties based on its resolution of the Disputed Items, and the Closing
Working Capital as so calculated will be final, binding and non-appealable by the parties. Each party will bear its own costs
and expenses in connection with the resolution of any such dispute by the Accounting Firm. The costs and expenses of the
Accounting Firm will be paid by the parties in inverse proportion to the extent to which the dollar amount of Closing Working
Capital contended for by each party (in the Closing Statement and in the Objections Statement, respectively) matches the
dollar amount of the Closing Working Capital as determined by the Accounting Firm. As an example only, if: Parent, in the
Closing Statement, contended that Closing Working Capital should be $X; Representative, in the Objections Statement,
contended that Closing Working Capital should be $X + $100,000; and the Accounting Firm determined Closing Working
Capital to be $X + $70,000, Parent would be required to pay 70% of the costs and expenses of the Accounting Firm and
Representative would be required to pay the remaining 30% of those costs and expenses.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(iii)
Access. For purposes of complying with the terms set forth in this Section 2.8(b), Representative, on the one hand,
and Parent, on the other hand, will, and Parent will cause the Company to, cooperate with and provide the other party, the
Accounting Firm and their respective representatives with access (upon reasonable notice and during normal business hours)
to the books, records (including work papers, schedules, memoranda and other documents), supporting data, facilities and
employees of the Company as may be reasonably requested in connection with review of the Closing Statement and the
resolution of any Disputed Items.
(iv)
Adjustment.
(A) If the Closing Working Capital (as finally determined pursuant to this Section 2.8(b)) is less than the smaller of (x)
the Estimated Closing Working Capital, or (y) $****, the Base Merger Consideration will be decreased on a
dollar-for-dollar basis by an amount equal to the amount by which the Closing Working Capital is less than the smaller
of the Estimated Working Capital or $****.
(B) If the Closing Working Capital (as finally determined pursuant to this Section 2.8(b)) is greater than the Estimated
Closing Working Capital, the Base Merger Consideration will be increased on a dollar-for-dollar basis by an amount
equal to the smaller of (x) the amount by which Closing Working Capital (as finally determined pursuant to this
Section 2.8(b) ) exceeds Estimated Working Capital, or (y) the dollar amount of the Estimated Adjustment.
The adjustment, if any, provided for in this Section 2.8(b)(iv) is referred to in this Agreement as the “Post-Closing Working
Capital Adjustment .”
(v)
Payment of Adjustment.
(A) If the Base Merger Consideration is reduced pursuant to Section 2.8(b)(iv)(A), Parent and Representative will
deliver to the Escrow Agent and to the Transfer Agent, within five Business Days of the date of the final determination
of the dollar amount of the Closing Working Capital pursuant to this Section 2.8(b) (whether by delivery from
Representative to Parent of a written acceptance of the amount reflected in the Closing Statement, by the expiration of
30 days after delivery of the Closing Statement by Parent without Representative having delivered an Objections
Statement, upon delivery by the Accounting Firm of its calculation, or upon other mutual agreement by Parent and
Representative), joint instructions directing the Escrow Agent and the Transfer Agent to pay to Parent an aggregate
amount, in cash and Escrowed Shares, free of the Escrow Legend, equal to the Post-Closing Working Capital
Adjustment, with the cash portion of any such payment to be made from the General Escrow Cash Amount, by wire
transfer of immediately available funds, within two Business Days of the receipt by the Escrow Agent of those
instructions, and the Escrowed Shares portion of any such payment to be made from the General Escrow PS Amount, by
transfer of the Escrowed Shares constituting that portion to Parent to be held as treasury shares free of the Escrow
Legend.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(B) If the Base Merger Consideration is increased pursuant to Section 2.8(b)(iv), Parent will pay to the Paying Agent for
disbursement to the Former Equity Owners in accordance with their Sharing Ratios, within five Business Days of the
date of the final determination of the dollar amount of the Closing Working Capital pursuant to this Section 2.8(b)
(whether by delivery from Representative to Parent of a written acceptance of the amount reflected in the Closing
Statement, by the expiration of 30 days after delivery of the Closing Statement by Parent without Representative having
delivered an Objections Statement, upon delivery by the Accounting Firm of its calculation, or upon other mutual
agreement by Parent and Representative), an amount equal to the Post-Closing Working Capital Adjustment, as follows:
(I) each Former Equity Owner’s Sharing Ratio will be multiplied by the aggregate amount to be paid or
transferred to all Former Equity Owners (such product being, with respect to each Former Equity Owner, the “
Working Capital Pro Rata Share ”);
(II) each Former Equity Owner’s Working Capital Pro Rata Share (x) will be multiplied by such Former Equity
Owner’s Adjusted Cash-Election Percentage (as defined in the Parent Shares/Cash Allocation Procedures) (such
product being the “ Working Capital Pro Rata Cash Share ”) and (y) will be multiplied by such Former Equity
Owner’s Adjusted PS-Election Percentage (as defined in the Parent Shares/Cash Allocation Procedures) (such
product being the “ Working Capital Pro Rata PS Share ”); and
(III) each Former Equity Owner will receive an amount of cash equal to its Working Capital Pro Rata Cash Share
and Parent Shares equal to its Working Capital Pro Rata PS Share (which such cash and Parent Shares will be paid
or delivered by Parent in the same manner as the Closing Payment Parent Shares (other than the Escrowed Shares).
(c) Treatment of Adjustments. Any amount to be paid pursuant to this Section 2.8 will be treated as an adjustment to the
Merger Consideration for all purposes.
2.9
Reserved **** Collections Adjustment.
(a)
For purposes of this Agreement, “Reserved **** Receivables” means “those receivables with respect to Net Sales
attributable to **** Products for the 12-month period ended June 30, 2016 that are included on Schedule 2.9, which receivables,
in the aggregate, have a face value of $****. From and after the Closing Date, the Company will use at least the same degree of
effort to collect the Reserved **** Receivables as it has historically used to collect receivables generally.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(b)
The Company will track all collections of Reserved **** Receivables received by the Company from July 1, 2016
through October 27, 2016 (the “ October Report Date ”) and from the October Report Date through January 27, 2017 (the “
January Report Date ”). Within ten days of the October Report Date, the Company will provide a report to Parent and to
Representative that sets forth the aggregate dollar amount collected by the Company with respect to all Reserved ****
Receivables from July 1, 2016 through the October Report Date (the “ First Tranche of Reserved **** Collections ”). Within ten
days of the January Report Date, the Company will provide a report to Parent and to Representative that sets forth the aggregate
dollar amount collected by the Company with respect to all Reserved **** Receivables after the October Report Date and
through the January Report Date (the “ Second Tranche of Reserved **** Collections ”).
(i)
By not later than three days after receipt by the Company of the October Report Date, Parent and Representative will
deliver joint instructions directing the Escrow Agent and the Transfer Agent to pay to the Paying Agent for disbursement to
Former Equity Owners and to transfer to Former Equity Owners, an aggregate amount, in cash and Escrowed Shares, free of
the Escrow Legend, equal to the lesser of (A) **** times the First Tranche of Reserved **** Collections, or (B) the entire
Reserved **** Collections Escrow Amount, subject to Sections 2.9(c) and (d).
(ii) By not later than three days after receipt by the Company of the January Report Date, Parent and Representative will
deliver joint instructions directing the Escrow Agent and the Transfer Agent to pay to the Paying Agent for disbursement to
Former Equity Owners and to transfer to Former Equity Owners, subject to Section 2.9(c) and (d):
(A) from the Reserved **** Collections Escrow Amount, an aggregate amount, in cash and Escrowed Shares, free of
the Escrow Legend, equal to the lesser of (A) **** times the Second Tranche of Reserved **** Collections, or (B) the
entire amount remaining in the Reserved **** Collections Escrow Amount after the making of the payment provided
for in Section 2.9(b)(i), and
(B) to pay to Parent, in cash and by transfer of Escrowed Shares, free of the Escrow Legend, the remainder, if any, of the
Reserved **** Collections Escrow Amount. Any amount of cash so paid and Escrowed Shares so transferred to Parent
(the “ Reserved **** Collections Adjustment ”) will constitute a reduction of the Merger Consideration as provided in
Section 2.2(f).
(c)
Any payment of cash or transfer of Escrowed Shares to the Former Equity Owners pursuant to this Section 2.9 will be
paid or transferred, as applicable, as if such cash and Escrowed Shares were a part of Net Closing Cash and/or Closing Payment
Parent Shares, and will be subject to the limitations and payment procedures set forth in Section 2.5 and subject to adjustment
pursuant to the Parent Shares/Cash Allocation Procedures. As to any payment or transfer pursuant to this Section 2.9, the cash
portion will come from the Reserved **** Collections Escrow Cash Amount and the Escrowed Shares portion will come from
the Reserved **** Collections Escrow PS Amount and will be paid or transferred as follows:
(i)
each Former Equity Owner’s Sharing Ratio will be multiplied by the aggregate amount to be paid or transferred to all
Former Equity Owners pursuant to this Section 2.9 (such product being, with respect to each Former Equity Owner, the “
**** Collections Pro Rata Share ”);
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(ii) each Former Equity Owner’s **** Collections Pro Rata Share (x) will be multiplied by such Former Equity Owner’s
Adjusted Cash-Election Percentage (as defined in the Parent Shares/Cash Allocation Procedures) (such product being the “
**** Collections Pro Rata Cash Share ”) and (y) will be multiplied by such Former Equity Owner’s Adjusted PS-Election
Percentage (as defined in the Parent Shares/Cash Allocation Procedures) (such product being the “ **** Collections Pro
Rata PS Share ”); and
(iii) subject to Section 2.9(d), each Former Equity Owner will receive an amount of cash equal to its **** Collections Pro
Rata Cash Share and Escrowed Shares, free of the Escrow Legend equal to its **** Collections Pro Rata PS Share (which
cash and Escrowed Shares will be transferred from the Reserved **** Collections Escrow Cash Amount and the Reserved
**** Collections Escrow PS Amount, respectively).
(d)
If any Former Equity Holder has failed to provide a Valid Form 9 or 8BEN, the Escrow Agent will pay any amount that
would otherwise have been payable to that Former Equity Holder pursuant to Section 2.9(b)(i) to Parent, to be held by Parent
until the Former Equity Holder provides a Valid Form 9 or 8BEN and then paid to the Former Equity Holder by Parent.
2.10
Base Accounts Receivable Collections Adjustment.
(a)
For purposes of this Agreement:
(i)
“Base Accounts Receivable” means those accounts receivable of the BioD Companies, totaling $****, that were
outstanding on June 30, 2016 and are included on the aged listing of Accounts Receivable outstanding on that date that is
attached to this Agreement as Exhibit C ; and
(ii)
“Base Collections Threshold” means $****.
(b)
From the Closing Date through the first anniversary of the Closing Date (that first anniversary, the “Base Collection
Cutoff Date ”), the Company will use at least the same degree of effort to collect the Base Accounts Receivable as it has
historically used to collect accounts receivables generally and will provide a status report on collections of Base Accounts
Receivable to Representative at least once each calendar quarter. Not later than ten days after the Base Collection Cutoff Date,
the Company will provide a report to Parent and to Representative that sets forth the aggregate dollar amount collected by the
Company with respect to all Base Accounts Receivable from July 1, 2016 through the Base Collection Cutoff Date (such dollar
amount, the “ Base Accounts Receivable Collections ”).
(c)
By not later than 30 days after the Base Collection Cutoff Date, Parent and Representative will deliver joint instructions
directing the Escrow Agent and the Transfer Agent:
(i)
to pay to the Paying Agent for disbursement to Former Equity Owners and to transfer to Former Equity Owners
(subject to Sections 2.10(d)) from the Base Accounts Receivable Collections Escrow Amount, an aggregate amount, in cash
and Escrowed Shares, free of the Escrow Legend, equal to the lesser of (A) the amount by which the Base Accounts
Receivable Collections exceeds the Base Collections Threshold, or (B) the entire Base Accounts Receivable Collections
Escrow Amount; and
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(ii) to pay to Parent, in cash and by transfer of Escrowed Shares, free of the Escrow Legend, the remainder, if any, of the
Base Accounts Receivable Collections Escrow Amount. Any amount of cash so paid and Escrowed Shares so transferred to
Parent (the “ Base Accounts Receivable Collections Adjustment ”) will constitute a reduction of the Merger Consideration
as provided in Section 2.2(g).
(d)
Any payment of cash or transfer of Escrowed Shares to the Former Equity Owners pursuant to this Section 2.10 will be
paid and transferred, as applicable, as if such cash and Escrowed Shares were a part of Net Closing Cash and/or Closing Payment
Parent Shares, and will be subject to the limitations and payment procedures set forth in Section 2.5 and subject to adjustment
pursuant to the Parent Shares/Cash Allocation Procedures. As to any payment or transfer pursuant to this Section 2.10, the cash
portion will come from the Base Accounts Receivable Collections Escrow Cash Amount and the Escrowed Shares portion will
come from the Base Accounts Receivable Collections Escrow PS Amount, and will be paid or transferred as follows:
(i)
each Former Equity Owner’s Sharing Ratio will be multiplied by the aggregate amount to be paid or transferred to
all Former Equity Owners pursuant to this Section 2.10 (such product being, with respect to each Former Equity Owner,
the “ Base Accounts Receivable Collections Pro Rata Share ”);
(ii)
each Former Equity Owner’s Base Accounts Receivable Collections Pro Rata Share (x) will be multiplied by such
Former Equity Owner’s Adjusted Cash-Election Percentage (as defined in the Parent Shares/Cash Allocation Procedures)
(such product being the “ Base Accounts Receivable Collections Pro Rata Cash Share ”) and (y) will be multiplied by such
Former Equity Owner’s Adjusted PS-Election Percentage (as defined in the Parent Shares/Cash Allocation Procedures)
(such product being the “ Base Accounts Receivable Collections Pro Rata PS Share ”); and
(iii)
subject to Section 2.10(e), each Former Equity Owner will receive an amount of cash equal to its Base Accounts
Receivable Collections Pro Rata Cash Share and Escrowed Shares equal to its Base Accounts Receivable Collections Pro
Rata PS Share (which cash and Escrowed Shares will be transferred from the Base Accounts Receivable Collections Escrow
Cash Amount and the Base Accounts Receivable Collections Escrow PS Amount, respectively).
(e)
If any Former Equity Holder has failed to provide a Valid Form 9 or 8BEN, the Escrow Agent will pay any amount that
would otherwise have been payable to that Former Equity Holder pursuant to 2.10(c)(i) to Parent, to be held by Parent until the
Former Equity Holder provides a Valid Form 9 or 8BEN and then paid to the Former Equity Holder by Parent.
2.11
Earn Out. As contemplated by Section 2.2, Former Equity Owners will be entitled to additional consideration as follows:
(a)
First Earn Out Consideration. If the Net Sales of the BioD Companies for the 12-month period ending on June 30,
2017 (the “ First Earn Out Year ”) exceeds the Net Sales of the BioD Companies for the 12-month period ending on June 30,
2016, the Former Equity Owners will be entitled to receive additional consideration (the “ First Earn Out Consideration ”) in an
aggregate amount equal to **** times the dollar amount of that excess, subject to (i) an upper limit on the amount of the First
Earn Out Consideration equal to $26,500,000, and (ii) potential offset of any portion of the First Earn Out Consideration in
excess of $13,250,000 (any such excess, the “ First Year Suspense Amount ”) by any Second Year Shortfall, as provided in
Section 2.11(c).
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(b)
Second Earn Out Consideration. If the Net Sales of the BioD Companies for the 12-month period ending on June 30,
2018 (the “ Second Earn Out Year ”) exceeds the Net Sales of the BioD Companies for the First Earn Out Year, the Former
Equity Owners will be entitled to receive additional consideration (the “ Second Earn Out Consideration ”) in an aggregate
amount equal to **** times the dollar amount of that excess, subject to an upper limit on the amount of the Second Earn Out
Consideration equal to $26,500, 000 minus the amount of the First Earn Out Consideration.
(c)
Potential Clawback. If the Net Sales of the BioD Companies for the Second Earn Out Year fall short of the Net Sales of
the BioD Companies for the First Earn Out Year (the amount of any such shortfall, the “ Second Year Shortfall ”), the First Year
Suspense Amount will be offset and reduced, but not below zero, by an aggregate amount equal to **** times the dollar amount
of the Second Year Shortfall. To the extent any First Year Suspense Amount is so offset and reduced, it will not be paid.
(d)
Earn Out Statements. No later than 60 days following the end of each Earn Out Year (each such 60-day period, an “
Earn Out Review Period ”), Parent will prepare and deliver to Representative a statement (an “ Earn Out Statement ”) setting
forth its calculation of Net Sales relevant to determining the amount, if any, of (i) the First Earn Out Consideration and any First
Year Suspense Amount (after the First Earn Out Year), or (ii) the Second Earn Out Consideration or any offset of the First Year
Suspense Amount (after the end of the Second Earn Out Year).
(e)
Dispute. Within 45 days following delivery of each Earn Out Statement by Parent, if Representative has any objection to
Parent’s calculation of the First Earn Out Consideration, the Second Earn Out Consideration, or any First Year Suspense
Amount, as the case may be, Representative will deliver to Parent a written statement setting forth her objections to the Earn Out
Statement (an “ Earn Out Objections Statement ”), which statement will identify in reasonable detail any and all items and
amounts to which Representative objects (such items and amounts so specified in reasonable detail in the Earn Out Objections
Statement, the “ Earn Out Disputed Items ”). If Representative does not deliver an Earn Out Objections Statement to Parent
within such 45 day period, the Earn Out Statement as prepared by Parent will be final, binding and non-appealable by the parties.
If Representative delivers an Earn Out Objections Statement, Representative and Parent will negotiate in good faith to resolve
any Earn Out Disputed Items. If Representative and Parent are not able to reach a final resolution with respect to any Earn Out
Disputed Item within 30 days after the delivery of the Earn Out Objections Statement to Parent, Representative and Parent will
jointly engage the Accounting Firm to resolve any unresolved Earn Out Disputed Items. If the parties so engage the Accounting
Firm, each party will submit to the Accounting Firm, not later than 30 days after the date on which the Accounting Firm is
engaged, a written statement with its position on each Earn Out Disputed Item (which, in the case of Parent, will be consistent
with the position taken in the Earn Out Statement and, in the case of Representative, will be consistent with the position taken in
the Earn Out Objections Statement), together with such supporting documentation as may be reasonably requested by the
Accounting Firm. Representative and Parent will each be entitled to meet with the Accounting Firm and will each use their
respective commercially reasonable efforts to cause the Accounting Firm to resolve such dispute as soon as practicable, but in
any event within 30 days after the date on which the Accounting Firm receives the statements prepared by Representative and
Parent. The Accounting Firm will determine the amount of the First Earn Out Consideration, the Second Earn Out Consideration,
or any First Year Suspense Amount, as the case may be, in accordance with GAAP and its final determination will be, in the
aggregate, neither more favorable to Parent than the position taken by Parent in the Earn Out Statement, nor more favorable to
Representative than the position taken by Representative in the Earn Out Objections Statement. The Accounting Firm will
provide a calculation of the First Earn Out Consideration, the Second Earn Out Consideration, or any First Year Suspense
Amount, as the case may be, to both parties based on its resolution of the Earn Out Disputed Items, and the First Earn Out
Consideration, the Second Earn Out Consideration, or any First Year Suspense Amount, as the case may be, as so calculated will
be final, binding and non-appealable by the parties. Each party will bear its own costs and expenses in connection with the
resolution of any such dispute by the Accounting Firm. The costs and expenses of the Accounting Firm will be paid by the
parties in inverse proportion to the extent to which the dollar amount of the First Earn Out Consideration, the Second Earn Out
Consideration, or any First Year Suspense Amount, as the case may be,, contended for by each party (in the Earn Out Statement
and in the Earn Out Objections Statement, respectively) matches the dollar amount of the First Earn Out Consideration, the
Second Earn Out Consideration, or any First Year Suspense Amount, as the case may be, as determined by the Accounting Firm.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(f)
Access. For purposes of complying with the terms set forth in this Section 2.11, Representative, on the one hand, and
Parent, on the other hand, will, and Parent will cause the Company to, cooperate with and provide the other party, the
Accounting Firm and their respective representatives with access (upon reasonable notice and during normal business hours) to
the books, records (including work papers, schedules, memoranda and other documents), supporting data, facilities and
employees of the Company as may be reasonably requested in connection with review of any Earn Out Statement and the
resolution of any Earn Out Disputed Items.
(g)
Per Share Earn Out Payment Value. The per share value of Parent Shares used to make any portion of the First Earn
Out Payment or the Second Earn Out Payment, as the case may be, will be equal to the volume weighted average price per share
for all transactions in Parent Shares reported on The NASDAQ Stock Market LLC during the last ten consecutive trading days in
the respective Earn Out Review Period (the “ Per Share Earn Out Payment Value ”).
(h)
Payment of Earn Out Consideration. Parent will pay (x) the First Earn Out Consideration (less any First Year Suspense
Amount), and (y) the Second Earn Out Consideration and any First Year Suspense Amount remaining after the application of
Section 2.11(c), as the case may be, within five Business Days of the date of the final determination of the dollar amount of the
items specified in clause (x) or (y), as the case may be (whether by delivery from Representative to Parent of a written
acceptance of the amount reflected in an Earn Out Statement, by the expiration of 45 days after delivery of the Earn Out
Statement by Parent without Representative having delivered an Earn Out Objections Statement, upon delivery by the
Accounting Firm of its calculation, or upon other mutual agreement by Parent and Representative). Parent will make each Earn
Out Payment using such combination of Parent Shares, valued at the Per Share Earn Out Payment Value, and cash as Parent may
determine in its sole discretion, except that:
(i) the maximum aggregate number of Parent Shares to be used by Parent to pay consideration to all Former Equity
Owners (whether as part of the Closing Payment, any Earn Out Payment, and/or any Product Payment) will not exceed the
Parent Share Limit;
(ii)
no more than 35% of the aggregate amount of any Earn Out Payment will be made in Parent Shares;
(iii) the portion of any Earn Out Payment to be made to any Non-Accredited Investor will be made entirely in cash; and
(iv) the portions of any Earn Out Payment to be made to any Accredited Investor (A) in Parent Shares (if and to the extent
Parent elects to make any part of the Earn Out Payment in Parent Shares) and (B) in cash will be determined in accordance
with the Parent Shares/Cash Allocation Procedures.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
For the avoidance of doubt, if and to the extent any portion of the Earn Out Payment to be made to any Former Equity Owner is
withheld as contemplated by Section 2.7 , unless otherwise determined by Parent, that withholding will be deducted from the
cash portion of that Earn Out Payment and any amount so withheld will be treated as having been paid to the Former Equity
Owner for all purposes of this Agreement.
(i)
Payment Procedures. Parent will make the cash portion and Parent Shares portions of any Earn Out Payment that is to
be made to each Former Equity Owner through the Paying Agent and the Transfer Agent following procedures consistent with
those prescribed in Section 2.5 in connection with the payment of cash and delivery of Parent Shares as part of the Closing
Payment.
(j)
No Interest. No interest will be paid to or accrued in favor of any Former Equity Owner with respect to payments of any
Earn Out Payment in accordance with any provision of this Section 2.11 .
(k)
Unclaimed Interests. Any portion of an Earn Out Payment that remains unclaimed by the Former Equity Owners after
the first anniversary of the date on which such Earn Out Payment was first tendered generally to Former Equity Owners will be
returned to Parent, upon demand, and any such Former Equity Owner who has not delivered a Valid Form W-9 or W-8BEN or
an accredited investor letter, as the case may be, on or before that first anniversary, may thereafter look only to Parent for
payment of the Earn out Payment. Notwithstanding the foregoing, Parent will not be liable to any Former Equity Owner for any
amounts paid to a Government Entity pursuant to applicable abandoned property, escheat or similar applicable Laws. Any
amounts remaining unclaimed by Former Equity Owners by the second anniversary of the date on which such Earn Out Payment
was first tendered generally to Former Equity Owners (or such earlier date, immediately before such time when the amounts
would otherwise escheat to or become property of any Government Entity) will become, to the extent permitted by applicable
Laws, the property of Parent free and clear of any claims or interest of any Person previously entitled thereto.
(l)
Obligation Transferred to New Parent. Until the first date on which the First Earn Out Consideration and the Second
Earn Out Consideration have been paid or it has been determined that no amount remains to be paid as any part of the First Earn
Out Consideration (including any First Year Overage Amount that is not offset) or as any Second Earn Out Consideration (such
first date, the “ Earn Out Completion Date ”), if Parent effects a sale, lease, exchange or other transfer, directly or indirectly, in
one transaction or a series of related transactions, of all or substantially all of the assets of Parent or the Company or a merger,
consolidation, recapitalization or other transaction in which any Person other than Parent or any Subsidiary of Parent becomes
the beneficial owner, directly or indirectly, of 50% or more of the combined voting power of all interests in Parent or the
Company (in either event, a “ New Parent ”), then Parent will cause such agreement as contains the terms and conditions
governing such transaction to obligate the New Parent to make the First Earn Out Consideration Payment and/or Second Earn
Out Consideration Payment, as applicable, as contemplated by this Agreement. If, at the time if any at which a New Parent
becomes obligated to make any Earn Out Consideration Payment, the New Parent is not a publicly traded entity, all Earn Out
Consideration Payments made by the New Parent must be made in cash (and no portion thereof may be paid in stock of the New
Parent).
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(m)
Acceleration in Certain Events.
(i)
****
(ii)
****
(A) ****
(B) ****
(iii)
****
(A) ****
(B) ****
2.12
Product Payments. As contemplated by Section 2.2, Former Equity Owners will be entitled to additional consideration
with respect to **** and **** if and to the extent so provided in the remainder of this Section 2.12 (any such additional
consideration, a “ Product Payment ”):
(a)
**** Product Payment.
(i)
****
(ii)
****
(A) ****
(B) ****
(C) ****
(I)
****
(II)
****
****
(iii)
****
(A) ****
(B) ****
(C) ****
(I)
****
(II)
****
****
(iv)
****
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
****
(b)
**** Product Payment.
(i)
****
(ii)
****
(A) ****
(B) ****
(C) ****
(I)
****
(II)
****
****
(iii)
****
(A) ****
(B) ****
(C) ****
(I)
****
(II)
****
****
(iv)
****
****
(c)
Aggregate Value of Product Payments.
(i)
****
(A) ****
(B) ****
(d) Collar Minimum. For purposes of this Agreement, the term “Collar Minimum” means a dollar amount equal to (x)
$42,500,000 minus (y) the Base Merger Consideration. ****
(e) Collar Maximum. For purposes of this Agreement, the term “Collar Maximum” means a dollar amount equal to (x)
$51,000,000 minus (y) the Base Merger Consideration. ****
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(f)
Per Share Product Payment Value. The per share value of Parent Shares used to make any portion of any Product
Payment will be equal to the volume weighted average price per share for all transactions in Parent Shares reported on The
NASDAQ Stock Market LLC during the period of ten consecutive trading days, the last of which is the last trading day before
the Business Day that is seven Business Days before the **** or the ****, as the case may be (the “ Per Share Product Payment
Value ”).
(g) Payment of Product Payments. Parent will make any Product Payment required by this Section 2.12 on the **** or the
****, as the case may be, using such combination of Parent Shares, valued at the Per Share Product Payment Value, and cash as
Parent may determine in its sole discretion, except that:
(i)
the maximum aggregate number of Parent Shares to be used by Parent to pay consideration to all Former Equity
Owners (whether as part of the Closing Payment, any Earn Out Payment, and/or any Product Payment) will not exceed the
Parent Share Limit;
(ii)
no more than 35% of the aggregate amount of any Product Payment will be made in Parent Shares;
(iii) the portion of any Product Payment to be made to any Non-Accredited Investor will be made entirely in cash; and
(iv) the portions of any Product Payment to be made to any Accredited Investor (A) in Parent Shares and (B) in cash will
be determined in accordance with the Parent Shares/Cash Allocation Procedures.
For the avoidance of doubt, if and to the extent any portion of the Product Payment to be made to any Former Equity Owner is
withheld as contemplated by Section 2.7 , unless otherwise determined by Parent, that withholding will be deducted from the
cash portion of that Product Payment and any amount so withheld will be treated as having been paid to the Former Equity
Owner for all purposes of this Agreement.
(h) Payment Procedures. Parent will make the cash portion and Parent Shares portions of any Product Payment that is to be
made to each Former Equity Owner to the Paying Agent and/or through the Transfer Agent following procedures consistent with
those prescribed in Section 2.5 in connection with the payment of cash and delivery of Parent Shares as part of the Closing
Payment.
(i)
No Interest. No interest will be paid to or accrued in favor of any Former Equity Owner with respect to payments of any
Product Payment in accordance with any provision of this Section 2.12 .
(j)
Unclaimed Interests. Any portion of an Product Payment that remains unclaimed by the Former Equity Owners after the
first anniversary of the respective Product Payment Date will be returned to Parent, upon demand, and any such Former Equity
Owner who has not delivered a Valid Form W-9 or W-8BEN or an accredited investor letter, as the case may be, on or before
that first anniversary, may thereafter look only to Parent for payment of the Earn out Payment. Notwithstanding the foregoing,
Parent will not be liable to any Former Equity Owner for any amounts paid to a Government Entity pursuant to applicable
abandoned property, escheat or similar applicable Laws. Any amounts remaining unclaimed by Former Equity Owners by the
second anniversary of the respective Product Payment Date (or such earlier date, immediately before such time when the
amounts would otherwise escheat to or become property of any Government Entity) will become, to the extent permitted by
applicable Laws, the property of Parent free and clear of any claims or interest of any Person previously entitled thereto.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(k) Obligation Transferred to New Parent. Until all Product Payments that could become payable under this Section 2.12
have been made or it has been determined that no further Product Payments could become payable, if Parent effects a sale, lease,
exchange or other transfer, directly or indirectly, in one transaction or a series of related transactions, of all or substantially all of
the assets of Parent or the Company or a merger, consolidation, recapitalization or other transaction in which a New Parent
becomes the beneficial owner, directly or indirectly, of 50% or more of the combined voting power of all interests in Parent or
the Company, then Parent will cause such agreement as contains the terms and conditions governing such transaction to obligate
the New Parent to make any Product Payments that might thereafter become payable, as and when applicable, as contemplated
by this Agreement. If a New Parent becomes obligated to make any Product Payment and the New Parent is not a publicly traded
entity, all Product Payments made by the New Parent pursuant to this Agreement must be made in cash (and no portion thereof
may be paid in stock of the New Parent).
(l)
Acceleration in Certain Events.
(i)
****
(ii)
****
2.13
Post-Closing Operation of the Company. Except as explicitly provided below in this Section 2.13, Parent will have sole
discretion with regard to all matters relating to the operation of the BioD Companies after the Closing; provided , however that
Parent covenants and agrees, until the end of the Second Earn Out Year: (i) to manage the business and affairs of the BioD Companies
in good faith, (ii) not to undertake any action with the intent to limit, delay or thwart the vesting of any Earn Out Payment or Product
Payment, (iii) to maintain a separate accounting of the Net Sales of the BioD Companies and complete and accurate books and records
relevant to those Net Sales and allow Representative reasonable access to examine those books and records upon reasonable notice;
(iv) not to prohibit the BioD Companies from selling any current or future BioD Company Products to any clinical specialty outside
the Field; and (iv) ****.
2.14
Representative; Binding Action; Lock-Up.
(a)
By virtue of the approval and adoption of this Agreement by the requisite Majority Approval (as defined in the Company
LLC Agreement), each of the Former Equity Owners will be deemed to have agreed to appoint Cynthia Weatherly (and by
execution of this Agreement Cynthia Weatherly hereby accepts such appointment) as the agent and attorney-in-fact (“
Representative ”) for and on behalf of the Former Equity Owners, to act in the name, place and stead of each Former Equity
Owner with respect to all actions required to be taken by the Former Equity Owners or Representative, on behalf of the Former
Equity Owners, pursuant to this Agreement, including (i) to deliver and receive all notices and communications, (ii) to prepare
and deliver Post-Closing Payment Spreadsheets and resolve any questions regarding the distribution of Post-Closing Payments,
including distributions to Representative in her capacity as a Former Equity Owner; (iii) monitor and enforce the post-Closing
obligations of Parent and the Surviving Company under this Agreement, including Section 2.9 ; (iv) take all actions
contemplated by Section 2.8(c) with respect to the determination of Closing Working Capital and cash on hand at the
Effective Time, including authorizing the payment of any adjustment under that section; and (v) to resolve or satisfy any
indemnification claims for Losses incurred by Parent Indemnified Parties under Article VIII and to agree to, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in the judgment of Representative for the accomplishment
of the foregoing. The power of attorney granted in this Section 2.14 is coupled with an interest and is irrevocable, may be
delegated by Representative and will survive the death or incapacity of any Former Equity Owner. No bond will be required of
Representative, and Representative will receive no compensation for her services. The identity of Representative may be
changed, and a successor Representative may be appointed, from time to time (including in the event of the resignation or the
death, dissolution, disability or other incapacity of Representative) by Former Equity Owners who, immediately before the
Effective Time, held at least 65% of the Class A Units, and any such successor will succeed Representative as Representative
hereunder.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(b)
Representative will not be liable to any Former Equity Owner for any act done or omitted hereunder as Representative
while acting in good faith and in the exercise of reasonable judgment, even though such act or omission constitutes negligence
on the part of such Representative, and any act done or omitted pursuant to the advice of counsel will be conclusive evidence of
such good faith. Representative will only have the duties expressly stated in this Agreement and will have no other duty, express
or implied. Representative may engage attorneys, accountants and other professionals and experts. Representative may in good
faith rely conclusively upon information, reports, statements and opinions prepared or presented by such professionals, and any
action taken by Representative based on such reliance will be deemed conclusively to have been taken in good faith and in the
exercise of reasonable judgment. In no event will Representative be liable for punitive, exemplary, speculative, consequential or
indirect damages.
(c)
From and after the Effective Time, a decision, act, consent or instruction of Representative within the scope of her
authority will constitute a decision of the Former Equity Owners and will be final, binding and conclusive upon the Former
Equity Owners. Each of Parent, the Transfer Agent, the Paying Agent and the Escrow Agent (i) may rely upon any such
decision, act, consent or instruction of Representative as being the decision, act, consent or instruction of each and every Former
Equity Owner; and (ii) is hereby relieved from any liability to any Person for any acts done in accordance with any such
decision, act, consent or instruction of Representative.
(d) The Former Equity Owner Expense Fund will be held and administered by Representative in accordance with the terms of
this Section 2.14(d) . Representative will have the right to pay (or reimburse himself to the extent she has advanced) the
out-of-pocket costs and expenses associated with the performance of her duties hereunder (collectively, “ Former Equity Owner
Expenses ”) from the Former Equity Owner Expense Fund, without notice to or consent of any other Person. Representative will
(i) maintain the Former Equity Owner Expense Fund in an interest-bearing bank account dedicated exclusively to the payment of
Former Equity Owner Expenses; (ii) not commingle the funds in such account with any of her other assets; (iii) maintain such
account free of liens, attachments or encumbrances; and (iv) hold such account in trust and disburse the funds in such account
exclusively in accordance with this Agreement. If at any time the balance of the Former Equity Owner Expense Fund is
insufficient to pay or reimburse the full amount of Former Equity Owner Expenses, then Representative will have the right to
charge the excess to the Former Equity Owners, with each Former Equity Owner being severally liable for his or her
proportionate share thereof (based on the relative Unit holdings of all Former Equity Owners immediately before the Effective
Time). If, at the time any Post-Closing Payment becomes due and payable, the remaining balance of the Former Equity Owner
Expense Fund is less than the Expense Fund Amount, Representative will have the right to specify in the applicable Post-Closing
Payment Spreadsheet that a portion of such Post-Closing Payment, up to the amount required to restore the balance of the
Former Equity Owner Expense Fund to the Expense Fund Amount, will be deposited with Representative and deducted from the
amount otherwise payable to the Former Equity Owners as contemplated by Section 2.11(h) . At such time or times as
Representative determines, in her reasonable judgment, that the remaining balance in the Former Equity Owner Expense Fund
exceeds the amount required to cover the Former Equity Owner Expenses that she reasonably expects to be incurred,
Representative will distribute the excess funds to the Paying Agent for disbursement to the Former Equity Owners in accordance
with their Sharing Ratios. Further, as soon as practicable after the date on which the final obligation of Representative under this
Agreement has been discharged or such other date as Representative deems appropriate, the Representative will pay any amounts
remaining in the Former Equity Owner Expense Fund to the Paying Agent for disbursement to the Former Equity Owners, in
accordance with their Sharing Ratios.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(e)
For so long as any amount remains in the Escrow Account, Parent will cause the Surviving Company to provide
Representative with reasonable access to information about the Surviving Company and the reasonable assistance of the officers
and employees of Parent and the Surviving Company for purposes of determining the ultimate disposition of those funds.
(f)
Lock-Up.
(i) From the Closing Date through the date that is 180 days after such date and from any Earn Out Payment Date or
Product Payment Date and the date that is 30 days after such date (each such 180-day or 30-day period being, a “ Lock-Up
Period ”), no Former Equity Owner may, without the prior written consent of Parent and then only in compliance with all
applicable securities laws: (A) offer, pledge, sell, contract to sell, grant any option or contract to purchase, purchase any
option or contract to sell, or otherwise dispose of, directly or indirectly, any of the Parent Shares issued on the Closing Date,
the applicable Earn Out Payment Date, or the applicable Product Payment Date, as the case may be, or (B) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of
any of the Parent Shares issued on such applicable date, whether any such transaction described in clause (A) or (B) above
is to be settled by delivery of Parents Shares, in cash or otherwise.
(ii) During any Lock-Up Period, no Former Equity Owner may make any demand for or exercise any right with respect to,
the registration of any Parent Shares issued on the applicable date without the prior written consent of Parent.
(iii) Parent will enter stop transfer instructions with the Transfer Agent and registrar relating to the transfer of Parent Shares
issued on the applicable date to ensure compliance by Former Equity Owners with the foregoing provisions. By accepting
Parent Shares as part of the consideration to be received in the Merger, as part of an Earn Out Payment, or as part of a
Product Payment, as applicable, each Former Equity Owner will be deemed to have consented to the entry of those stop
transfer instructions.
(iv)
For the avoidance of doubt:
(A) the 180-day Lock-Up Period will apply only with respect to Parent Shares issued to Former Equity Owners on the
Closing Date (and not to any other Parent Shares); and
(B) any 30-day Lock-Up Period will apply only with respect to Parent Shares issued to Former Equity Owners on a
particular Earn Out Payment Date or a particular Product Payment Date (and not to any other Parent Shares).
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(v) The parties acknowledge that none of the Parent Shares issued to Former Equity Owners pursuant to this Agreement
will be registered pursuant to the Securities Act. Subject to the Lock-Up Periods set forth in this Section 2.14(f), the
parties intend that all such Parent Shares will become freely tradable six months after the Closing Date pursuant to the
exemption available under Rule 144 under the Securities Act (“ Rule 144 ”) after satisfaction of the holding periods
required by Rule 144. As the availability of the exemption under Rule 144 depends, in part, on Parent remaining current in
its reporting obligations under the Exchange Act, Parent shall use its reasonable best efforts to remain current until the
expiration of the holding periods under Rule 144 applicable to the Parent Shares issued pursuant to this Agreement
2.15 Certain Adjustments. If, at any time during the period between (a) the date of this Agreement and (b) the first date on which
no further Earn Out Payment or Product Payment may thereafter become payable under this Agreement, any change in the outstanding
shares of capital stock of Parent occurs (or for which the relevant record date will occur) as a result of any reclassification,
recapitalization, stock split (including a reverse stock split) or subdivision or combination or readjustment of shares, or any stock
dividend or stock distribution with a record date during such period, the Merger Consideration, the Per Share Signing Value, the Per
Share Earn Out Value, and any other dependent items, as applicable, will be equitably and proportionately adjusted, if necessary and
without duplication, to reflect such change.
Article III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as follows:
3.1
Organization and Good Standing. Each of the BioD Companies and BD Acquisition Group LLC is a limited liability
company duly organized, validly existing, and in good standing under the Laws of the State of Delaware. The BioD Companies are
qualified to do business in the jurisdictions set forth on Schedule 3.1 , which constitute all such qualifications that are required given
the character of each of the BioD Companies’ assets and properties or in which the transaction of the Business makes such
qualification necessary, except where the failure to be so qualified is not material to the conduct of the BioD Companies’ business.
3.2
Authority.
(a)
Each of the BioD Companies has all requisite power and authority necessary to own and operate its properties and to carry
on the Business as now conducted. The copies of the Certificates of Formation and LLC Agreements of each of the BioD
Companies and of BD Acquisition Group LLC made available to Parent are complete and correct and reflect all amendments
made thereto at any time before the date of this Agreement. The minute books and other books and records of each of the BioD
Companies are substantially correct and complete.
(b) The Company has all requisite power and authority necessary to execute and deliver this Agreement and the other
Ancillary Agreements to which it is or will be party and to perform its obligations hereby and thereby. The execution, delivery
and performance by the Company of this Agreement and the other Ancillary Agreements to which it is or will be a party and the
consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Company. This Agreement has been duly and validly executed and delivered by the Company and (assuming
this Agreement constitutes a legal, valid and binding obligation of Parent, Merger Sub, and Representative) constitutes a legal,
valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited
by (x) applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement
of creditors’ rights, and (y) general principles of equity that restrict the availability of equitable remedies.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
3.3
Capitalization; Subsidiaries; Indebtedness.
(a) The authorized, issued and outstanding Units are set forth on the Unit Table. The Units set forth on the Unit Table
constitute all of the issued and outstanding Equity Interests in the Company and all of the issued and outstanding Units are
validly issued, fully paid and non-assessable.
(b)
Except as disclosed on Schedule 3.3(b), there are (i) no outstanding subscriptions, options, calls, convertible debt,
contracts, commitments, understandings, restrictions, arrangements, warrants, or other rights, including any rights plan, or any
right of conversion or exchange under any outstanding security, instrument, or other agreement, obligating any of the BioD
Companies to issue, deliver, or sell, or cause to be issued, delivered or sold, additional Equity Interests of any of the BioD
Companies or obligating any BioD Company to grant, extend or enter into any such agreement or commitment, and (ii) no
voting trusts, proxies, or other agreements or understandings to which any BioD Company is a party or bound with respect to the
voting of any of the Equity Interests of any of the BioD Companies or which restrict the transfer of any such Equity Interest (in
each case including the Units). Except as set forth on Schedule 3.3(b) , there are no outstanding contractual obligations of any
BioD Company to repurchase, redeem, or otherwise acquire any Equity Interest of any BioD Company. None of the BioD
Companies is under any obligation to register the offer and sale or resale of its securities under the Securities Act and the rules
and regulations promulgated thereunder.
(c)
The Company is the sole member of the Company Subsidiaries. The Company does not have any Subsidiaries or hold any
Equity Interest of any Person other than the Company Subsidiaries.
(d)
Except as set forth on Schedule 3.3(d), none of the BioD Companies has any Indebtedness.
(e)
The information set forth on the Unit Table is complete and accurate as of the date of execution of this Agreement, and the
information set forth on the updated Unit Table will be complete and accurate as of the Effective Time.
3.4
No Conflict. Except as set forth on Schedule 3.4, the consummation of the transactions contemplated by this Agreement and
the execution and delivery by the Company of all agreements and instruments contemplated hereby to which the Company is a party,
and the fulfillment of and compliance with the respective terms hereof and thereof by the Company, does not and will not (i) conflict
with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under (whether with or without the passage
of time, the giving of notice or both), (iii) result in the creation of any Lien upon the Units or any asset or property of any of the BioD
Companies, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of, or
(vi) require any authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with, any third
party or any Government Entity pursuant to, (A) the Certificates of Formation, the LLC Agreements, or any other Organizational
Documents of any of the BioD Companies, (B) any Law or any Order to which the BioD Companies or any of their respective assets
or properties is subject, or (C) any Contracts or Leases.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
3.5
Financial Statements.
(a)
Attached hereto as Schedule 3.5(a) are (i) the 2014 Audited Financial Statements and the 2015 Audited Financial
Statements (collectively, the “ Audited Financial Statements ”); (ii) the consolidated balance sheets of the BioD Companies as of
December 31, 2013, and the related statements of income, members’ equity, and cash flows for the fiscal year then ended,
together with the notes thereto, if any, all as prepared by management of the Company and used by the Company for general
management purposes; and (iii) the consolidated balance sheets of the BioD Companies as of June 30, 2016, and the related
statements of income, members’ equity, and cash flows for the six month period then ended, all as prepared by management of
the Company and used by the Company for general management purposes (the “ June 30, 2016 Financial Statements ” and,
together with the items set forth in (ii), the “ Management Financial Statements ”). The consolidated balance sheet of the BioD
Companies as of December 31, 2015, included in the 2015 Audited Financial Statements is referred to in this Agreement as the “
12/31/15 Balance Sheet .”
(b)
The Management Financial Statements fairly present in all material respects the financial position of the BioD Companies
at the dates of the balance sheets included therein and the results of its operations for the respective periods indicated therein.
(c)
The Audited Financial Statements (i) have been prepared from, and are in accordance with, the books and records of the
BioD Companies and fairly reflect all of the properties, assets, Liabilities and transactions of the BioD Companies, in all material
respects, (ii) fairly present, in all material respects, the financial condition of the BioD Companies, and (iii) accurately reflect, in
all material respects, the operating results and cash flows of the BioD Companies, in each case at the date and for the time period
indicated. The Audited Financial Statements have been prepared in accordance with GAAP consistently applied.
(d)
The books of account of the BioD Companies to which Parent and its representatives have been provided access are true,
accurate and complete in all material respects.
3.6
Absence of Certain Developments. Except as set forth on Schedule 3.6, since December 31, 2015, each of the BioD
Companies has operated in the Ordinary Course of Business and (i) there has not been any event, change, occurrence or circumstance
that has had, or could reasonably be expected to have, a Material Adverse Effect, and (ii) none of the BioD Companies has (except as
contemplated by this Agreement or any Ancillary Agreement):
(a)
mortgaged, pledged, or subjected to any Lien (except Permitted Liens) any of its assets or properties;
(b)
sold, leased, conveyed, assigned, pledged, or transferred any portion of its tangible assets or transferred, assigned, or
licensed any of the BioD Intellectual Property;
(c)
issued, sold, or transferred any of its Equity Interests, securities convertible into its Equity Interests, or warrants, options,
or other rights to acquire its Equity Interests, or any bonds or debt securities;
(d)
purchased, leased, or otherwise acquired any property or assets of any Person for an amount in excess of $50,000
individually (in the case of a lease, per annum) or $500,000 in the aggregate (in the case of a lease, for the entire term of the
lease, not including an option term);
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(e)
declared or paid any dividends or distributions on or in respect of any of its Equity Interests or redeemed, purchased, or
acquired any Equity Interest of any Person;
(f)
incurred any Indebtedness or waived any material right or claim, including any write-off of any accounts receivable not
made in the Ordinary Course of Business, or made any capital contributions to, investment in, or any loan to any other Person;
(g)
made any capital expenditures or commitments therefor, except in the Ordinary Course of Business in accordance with its
existing capital expenditure budget;
(h) paid, discharged, or satisfied any Liability in excess of $50,000, other than the repayment of trade obligations or note
obligations pertaining to the Company’s revolving line of credit at Triumph Bank;
(i)
failed to promptly pay and discharge any current Liability;
(j)
terminated any Material Contract (other than as a result of the expiration of the term of such Material Contract pursuant to
its terms) or executed any amendment or modification of any Material Contract;
(k) made any material changes in its Employee Benefit Plans or made any changes in wages, salary, or other compensation
with respect to its officers, managers, or employees, or made any material changes to the terms of any agreement with any
employee;
(l)
adopted, amended, modified, or terminated any bonus, profit sharing, incentive, severance, or other plan, agreement or
commitment for the benefit of any employee, officer, or manager;
(m) adopted any plan of merger, consolidation, reorganization, liquidation, or dissolution or filing of a petition in bankruptcy
under any provisions of federal or state bankruptcy Law or consented to the filing of any bankruptcy petition against it under any
similar Law;
(n)
except as required by Law, made or entered into any (i) new Tax election or change in any Tax election, (ii) amendment
of any Tax Return, (iii) settlement or compromise of any Tax audit, (iv) change in any Tax accounting method or practice, or
(v) agreement with respect to Taxes;
(o)
made any change in any accounting methods, elections, principles or practices used by the Company, except as required
by GAAP or as disclosed in the 2015 Audited Financial Statements or Management Financial Statements;
(p)
made any change in cash management practices and policies, practices, and procedures with respect to the collection of
accounts receivable, establishment of reserves for doubtful accounts, accrual of accounts receivable, prepayment of expenses,
payment of trade accounts payable, accrual of other expenses, deferral of revenue, and acceptance of customer deposits, other
than those changes required by the Company’s auditor during the Company’s 2014 and 2015 financial audits;
(q)
paid, loaned, or advanced (other than the payment of salary and benefits in the Ordinary Course of Business) any amounts
to, or sold, transferred or leased any of its assets to, or entered into any other transactions with, any of its Affiliates, or made any
loan to, or entered into any other transaction with, any of its employees, managers, or officers (other than compensation, standard
employee-related agreements, and the payment, advance, or reimbursement of expenses, in each case, in the Ordinary Course of
Business);
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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3.7
(r)
commenced or settled any litigation; or
(s)
agreed (whether in writing or orally) to do any of the foregoing.
Title to Assets.
(a)
Except as set forth on Schedule 3.7(a), each of the BioD Companies has good and valid title to, or a valid leasehold
interest in, the properties and assets, tangible or intangible, that are personal property and that are either used or held for use by it
(wherever located), that are (i) reflected on the 12/31/15 Balance Sheet or (ii) that were acquired after December 31, 2015, in
each case free and clear of all Liens, except for Permitted Liens.
(b)
The assets and properties referred to in (a) above, taken as a whole, are free from any material defects, have been
maintained in accordance with normal industry practice, and are in an operating condition and repair (subject to normal wear and
tear) adequate and suitable for the purposes for which such assets and properties are presently used. Without liming the
generality of the foregoing, each of the BioD Companies owns or holds a valid leasehold interest in, or a valid license to use, all
the assets, properties and rights, whether tangible or intangible, necessary for the conduct of its business as presently conducted
subject to any required consents set forth on Schedule 3.4 .
3.8
Tax Matters. Except as set forth on Schedule 3.8:
(a)
The BioD Companies have timely filed all Tax Returns that each of them was required to file for Pre-Closing Tax Periods
and have paid all Taxes owed, whether or not shown on any Tax Return. All such Tax Returns as have been filed were true,
accurate, and complete in all material respects.
(b)
The BioD Companies have timely and properly withheld and paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any employee, independent contractor, member, creditor, customer, or other party
and have complied with all information reporting and backup withholding provisions of applicable Law.
(c)
There are no Liens for Taxes (other than Permitted Liens for current Taxes not yet due and payable) upon any assets of the
BioD Companies.
(d)
There is no dispute or claim concerning any Tax liability of any of the BioD Companies, including but not limited to any
as claimed or raised by any Taxing Authority in writing. All Tax deficiencies asserted, or assessments made, against the BioD
Companies as a result of any examinations by any Taxing Authority have been fully paid.
(e)
None of the BioD Companies has agreed to any extension or waiver of any statute of limitations period that has not
expired in respect of any Tax Return. None of the BioD Companies has agreed to nor is subject to any extension of time with
respect to a Tax assessment or deficiency. None of the BioD Companies is currently the beneficiary of any extension of time
within which to file any Tax Return.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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(f)
No federal, state, local, or foreign Tax audits, examinations, or investigations or administrative or judicial Tax Proceedings
are currently ongoing, pending, or have been threatened with respect to any BioD Company in respect of any Tax.
(g)
No claim has been made by a Taxing Authority in a jurisdiction where any BioD Company does not file Tax Returns that
such BioD Company may be subject to taxation by that jurisdiction.
(h) None of the BioD Companies is a party to any Tax allocation, Tax indemnity, or Tax sharing agreements or similar
arrangements.
(i)
The BioD Companies have collected all sales, use, or value added taxes required to be collected by applicable Law, and
have timely remitted, or will remit on a timely basis, such amounts to the appropriate Taxing Authorities.
(j)
The Company has provided Parent with correct and complete copies of all Tax Returns filed by or with respect to the BioD
Companies, and all examination reports and statements of deficiencies issued to, assessed against, or agreed to by the BioD
Companies for all taxable periods ending after December 31, 2012.
(k) None of the BioD Companies has been a member of a consolidated, affiliated, combined, or unitary Tax group, and none
of the BioD Companies has any liability for Taxes of any Person under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign Tax Law), as a transferee or successor, by contract or otherwise.
(l)
None of the BioD Companies will be required to include in a Post-Closing Tax Period taxable income attributable to
income of such BioD Company that accrued and was received in a Pre-Closing Tax Period but was not recognized in any such
period for any reason, including (i) the installment method of accounting, (ii) the long-term contract method of accounting, or
(iii) a “closing agreement” as described in Section 7121 of the Code (or any provision of any state, local or foreign Tax Law
having a similar effect).
(m) None of the BioD Companies has agreed to, and is not required to, make any adjustment under Section 481(a) of the Code
by reason of any change in accounting method or otherwise.
(n) None of the BioD Companies has made any payments of, is not obligated to make any payments of, and is not a party to
any agreement or agreements that, individually or collectively, provide for the payment by any of the BioD Companies of, any
amount of salaries or compensation for services (i) that is not deductible under Sections 162(a)(1) or 404 of the Code or (ii) that
is an “excess parachute payment” pursuant to Section 280G of the Code.
(o) None of the BioD Companies has been a party to a “reportable transaction” (as such term is defined in Treasury Regulation
Section 1.6011-4(b)).
(p) Since the formation thereof and through the Closing Date, (i) each of the BioD Companies has been (and will be) treated
as a partnership for U.S. federal and applicable state, local and foreign income Tax purposes, (ii) neither any BioD Company, nor
any other Person on behalf of any BioD Company, has made (or will make) an election to be treated as other than a partnership
pursuant to Treasury Regulations Section 301.7701-3 (or any similar provision of applicable state, local or foreign Tax Law);
and (iii) no BioD Company is (or ever has been) a publicly traded partnership under Section 7704 of the Code.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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3.9
Contracts and Commitments.
(a)
Except as set forth on Schedule 3.9(a), none of the BioD Companies is a party to or bound by any of the following
(whether written or oral):
(i) any pension, profit sharing, Unit option, employee Unit purchase, or other plan or arrangement providing for deferred
or other compensation to employees;
(ii) any collective bargaining agreement or any other Contract with any labor union or other similar organization, or any
severance agreements, programs, policies, or arrangements;
(iii) any management agreement or Contract for (1) the employment of any officer, individual employee, or other Person
on a full-time, part-time, consulting, or other basis or (2) that provides for the payment of any cash or other compensation or
benefits upon the consummation of the transactions contemplated hereby;
(iv)
any Contract involving any Government Entity;
(v) any Contract relating to borrowed money or other Indebtedness, or the mortgaging, pledging, or otherwise placing a
Lien on any asset or group of assets of any of the BioD Companies, or any letter of credit arrangements, or any guarantee
therefor;
(vi) any Contract that requires the payment of any fee or penalty in excess of $10,000 in the event of any failure to
perform or late performance of such Contract by any of the BioD Companies;
(vii) any Contract under which the any BioD Company is a (A) lessee of or holds or operates any personal property owned
by any other party, except for any lease of personal property under which the aggregate annual rental payments do not
exceed $50,000 or (B) lessor of or permits any third party to hold or operate any property, real or personal, owned or
controlled by the BioD Companies;
(viii) any Contract with an annual value in excess of $50,000 pursuant to which a third party distributes the BioD
Companies’ goods;
(ix) any Contract (or group of related Contracts) with the same party continuing over a period of more than six months
from the date or dates thereof, involving more than $50,000 annually in services provided by any of the BioD Companies or
$50,000 annually payable by the BioD Companies;
(x) any Contract granting any Person any option, right of first refusal, or preferential or similar right to purchase any of
the assets of the BioD Companies;
(xi) any Contract relating to the ownership of, Investments in, or loans and advances to any Person, including Investments
in joint ventures and minority equity investments, or contracts or agreements that involve the sharing of profits, losses,
costs, or Liabilities with any other Person;
(xii) any Contract relating to Licensed Intellectual Property (other than any “shrink-wrap,” “click-wrap,” or other similar
non-customized software that is licensed solely pursuant to a non-exclusive license or is generally available for less than an
aggregate amount per application of $5,000);
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Exchange Commission.
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(xiii) any broker, dealer, franchise, agent, sales representative, sales, or distribution Contract with an annual value in excess
of $50,000;
(xiv) any power of attorney or other similar Contract or grant of agency;
(xv) any Contract with an annual value in excess of $50,000 that includes any “take or pay,” “meet or release,” “most
favored nation,” or other similar pricing or delivery provisions or any Contract with a group purchasing organization;
(xvi) any Contract that provides for the indemnification of any Person, including, but not limited to, any managers, officers,
or employees of the BioD Companies;
(xvii) any Contract that relates to the acquisition or disposition of any Equity Interests or all or substantially all of the
assets of any other Person (whether by merger, sale of Equity Interests, sale of assets, or otherwise);
(xviii) any Contract that limits or purports to limit any of the BioD Companies from engaging in any line of business or in
any geographic area or during any period of time ;
(xix) any nondisclosure or confidentiality agreements with any third party, including, but not limited to, managers,
officers, and employees of the BioD Companies executed within the prior twelve months;
(xx) any other Contract, other than a Lease or a Contract previously disclosed in this subsection (a), that is material to the
operations and business prospects of the BioD Companies or involves a consideration in excess of $50,000 annually,
whether or not in the Ordinary Course of Business.
(b)
All of the Contracts set forth or required to be set forth on Schedule 3.9(a) (collectively, the “Material Contracts ”) are
valid, binding, and enforceable as to the applicable BioD Company and, to the Knowledge of the Company, as to the other
parties thereto, in each case in accordance with their respective terms. Complete and correct copies of each Material Contract
(including all material modifications, amendments, schedules, exhibits and supplements thereto and waivers thereunder which
are in effect as of the date hereof) have been made available to Parent. Each of the Material Contracts is in full force and effect
without penalty in accordance with its respective terms. Except as set forth on Schedule 3.9(b) , none of the BioD Companies
nor, to the Knowledge of the Company, any other party to any Material Contract is in breach of or default under (or is alleged to
be in breach of or default under), or has provided or received any notice of any intention to terminate, any Material Contract.
Except as set forth on Schedule 3.9(b) , no event or circumstance has occurred that, with notice or lapse of time or both, would
constitute an event of default under any Material Contract or result in a termination thereof or would cause or permit the
acceleration or other changes of any right or obligation or the loss of any benefit thereunder.
3.10
Intellectual Property Rights.
(a) Schedule 3.10(a) is a true, accurate and complete list of the Owned Intellectual Property, whether owned exclusively or
non-exclusively, that is subject to any issuance, registration, application or other filing by, to or with any Government Entity or
authorized private registrar in any jurisdiction (collectively, “ BioD Intellectual Property Registrations ”), including registered
trademarks, domain names and copyrights, registered social media usernames and other digital source identifiers, issued patents,
and pending applications for any of the foregoing, all as of the date hereof, with owner(s), countries, title or mark, registration
and application numbers and filing and expiration dates indicated, as applicable.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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(i) Schedule 3.10(a)(i) is a true, accurate and complete list of the Licensed Intellectual Property that is subject to any
issuance, registration, application or other filing by, to or with any Government Entity or authorized private registrar in any
jurisdiction (collectively, “ Licensed Intellectual Property Registrations ”), including registered trademarks, domain names
and copyrights, registered social media usernames and other digital source identifiers, issued patents, and pending
applications for any of the foregoing, all as of the date hereof, with owner(s), countries, title or mark, registration and
application numbers and filing and expiration dates indicated, as applicable.
(ii) Except as set forth on Schedule 3.10(a)(ii), the BioD Companies have the exclusive right to use and possess the BioD
Intellectual Property for the life thereof for any purpose.
(iii) Schedule 3.10(a)(iii) lists (A) any Contract that relates to the BioD Intellectual Property or the Intellectual Property
Rights of another Person (excluding software shrink-wrap and click wrap licenses) that is not a Material Contract and (B)
other Intellectual Property Rights, except for trade secrets, that are not BioD Intellectual Property Registrations, but are used
in the Business. The BioD Companies, in the period ending twelve (12) months following the date hereof, do not intend to
submit any applications for registration of any Intellectual Property Rights, that, if such application were submitted before
the date hereof, would constitute BioD Intellectual Property Registrations. All required filings and fees related to the BioD
Intellectual Property Registrations have been timely filed with and paid to the relevant Governmental Entities and
authorized registrars, solely in the name of the Company or the Company Subsidiaries, as applicable. The BioD Intellectual
Property Registrations are valid, subsisting, enforceable, in full force and effect and are in good standing, and with respect
to the BioD Intellectual Property Registrations, all fees, payments, and filings due within ninety (90) days after the Closing
Date have been duly made, and are not subject to any Taxes or other fees, other than periodic filing and maintenance fees,
all of which have been paid in the ordinary course. The BioD Intellectual Property constitutes all of the Intellectual Property
Rights necessary to operate, in all material respects, the Business.
(b) Except as disclosed on Schedule 3.10(b), (1) no Order, claim, or Action has been issued or initiated, is pending or is
threatened, that challenges the BioD Companies’ ownership of or the legality, validity, use or enforceability of any of the Owned
Intellectual Property and (2) no Order, claim, or Action has been issued or initiated, is pending or is threatened, that challenges
the BioD Companies’ use of or the legality, validity, use or enforceability of any of the Licensed Intellectual Property. The BioD
Companies have taken commercially reasonable actions to maintain and sufficiently protect all of the Owned Intellectual
Property against potential infringements or misappropriation and will continue to maintain and protect those rights before the
Closing so as not to adversely affect the validity or enforcement of such items. The execution or delivery of this Agreement, or
performance of the BioD Companies’ obligations hereunder, will not cause the diminution, termination, or forfeiture of any
BioD Intellectual Property, and the BioD Companies will not owe any payments to any party as a result of the consummation of
the transactions contemplated hereby. Except as set forth on Schedule 3.10(b)(i) , no Person (a) other than the BioD Companies,
owns or has any other right in or to, or has claimed any ownership or other right in or to, any of the Owned Intellectual Property
material to or used by the Business or (b) is infringing upon any of the Owned Intellectual Property material to or used by the
Business. There is not, and there has not been, any Action pending, or threatened, whether or not resolved or settled, with respect
to the representations set forth in (a) or (b) of the foregoing sentence. Except as set forth on Schedule 3.10(b)(ii) , the Owned
Intellectual Property is not the subject of any license and the BioD Intellectual Property is not subject to any other agreement or
arrangement that requires payment by any of the BioD Companies to any Person with respect to the use by one or more of the
BioD Companies of the BioD Intellectual Property or any obligation to grant any right to any Person to the Owned Intellectual
Property or any right to any Person to the BioD Companies’ rights in the Licensed Intellectual Property. Except as set forth on
Schedule 3.10(b)(ii), none of the BioD Companies is obligated to pay any royalty or other payment with respect to any
Intellectual Property Rights of any other Person, and no such rights are necessary to operate the current Business.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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(c) To the Knowledge of the Company, the BioD Companies have not interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property Rights of third parties, and, except as set forth on Schedule 3.10(c) ,
the BioD Companies have not received any written charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the BioD Companies must license or refrain from using
any Intellectual Property Rights of any third party). Except as set forth on Schedule 3.10(c) , to the Knowledge of the
Company, no third party has interfered with, infringed upon, misappropriated or otherwise come into conflict with the Owned
Intellectual Property.
(d)
Except as set forth on Schedule 3.10(d), all Persons who have participated in the creation or development of Intellectual
Property Rights on behalf of the BioD Companies have executed and delivered to the BioD Companies a valid and enforceable
agreement: (i) providing for the nondisclosure by such Person of any confidential information of the BioD Companies; and (ii)
providing for (A) the assignment by such Person to the BioD Companies of any and all Intellectual Property Rights arising out of
such Person’s employment by, engagement by or contract with the BioD Companies or (B) a perpetual, exclusive license for
such Intellectual Property. Except as set forth on Schedule 3.10(d) , (xi) no Person has retained any right, title, or interest in or
to any Owned Intellectual Property and (xii) no manager, officer, shareholder, employee, consultant, contractor, agent, or other
representative of the BioD Companies owns or claims any rights in (nor has any of them made application for) any Intellectual
Property Rights owned or used by the BioD Companies.
(e) The BioD Companies have taken commercially reasonable measures to protect the secrecy, confidentiality, and value of all
of their “trade secrets” (as such are determined under any applicable Law), the Owned Intellectual Property, and the BioD
Companies’ rights in the Licensed Intellectual Property. Each of the BioD Companies has entered into a confidentiality and
non-disclosure agreement with each of its managers, officers and employees, and consultants, contractors and/or agents
contributing to the Intellectual Property Rights of the BioD Companies, to protect the confidentiality and value of such
Intellectual Property Rights, and except as set forth on Schedule 3.10(e) , to the Knowledge of Company there has not been any
material breach by any of the foregoing of any such agreement. The BioD Companies have not taken any action nor failed to
take any action that directly or indirectly caused any BioD Intellectual Property to enter the public domain or in any way
adversely affect its value to Parent, or its ownership thereof.
(f)
No funding from any Government Entity or facilities of a university, college, other educational institution or non-profit
organization was used in the development of any of the Owned Intellectual Property, and no Government Entity, university,
college, other educational institution or non-profit organization has a claim or right to claim any right in the Owned Intellectual
Property. No employee or contractor of the BioD Companies who was involved and contributed to the creation or development
of any Owned Intellectual Property has performed services for a Government Entity, university, college, other educational
institution, or non-profit organization during a time period when such employee or contractor also was involved in or contributed
to the creation or development of the Owned Intellectual Property.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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3.11
FDA and Other Regulatory Matters.
(a)
Except as set forth in Schedule 3.11(a), if applicable, none of the BioD Companies has received any notice or other
communication from any Government Entity (i) contesting the uses of or the labeling and promotion of any of the products sold
by the BioD Companies (“ BioD Company Products ”) or (ii) otherwise alleging any violation of any Law by any of the BioD
Companies with respect to any BioD Company Products, excluding all observations communicated in FDA Form 483s resolved
prior to 2013.
(b)
There have been no seizures conducted or threatened by the FDA or any other Government Entity, and no recalls, market
withdrawals, field notifications, notifications of misbranding or adulteration, safety alerts conducted or adverse regulatory
actions, requested, or threatened by the FDA or by any other Government Entity, in each case relating to any of the BioD
Companies or the Business, any of their assets, or the BioD Company Products.
(c)
Certain Filings and Lists.
(i) The BioD Companies have filed and maintained their respective Tissue Establishment Registrations in accordance
with 21 CFR Part 1271 with FDA as processors and distributors of human cells, tissues and cellular- and tissue-based
products (HCT/Ps). No filing or submission to FDA or any other Government Entity contains any material omission or
material false information.
(ii) Schedule 3.11(c)(ii): (1) lists all BioD Company Products (by SKU); (2) describes them by product category, general
description, and type of product that each is “regulated as” (e.g., Section 361); (3) shows the applicable BioD Company’s
status with respect to each BioD Company Product (e.g., “manufacturer”); and (4) indicates: (A) which BioD Company
Products are commercialized, marketed, sold or placed in interstate commerce in the United States under an approved or
cleared FDA authority (e.g., traditional, abbreviated or special 510(k), IDE, or IND); (B) which BioD Company Products
are commercialized, marketed, or sold solely pursuant to a Tissue Establishment Registration, (C) which BioD Company
Products are commercialized, marketed or sold outside the United States under an approved or cleared authority from
another Government Entity; and (D) which BioD Company Products are not so commercialized, marketed, sold, or placed
in interstate commerce under an approved or cleared authority or pursuant to a Tissue Establishment Registration, and
indicating why such BioD Company Products are being so commercialized, marketed, sold or placed without such
authority. Schedule 3.11(c)(ii) also lists all traditional, abbreviated or special 510(k) submissions, IDE submissions, IND
submissions and similar submissions (e.g., relating to CE Markings) related to the Business and currently pending with the
FDA or any Government Entity outside the United States.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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(d)
Product Safety.
(i)
None of the BioD Companies has been required to file with FDA a report concerning an adverse reaction or an
adverse event (including MedWatch) or to file any other report or provide information to any product safety agency (other
than FDA), commission, board or other Government Entity of any jurisdiction, concerning actual or potential hazards with
respect to any BioD Company Product. Each BioD Company Product complies with all material product safety standards of
each applicable product safety agency, commission, board, or other Government Entity.
(ii) Each BioD Company Product is, and at all relevant times has been, fit for the ordinary purposes for which it is
intended to be used and conforms to any promises or affirmations of fact made in all regulatory filings pertaining thereto
and made on the container or label for such BioD Company Product or in connection with its sale. Each BioD Company
Product is recovered, processed, packaged, labeled, handled, stored and shipped in keeping with cGTP and current product
release specifications.
(iii) None of the BioD Companies has received any written notice that such BioD Company has, and there is no reasonable
basis for any Action against any of the BioD Companies for, any Liability arising out of any injury to any person or
property as a result of a BioD Company Product.
(e)
Except as set forth on Schedule 3.11(e)(i), all operations of the BioD Companies (i) are compliant with all applicable
Good Tissue Practices as defined by 21 CFR Part 1271 and any similar Permits or Laws of any other Government Entity,
including those relating to investigational use, premarket approval and applications or abbreviated applications to market a new
BioD Company Product, and (ii) have achieved and maintained all applicable state licensures as listed on Schedule 3.11(e)(ii);
and (iii) have achieved and maintained American Association of Tissue Banks accreditation. There is no pending or threatened
Action to audit, repeal, fail to renew or challenge any such licensure or accreditation. Each BioD Company’s personnel have all
training necessary to provide its services. Each BioD Company has compliance programs in place to promote compliance with
all legal requirements.
(f)
Each of the BioD Companies has consistently obtained and maintained any necessary Institutional Review Board (“IRB”)
approvals of clinical trials or modifications thereto, conducted, supervised, or monitored by such BioD Company. In no clinical
trial conducted, supervised or monitored by any BioD Company has IRB approval ever been suspended, terminated, put on
clinical hold, or voluntarily withdrawn because of deficiencies attributed to such BioD Company.
(g)
Schedule 3.11(g) sets forth a complete and accurate listing of all preclinical and clinical studies, together with the dates
and brief descriptions of such studies, previously or currently undertaken or sponsored by any of the BioD Companies with
respect to any BioD Company Product. All material information regarding the efficacy, safety and utility of the BioD Company
Products has been collected and maintained in accordance with accepted industry practices for companies of the size and nature
of the BioD Companies and will be readily accessible to Parent after the Effective Time. The Company has heretofore provided
to Parent all material correspondence and contact information (including 483 inspection reports, untitled letters, warning letters,
cease and desist letters, and consents) between the BioD Companies and FDA or any other Government Entity regarding the
BioD Company Products, and, to the extent provided to any of the BioD Companies, between FDA and other Government
Entities relating thereto.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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3.12
Health Care Law Matters.
(a) Compliance with Health Care Laws. Each of the BioD Companies and all representatives acting on their behalf (with
respect to actions taken on any BioD Company’s behalf) are in compliance in all material respects with all applicable Health
Care Laws, including with respect to such BioD Company’s business, properties, assets, and the BioD Company Products.
(b) Filings. All material reports, documents, claims and notices required to be filed, maintained or furnished to the FDA or to
any Government Entity by each BioD Company or representatives acting on their behalf (with respect to actions taken on any
BioD Company’s behalf) have been so filed, maintained or furnished, and all such reports, documents, claims and notices were
complete and correct in all material respects on the date filed (or were corrected in or supplemented by a subsequent filing).
(c)
Certain Statements. Neither any BioD Company nor, to the Knowledge of the Company, any representative acting on their
behalf (with respect to actions taken on any BioD Company’s behalf) has, in connection with any requirement under any Health
Care Law: (i) made an untrue statement of a material fact or fraudulent statement to the FDA or other government agency, (ii)
failed to disclose a material fact required to be disclosed to the FDA or other government agency, or (iii) committed an act, made
a statement, or failed to make a statement that, at the time such disclosure was made, constituted a violation of any Health Care
Law or would reasonably be expected to provide a basis for the FDA to invoke its policy respecting “Fraud, Untrue Statements
of Material Facts, Bribery, and Illegal Gratuities,” as set forth in 56 Fed. Reg. 46191 (September 10, 1991), in each case relating
to any BioD Company, any BioD Company’s business, any BioD Company’s assets, or the BioD Company Products.
(d)
Proceedings. To the Knowledge of the Company, there are no facts, circumstances, or conditions that currently exist that
would reasonably be expected to form the basis for any Action by a Government Entity against or affecting any of the BioD
Companies, any BioD Company’s business, any BioD Company’s assets, or the BioD Company Products relating to any Health
Care Law.
(e)
Prohibited Transactions. Neither any BioD Company nor any representative acting on behalf of any BioD Company is a
party to any Contract (including any consulting agreement or speaking arrangement) with any Health Care Professional who is in
a position to (i) make or influence referrals to or otherwise generate business to or for any of the BioD Companies, or (ii) provide
services, lease space, lease equipment or engage in any other venture or activity with any BioD Company, other than in each
case Contracts that are in compliance with all applicable Health Care Laws. Neither any of the BioD Companies nor any
representative acting on behalf of any BioD Company has directly or indirectly: (i) offered or paid any remuneration, in cash or
in kind, to, or made any financial arrangements with, any Health Care Professional in order to illegally obtain business or
payments from such Health Care Professional in violation of any Health Care Law; or (ii) given or agreed to give, or has
knowledge that there has been made or that there is any illegal agreement to make, (A) any illegal gift or illegal gratuitous
payment of any kind, nature or description (whether in money, property or services) to any Health Care Professional in violation
of any Health Care Law; (B) any contribution, payment or gift of funds or property to, or for the private use of, any Health Care
Professional where either the contribution, payment or gift or the purpose of such contribution, payment or gift is or was illegal
under any applicable Health Care Law; or (C) any payment to any Health Care Professional or to any representative of any BioD
Company, with the intention or understanding that any part of such payment would be used or was given for an illegal purpose
under any applicable Health Care Law.
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(f)
Fair Market Value. The compensation paid or agreed to be paid by any of the BioD Companies to any Health Care
Professional who is currently employed by or contracted with such BioD Company is fair market value for the services and items
actually provided by such Health Care Professional, not taking into account the value or volume of referrals or other business
generated by such Health Care Professional for such BioD Company. Each of the BioD Companies at all times maintained a
written agreement with each Health Care Professional receiving compensation from such BioD Company.
(g) Healthcare Programs. Neither any of the BioD Companies, nor any Affiliates, representatives, officers, or personnel of any
BioD Company (i) is currently excluded, debarred, or otherwise ineligible to participate in the federal health care programs as
defined in 42 U.S.C. § 1320a-7b(f) or any state healthcare program (collectively, the “ Healthcare Programs ”); (ii) debarred by
the FDA pursuant to 21 U.S.C. § 335a or b; (iii) has been convicted of a criminal offense related to the provision of healthcare
items or services but have not yet been excluded, debarred, or otherwise declared ineligible to participate in the Healthcare
Programs; and (iv) is not under investigation or otherwise aware of any circumstances which may result in being excluded from
participation in the Healthcare Programs.
3.13 Litigation. Except as set forth on Schedule 3.13, (a) there are no Actions pending or threatened by or against the BioD
Companies or that relate to or affect their assets (including any Actions with respect to the transactions contemplated by this
Agreement), and during the five years before the date hereof, no such Actions were brought by or against any of the BioD Companies,
(b) no event has occurred or circumstances exist that may give rise to, or serve as a basis for, any such Action, and (c) none of the
BioD Companies is subject to any Order.
3.14 Brokerage. Except as set forth on Schedule 3.14, there are and will be no claims for brokerage commissions, investment
banker’s fees, finders’ fees, or similar compensation in connection with the transactions contemplated by this Agreement based on any
arrangement or agreement to which the Company is a party or subject to.
3.15
Environmental and Safety Matters. Except as set forth on Schedule 3.15(a):
(a) The BioD Companies have complied and are in material compliance with all Environmental, Health and Safety
Requirements.
(b)
Without limiting the generality of the foregoing, the BioD Companies have obtained, have at all times complied with in
all material respects, and are in current compliance with, in all material respects, all permits, licenses, and other authorizations
that may be required pursuant to any Environmental, Health and Safety Requirements, and all such permits, licenses, and
authorizations may be relied upon by Parent for the lawful operation of the Business on and after the Closing without transfer,
reissuance, or other governmental action. A list of all such permits, licenses and other authorizations is set forth on
Schedule 3.15(b) .
(c)
None of the BioD Companies has received any written request for information, demand letter, administrative inquiry,
complaint, notice, report, or information regarding any actual or alleged violations of or any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise) or corrective, investigatory or remedial obligations arising
under Environmental, Health and Safety Requirements.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
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(d)
None of the BioD Companies has treated, stored, disposed of, arranged for or permitted the disposal of, transported,
handled, or Released any Hazardous Material or owned, occupied, or operated any facility or property (and no such property or
facility is contaminated by any Hazardous Material) so as to give rise to any current or future material Liabilities (including any
Liability for response costs, reporting, investigation, assessment, remediation, corrective action costs, personal injury, natural
resource damages, property damage, or attorneys’ fees or any investigative, corrective or remedial obligations) pursuant to any
Environmental, Health and Safety Requirements. None of the BioD Companies has stored, treated, recycled, or disposed or
arranged for the storage, treatment, recycling, or disposal of Hazardous Materials to any site listed or proposed for listing on the
National Priorities List promulgated pursuant to CERCLA, listed on the CERCLA Information System or included on any
similar listed maintained by any Government Entity.
(e)
There are no underground or aboveground storage tanks located on or in the Leased Real Property.
(f)
There is no asbestos, asbestos-containing materials, or polychlorinated biphenyls contained in or forming part of any
building, building component, structure, or office space in or on the Leased Real Property.
(g) The Company has provided to Parent copies of all material documentation in possession or control of it and the Company
Subsidiaries regarding Hazardous Materials or concerning compliance with Environmental, Health and Safety Requirements.
3.16 Insurance. Schedule 3.16 sets forth (a) a true, correct and complete list of all current policies or binders of fire, liability,
product liability, umbrella liability, real and personal property, workers’ compensation, vehicular, fiduciary liability, and other
casualty and property insurance maintained by the BioD Companies (each, an “ Insurance Policy ”) and (b) a list of all pending claims
and a list of the claims history for each of the BioD Companies since December 31, 2015. There are no claims pending under any such
Insurance Policies as to which coverage has been questioned, denied, or disputed or in respect of which there is an outstanding
reservation of rights. In the past five years, none of the BioD Companies has received any notice of, cancellation of, premium increase
with respect to, or alteration of coverage under, any of such Insurance Policies. All premiums due on such Insurance Policies have
either been paid or, if not yet due, accrued on the 2015 Audited Financial Statements. All such Insurance Policies (x) are in full force
and effect and enforceable in accordance with their terms and (y) have not been subject to any lapse in coverage. None of the BioD
Companies is in default under, nor has otherwise failed to comply with, in any material respect, any provision contained in any such
Insurance Policy. The Insurance Policies are sufficient for compliance with all applicable Laws and Contracts to which the applicable
BioD Company is a party or by which it is bound. The Company has made available to Parent true, correct and complete copies of the
Insurance Policies. None of the BioD Companies has any self-insurance or co-insurance programs.
3.17
Labor and Employment Matters.
(a)
Schedule 3.17(a) contains a true and complete list of (i) each individual employed by the Company, (ii) the title or
position of such employee (including whether full or part time), (iii) the rate of current base compensation payable to such
employee, (iv) any accrued vacation or accrued or deferred bonus payments payable to such employee, (v) any contingent,
deferred or incentive compensation payable to such employee, and (vi) the managers and officers of each of the BioD
Companies. All commissions and bonuses payable by the BioD Companies as of the Closing Date to such employees, or to any
Person engaged as a consultant or contractor, for services performed on or before the Closing Date will have been, as of the
Closing Date, either paid in full or properly accrued for on the books of the BioD Companies. Except as set forth on
Schedule 3.17(a) , no executive or employee of any of the BioD Companies, and no group of employees of any of the BioD
Companies, has any plans to terminate their employment with the respective BioD Company (whether as a result of the
consummation of the transactions contemplated by this Agreement or otherwise). Except as set forth on Schedule 3.17(a) , none
of the BioD Companies has, at any time after December 31, 2015, increased the rate of current base compensation payable to any
employee. Except as set forth on Schedule 3.17(a) , any such increases in the rate of current base compensation payable to any
employee since December 31, 2015, that are set forth on Schedule 3.17(a) have been made in the Ordinary Course of
Business.
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(b)
Except for any Contract set forth on Schedule 3.17(b), no employee of any of the BioD Companies has an employment
arrangement that is not “at will.” Except as set forth in Schedule 3.17(b) , the consummation of the transactions contemplated
by this Agreement will not entitle any employee to any change in control payments, severance payments, bonus, retirement
allowance or benefit or any other type of payment due to any Contract between the applicable BioD Company and any such
employee.
(c)
Except as set forth on Schedule 3.17(c), none of the BioD Companies is a party to, or bound by, any collective bargaining
or other Contract with a union or other labor organization representing any of its employees, and there are no unions or other
labor organizations representing, purporting to represent or attempting to represent any such employee. For the past five years,
there has never been, nor has there been any threat of, any strike, slowdown, work stoppage, lockout, concerted refusal to work
overtime or other similar labor activity or dispute affecting any of the BioD Companies or any of the employees.
(d)
Each of the BioD Companies has complied, and is in compliance with all Laws applicable to the BioD Companies
pertaining to employment and employment practices relating to its employees, including all Laws applicable to the BioD
Companies relating to labor relations, equal employment opportunities, employment discrimination, harassment, retaliation,
reasonable accommodation, disability rights or benefits, immigration, wages, hours, overtime compensation, child labor, health
and safety, workers’ compensation, leaves of absence and unemployment insurance. There are no Actions pending or threatened
against any of the BioD Companies to be brought or filed by or with any Government Entity or arbitrator in connection with the
employment of any current or former employee, consultant, or independent contractor of any of the BioD Companies, including
any Actions relating to unfair labor practices, employment discrimination, harassment, retaliation, equal pay, or any other
employment related matter arising under Laws applicable to the BioD Companies.
(e)
Each of the BioD Companies has complied, and is in compliance with all Laws applicable to the BioD Companies relating
to their employees, including provisions relating to hiring, terms and conditions, termination, collective bargaining and the
withholding and payment of social security and other Taxes. For the past five years, none of the BioD Companies has incurred,
and no circumstances exist under which any of the BioD Companies would reasonably be expected to incur, any Liability arising
from the misclassification of any former or current employee as consultants or independent contractors or from the
misclassification of consultants or independent contractors as employees of any BioD Company. For the past five years, none of
the BioD Companies has violated the Worker Adjustment and Retraining Notification Act, as amended.
(f)
To the Knowledge of the Company, no employee of any of the BioD Companies is a party to any confidentiality
agreement, non-competition agreement, or proprietary rights agreement with any other third party that could reasonably be
expected to affect any BioD Company or the employee’s duties with respect to the Business following the Closing.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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3.18
Employee Benefit Plans.
(a)
Schedule 3.18(a) contains a complete and accurate list of all Employee Benefit Plans.
(b) Except as set forth on Schedule 3.18(b), each Employee Benefit Plan (and each related trust, insurance contract, or fund)
has been maintained, funded and administered in compliance in all material respects with the terms of such plan and the
applicable requirements of ERISA, the Code, and other applicable Laws.
(c) All required reports and descriptions (including Form 5500 annual reports, summary annual reports, and summary plan
descriptions, as applicable) have been timely filed or distributed with respect to each Employee Benefit Plan in accordance with
the requirements of the Code, ERISA, and applicable Law.
(d) Each of the BioD Companies has paid or accrued all amounts it is required to pay as contributions to each Employee
Benefit Plan by the date such contributions were required to be made, and all monies withheld from employee paychecks with
respect to Employee Benefit Plans have been transferred to the appropriate plan within the time specified by applicable Law.
With respect to the Employee Benefit Plans, all required contributions of each of the BioD Companies due, and all insurance
premiums required to be paid, on or before the Closing Date will have been, as of the Closing Date, either made or properly
accrued for on the books of the BioD Companies.
(e) With respect to any insurance policy providing funding for benefits under any Employee Benefit Plan, there is no Liability
of any of the BioD Companies in the nature of a retroactive rate adjustment, loss sharing arrangement, or other actual or
continent Liability, nor would there be any such Liability if such insurance policy were terminated on the date hereof, and no
insurance company issuing any such policy is in receivership, conservatorship, liquidation, or similar proceeding, to the
Knowledge of Company, no such proceedings with respect to any such insurer are imminent.
(f) Except as set forth on Schedule 3.18(f), none of the Employee Benefit Plans is subject to Title IV of ERISA. Except as set
forth on Schedule 3.18(f) , none of the BioD Companies is a participating or contributing employer in any “multiemployer
plan” (as defined in Section 3(37) of ERISA) with respect to employees of such BioD Company nor has any BioD Company
incurred any withdrawal liability with respect to any multiemployer plan or any liability in connection with the termination or
reorganization of any multiemployer plan. No Employee Benefit Plan or employment agreement provides health care or death
benefit coverage beyond termination of employment, except to the extent required by Law. No Employee Benefit Plan provides
benefits to any individual who is not a current or former employee of any of the BioD Companies or the dependents or other
beneficiary of any such current or former employee. None of the BioD Companies has ever maintained or contributed to a
“welfare benefit fund” as defined in Section 419(e) of the Code, a “voluntary employees’ beneficiary association” (within the
meaning of Section 501(c)(9) of the Code) or a “supplemental unemployment benefit plan” (within the meaning of
Section 501(c)(17) of the Code).
(g) The Company has delivered or made available to Parent true and complete copies of: (i) the current plan documents
(including amendments and all documents under which the Employee Benefit Plan is operating) and summary plan descriptions
for each Employee Benefit Plan; (ii) the most recent determination, advisory or opinion letter received from or issued by the IRS,
if applicable, with respect to any of the Employee Benefit Plans; (iii) all related trust agreements, insurance contracts, and other
funding agreements that implement each Employee Benefit Plan; (iv) the three most recent Form 5500 annual reports and
attached schedules for each Employee Benefit Plan for which such reports are required to be filed; (v) all material
correspondence to and from any Government Entity with respect to an Employee Benefit Plan received in the last three years;
and (vi) all discrimination tests for the most recent two plan years for each Employee Benefit Plan for which such testing is
required.
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(h) Except as set forth on Schedule 3.18(h), each Employee Benefit Plan intended to be qualified under Section 401(a) of the
Code has heretofore been determined by the IRS to be so qualified, and each trust created thereunder has heretofore been
determined by the IRS to be exempt from tax under the provisions of Section 501(a) of the Code, and nothing has occurred since
the date of any such determination that to the Knowledge of the Company could reasonably be expected to result in a revocation
of such determination. For purposes of this Section 3.18(h) , “determined” or “determination” refers to the issuance by the IRS
of a favorable determination letter or, in the case of a prototype plan, opinion letter, or in the case of a volume submitter plan,
advisory letter, with respect to the plan and trust document(s).
(i) As of the date of this Agreement, there are no pending suits, actions, arbitrations, legal proceedings, administrative,
quasi-administrative, or enforcement proceeding or arbitration proceeding before any Government Entity, or any other formal
proceeding, investigation, inquiry, or review of the BioD Companies by any Government Entity (other than routine benefit
claims) that have been asserted or instituted by, against, or relating to, any Employee Benefit Plan, the assets of any trust or other
funding arrangement under any Employee Benefit Plan, or any of the BioD Companies, or any fiduciary with respect to any
Employee Benefit Plan or any such trust or other funding arrangement. To the Knowledge of the Company, with respect to each
Employee Benefit Plan, no event has occurred and there exists no condition or set of circumstances in connection with which any
of the BioD Companies could be subject to any material liability (other than for routine benefit claims) under the terms of, or
with respect to, such Employee Benefit Plan, ERISA, the Code, or any other applicable Law.
(j) Except as disclosed in Schedule 3.18(j), neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated by this Agreement will, either alone or in combination with any other event, increase any benefits
payable under any Employee Benefit Plan, or result in any acceleration of the time of payment or vesting of any such benefits.
(k) Each Employee Benefit Plan is amendable and terminable unilaterally by the applicable BioD Company at any time
without liability or expense to any BioD Company or such Employee Benefit Plan as a result thereof (other than for benefits
accrued through the date of termination or amendment and reasonable administrative expenses related thereto) and no Employee
Benefit Plan, plan documentation or agreement, summary plan description, or other written communication distributed generally
to employees by its terms prohibits any BioD Company from amending or terminating any Employee Benefit Plan.
(l) No payment pursuant to any Employee Benefit Plan or other agreement, policy, or arrangement of any BioD Company to
any “service provider” (as defined in Section 409A of the Code and the regulations and guidance of the Internal Revenue Service
promulgated thereunder) would subject any person to tax pursuant to Section 409A(1) of the Code, whether pursuant to the
consummation of the transactions contemplated by this Agreement or otherwise. None of the BioD Companies has an obligation
to make any reimbursement or other payment to any person with respect to any tax imposed under Section 409A of the Code.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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3.19
Compliance with Laws; Permits.
(a) Except as set forth on Schedule 3.19(a), the BioD Companies have complied at all times and are in compliance in material
respects with all Laws applicable to them or to the operation of the Business. No notices have been received by, and no claims
have been filed against, any of the BioD Companies alleging a violation of any such Laws.
(b) The Company holds all material permits, approvals, registrations, franchises, licenses, certificates, accreditations, and other
authorizations of all Government Entities required for the conduct of the Business and the ownership of their assets and
properties (collectively, the “ Material Permits ”). A complete and accurate list of the Material Permits held by the BioD
Companies is set forth on Schedule 3.19(b) . No notices have been received by any of the BioD Companies alleging the failure
to hold any Permit. None of the BioD Companies has received notice that it is in violation with the terms and conditions of any
of the Material Permits set forth on Schedule 3.19(b) , and each such Material Permit is valid and is in full force and effect.
3.20 Related Party Transactions. Except as set forth on Schedule 3.20, no Related Party (a) has been during the past five years a
party to any Contract with any of the BioD Companies, (b) is currently a party to any Contract with any of the BioD Companies that is
in effect as of the Closing Date, or (c) has (or has had during the past five years) any interest in any of the assets or properties of any
of the BioD Companies or any of the assets or properties used by the BioD Companies in the conduct of the Business. For the
avoidance of doubt, this Schedule 3.20 applies to transactions between the BioD Companies.
3.21
Real Property.
(a) Owned Real Property. Except as set forth on Schedule 3.21(a), the BioD Companies do not currently own, and have never
owned any real property.
(b) Leased Real Property. Schedule 3.21(b) sets forth a true and complete list of all Leases (including all amendments,
extensions, renewals, guaranties ,and other agreements with respect thereto) for each Leased Real Property (including the date
and name of the parties to such Lease document). The Company has delivered to Parent a true and complete copy of each Lease
document (including any amendments, extensions, renewals, or guaranties thereof) and, in the case of any oral Lease, a written
summary of the material terms of such Lease. Except as set forth in Schedule 3.21(b) , with respect to each of the Leases:
(i) such Lease is legal, valid, binding, enforceable, and in full force and effect; (ii) the Closing of the transactions contemplated
by this Agreement will not require the consent of any third party to such Lease and will not result in a breach of or default under
such Lease or otherwise cause such Lease to cease to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the Closing provided such consent is obtained; (iii) the applicable BioD Company’s possession and
quiet enjoyment of the Leased Real Property under such Lease has not been disturbed, and there are no disputes with respect to
such Lease; (iv) the applicable BioD Company and such other party to the Lease are not in breach or default under such Lease,
and no event has occurred or circumstance exists which, with the delivery of notice, the passage of time or both, would constitute
such a breach or default, or permit the termination, modification or acceleration of rent under such Lease; and (v) the applicable
BioD Company has not subleased, licensed, or otherwise granted any Person the right to use or occupy such Leased Real
Property or any portion thereof. Except as set forth on Schedule 3.21(b) , none of the BioD Companies leases and has not
leased any land, buildings, structures, improvements, fixtures or other interest in any real property.
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(c) Real Property Used in The Business. The Leased Real Property identified in Schedule 3.21(b) comprises all of the real
property leased by the BioD Companies or used or held for use by the BioD Companies in the operation of the Business.
3.22 Absence of Undisclosed Liabilities. Except as set forth on Schedule 3.22(a), none of the BioD Companies has any Liability
that is required to be set forth in a balance sheet, or disclosed in any footnote related thereto, prepared in accordance with GAAP,
other than Liabilities reflected in, reserved against, or described on the 12/31/15 Balance Sheet. All Liabilities of the BioD Companies
that have been incurred after December 31, 2015, other than in the Ordinary Course of Business, are set forth on Schedule 3.22(b) .
3.23 Accounts Receivable. All accounts receivable reflected on the 12/31/15 Balance Sheet and the accounts receivable arising after
December 31, 2015 (a) have arisen from bona fide, arm’s length transactions entered into by the BioD Companies involving the sale
of goods or rendering of services in the Ordinary Course of Business, and (b) except as set forth in Schedule 3.23 , constitute valid,
undisputed claims of the BioD Companies and are not subject to claims of set-off or other defenses or counterclaims other than normal
cash discounts or returns accrued in the Ordinary Course of Business.
3.24 Customers and Suppliers. Schedule 3.24(a) sets forth a list of (a) the customers of the BioD Companies that have purchased
products or services from the Company in excess of $100,000 (each a “ Material Customer ”) and (b) the suppliers to the BioD
Companies that have supplied products or services to the Company valued in excess of $50,000 (each a “ Material Supplier ”), in each
case for the fiscal years ended December 31, 2014 and 2015, and the quarter ended March 31, 2016. Except as set forth on
Schedule 3.24 (b), none of the Material Customers or Material Suppliers have, the BioD Companies have not received any written
notice from any Material Customer or any Material Supplier indicating that it will, and none of the BioD Companies reasonably
believe that any Material Customer or Material Supplier intends to, stop, materially decrease the rate of, or materially change the
terms (whether related to payment, price or otherwise) with respect to, purchasing or supplying products or services from or to the
BioD Companies, as applicable.
3.25 Certain Payments. Neither any of the BioD Companies nor any manager, officer, employee, or other Person acting on behalf
of any of the BioD Companies has directly or indirectly in the past five years (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback or other payment to any Person, regardless of form, whether in money, property, or services, (i) to obtain
favorable treatment in securing business for the BioD Companies, (ii) to pay for favorable treatment for business secured by the BioD
Companies, or (iii) to obtain special concessions or for special concessions already obtained, for or in respect of the BioD Companies,
which, in each case of (i), (ii) and (iii), is in violation of any Law, or (b) established or maintained any fund or asset with respect to the
Business that has not been recorded in the Management Financial Statements.
3.26 Bank Accounts. Schedule 3.26 sets forth each of the bank, investment, deposit, or other similar accounts of the BioD
Companies and the name of each Person that is an authorized signatory with respect to such account.
3.27 BD Acquisition Group. Neither the formation of BD Acquisition Group LLC nor the acquisition by BD Acquisition Group
LLC of either the **** or the **** will give any Former Equity Owner any claim against Parent or any of its Affiliates arising out of
any purported failure to provide to each Former Equity Owner an interest in BD Acquisition Group LLC that is proportionate to that
Former Equity Owner’s interest in the Company as of immediately before the Closing.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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3.28 Full Disclosure. No representation or warranty by the Company, whether on behalf of itself or any of the BioD Companies, in
this Agreement and no statement contained in the disclosure schedules to this Agreement or any certificate or other document
furnished or to be furnished to Parent or any of its representatives pursuant to this Agreement contains any untrue statement of a
material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in
which they are made, not misleading.
3.29 No Other Representations and Warranties. Except for the representations and warranties contained in this Article III
(including the related portions of the disclosure schedules), neither the Company nor any other Person has made or makes any other
express or implied representation or warranty, either written or oral, on behalf of the Company or any of the other BioD Companies.
Without limiting the generality of the foregoing, neither the Company nor any other Person has made or makes any representation or
warranty with respect to any projections, estimates or budgets of future revenues, future results of operations, future cash flows or
future financial condition (or any component of any of the foregoing) of the Company.
Article IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, represent and warrant to the Company as follows:
4.1 Organization, Power and Authority. Each of Parent and Merger Sub is a corporation organized, validly existing and in good
standing under the laws of its incorporation. Parent and Merger Sub have all requisite power and authority necessary to execute and
deliver this Agreement and to carry out the transactions contemplated by this Agreement.
4.2 Authorization; No Breach. The execution, delivery and performance of this Agreement and all other agreements or instruments
contemplated hereby to which Parent and/or Merger Sub is a party or by which either of them is bound have been duly authorized by
all requisite proceedings of Parent and Merger Sub. This Agreement and all other Ancillary Agreements contemplated hereby to
which Parent and/or Merger Sub is a party, when executed and delivered by Parent and/or Merger Sub, as the case may be, in
accordance with the terms hereof, will each constitute a valid and binding obligation of Parent and/or Merger Sub, as the case may be,
enforceable in accordance with its terms, subject only to bankruptcy, insolvency, reorganization, moratoriums or similar laws at the
time in effect affecting the enforceability or right of creditors generally and by general equitable principles which may limit the right
to obtain equitable remedies.
4.3 No Conflict. The execution, delivery and performance by Parent and/or Merger Sub of this Agreement and all other Ancillary
Agreements contemplated hereby to which Parent and/or Merger Sub is a party, and the fulfillment of and compliance with the
respective terms hereof and thereof by Parent and/or Merger Sub, do not and will not (a) conflict with or result in a breach of the
terms, conditions or provisions of, (b) constitute a default under (whether with or without the passage of time, the giving of notice or
both), (c) give any third party the right to modify, terminate or accelerate any obligation under, (d) result in a violation of, or
(e) require any authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with, any
Government Entity pursuant to, (i) the Organizational Documents of Parent and/or Merger Sub, (ii) any Law or Order to which Parent
and/or Merger Sub is subject, or (iii) any material agreement, instrument, judgment or decree to which Parent and/or Merger Sub is
subject. Neither Parent nor Merger Sub is required to submit any notice, report or other filing with any Government Entity in
connection with the execution, delivery or performance by it of this Agreement or the consummation of the transactions contemplated
hereby. Other than the applicable filings with NASDAQ, no consent, approval or authorization of any Government Entity or any other
party or Person is required to be obtained by Parent and/or Merger Sub in connection with its execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby.
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4.4
Brokerage. Except for fees and expenses payable to Greenhill & Co., all of which will be paid by Parent without any effect on
the amount of Merger Consideration to be paid under this Agreement, there are no claims for brokerage commissions, finders’ fees or
similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement to
which Parent and/or Merger Sub is a party or to which either of them is subject.
4.5
Merger Sub. Since the date of its incorporation and through and including the Closing, Merger Sub has not carried on, and will
not carry on, any business or conducted any operations other than the execution of this Agreement, the performance of their
obligations thereunder and matters ancillary thereto.
4.6
Litigation. There is no private or governmental Action, suit, proceeding, claim, arbitration or investigation, pending before any
Government Entity or overtly threatened in a written communication with Parent, against Parent, or its Subsidiaries or any of their
respective properties or any of their respective officers, directors, or managers (in their capacities as such) that challenges, or that may
have the effect of preventing, delaying, making illegal or otherwise interfering with, the Merger, Parent’s ability to pay the Merger
Consideration, or any of the other transactions contemplated by this Agreement.
4.7
Availability of Funds. Parent and/or Merger Sub has available cash or existing available borrowing capacity under committed
borrowing facilities on the date hereof, and Parent and/or Merger Sub will have available cash at Closing, in each case that is
sufficient to enable Parent and Merger Sub to consummate the transactions contemplated herein. Parent’s and Merger Sub’s
obligations hereunder are not contingent upon procuring any financing.
4.8
Capitalization. As of June 30, 2016, the authorized capital stock of Parent consists of (a) 50,000,000 shares of Parent common
stock, of which 25,963,801 shares are issued and outstanding, and (b) 1,468,750 shares of preferred stock, of which 73,332 shares are
issued and outstanding. Except as set forth in Schedule 4.8 , Parent is not a party to or bound by any option, call warrant, conversion
privilege or other agreement obligating Parent at present, at any future time, or upon occurrence of any event to issue or sell any
shares of Parent common stock or other capital stock of Parent. Since June 30, 2016, Parent has not issued any shares of Parent
common stock or shares of preferred stock, other than any outstanding derivative securities and shares issued pursuant to Parent’s
stock option plan.
4.9
Issuance of Parent Shares.
(a) The Parent Shares to be issued pursuant to this Agreement are not, and, at the time of the issuance of such shares, will not
be, subject to any preemptive rights, rights of first refusal, subscription or similar rights that have not been properly waived; and
(ii) the issuance of Parent Shares has been, and will be, duly authorized by all necessary corporate action on the part of Parent
and when issued pursuant to the terms of this Agreement will be validly issued, fully paid, and non-assessable and free from any
encumbrance (including, claims or rights under any voting trust agreements, shareholder agreements or other agreements).
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(b) At the time of each issuance of the Parent Shares under this Agreement, such issuance will be exempt from the registration
requirements of the Securities Act, will have been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable state securities laws and pursuant to Section 12(b) of
the Exchange Act and will have been issued in compliance with all applicable rules and regulations of NASDAQ (or such other
securities exchange or quoting service that makes the primary market in shares of Parent common stock if it is not then listed on
NASDAQ). Parent has not, in the twelve months preceding the date hereof, received notice from NASDAQ to the effect that
Parent is not in compliance with the listing or maintenance requirements of such trading market. The consummation of the
transactions contemplated by this Agreement does not violate the rules and regulations of NASDAQ. Parent has taken no action
designed to, or which to its Knowledge is likely to have the effect of, terminating the registration of Parent common stock under
the Exchange Act.
4.10
SEC Filings.
(a) Parent has filed with the Securities and Exchange Commission true and complete copies of all reports, schedules, forms,
statements and any definitive proxy or information statements required to be filed by Parent pursuant to the Exchange Act since
January 1, 2015 (the “ SEC Filings ”), each of which has complied in all material respects with the applicable requirements of
the Securities Act and the rules and regulations promulgated thereunder, Exchange Act and the rules and regulations
promulgated thereunder, and the Sarbanes-Oxley Act and the rules and regulations promulgated thereunder, each as in effect on
the date so filed, except to the extent updated, amended, restated or corrected by a subsequent SEC Filing filed or furnished to
the SEC by Parent and in either case, publicly available as of the date hereof. None of the SEC Filings (including, any financial
statements or schedules included or incorporated by reference therein) contained when filed or currently contains, and any SEC
Filings filed with the SEC subsequent to the date hereof will not contain, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which
they were made, not misleading, except to the extent updated, amended, restated or corrected by a subsequent SEC Filing.
(b) Except to the extent updated, amended, restated or corrected by a subsequent SEC Filing filed on or prior to the date
hereof, all of Parent’s financial statements included in the SEC Filings, in each case, including any related notes thereto, as filed
with the SEC (those filed with the SEC are collectively referred to as the “ Parent Financial Statements ”), have been prepared in
accordance with GAAP applied on a consistent basis through the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as may be permitted by Form 10-Q of the SEC and subject, in the case of the
unaudited statements, to normal, year-end audit adjustments which would not reasonably be expected to be material, individually
or in the aggregate). The consolidated balance sheets (including the related notes) included in such Parent Financial Statements
(if applicable, as updated, amended, restated or corrected in a subsequent SEC Filing) fairly present, in all material respects, the
consolidated financial position of Parent and its consolidated subsidiaries at the respective dates thereof, and the consolidated
statements of operations, stockholders’ equity and cash flows (in each case, including the related notes) included in such Parent
Financial Statements (if applicable, as updated, amended, restated or corrected in a subsequent SEC Filing) fairly present, in all
material respects, the consolidated statements of operations, stockholders’ equity and cash flows of Parent and its consolidated
subsidiaries for the periods indicated, subject, in the case of the unaudited statements, to normal, year-end audit adjustments
which could not reasonably be expected to be material, individually or in the aggregate.
(c) Parent has designed and maintains a system of “internal control over financial reporting” (as defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with GAAP.
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(d) The management of Parent has (i) implemented disclosure controls and procedures (as defined in Rule 13a-15(e) of the
Exchange Act) to ensure that material information relating to Parent, including its consolidated subsidiaries, is made known to
the Chief Executive Officer and Chief Financial Officer of Parent by others within those entities, and (ii) has disclosed, based on
its most recent evaluation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act), to
Parent’s outside auditors and the audit committee of the board of directors of Parent (A) all significant deficiencies and material
weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
Parent’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that
involves management or other employees who have a significant role in Parent’s internal control over financial reporting.
Neither Parent nor any of its consolidated subsidiaries has any liabilities or obligations of any kind whatsoever, whether or not
accrued and whether or not contingent or absolute, that are material to Parent and its consolidated subsidiaries, taken as a whole,
other than (1) liabilities or obligations disclosed or provided for in the consolidated balance sheet of Parent and its consolidated
subsidiaries as of December 31, 2015, including the notes thereto, contained in the SEC Filings, (2) liabilities or obligations
incurred on behalf of Merger Sub in connection with this Agreement, (3) liabilities or obligations incurred in the ordinary course
of business consistent with past practice since December 31, 2015, and (4) other liabilities or obligations that are not otherwise
covered by insurance that were not, and could not reasonably be expected to be, material and adverse to the financial condition,
businesses, results of operations, properties or assets of Parent and its consolidated subsidiaries, taken as a whole.
4.11 Independent Investigation. Parent has conducted its own independent investigation, review and analysis of the business,
results of operations, prospects, condition (financial or otherwise) or assets of the Company, and acknowledges that it has been
provided adequate access to the personnel, properties, assets, premises, books and records, and other documents and data of the
Company for such purpose. Parent acknowledges and agrees that: (a) in making its decision to enter into this Agreement and to
consummate the transactions contemplated hereby, Parent has relied solely upon its own investigation and the express representations
and warranties of the Company set forth in Article III of this Agreement (including the related portions of the disclosure schedules);
and (b) none of the Company or any other Person has made any representation or warranty as to the Company or this Agreement,
except as expressly set forth in Article III of this Agreement (including the related portions of the disclosure schedules).
Article V
CERTAIN COVENANTS
5.1
Certain Actions to Close Transactions. Subject to the terms of this Agreement, each party will use its commercially
reasonable efforts to fulfill, and to cause to be satisfied, the conditions in Article VI (but with no obligation to waive any such
condition) so as to consummate and effect the transactions contemplated herein, including (i) using commercially reasonable efforts to
obtain all necessary actions or nonactions, waivers, consents and approvals from Government Entities required to be obtained by such
party and to make all necessary registrations and filings and take all commercially reasonable steps as may be necessary to obtain any
necessary approval or waiver from, or to avoid an action or proceeding by, any Government Entity, (ii) using commercially reasonable
efforts to obtain all necessary consents, approvals or waivers from third parties required to be obtained by such party, and (iii) the
execution and delivery of any additional instruments necessary to consummate the Merger and the other transactions contemplated by
this Agreement and to otherwise fully carry out the purposes of this Agreement; provided that the parties hereto understand and agree
that commercially reasonable efforts of any party hereto will not be deemed to include: (x) entering into any settlement, undertaking,
consent decree, stipulation or agreement with any Government Entity in connection with the transactions contemplated hereby or
defending against or initiating any lawsuit, Action or proceeding, judicial or administrative, challenging this Agreement or the
transactions contemplated hereby, or (y) divesting or otherwise holding separate (including by establishing a trust or otherwise), or
taking any other action (or otherwise agreeing to do any of the foregoing) with respect to any of its (or any of its Affiliates’)
businesses, assets or properties. The Company and Parent each will keep the other apprised of the status of matters relating to
completion of the transactions contemplated by this Agreement.
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5.2 Conduct of Business Before the Closing. From the date hereof until the Closing, except as otherwise or consented to in writing
by Parent (which consent will not be unreasonably withheld or delayed), the Company will, (x) conduct the Business of the Company
in the Ordinary Course of Business consistent with past practice; and (y) use commercially reasonable efforts to maintain and preserve
intact the current organization, business and franchise of the Company and to preserve the rights, franchises, goodwill and
relationships of its employees, customers, lenders, suppliers, regulators and others having business relationships with the Company.
Without limiting the foregoing, from the date hereof until the Closing Date, the Company will:
(a) preserve and maintain all of its Material Permits;
(b) pay its debts, Taxes and other obligations when due;
(c) maintain the properties and assets owned, operated or used by the Company in the same condition as they were on the date
of this Agreement, subject to reasonable wear and tear;
(d) continue in full force and effect without modification all Insurance Policies, except as required by applicable Law;
(e) use commercially reasonable efforts to defend and protect its properties and assets from infringement or usurpation;
(f) perform all of its obligations under all Contracts relating to or affecting its properties, assets or business in all material
respects;
(g) maintain its books and records in accordance with past practice;
(h) comply in all material respects with all applicable Laws; and
(i)
not to take or permit any action that would cause any of the changes, events or conditions described in Section 3.6 to occur.
5.3
Access to Information. From the date hereof until the Closing, the Company will, (a) afford Parent and its representatives full
and free access to and the right to inspect all of the Leased Real Property, properties, assets, premises, books and records, Contracts
and other documents and data related to the Company; (b) furnish Parent and its representatives with such financial, operating and
other data and information related to the Company as Parent or any of its representatives may reasonably request; and (c) instruct the
representatives of the Company to cooperate with Parent in its investigation of the Company. Any investigation pursuant to this
Section 5.3 will be conducted in such manner as not to interfere unreasonably with the conduct of the business of the Company. No
investigation by Parent or other information received by Parent will operate as a waiver or otherwise affect any representation,
warranty or agreement given or made by the Company in this Agreement.
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5.4
No Solicitation of Other Bids.
(a) The Company will not, and will not authorize or permit any of its officers or managers or Affiliates or any of its or their
representatives to, directly or indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries regarding an Acquisition
Proposal; (ii) enter into discussions or negotiations with, or provide any information to, any Person concerning a possible
Acquisition Proposal; or (iii) enter into any agreements or other instruments (whether or not binding) regarding an Acquisition
Proposal. The Company will immediately cease and cause to be terminated, and will cause its officers, managers and Affiliates
and all of its and their representatives to immediately cease and cause to be terminated, all existing discussions or negotiations
with any Persons conducted heretofore with respect to, or that could lead to, an Acquisition Proposal. For purposes hereof, “
Acquisition Proposal ” will mean any inquiry, proposal or offer from any Person (other than Parent or any of its Affiliates)
concerning (i) a merger, consolidation, liquidation, recapitalization, share exchange or other business combination transaction
involving the Company; (ii) the issuance or acquisition of shares of Units or other equity securities of the Company; or (iii) the
sale, lease, exchange or other disposition outside the ordinary course of business of any significant portion of the Company’s
properties or assets.
(b) In addition to the other obligations under this Section 5.4, the Company will promptly (and in any event within two
Business Days after receipt thereof by the Company or any of its representatives) advise Parent orally and in writing of any
Acquisition Proposal, any request for information with respect to any Acquisition Proposal, or any inquiry with respect to or
which could reasonably be expected to result in an Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the Person making the same.
(c) The Company agrees that the rights and remedies for noncompliance with this Section 5.4 will include having such
provision specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach
or threatened breach will cause irreparable injury to Parent and that money damages would not provide an adequate remedy to
Parent.
5.5
Notice of Certain Events.
(a) From the date hereof until the Closing, the Company will promptly notify Parent in writing of any fact, circumstance, event
or Action the existence, occurrence or taking of which (A) has had, or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect, (B) has resulted in, or could reasonably be expected to result in, any representation or
warranty made by the Company hereunder not being true and correct or (C) has resulted in, or could reasonably be expected to
result in, the failure of any of the conditions set forth in Section 6.2 to be satisfied.
(b) From the date hereof until the Closing, Parent will promptly notify the Company in writing of any fact, circumstance, event
or Action the existence, occurrence or taking of which (A) has had, or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect, (B) has resulted in, or could reasonably be expected to result in, any representation or
warranty made by Parent or Merger Sub hereunder not being true and correct or (C) has resulted in, or could reasonably be
expected to result in, the failure of any of the conditions set forth in Section 6.3 to be satisfied.
(c) From the date hereof until the Closing, the Company, on the one hand, and Parent on the other hand, will give prompt
written notice to the other party promptly upon becoming aware of:
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(i)
any notice or other communication from any Person alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any Government Entity in connection with the transactions contemplated by
this Agreement; and
(iii) any Actions commenced or, to such party’s Knowledge, threatened against, relating to or involving or otherwise
affecting that party that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant
to Section 3.13 or Section 4.6 , as applicable, or that relates to the consummation of the transactions contemplated by
this Agreement.
(d) A party’s receipt of information pursuant to this Section 5.5 will not operate as a waiver or otherwise affect any
representation, warranty or agreement given or made by any other party in this Agreement and will not be deemed to amend or
supplement the disclosure schedules..
5.6
General. In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each
of the parties will take such further action (including the execution and delivery of such further instruments and documents) as any
other party reasonably may request, all at the sole cost and expense of the requesting party (unless the requesting party is entitled to
indemnification therefore under Article VIII ).
5.7
Tax Matters. This Section 5.7 will exclusively govern the allocation of Taxes and responsibility as between the parties with
respect to the Tax matters referred to in this Section 5.7 .
(a) Tax Indemnification. Subject to Section 8.2(c), the Former Equity Owners will, exclusively by delivery of instructions
from Representative to the Escrow Agent to pay funds held under the Escrow Agreement, indemnify, defend, save and hold
harmless Parent and the Surviving Company against any Losses attributable to any of the following that are not due to accrued
Taxes that are included in the calculation of Closing Working Capital: (i) all Taxes (or the nonpayment thereof) of the Company
for all taxable periods ending on or before the Closing Date and the portion through the end of the Closing Date for any taxable
period that includes (but does not end on) the Closing Date (a “ Pre-Closing Tax Period ”), (ii) all Taxes of any member of an
affiliated, consolidated, combined or unitary group of which the Company (or any predecessor or current or former affiliate of
any of the foregoing) is or was a member on or before the Closing Date, including pursuant to Treasury Regulation Section
1.1502-6 (or any analogous provision of state, local or foreign Tax Law), (iii) any and all Taxes of any Person (other than the
Company) imposed on the Company as a transferee or successor, by contract or pursuant to any Law, which Taxes relate to an
event or transaction occurring on or before the Closing, (iv) any Losses from a breach of any representation or warranty set forth
in Section 3.8 , (v) the Company’s share of Taxes described in Section 5.7(g) , and (vi) any and all Straddle Period Taxes
allocable to the Company for the Pre-Closing Period.
(b) Straddle Period. In the case of any taxable period that includes (but does not end on) the Closing Date (a “ Straddle Period
”), the amount of any Taxes based on or measured by sales, use, value added, income, profits or receipts or payment of wages of
the Company for the Pre-Closing Tax Period will be determined based on an interim closing of the books as of the close of
business on the Closing Date and the amount of other Taxes of the Company for a Straddle Period that relates to the Pre-Closing
Tax Period will be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction, the numerator of
which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of
days in such Straddle Period.
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(c) Responsibility for Filing Tax Returns. Representative will prepare or cause to be prepared and file or cause to be filed the
final IRS Form 1065 for the Company, as well as any final state, local, or foreign income tax returns. All such tax returns will be
filed on a basis consistent with prior Tax Returns, except as required by applicable Tax Law. Parent will prepare or cause to be
prepared and file or cause to be filed all other Tax Returns for the Company that are to be filed as of and after the Closing Date
in accordance with applicable Tax Law, including any Tax Return in respect of any Straddle Period (each, a “ Straddle Period
Tax Return ”).
(d)
Cooperation on Tax Matters.
(i)
Parent and Representative will cooperate fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Section 5.7 and any audit, litigation or other proceeding with
respect to Taxes relating to a period of time before the Closing Date. Such cooperation will include the retention and (upon
the other party’s request) the provision of records and information that are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient basis, at a reasonable cost to requesting party, to
provide additional information and explanation of any material provided hereunder. The Company agrees (A) to retain all
books and records with respect to Tax matters pertinent to the Company relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations (and, to the extent notified by Parent or Representative, any
extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any
Taxing Authority, and (B) to give the other party reasonable written notice before destroying or discarding any such books
and records and, if the other party so requests, will allow the other party to take possession of such books and records.
(ii) Parent and Representative further agree, upon request, to use their commercially reasonable efforts to obtain any
certificate or other document from any Taxing Authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with respect to the transactions contemplated hereby).
(e) Certain Tax Information. Parent and Representative agree, upon request, to promptly provide the other party with all
information that either party may be required to report pursuant to Section 6043 or Section 6043A of the Code, or Treasury
Regulations promulgated thereunder.
(f) Tax-Sharing Agreements. All tax-sharing agreements or similar agreements with respect to or involving the Company
will be terminated as of the Closing Date and, after the Closing Date, the Company will not be bound thereby or have any
liability thereunder.
(g) Certain Taxes and Fees. All transfer, documentary, sales, use, stamp, registration and other such Taxes, and all
conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with
the consummation of the transactions contemplated by this Agreement will be borne 50% by Parent and 50% by the Company,
and the Company’s share of such amounts will be paid to Parent from the funds held under the Escrow Agreement.
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(h)
Purchase Price Allocation. The parties agree that the transactions contemplated by this Agreement will be treated
from Parent’s perspective for U.S. federal income Tax purposes as an asset purchase and from the perspective of the Former
Equity Owners for U.S. federal income Tax purposes as a sale of partnership interests pursuant to Situation 2 of IRS Revenue
Ruling 99-6, 1991-1 C.B. 432. Parent and each Former Equity Owner agree that the sum of the Purchase Price and the liabilities
of the Company as of the Closing Date that are assumed by Parent (collectively, the “ Asset Sale Purchase Price ”) will be
allocated between and among the assets held by the Company as of the Closing Date. Within 90 days after the Closing Date,
Parent will provide Representative with a schedule (the “ Allocation Schedule ”) setting forth Parent’s allocation of the Asset
Sale Purchase Price for the purpose of, and in accordance with, Section 1060 of the Code and the applicable Treasury
Regulations and any applicable provision of state, local or foreign Law, among the various class of assets listed on IRS Form
8594. Such allocation will be deemed final unless Representative notifies Parent in writing of any disagreement with the
Allocation Schedule within 30 days of receipt of such schedule. Parent and Representative will cooperate in good faith in order
to reach agreement as to the allocation within 30 days of receipt by Parent of notice from Representative of the Former Equity
Owners’ disagreement with the Allocation Schedule. If the parties are unable to reach agreement, the disputed items will be
resolved by the Accounting Firm and any determination by the Accounting Firm will be final (the final schedule as agreed to by
the parties or as determined by the Accounting Firm, the “ Final Allocation Schedule ”). The costs, fees and expenses of the
Accounting Firm will be borne equally by Parent, on the one hand, and Representative (on behalf of the Former Equity Owners),
on the other hand. Parent and the Former Equity Owners will execute and file all Tax Returns in a manner consistent with the
Final Allocation Schedule and will not take a position in any Tax proceeding or audit or otherwise that is inconsistent with the
Final Allocation Schedule; provided, however, that nothing contained herein will require the Former Equity Owners or Parent to
contest, beyond the exhaustion of such party’s administrative remedies before any Taxing Authority or agency, and the Former
Equity Owners and Parent will not be required to litigate before any court, including, without limitation, the United States Tax
Court, any proposed deficiency or adjustment by any Taxing Authority or agency that challenges such allocation. Parent and
Representative will give prompt notice to each other of the commencement of any tax audit or the assertion of any proposed
deficiency or adjustment by any Taxing Authority or agency that challenges such allocation.
5.8
Indemnification of Officers and Managers of the Company.
(a) Parent and Merger Sub agree that all rights to indemnification, advancement of expenses and exculpation by the Company
now existing in favor of each individual who is now, or has been at any time before the date hereof an officer or manager of the
Company and the Company Subsidiaries (each an “ Indemnified Party ”) as provided in the Company Certificate of Formation or
the Company LLC Agreement, in each case as in effect on the date of this Agreement, or pursuant to any other agreements in
effect on the date hereof and disclosed in Schedule 3.9 , will be assumed by the Surviving Company in the Merger, without
further action, at the Effective Time and will survive the Merger and will remain in full force and effect in accordance with their
terms, and, if any proceeding is pending or asserted or any claim made during such period, until the final disposition of such
proceeding or claim.
(b) For six years after the Effective Time, to the fullest extent permitted under applicable Law, Parent and the Surviving
Company (the “ Indemnifying Parties ”) will indemnify, defend and hold harmless each Indemnified Party against all losses,
claims, damages, liabilities, fees, expenses, judgments and fines arising in whole or in part out of actions or omissions in their
capacity as such occurring at or before the Effective Time (including in connection with the transactions contemplated by this
Agreement), and will reimburse each Indemnified Party for any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such losses, claims, damages, liabilities, fees, expenses, judgments and
fines as such expenses are incurred, subject to the Surviving Company’s receipt of an undertaking by such Indemnified Party to
repay such legal and other fees and expenses paid in advance if it is ultimately determined in a final and non-appealable
judgment of a court of competent jurisdiction that such Indemnified Party is not entitled to be indemnified under applicable Law;
provided, however, that the Surviving Company will not be liable for any settlement effected without the Surviving Company’s
prior written consent (which consent will not be unreasonably withheld or delayed).
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(c) The obligations of Parent and the Surviving Company under this Section 5.8 will survive the consummation of the Merger
and will not be terminated or modified in such a manner as to adversely affect any Indemnified Party to whom this Section 5.8
applies without the consent of such affected Indemnified Party (it being expressly agreed that the Indemnified Parties to whom
this Section 5.8 applies will be third party beneficiaries of this Section 5.8 , each of whom may enforce the provisions of this
Section 5.8 ).
(d) If Parent, the Surviving Company or any of their respective successors or assigns (i) consolidates with or merges into any
other individual and will not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers
all or substantially all of its properties and assets to any individual, then, and in either such case, proper provision will be made
so that the successors and assigns of Parent or the Surviving Company, as the case may be, will assume all of the obligations set
forth in this Section 5.8 . The agreements and covenants contained herein will not be deemed to be exclusive of any other rights
to which any Indemnified Party is entitled, whether pursuant to Law, contract or otherwise. Nothing in this Agreement is
intended to, will be construed to or will release, waive or impair any rights to directors’ and officers’ insurance claims under any
policy that is or has been in existence with respect to the Company or its officers, managers and employees, it being understood
and agreed that the indemnification provided for in this Section 5.8 is not before, or in substitution for, any such claims under
any such policies.
5.9
Board Observer. From the Closing Date until either (a) the Second Earn Out Payment has been made or (b) it has been
determined that the Second Earn Out Payment will not be made following compliance with Section 2.11(e) hereof, but not
thereafter, **** (or, in his stead, such other individual as may be designated from time to time by the Former Equity Owners who held
at least 65% of the Class A Units) will have the right to attend meetings of the Parent Board as a non-voting party (in such capacity,
such individual is referred to herein as the “ Board Observer ”). The Board Observer will be generally entitled to receive notices and
documents regarding Parent Board meetings to the same extent as the directors of Parent and to participate in Parent Board
deliberations generally to the same extent as the directors but will not have a right to vote. The Board Observer will be subject to the
same confidentiality obligations as members of the Parent Board. The Parent Board may exclude the Board Observer from meetings
and from the receipt of information as necessary to preserve Parent’s attorney-client privilege (whether in the case of potential
litigation or otherwise), in cases in which a potential conflict of interest is present, and, to the extent deemed appropriate by the
Chairman of the Parent Board, when the Parent Board meets in executive session.
5.10 Conduct of Business by Parent Before the Closing. From the date hereof until the earlier of the termination of this
Agreement or the Closing Date, except as otherwise (i) provided or contemplated in this Agreement, (ii) set forth on Schedule 5.10, or
(iii) consented to in writing by the Company (which consent may not be unreasonably withheld or delayed; provided, that the
Company will respond as soon as reasonably practicable but in no event later than five Business Days following receipt of Parent’s
request for such response and such response will be deemed given if the Company fails to respond within such period), Parent will
not, and will not cause or permit Merger Sub to:
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Exchange Commission.
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(a) amend or otherwise change the articles of incorporation or bylaws or equivalent organizational documents of Parent in any
manner that would reasonably be expected to (i) materially impair, delay or prevent the consummation of the Merger, (ii)
otherwise have a material adverse effect on Parent, or (iii) materially and adversely affect the benefits granted by the transactions
contemplated hereby to the Company or the Equity Owners;
(b) authorize or adopt a plan of liquidation, dissolution or recapitalization, or resolutions providing for a complete or partial
liquidation, dissolution or recapitalization of Parent common stock;
(c) take any action that would fundamentally change or alter the nature of the businesses of Parent and its subsidiaries on a
consolidated basis; or
(d)
5.11
5.12
enter into any formal agreement committing to do any of the foregoing.
****.****
(a)
****
(b)
****
(c)
****.
(d)
****
(e)
****
Repurchase Rights.
(a)
****
(b)
****
(c)
****
Article VI
CONDITIONS TO CLOSING
6.1
Conditions to Each Party’s Obligation to Effect the Merger. The respective obligations of each party hereto to effect the
Merger are subject to the satisfaction (or waiver, if permissible under applicable Law) on or before the Closing Date of the following
conditions:
(a) No Injunctions or Restraints. No Law or Order enacted, promulgated, issued, entered, amended or enforced by any
Government Entity or arbitrator will be in effect enjoining, restraining, preventing or prohibiting consummation of the Merger or
any other material transaction contemplated by this Agreement or making the consummation of the Merger or such other
transaction illegal.
6.2
Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to consummate the
transactions contemplated by this Agreement are further subject to the fulfillment (or waiver by Parent and Merger Sub, in their sole
discretion and if permitted under applicable Law), at or before the Closing, of each of the following conditions:
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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(a) Other than the representations and warranties of the Company contained in Section 3.1 (Organization and Power),
Section 3.2 ( Authority ), Section 3.3 ( Capitalization; Subsidiaries; Indebtedness ), Section 3.5 ( Financial Statements ),
and Section 3.14 ( Brokerage ) (collectively, the “ Company Specified Representations and Warranties ”), the representations
and warranties of the Company contained in this Agreement and any certificate or other writing delivered pursuant hereto will be
true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect)
or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect)
on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except
those representations and warranties that address matters only as of a specified date, the accuracy of which will be determined as
of that specified date in all respects). The Company Specified Representations and Warranties will be true and correct in all
respects on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such
date (except those representations and warranties that address matters only as of a specified date, the accuracy of which will be
determined as of that specified date in all respects).
(b) The Company will have duly performed and complied in all material respects with all agreements, covenants, and
conditions required by this Agreement to be performed or complied with by it before or on the Closing Date; provided, that, with
respect to agreements, covenants and conditions that are qualified by materiality, the Company will have performed such
agreements, covenants and conditions, as so qualified, in all respects.
(c) Parent will have received a copy of (i) the completed Audited Financial Statements, (ii) any unaudited quarterly financial
statements completed since December 31, 2015 (the “ Post-2015 Quarterly Financial Statements ”), and (iii) unaudited monthly
financial statements for any calendar months not included in the most recent Post-2015 Quarterly Financial Statement.
(d) From the date of this Agreement, there will not have occurred any Material Adverse Effect, nor will any event or events
have occurred that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to result in a
Material Adverse Effect.
(e) Parent will have received each of the following documents, in each case duly executed (if applicable) by each party thereto
other than Parent and in form and substance reasonably acceptable to Parent:
(i)
an escrow agreement, among Representative, Parent, and the Escrow Agent, in form and substance satisfactory to each
of them (the “ Escrow Agreement ”);
(ii) a paying agent agreement among Representative, Parent, and the Paying Agent, in form and substance satisfactory to
each of them (the “ Paying Agent Agreement ”);
(iii) such documents, signed by Representative and/or by each Former Equity Owner who may receive Parent Shares
pursuant to this Agreement, as may be required to authorize the Transfer Agent to transfer to Parent, if and to the extent
required by this Agreement, any Escrowed Shares that are to be held in the name of each Former Equity Owner, all in form
and substance reasonably satisfactory to Parent and the Transfer Agent;
(iv) employment agreements with each of Tim Brahm, Russ Olsen, David Szalay, and Jon Hargis, each of which provides
for compensation not less than the levels in effect before the execution of this Agreement and will include an agreement not
to compete with the Business (as defined in this Agreement) for one year following termination of employment, and such
other provisions as may be mutually agreed upon by Parent and the respective officer (collectively, the “ Employment
Agreements ”);
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Exchange Commission.
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(v)
copies of all consents to be obtained in order to consummate the transactions contemplated by this Agreement with
respect to the agreements identified on Schedule 6.2(e)(v) ;
(vi)
invoices reflecting the Company Transaction Expenses;
(vii)
written resignations of such managers and officers, if any, of the BioD Companies as may be requested by Parent;
(viii) a waiver by each of the Equity Owners of the applicability of the “right of first refusal” provisions in the Company’s
Organizational Documents;
(ix) a certificate, in form and substance reasonably acceptable to Parent, dated as of the Closing Date and signed by a duly
authorized officer of the Company, certifying that, pursuant to Treasury Regulations Section 1.1445-11T(d)(2), either (A)
50% or more of the value of the gross assets of the Company does not consist of “United States real property interests”
(within the meaning of Section 897(c)(1)(A) of the Code) or (B) 90% or more of the value of the gross assets of the
Company does not consist of “United States real property interests” plus cash or cash equivalents; and
(x)
A certificate, dated as of the Closing Date and signed by a duly authorized officer of the Company, certifying that,
pursuant to Treasury Regulations Section 1.1445-2(b), the Company is not a foreign person within the meaning of Section
1445 of the Code, in form and substance reasonably acceptable to Parent.
(f) Parent will have received a certificate of a duly authorized officer of the Company, current as of the Closing Date,
certifying:
(i)
that the amounts set forth on the Closing Payment Spreadsheet as Company Transaction Expenses are accurate and
complete; and
(ii)
that the information set forth on the updated Unit Table that is part of the Closing Payment Spreadsheet is accurate
and complete.
6.3
Conditions to Obligations of the Company. The obligations of the Company to consummate the transactions contemplated
by this Agreement are further subject to the fulfillment (or the Company’s waiver, in its sole discretion and if permitted under
applicable Law) at or before the Closing, of each of the following conditions:
(a) Other than the representations and warranties of Parent contained in Section 4.1 (Organization, Power and Authority),
Section 4.4 ( Brokerage ), and Section 4.7 ( Availability of Funds ) (collectively, the “ Parent Specified Representations and
Warranties ”), the representations and warranties of Parent contained in this Agreement, the Escrow Agreement, and any
certificate or other writing delivered pursuant hereto will be true and correct in all respects (in the case of any representation or
warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or
warranty not qualified by materiality or Material Adverse Effect) on and as of the date hereof and on and as of the Closing Date
with the same effect as though made at and as of such date (except those representations and warranties that address matters only
as of a specified date, the accuracy of which will be determined as of that specified date in all respects). The Parent Specified
Representations and Warranties will be true and correct in all respects on and as of the date hereof and on and as of the Closing
Date with the same effect as though made at and as of such date.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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(b) Parent will have duly performed and complied in all material respects with all agreements, covenants and conditions
required by this Agreement and the Escrow Agreement to be performed or complied with by it before or on the Closing Date;
provided, that, with respect to agreements, covenants and conditions that are qualified by materiality, Parent will have performed
such agreements, covenants and conditions, as so qualified, in all respects.
(c) The Representative will have received each of the following documents, in each case duly executed (if applicable) by each
party thereto other than the Company and in form and substance reasonably acceptable to Representative:
(i)
the Escrow Agreement;
(ii)
the Paying Agent Agreement; and
(iii) each of the Employment Agreements.
Article VII
TERMINATION
7.1
Termination.
(a)
This Agreement may be terminated at any time before the Closing:
(i)
by the mutual written consent of Parent, Merger Sub, and the Company;
(ii)
by Parent and/or Merger Sub by written notice to the Company if:
(A) neither Parent nor Merger Sub is then in material breach of any provision of this Agreement and there has been a
breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by the Company
pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VI and such
breach, inaccuracy or failure has not been cured by the Company within 30 days of Representative’s receipt of written
notice of such breach from Parent and/or Merger Sub; or
(B) any of the conditions set forth in Section 6.1 or Section 6.2 has not been, or if it becomes apparent to Parent that any
of such conditions will not be, fulfilled by August 27, 2016, unless such failure is due to the failure of Parent and/or
Merger Sub to perform or comply with any of the covenants, agreements or conditions hereof to be performed or
complied with by it before the Closing;
(iii) by the Company by written notice to Parent and to Merger Sub if:
(A) the Company is not then in material breach of any provision of this Agreement and there has been a breach,
inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Parent and/or Merger
Sub pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VI and
such breach, inaccuracy or failure has not been cured by Parent and/or Merger Sub within 30 days of the receipt by them
of written notice of such breach from the Company; or
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(B) any of the conditions set forth in Section 6.1 or Section 6.3 has not been, or if it becomes apparent to the Company
that any of such conditions will not be, fulfilled by August 27, 2016, unless such failure is due to the failure of the
Company to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied
with by it before the Closing; or
(iv) by Parent or the Company if (i) any Law makes consummation of the transactions contemplated by this Agreement
illegal or otherwise prohibited or (ii) any Government Entity has issued an Order restraining or enjoining the transactions
contemplated by this Agreement, and such Order has become final and non-appealable.
(b) If not earlier terminated pursuant to Section 7.1(a) or extended by mutual agreement of the parties, this Agreement will
terminate without further action by either party on August 27, 2016.
7.2
Effect of Termination. In the event of the termination of this Agreement in accordance with this Article VII, this Agreement
will forthwith become void and there will be no liability on the part of any party hereto except as set forth in this Article VII and
except that nothing herein will relieve any party hereto from liability for any willful breach of any provision hereof.
Article VIII
INDEMNIFICATION
8.1
Survival. The representations, warranties and covenants of the Company, on the one hand, and Parent and Merger Sub, on the
other hand, contained in this Agreement (including the disclosure schedules attached hereto and any certificates delivered pursuant
hereto) will survive the Closing to the extent specified below:
(a) All covenants and agreements (as distinct from representations and warranties) that contemplate performance following the
Closing Date will survive the Closing in accordance with their terms.
(b) The representations and warranties of the Company set forth in Article III will survive the Closing until the close of
business on July 31, 2017 (the “ Representation Expiration Date ”), at which time they will expire. No claim may be brought or
indemnity asserted with respect to any such representation or warranty after they expire, but any claim (whether or not fixed as
to liability or liquidated as to amount) with respect to which an Indemnitee has given written notice to the Indemnitor in
accordance with Section 8.4 on or before the Representation Expiration Date may continue to be asserted and indemnified
against until finally resolved.
(c) The representations and warranties of Parent and Merger Sub made in Sections 4.9, 4.10, and 4.11 will survive the Closing
until the Earn Out Completion Date, at which time they will expire. No other representations and warranties of Parent and
Merger Sub will survive the Closing, and no claim may be made thereon or with respect thereto after the Closing.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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8.2
General Indemnification.
(a) Indemnification Obligations of the Former Equity Owners. From and after the Effective Time and subject to the
limitations set forth in this Article VIII , the Former Equity Owners will, exclusively through directions given by
Representative to the Escrow Agent to disburse funds held under the Escrow Agreement, indemnify Parent and its successors
and permitted assigns, and their respective Affiliates, officers, directors, employees, managers, members and partners
(collectively, the “ Parent Indemnified Parties ”), and will save and hold each of them harmless against and pay on behalf of or
reimburse such Parent Indemnified Parties in respect of any Liabilities, damages, penalties, fines, judgments, awards,
settlements, expenses (including reasonable attorneys’ and consultants’ fees) and costs (individually a “ Loss ” and collectively “
Losses ”) that any such Parent Indemnified Party may incur, suffer, sustain or become subject to as a result of:
(i)
any inaccuracy in or breach of any representation or warranty made by the Company in this Agreement; or
(ii)
any non-fulfillment or breach of any covenant made by the Company and/or Representative in this Agreement.
(b) Indemnification Obligations of Parent. Parent will indemnify Representative and the Former Equity Owners and each of
their respective successors and permitted assigns (collectively, the “ Former Equity Owner Indemnified Parties ”) and will save
and hold each of them harmless against and pay on behalf of or reimburse such Former Equity Owner Indemnified Parties as and
when incurred for any Losses that any Former Equity Owner Indemnified Party may incur, suffer, sustain or become subject to
as a result of:
(i)
any inaccuracy in or breach of any representation or warranty made by Parent and Merger Sub made in Sections 4.9,
4.10, and 4.11; or
(ii)
any non-fulfillment or breach of any covenant made by Parent in this Agreement.
(c) Limitations on Indemnification. Notwithstanding anything in this Agreement to the contrary, the right of Parent
Indemnified Parties to indemnification pursuant to this Article VIII is limited as follows:
(i)
Claims Pursuant to Section 8.2(a)(i). The Former Equity Owners will not be required to indemnify Parent
Indemnified Parties in respect of any Losses for which indemnity is claimed under Section 8.2(a) :
(A) unless and until the aggregate of all such Losses exceeds $200,000 (the “Deductible”), in which case the Former
Equity Owners will only be required to indemnify Parent Indemnified Parties for Losses in excess of the Deductible; and
(B) to the extent the aggregate liability of the Former Equity Owners for all such Losses exceeds $2,000,000.
Moreover, the Former Equity Owners will not be liable for any individual or series of related Losses which do not exceed
$2,000 (which Losses will not be counted towards the other limits in this Section 8.2(c)(i) ).
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(ii) Claims Pursuant to Section 8.2(a)(ii) and Fraud by the Company. Notwithstanding the above, the limitations
contained in Section 8.2(c)(i)(A) will not limit the Former Equity Owners’ obligations to indemnify Parent Indemnified
Parties (A) pursuant to Section 8.2(a)(ii) (non-fulfillment or breach of any covenant) or (B) for any Losses that any Parent
Indemnified Party may incur, suffer, sustain, or become subject to as a result of fraud on the part of the Company.
(iii) Claims Based on Fraud by a Former Equity Owner. Notwithstanding the above, the limitations contained in
Section 8.2(c)(i)(A) will not limit the obligations of any Former Equity Owner to indemnify Parent Indemnified Parties
with respect to any Losses that any Parent Indemnified Party may incur, suffer, sustain, or become subject to as a result of
fraud on the part of such Former Equity Owner, provided that in no event will a Former Equity Owner have any liability
under this Section 8.2(c)(iii) (x) for an amount in excess of the Merger Consideration received by such Former Equity
Owner pursuant to this Agreement or (y) resulting from fraud on the part of another Former Equity Owner.
(iv) Insurance. The right of an indemnified party to indemnification pursuant to Section 8.2 on account of any Losses will
be reduced by all insurance proceeds actually received by such party, less any collection costs and increases in future
premiums related to such Losses.
(v) Punitive Damages. The indemnified parties will not be entitled to recover punitive, exemplary, speculative,
consequential or indirect damages under this Article VIII .
(vi) Rights to Indemnification to be Determined without Reference to Materiality Qualifications. For purposes of this
Article VIII , any inaccuracy in or breach of any representation or warranty will be determined without regard to any
materiality, Material Adverse Effect or other similar qualification contained in or otherwise applicable to such representation
or warranty.
(vii) Knowledge. Except as provided in the last sentence of this Section 8.2(c)(vii), no Former Equity Owner will be liable
under this Article VIII for any Losses resulting from or relating to any inaccuracy in or breach of any representation or
warranty in this Agreement if Parent Indemnified Parties had knowledge of such inaccuracy or breach prior to Closing.
Parent Indemnified Parties will be entitled to indemnification under this Article VIII for any Losses resulting from or
relating to any inaccuracy or breach of any representation or warranty in Section 3.12 of this Agreement (“ Health Care Law
Matters ”), whether or not Parent or any Parent Indemnified Party had knowledge of such inaccuracy or breach prior to
Closing; provided, however, Parent Indemnified Parties shall be deemed to have knowledge of the Company’s FDA Untitled
Letter dated June 22, 2015 and the contents thereof, and such knowledge will preclude any Parent Indemnified Parties from
pursuing indemnification under this Article VIII for any Losses relating to, or arising out of, continued marketing of the
products identified in the FDA Untitled Letter to the extent those Losses result from those products not being solely
regulated by Section 361 of the PHS Act because they are more than minimally manipulated due to the cryomilling process.
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Exchange Commission.
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8.3
Exclusive Remedy. From and after the Effective Time, the remedies provided by this Article VIII, subject to the limitations
set forth herein, will be the sole and exclusive remedies of Parent Indemnified Parties and the Former Equity Owner Indemnified
Parties relating to or arising out of any inaccuracy in or breach of any representation, warranty, covenant, agreement or obligation set
forth herein or otherwise relating to the subject matter of this Agreement (other than claims arising from fraud and claims for specific
performance of the terms of this Agreement or the Escrow Agreement). Without limiting the generality of the foregoing, Parent
Indemnified Parties and Former Equity Owner Indemnified Parties hereby waive any statutory, equitable or common law rights or
remedies that otherwise may be asserted by such party for the recovery of Losses resulting from, relating to or arising out of any
inaccuracy in or breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the
subject matter of this Agreement, except pursuant to the indemnification provisions set forth in this Article VIII . Nothing in this
Section 8.3 will limit any Person’s right to seek or obtain specific performance of the terms of this Agreement or the Escrow
Agreement or to seek any remedy on account of any Person’s fraudulent conduct.
8.4
Indemnification Procedures.
(a) Third Party Claims. If any Person making a claim for indemnification under this Article VIII (an “ Indemnitee ”) receives
written notice of the assertion or commencement of any Action made or brought by any Person who is not a party to this
Agreement (or an Affiliate of a party to this Agreement or a representative of the foregoing) against the Indemnitee (a “ Third
Party Claim ”), the Indemnitee must deliver to the indemnifying party (an “ Indemnitor ”) a written notice of such Third Party
Claim promptly after receiving notice of such Third Party Claim describing in reasonable detail the nature of such Third Party
Claim, a good faith estimate of the amount of Losses thereof (if known and quantifiable) and the basis thereof; provided ,
however , that the failure to so notify an Indemnitor will not relieve the Indemnitor of its obligations hereunder unless and to the
extent the Indemnitor will be actually prejudiced by such failure to so notify. Any Indemnitor will be entitled to participate in the
defense of such Third Party Claim at such Indemnitor’s expense or, by giving written notice to the Indemnitee in which the
Indemnitor accepts and assumes the responsibility for all Losses relating to such Third Party Claim (subject to the limitations set
forth below), will be entitled to assume the defense of such Third Party Claim by appointing a reputable counsel reasonably
acceptable to the Indemnitee to be the lead counsel in connection with such defense; provided , however , that:
(i)
the Indemnitee will be entitled to participate in the defense of such Third Party Claim and to employ counsel of its
choice for such purpose and the Indemnitee will be responsible for the fees and expenses of such separate counsel; provided ,
further that if (A) any fees and expenses of such separate counsel were incurred by the Indemnitee before the date the
Indemnitor assumes control of such Third Party Claim or (B) any fees or expenses of such separate counsel engaged by the
Indemnitee are incurred following a determination that, in the reasonable opinion of counsel to the Indemnitee, there are
legal defenses available to an Indemnitee that are inconsistent with those available to the Indemnitor, then, notwithstanding
the foregoing, such fees and expenses of separate counsel will be borne by the Indemnitor (subject to the limitations set forth
herein); and
(ii) the Indemnitor will not be entitled to assume control of the defense of a Third Party Claim if (A) such claim relates to
or arises in connection with any criminal proceeding, Action, indictment, allegation or investigation; (B) the Indemnitee
reasonably believes an adverse determination with respect to such claim would be materially detrimental to or injure the
Indemnitee’s reputation or future business prospects; (C) the claim seeks an injunction or equitable relief against the
Indemnitee; (D) the Indemnitor failed or is failing to vigorously prosecute or defend such claim; (E) such claim is asserted
directly or on behalf of a Person that is a customer or supplier of the Company; or (F) the Indemnitor, in the reasonable
judgment of the Indemnitee, does not have the financial resources to satisfy the amount of such claim, provided , that
before the Indemnitee making such judgment, the Indemnitee will give the Indemnitor written notice and the opportunity to
demonstrate to the Indemnitee in writing such Indemnitor’s financial ability to satisfy the amount of such claim.
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Exchange Commission.
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(b) Settlement of Third Party Claims. Notwithstanding any other provision of this Agreement, the Indemnitor will not enter
into settlement of any Third Party Claim without the prior written consent of the Indemnitee (which consent will not be
unreasonably withheld, conditioned or delayed), except as provided in this Section 8.4(b) . If an offer is made to settle a Third
Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee and
provides for the unconditional release of each Indemnitee from all liabilities and obligations in connection with such Third Party
Claim and the Indemnitor desires to accept and agree to such offer, the Indemnitor will give written notice to that effect to the
Indemnitee. If the Indemnitee fails to consent to such offer within ten Business Days after its receipt of such notice, the
Indemnitor may continue to contest or defend such Third Party Claim and in such event, the maximum liability of the Indemnitor
as to such Third Party Claim will not exceed the amount of such settlement offer. If the Indemnitee fails to consent to such offer
and also fails to assume defense of such Third Party Claim, the Indemnitor may settle the Third Party Claim upon the terms set
forth in such firm offer to settle such Third Party Claim.
(c) Direct Claims. Any Action by an Indemnitee on account of a Loss that does not result from a Third Party Claim (a “ Direct
Claim ”) must be asserted by the Indemnitee as soon as is reasonably practicable after the Indemnitee becomes aware of such
Direct Claim, but no delay in, or failure to give such notice will adversely affect any of the other rights or remedies of the
Indemnitee or alter or relieve the Indemnitor of its obligation to indemnify the Indemnitee to the extent that such delay or failure
has not materially prejudiced the Indemnitor. Such notice by the Indemnitee must describe the Direct Claim in reasonable detail
and will indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the
Indemnitee. The Indemnitee will allow the Indemnitor and its professional advisors to investigate the matter or circumstance
alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and
the Indemnitee will assist the Indemnitor’s investigation by giving such information and assistance (including reasonable access
to the Company’s premises and personnel and the right to examine and copy any accounts, documents or records) as the
Indemnitee or any of its professional advisors may reasonably request. Within 20 Business Days after being notified of any such
Direct Claim, the Indemnitor must notify the Indemnitee of whether or not such Indemnitor disputes its liability for such Direct
Claim. If the Indemnitor does not so notify the Indemnitee that it disputes its liability for such Direct Claim within such
20-Business Day period, the Indemnitee will have the right to initiate the dispute resolution procedures set forth in Section 10.12.
8.5
Payments. Once a Loss is agreed to by an Indemnitor or is conclusively determined to be a liability of an Indemnitor pursuant
to the dispute resolution procedures set forth in Section 10.12, the Indemnitor must satisfy its obligations by initiating (or, if the
Indemnitor is, collectively, the Former Equity Owners, by cooperating with Parent to cause the Escrow Agent to initiate) a wire
transfer of immediately available funds in the amount of such Loss to an account designated in writing by the Indemnitee within
30 days after the final determination thereof.
8.6
Merger Consideration Adjustment Treatment. All indemnification payments made pursuant to this Article VIII will be
treated as adjustments to the Merger Consideration for all purposes and the parties agree to file their Tax Returns accordingly.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
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Article IX
Definitions
9.1
Definitions. For the purposes hereof, the following terms have the meanings set forth below:
“2014 Audited Financial Statements” means the audited consolidated balance sheet of the BioD Companies as of December 31,
2014, and the related statements of income, members’ equity, and cash flows for the fiscal year then ended, together with the notes
thereto and the report thereon, that (a) are prepared from the books and records of the BioD Companies, and (b) are prepared in
accordance with GAAP, together with an unqualified audit opinion by the BioD Companies’ auditor.
“2015 Audited Financial Statements” means the audited consolidated balance sheet of the BioD Companies as of December 31,
2015, and the related statements of income, members’ equity, and cash flows for the fiscal year then ended, together with the notes
thereto and the report thereon, that (a) are prepared from the books and records of the BioD Companies, and (b) are prepared in
accordance with GAAP, together with an unqualified audit opinion by the BioD Companies’ auditor.
“12/31/15 Balance Sheet” has the meaning set forth in Section 3.5(a).
“Accounting Firm” has the meaning set forth in Section 2.8(b)(ii).
“Accredited Investor” means a Former Equity Owner who, as of the Effective Time, is an accredited investor, as that term is
defined in Regulation D under the Securities Act.
“Acquisition Proposal” has the meaning set forth in Section 5.4(a).
“Action” means any cause of action, lawsuit, arbitration, audit, notice of violation, proceeding, litigation, citation, summons,
subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.
“Affiliate” of any particular Person means any other Person controlling, controlled by or under common control with such
particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies
of a Person whether through the ownership of voting securities, contract or otherwise.
“Agreement” has the meaning set forth in the preamble.
“Allocation Schedule” has the meaning set forth in Section 5.7(h).
“Ancillary Agreement” means, with respect to a Person, any document executed and delivered by or on behalf of such Person or
any Affiliate of such Person, in connection with the execution and delivery of this Agreement or Closing, pursuant to the terms of
this Agreement (but not including this Agreement).
“Asset Sale Purchase Price” has the meaning set forth in Section 5.7(h).
“Audited Financial Statements” has the meaning set forth in Section 3.5.
“Base Merger Consideration” has the meaning set forth in Section 2.2.
“Board Observer” has the meaning set forth in Section 5.9.
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Exchange Commission.
CONFIDENTIAL
“Board of Managers” means the Board of Managers of the Company.
“Business” means the development, manufacturing, and marketing of regenerative tissue products based on human amnion.
“Business Day” means any day that is not a Saturday, a Sunday or a day on which banks in New York, New York are required or
permitted to be closed.
“CE Marking” means that certain conformity marking for products to be sold in the European Economic Area.
“CERCLA” means the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended.
“Certificates of Formation” mean, collectively, (a) the Company Certificate of Formation, (b) the Certificate of Formation, dated as
of February 2, 2009, of BioDlogics, and all amendments filed with respect thereto, and (c) the Certificate of Formation, dated as of
October 20, 2005, of BioRecovery, and all amendments with respect thereto, each as filed in the State of Delaware.
“Closing” has the meaning set forth in Section 1.2(a).
“Closing Date” has the meaning set forth in Section 1.2(a).
“Closing Payment” has the meaning set forth in Section 2.8(a)(ii).
“Closing Payment Spreadsheet” has the meaning set forth in Section 2.4.
“Closing Statement” has the meaning set forth in Section 2.8(b)(i).
“Closing Working Capital” means the excess of (i) the Current Assets of the BioD Companies as of the Closing Date over (ii) the
Current Liabilities of the BioD Companies as of the Closing Date, in each case calculated in a manner consistent with the 2015
Audited Financial Statements.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company” has the meaning set forth in the preamble to this Agreement.
“Company Certificate of Formation” means the Certificate of Formation, dated as of October 20, 2005, of the Company, and all
amendments filed with respect thereto, as filed in the State of Delaware.
“Company LLC Agreement” means that certain Limited Liability Company Agreement, dated as of October 20, 2005, of the
Company, as amended from time to time.
“Company Specified Representations and Warranties” has the meaning set forth in Section 6.2(a).
“Company Subsidiaries” means, collectively, BioDlogics and BioRecovery.
“Company Transaction Expenses” means the fees and expenses payable by the Company to Baker, Donelson, Bearman, Caldwell
& Berkowitz, P.C. and Canaccord Genuity arising from, incurred in connection with or incident to this Agreement and the
transactions contemplated hereby that relate solely to legal, advisory or brokerage services provided and expenses incurred at or
before the Effective Time.
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Exchange Commission.
CONFIDENTIAL
“Contracts” means the contracts, agreements, leases (other than the Leases), licenses, deeds, mortgages, promissory notes,
indentures, purchase orders, task orders, change orders or other documents in which the terms of any Contract are supplemented or
in any way modified to which any of the BioD Companies is a party, whether written or oral.
“Current Assets” means cash, accounts receivable, inventory and prepaid expenses, but excluding (a) the portion of any prepaid
expense of which neither Parent nor the Surviving Company will receive the benefit following the Closing, (b) deferred Tax assets,
and (c) receivables from any of the BioD Companies’ Affiliates, managers, employees, officers or equity owners and any of their
respective Affiliates determined in accordance with GAAP.
“Current Liabilities” means accounts payable, accrued Taxes and accrued expenses, but excluding Company Transaction Expenses
and excluding payables to any of the BioD Companies’ Affiliates, managers, employees, officers or equity owners and any of their
respective Affiliates, deferred Tax liabilities and the current portion of long term debt, determined in accordance with GAAP.
“Deductible” has the meaning set forth in Section 8.2(c)(i)(A).
“Direct Claim” has the meaning set forth in Section 8.4(c).
“Disputed Items” has the meaning set forth in Section 2.8(b)(ii).
“Earn Out Completion Date” has the meaning set forth in Section 2.11(l).
“Earn Out Disputed Items” has the meaning set forth in Section 2.11(e).
“Earn Out Objection Statement” has the meaning set forth in Section 2.11(e).
“Earn Out Payment” means a payment of either the First Earn Out Consideration or Second Earn Out Consideration, as applicable.
“Earn Out Payment Date” means the date on which an Earn Out Payment is made.
“Earn Out Review Period” has the meaning set forth in Section 2.11(b).
“Earn Out Year” means a First Earn Out Year or Second Earn Out Year.
“Effective Time” has the meaning set forth in Section 1.2(b).
“Employee Benefit Plan” means each “employee benefit plan” (as defined in ERISA §3(3)) and each other material benefit plan,
program, or arrangement maintained, sponsored, contributed to (or required to be contributed to) by the Company or any ERISA
Affiliate of any of the BioD Companies, or with respect to which any of the BioD Companies or any ERISA Affiliate of the BioD
Companies has any Liability.
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Exchange Commission.
CONFIDENTIAL
“Environmental, Health and Safety Requirements” means all federal, state, local and foreign Laws, all judicial and administrative
orders and determinations, all contractual obligations and all common law, in each case concerning public health and safety,
worker health and safety and pollution, exposure to Hazardous Materials or protection of the environment, including those:
(i) relating to natural resources or natural resource damages, endangered or threatened species, human health or safety or the
environment (including ambient air, soil, surface water or groundwater or subsurface strata) or (ii) concerning the presence of,
exposure to, or the management, manufacture, use, Release, containment, storage, recycling, reclamation, reuse, treatment,
licensing, reporting, permitting, investigation, generation, discharge, transportation, processing, production, disposal or
remediation of any Hazardous Materials.
“Equity Interest” means any unit, membership interest, capital stock, partnership or other similar interest in any Person, and any
option, warrant, right or security (including debt securities) convertible, exchangeable or exercisable therefore.
“Equity Owner,” up until immediately before the Effective Time, means a Person who holds Units.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means any organization that is a member of the controlled group of organizations of the Company and the
Company Subsidiaries (within the meaning of Sections 414(b), (c) or (e) of the Code).
“Escrow Agent” means such entity as Representative and Parent agree should act as escrow agent under the Escrow Agreement.
“Escrow Agreement” has the meaning set forth in Section 6.2(e)(i).
“Estimated Adjustment” has the meaning set forth in Section 2.8(a)(ii).
“Estimated Closing Working Capital” has the meaning set forth in Section 2.8(a)(i).
“Exchange Act” means the Exchange Act of 1934, as amended.
“Expense Fund Amount” has the meaning set forth in Section 2.4(b)(iii)(B).
“FDA” means the U.S. Food and Drug Administration.
“FDA Meeting” has the meaning set forth in Section 5.11(c).
“FDA Meeting Minutes” has the meaning set forth in Section 5.11(c).
“Field” means the following dermal applications: partial and full thickness burns, pressure ulcers, venous ulcers, diabetic ulcers,
chronic vascular ulcers, tunnel/undermined wounds, surgical wounds (donor sites/grafts and dehiscence), trauma wounds
(abrasions, laceration, second degree burns, and skin tears), radiation induced wounds/burns, post-operative wounds, and draining
wounds. For clarity, “ Field ” does not include, without limitation, ocular, internal surgical, cardiac, ENT, dental, cosmetic, plastic,
reconstructive, pain management, urology, OB/GYN, sports medicine or orthopedic applications.
“Final Allocation Schedule” has the meaning set forth in Section 5.7(h).
“First Earn Out Consideration” has the meaning set forth in Section 2.11(a).
“First Earn Out Year” has the meaning set forth in Section 2.11(a).
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Exchange Commission.
CONFIDENTIAL
“Former Equity Owner,” from and after the Effective Time, means a Person who held Units that were outstanding immediately
before the Effective Time.
“Former Equity Owner Expense Fund” means the cash fund held and administered by Representative for the payment of Former
Equity Owner Expenses.
“Former Equity Owner Expenses” has the meaning set forth in Section 2.14(d).
“Former Equity Owner Indemnified Parties” has the meaning set forth in Section 8.2(b).
“GAAP” means United States generally accepted accounting principles consistently applied, as in effect from time to time.
“General Escrow Amount” has the meaning set forth in Section 2.4(a).
“Government Entity” means individually, and “Government Entities” means collectively, the United States of America or any
other nation, any state, municipality or other political subdivision thereof, or any entity exercising executive, legislative, judicial,
regulatory or administrative functions of government, including any court, in each case having jurisdiction over the Company.
“Hazardous Materials” means (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid,
mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of
similar import or regulatory effect under Environmental, Health and Safety Requirements, and (b) any petroleum or
petroleum-derived products, radioactive materials or wastes, asbestos in any form, urea formaldehyde foam insulation,
polychlorinated biphenyls, and, to the extent actually regulated by Environmental Health and Safety Requirements, radon, mold,
and lead or lead-containing materials.
“Health Care Law” means any Law relating to health care regulatory matters, including, without limitation (a) 42 U.S.C. §§
1320a-7, 7a and 7b, which are commonly referred to as the “Medicare-Medicaid Anti-Fraud and Abuse Amendments,” (b) 42
U.S.C. § 1395nn and all regulations promulgated thereunder, which are commonly referred to as the “Stark Law,” (c) 31 U.S.C. §§
3729-3733, which is commonly referred to as the “Federal False Claims Act,” (d) HIPAA, (e) the Occupational Safety and Health
Act and all regulations promulgated under such legislation, (f) the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 321 et seq.,
as amended, and all regulations promulgated thereunder, including the labeling and advertising regulations and the prohibitions
against pre-approval (or pre-clearance) promotion of unapproved products or unapproved intended uses of products (g) the Public
Health Services Act, as amended, and its implementing regulations, (h) the Clinical Laboratory Improvement Amendments, and all
regulations promulgated thereunder, including 42 C.F.R. Part 493, (i) applicable laws of the United States Drug Enforcement
Administration and all regulations promulgated thereunder, (j) applicable state anti-kickback, fee-splitting and patient brokering
laws, (k) state information privacy and security laws, and (l) state laws governing the licensure and operation of clinical
laboratories.
“Health Care Professional” means any individual who is in a position to purchase, prescribe, dispense, administer, recommend or
arrange for the purchase, influence the use or prescription of, recommend, or facilitate access to any BioD Company Product or
similar products.
“Healthcare Programs” has the meaning set forth in Section 3.12(g).
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Exchange Commission.
CONFIDENTIAL
“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, Title II, Subtitle F, Sections 261-264, Public
Law 104-191, and the Standards for Privacy of Individually Identifiable Health Information, 45 C.F.R. Parts 160-164 as of the
effective dates of such laws.
“Indebtedness” means, without duplication, with respect to the BioD Companies, (i) any liability or obligation for borrowed money
(including, without limitation, all principal, interest, premiums, penalties, fees, expenses, indemnities, brokerage costs and any
payments associated with the repayment of any such obligations), (ii) any liability or obligation evidenced by any note, bond,
debenture or other debt security, (iii) any commitment that assures a creditor against loss (including contingent reimbursement
obligations with respect to letters of credit, banker’s acceptance or note purchase facility), (iv) any liability or obligation pursuant
to a guarantee, (v) any obligations under capitalized leases determined in accordance with GAAP or with respect to which such
entity is liable, contingently or otherwise, as obligor, guarantor or otherwise, or with respect to which obligations such entity
assures a creditor against loss, and (vi) any obligations under any interest rate, currency or other hedging arrangement. For the
avoidance of doubt, Indebtedness will not include any trade payables incurred in the Ordinary Course of Business.
“Indemnified Party” has the meaning set forth in Section 5.8(a).
“Indemnifying Party” has the meaning set forth in Section 5.8(b).
“Indemnitee” has the meaning set forth in Section 8.4(a).
“Indemnitor” has the meaning set forth in Section 8.4(a).
“Insurance Policy” has the meaning set forth in Section 3.16.
“Intellectual Property Rights” means any or all of the following and all similar intangible property and related proprietary rights,
interests and protections, however arising, pursuant to the Laws of any jurisdiction throughout the world: (i) all design and utility
patents, letters patent, patented and patentable designs and inventions, and pending patent applications and provisional
applications, including continuations, divisionals, continuations-in-part, reexaminations, renewals, or reissues of patent
applications and patents issuing thereon throughout the world, (ii) all trademarks, service marks, trade names, service names, brand
names, logos, slogans and trade dress and other proprietary indicia of goods and services whether registered, unregistered or arising
by Laws, and all applications, registrations and renewals thereof, including intent-to-use applications, all issuances, extensions and
renewals of such registrations and applications and all rights corresponding thereto throughout the world, (iii) all original works of
authorship in any medium of expression, whether or not published, all copyrights (whether registered, unregistered or arising by
Laws), all registrations and applications for registration of such copyrights, and all issuances, extensions and renewals of such
registration and applications, and all other literary property or author rights and all other rights corresponding thereto throughout
the world, and mask work rights, (iv) internet domain names, whether or not trademarks, registered in any generic top level domain
by any authorized private registrar or Government Entity, uniform resource locators, (v) confidential information, formulas,
designs, devices, technology, know-how, research and development, inventions, invention disclosures, proprietary information,
improvements, methods, processes, compositions, customer lists and other trade secrets, whether or not patentable and any
documentation related thereto and (vi) computer software (including data, source code and all related documentation and
information).
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Exchange Commission.
CONFIDENTIAL
“Investment” as applied to any Person means (i) any direct or indirect purchase or other acquisition by such Person of any notes,
obligations, instruments, stock, securities or ownership interest (including partnership interests and joint venture interests) of any
other Person and (ii) any capital contribution by such Person to any other Person.
“IRB” has the meaning set forth in Section 3.11(f).
“IRS” means the United States Internal Revenue Service.
“June 30, 2016 Financial Statements” has the meaning set forth in Section 3.5(a).
“Knowledge of the Company” means the actual knowledge of any of Russ Olsen, Tim Brahm, Donna Best, Jerry Chang, Darin
Gerlach, or Kevin Scott, and/or the constructive knowledge any one or more of them would have had after due inquiry.
“Laws” means all statutes, laws, codes, ordinances, regulations, rules, orders, judgments, writs, injunctions, acts or decrees of any
Government Entity.
“Leased Real Property” means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings,
structures, improvements, fixtures or other interest in real property held by any of the BioD Companies.
“Leases” means all leases, subleases, licenses, concessions and other agreements (written or oral) pursuant to which any of the
BioD Companies holds any Leased Real Property, including the right to all security deposits and other amounts and instruments
deposited by or on behalf of the applicable BioD Company thereunder.
“Liability” or “Liabilities” means, with respect to any Person, any direct or indirect liability, obligation, debt, guaranty or
endorsement of whatever kind or nature (whether secured or unsecured, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether due or to become due, or otherwise) and
whether or not the same is required to be accrued on the financial statements of such Person, including any liability for Taxes.
“Licensed Intellectual Property” means all of the Intellectual Property Rights used by the BioD Companies in connection with the
Business other than the Owned Intellectual Property.
“Lien” or “Liens” means any mortgage, pledge, security interest, right of first refusal, option, encumbrance, lien, or charge of any
kind (including any conditional sale or other title retention agreement or lease in the nature thereof), any sale of receivables with
recourse against the any of the BioD Companies, any filing or agreement to file a financing statement as debtor under the Uniform
Commercial Code or any similar statute, or any subordination arrangement in favor of another Person.
“LLC Agreement” means the Company LLC Agreement.
“Lock-Up Period ” has the meaning set forth in Section 2.14(f)(i).
“Loss” or “Losses” has the meaning set forth in Section 8.2(a).
“Management Financial Statements” has the meaning set forth in Section 3.5(a).
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Exchange Commission.
CONFIDENTIAL
“Material Adverse Effect” means an event, occurrence, or development which has had a material adverse effect upon the financial
condition or operating results of the BioD Companies taken as a whole, except any adverse effect related to or resulting from
(i) general business or economic conditions affecting the industry in which the BioD Companies operate that do not
disproportionately affect the BioD Companies, (ii) national or international political or social conditions, including the engagement
by the United States in hostilities or the escalation thereof, whether or not pursuant to the declaration of a national emergency or
war, or the occurrence or the escalation of any military or terrorist attack upon the United States, or any of its territories,
possessions, or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, in
each case that do not disproportionately affect the BioD Companies, (iii) changes in laws, rules, regulations, orders, or other
binding directives issued by any Government Entity, (iv) the taking of any action contemplated by this Agreement or the other
agreements contemplated hereby or the announcement of this Agreement, the other agreements contemplated hereby or the
transactions contemplated hereby or thereby (except to the extent in violation of this Agreement), or (v) the execution and delivery
of this Agreement or announcement of the transactions contemplated hereby or the identity, business or operations of Parent or its
Subsidiaries or any facts or circumstances relating to Parent or its Subsidiaries, including in each case the loss of customers,
suppliers or vendors.
“Material Contracts” has the meaning set forth in Section 3.9(b).
“Material Customer” has the meaning set forth in Section 3.24.
“Material Permits” has the meaning set forth in Section 3.19(b).
“Material Supplier” has the meaning set forth in Section 3.24.
“MedWatch” means the FDA’s Safety Information and Adverse Event Reporting Program.
“Merger” has the meaning set forth in Section 1.1
“Merger Consideration” has the meaning set forth in Section 2.2.
“Merger Sub” has the meaning set forth in the preamble.
“Net Sales” for any period means gross sales made by the BioD Companies, determined on a consolidated basis after deducting
amounts in respect of any returns and customer discounts, in each case calculated in a manner consistent with the 2015 Audited
Financial Statements. For the avoidance of doubt, Net Sales do not include royalties received from any source but do include
(i) payments (including Transfer Pricing) by Parent or any of its Affiliates (other than the BioD Companies) to any of the BioD
Companies for any current or future BioD Company Products, and, without duplication, (ii) sales by Parent or any of its Affiliates
to third parties of BioDRestore, BioDFactor®, BioDOptix®, BioDFence®, BioDFence® G3, BioDDryFlex® and same by
different trade name, and of any other future BioD Company Products, except that, in the case of both clause (i) and (ii), “future
BioD Company Products” will include only products that are internally developed by the Company and will not include any BioD
Company Products or Parent products that were developed or currently licensed by any other Person before being acquired by the
Company.
“Nine Month Date” has the meaning set forth in Section 2.12(a)(i).
“Non-Accredited Investor” means a Former Equity Owner who is not an Accredited Investor.
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CONFIDENTIAL
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“Order” means any order, judgment, ruling, injunction, assessment, award, decree or writ, in each case issued by any Government
Entity.
“Ordinary Course of Business” means the BioD Companies’ ordinary course of business consistent with their past custom and
practice, whether on an individual company basis or collectively.
“Organizational Document” means, for any Person: (a) the articles or certificate of incorporation, formation or organization (as
applicable) and the by-laws or similar governing document of such Person; (b) any limited liability company agreement,
partnership agreement, operating agreement, stockholder agreement, voting agreement, voting trust agreement or similar document
of or regarding such Person; or (c) any other charter or similar document adopted or filed in connection with the incorporation,
formation, organization or governance of such Person.
“Owned Intellectual Property” means all of the Intellectual Property Rights owned by the BioD Companies.
“Parent” has the meaning set forth in the preamble.
“Parent Board” has the meaning set forth in Section 2.13.
“Parent Indemnified Parties” has the meaning set forth in Section 8.2(a).
“Parent Share Limit” means (a) 5,166,796 Parent Shares, which number constitutes approximately 19.9% of all Parent Shares
outstanding as of the date of this Agreement, minus (b) such number of Parent Shares as may be purchased by Former Equity
Owners in a private placement that may be conducted by Parent following the execution of this Agreement.
“Parent Shares” means shares of common stock of Parent.
“Parent Specified Representations and Warranties” has the meaning set forth in Section 6.3(a).
“BioD Companies” means, collectively, the Company, BioDlogics, and BioRecovery.
“BioD Company Products” has the meaning set forth in Section 3.11(a).
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“BioD Intellectual Property” means the Owned Intellectual Property and the Licensed Intellectual Property.
“BioD Intellectual Property Registrations” has the meaning set forth in Section 3.10(a)(i).
“BioDlogics” means BioDlogics, LLC, a Delaware limited liability company.
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Exchange Commission.
CONFIDENTIAL
“BioRecovery” means BioRecovery, LLC, a Delaware limited liability company.
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“Paying Agent” means such entity as Representative and Parent agree should act as paying agent under the Paying Agent
Agreement.
“Paying Agent Agreement” has the meaning set forth in Section 6.2(e)(ii).
“Per Share Earn Out Payment Value” has the meaning set forth in Section 2.11(g).
“Per Share Product Payment Value” has the meaning set forth in Section 2.12(f).
“Per Share Signing Value” has the meaning set forth in Section 2.6.
“Per Unit Share,” as to each payment of Merger Consideration that is payable to Former Equity Owners (whether at the Closing or
at any time or times thereafter), means a fractional share of such payment determined by multiplying the aggregate amount of that
payment by a fraction, the numerator of which is one and the denominator is the aggregate number of Units (including Class A
Units, Class B Units, and Class C Units) set forth on the Unit Table that is attached as Exhibit A .
“Permitted Liens” means (i) statutory Liens for current Taxes or other governmental charges not yet due and payable,
(ii) mechanic’s, carriers’, workers’, repairers’ and similar statutory Liens arising or incurred in the Ordinary Course of Business for
amounts which are not delinquent and which are not, individually or in the aggregate, significant, (iii) zoning, entitlement, building
and other land use regulations imposed by Government Entities having jurisdiction over the Leased Real Property which are not
violated by the current use and operation of the Leased Real Property, (iv) covenants, conditions, restrictions, easements and other
similar matters of record affecting title to the Leased Real Property which do not materially impair the occupancy or use of the
Leased Real Property for the purposes for which it is currently used or proposed to be used in connection with the Business,
(v) public roads and highways, (vi) Liens arising under worker’s compensation, unemployment insurance, social security,
retirement and similar legislation, and (viii) purchase money liens and liens securing rental payments under capital lease
arrangements.
“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a Government Entity or any department, agency or political subdivision
thereof.
“Post-2015 Quarterly Financial Statements” has the meaning set forth in Section 6.2(c).
“Post-Closing Payment” means any amount that becomes due and payable, directly or indirectly, to Former Equity Owners
pursuant to the Escrow Agreement or Section 2.8 , Section 2.12 , or Section 5.7 of this Agreement.
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Exchange Commission.
CONFIDENTIAL
“Post-Closing Payment Spreadsheet” means a certificate executed by Representative setting forth, in reasonable detail, as of the
date any Post-Closing Payment is required to be made, (i) the amount of any supplemental deposit to the Former Equity Owner
Expense Fund requested by Representative in accordance with Section 2.14(d) , arising in connection with or related to such
Post-Closing Payment, and wire transfer instructions for any Person to whom any such expenses or deposit will be payable; and (ii)
with respect to each Former Equity Owner, the aggregate number of Units formerly held by such Person, and the portion of the
Post-Closing Payment payable to such Person.
“Post-Closing Tax Period” means the taxable period beginning after the Closing Date, excluding the portion through the end of the
Closing Date for any taxable period that includes (but does not end on) the Closing Date.
“Pre-Closing Statement” has the meaning set forth in Section 2.8(a)(i).
“Pre-Closing Tax Period” has the meaning set forth in Section 5.7(a).
“Product Payment Date” means the date on which a Product Payment is made.
“Related Party” means any current or former member, manager, officer, employee or Affiliate of any of the BioD Companies.
“Release” has the meaning set forth in CERCLA.
“Representation Expiration Date” has the meaning set forth in Section 8.1(b).
“Representative” has the meaning set forth in Section 2.14(a).
“Securities Act” has the meaning set forth in Section 3.3(b).
“Second Earn Out Consideration” has the meaning set forth in Section 2.11(b).
“Second Earn Out Year” has the meaning set forth in Section 2.11(b).
“Securities Act” means the Securities Act of 1933, as amended.
“Sharing Ratio” means a ratio, the numerator of which is the number of Units held by the respective Equity Owner and the
denominator of which is the total number of Units.
“Straddle Period” has the meaning set forth in Section 5.7(b).
“Straddle Period Taxes” means any Taxes with respect to the Straddle Period.
“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a
limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person
or a combination thereof.
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Exchange Commission.
CONFIDENTIAL
“Surviving Company” has the meaning set forth in Section 1.1(a).
“Tax” or “Taxes” means any federal, state, county, local or foreign income, gross receipts, commercial activity, ad valorem,
franchise, net worth, profits, sales or use, value added, transfer, production, documentary, profits, windfall profits, registration,
excise, utility, environmental, premium, communications, real or personal property, real property transfer, intangibles, capital
stock, license, lease, service, service use, payroll, wage or other withholding, employment, unemployment, social security,
severance, stamp, occupation, alternative or add-on minimum, estimated, customs, duties and other taxes of any kind whatsoever
(including tax for which a taxpayer is responsible by reason of Treasury Regulations Section 1.1502-6 and any comparable
provision of state, local or foreign Tax Law) or as a successor or by reason of contract, indemnity or otherwise, together with any
interest, deficiencies, penalties, additions to tax, and any interest attributable in respect of such deficiencies, penalties or additions)
whether disputed or not.
“Tax Return” means any return, declaration, report, claim for refund, information report or filing with respect to Taxes, including
any schedules attached thereto and including any amendment thereof.
“Taxing Authority” means any Government Entity responsible for the imposition or the administration of any Tax.
“Third Party Claim” has the meaning set forth in Section 8.4(a).
“Tissue Establishment Registration” means, in the case of a BioD Company, such BioD Company’s registration with the FDA as a
human cells, tissue, and/or cellular and tissue-based product establishment pursuant to 21 CFR Part 1271.
“Transfer Pricing” means the pricing charged by Company to Parent or any of its Affiliates (other than the BioD Companies) for
any BioD Company Products.
“Treasury Regulations” means final and temporary regulations promulgated under the Code.
“Unit” means a Class A Unit, a Class B Unit, or a Class C Unit, all as defined in the Company LLC Agreement.
“Unit Table” has the meaning set forth in Section 2.2(f).
“Valid Form W-9 or W-8BEN” has the meaning set forth in Section 2.5(e).
“Voting Interests” has the meaning assigned to it in the Company LLC Agreement.
9.2
Other Definitional Provisions.
(a)
All references in this Agreement to Exhibits, disclosure schedules, Articles, Sections, subsections and other
subdivisions refer to the corresponding Exhibits, disclosure schedules, Articles, Sections, subsections and other subdivisions of
or to this Agreement unless expressly provided otherwise.
(b)
The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer to this
Agreement as a whole and not to any particular subdivision unless expressly so limited. The words “this Article,” “this Section”
and “this subsection,” and words of similar import, refer only to the Article, Section or subsection hereof in which such words
occur. The word “or” is exclusive, and the word “including” (in its various forms) means including without limitation.
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
(c)
The symbol “$” and the word “dollars” refer to United States currency unless otherwise specifically provided.
Article X
Miscellaneous
10.1 Expenses. All costs and expenses incurred in connection with this Agreement, the Merger and the other transactions
contemplated by this Agreement (including, without limitation, the fees and expenses of outside legal counsel) (a) if incurred by
Parent or Merger Sub, will be paid by Parent, (b) if incurred by the Company, will be paid by the Company (except for those
Company Transaction Expenses that will be paid as provided in Section 2.4(c)), and (c) if incurred by any member of the Company,
will be paid by the member of the Company incurring the cost or expense.
10.2
Remedies. Except as expressly provided in Article VIII or elsewhere in this Agreement:
(a) any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically
(without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement, and
to exercise all other rights granted by Laws;
(b)
all such rights and remedies will be cumulative and non-exclusive, and may be exercised singularly or concurrently;
(c)
the parties acknowledge that any breach of this Agreement may cause substantial irreparable harm to the other party; and
(d)
this Agreement may be enforced in equity by specific performance, temporary restraining order and/or injunction.
10.3 Consent to Amendments; Waivers. This Agreement may be amended, or any provision of this Agreement may be waived
upon the approval, in a writing, executed by Parent and Representative. No course of dealing between or among the parties hereto will
be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any such party or such
holder under or by reason of this Agreement.
10.4 Successors and Assigns. This Agreement and the rights hereunder will not be assignable or transferable by any party without
the consent of the other parties (the consent of Representative in the case of any assignment by Parent), except that Parent may
(a) assign all or any portion of its rights under this Agreement to any of its Affiliates (but such assignment will not release Parent from
any liability or obligation under this Agreement and provided that Parent will enter into a customary guaranty of such obligations, in
such form as reasonably satisfactory to Representative) or (b) collaterally assign all or any portion of its rights under this Agreement
to any of the Company’s or Parent’s lenders, in each case without the prior written consent of Representative. This Agreement will be
binding upon the parties hereto and their respective successors and permitted assigns.
10.5 Press Releases and Communications. Parent intends to make a press release and public announcement related to this
Agreement and the transactions contemplated herein shortly after the execution of this Agreement. Parent will provide a copy of the
proposed press release to the Company for its review and comment before issuing the press release. The Company will not make a
press release or public announcement related to this Agreement or the transactions contemplated herein without the approval of Parent
(which will not be unreasonably withheld, conditioned or delayed).
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
10.6 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and
valid under applicable Law, but if any provision of this Agreement or the application of any such provision to any Person or
circumstance will be held to be prohibited by, illegal or unenforceable under applicable Law or rule in any respect by a court of
competent jurisdiction, such provision will be ineffective only to the extent of such prohibition, illegality or unenforceability, without
invalidating the remainder of such provision or the remaining provisions of this Agreement.
10.7 Counterparts. This Agreement may be executed in counterparts (including by means of telecopied, facsimile or PDF
signature pages), any one of which need not contain the signatures of more than one party, but all such counterparts taken together will
constitute one and the same agreement.
10.8 Entire Agreement. This Agreement and the other agreements and documents referred to herein contain the entire agreement
and understanding among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and
understandings, whether written or oral, relating to such subject matter in any way.
10.9 No Third Party Beneficiaries. Except as set forth in Section 5.8, this Agreement is for the sole benefit of the parties hereto
and their permitted successors and assigns (other than with respect to Parent Indemnified Parties and Former Equity Owner
Indemnified Parties, who will be third party beneficiaries of this Agreement) and nothing herein expressed or implied will give or be
construed to give any Person, other than the parties hereto and such permitted successors and assigns, any legal or equitable rights
hereunder.
10.10 Schedules and Exhibits. All Schedules, Annexes, and Exhibits attached hereto or referred to herein are hereby incorporated in
and made a part of this Agreement as if set forth in full herein. Capitalized terms used in the Schedules and not otherwise defined
therein have the meanings given to them in this Agreement. The disclosures set forth in any section of the disclosure schedules relate
only to the representations and warranties in the section of the Agreement in which such section of the disclosure schedules are
expressly referenced except as would be clearly apparent to an independent third party that a disclosure in one section of the
disclosure schedules is also applicable to another section of the disclosure schedules or another representation or warranty of the
Company. The specification of any dollar amount or the inclusion of any item in the representations and warranties contained in this
Agreement or the disclosure schedules or Exhibits is not intended to imply that the amounts, or higher or lower amounts, or the items
so included, or other items, are or are not required to be disclosed (including, without limitation, whether such amounts or items are
required to be disclosed as material or threatened) or are within or outside of the Ordinary Course of Business, and no party will use
the fact of the setting of the amounts or the fact of the inclusion of any item in this Agreement or the disclosure schedules or Exhibits
in any dispute or controversy between the parties as to whether any obligation, item or matter not described or included in this
Agreement or in any disclosure schedule or Exhibit is or is not required to be disclosed (including whether the amount or items are
required to be disclosed as material or threatened) or is within or outside of the Ordinary Course of Business for purposes of this
Agreement. The information contained in this Agreement and in the Schedules and Exhibits is disclosed solely for purposes of this
Agreement, and no information contained herein or therein will be deemed to be an admission by any party to any third party of any
matter whatsoever (including, without limitation, any violation of law or breach of contract).
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
10.11 Governing Law. Except for questions of arbitrability (as to which federal law will apply as provided in Section 10.12(b)), all
issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement and the Schedules and
Exhibits hereto will be governed by, and construed in accordance with, the Laws of the State of Delaware without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the
application of the Laws of any jurisdiction other than the State of Delaware.
10.12 Dispute Resolution.
(a) Negotiation. If any controversy or claim arises relating to this Agreement, the parties will attempt in good faith to
negotiate a solution to their differences. If negotiation does not result in a resolution within 30 days of the date on which one
party has notified the other of the controversy or claim, either party may elect to initiate arbitration under Section 10.12(b).
(b) Arbitration. Any controversy or claim between the parties arising out of or relating to this Agreement or a breach thereof
which cannot be resolved by negotiation pursuant to Section 10.12(a) will be resolved by binding arbitration administered by the
American Arbitration Association (the “ AAA ”) under this Section 10.12(b) and the AAA’s then-current Commercial
Arbitration Rules. The arbitration will be held in Wilmington, Delaware or such other city in the United States as the parties
may agree, before a sole disinterested arbitrator who is experienced in handling commercial disputes. If the parties are unable to
jointly appoint an arbitrator within 30 days of the date on which the arbitration is instituted, either party may apply to the AAA
to have the arbitrator appointed in accordance with the AAA’s rules for the appointment of an arbitrator from the AAA
panel. The arbitrator’s award will be final and binding and judgment on the award may be entered in any court having
jurisdiction thereof. The arbitrator will not have the power to award punitive or exemplary damages, or any damages excluded
by, or in excess of, any damage limitations expressed in this Agreement; provided, however, the Arbitrator will have the power
to apportion the costs associated with the arbitration in such manner as the Arbitrator deems most appropriate. Issues of
arbitrability will be determined in accordance solely with the federal substantive and procedural laws relating to arbitration; in all
other respects, the arbitrator will be obligated to apply and follow the substantive law of the State of Delaware.
(c) Equitable Relief. Notwithstanding the provisions of Section 10.12(a) and Section 10.12(b), either party may seek from a
court of competent jurisdiction any interim or provisional equitable relief necessary to protect the rights or property of such party
without the necessity of proving actual damages or posting of bond or any other security.
10.13 Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this
Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient or when sent by email
(provided the email is promptly followed by delivery by reputable overnight courier service), or one Business Day after being sent to
the recipient by reputable overnight courier service (charges prepaid). Such notices, demands and other communications will be sent
to Parent and to Representative at the addresses indicated below or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party. All notices, demands and other communications hereunder
may be given by any other means, but will not be deemed to have been duly given unless and until actually received by the intended
recipient.
To Representative:
Cynthia Weatherly
2366 Mont Alban Cove
Germantown, TN 38139
[email protected]
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
with a copy to (which will not constitute notice to Representative):
Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C.
165 Madison Ave., Suite 2000
Memphis, Tennessee 38103
Attention: Mary Ann Jackson
Facsimile: (901) 577-0740
[email protected]
To the Company:
BioD, LLC
7740A Trinity Rd., Suite 107
Cordova, Tennessee 38018
Attn: Russ Olsen
[email protected]
with a copy to only one of (a) Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. (in the case only of notices given before the
Effective Time) or (b) Thompson Hine LLP (in the case only of notices given after the Effective Time), which will not constitute
notice to the Company, at the respective address shown here:
Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C.
165 Madison Ave., Suite 2000
Memphis, Tennessee 38103
Attention: Mary Ann Jackson
Facsimile: (901) 577-0740
[email protected]
or
Thompson Hine LLP
335 Madison Ave
New York, NY 10017
Attn: Todd Mason
[email protected]
To Parent:
Derma Sciences, Inc.
214 Carnegie Center, Suite 300
Princeton, New Jersey 08540
Attn: Martin J. Conroy, Chief Legal Officer
[email protected]
with a copy to (which will not constitute notice to Parent):
Thompson Hine LLP
335 Madison Ave
New York, NY 10017
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
Attn: Todd Mason
[email protected]
10.14 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. If an
ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties hereto, and
no presumption or burden of proof will arise favoring or disfavoring any party hereto by virtue of the authorship of any of the
provisions of this Agreement.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
CONFIDENTIAL
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and Plan of Merger on the date first written above.
Derma Sciences, Inc.
By: /s/ Stephen T. Wills
Name: Stephen T. Wills
Title: Executive Chairman and Interim Principal Executive
Officer
Derma Sciences, Inc.
By: /s/ Stephen T. Wills
Name: Stephen T. Wills
Title: Executive Chairman and Interim Principal
Executive Officer
BioD, LLC
By: /s/ Russell I. Olsen
Name: Russell I. Olsen
Title: CEO
Representative:
/s/ Cynthia Weatherly
Cynthia Weatherly
BD Acquisition Group, LLC hereby executes this Agreement to acknowledge that it may be provided an option to acquire the ****
and/or the **** pursuant to Section 5.12 and that, unless and until the option specified in either Section 5.12(a) or Section 5.12(b)
becomes exercisable by the terms of one of those sections, BD Acquisition Group, LLC will have no rights against Parent or any of its
Affiliates, whether under this Agreement or otherwise.
BD Acquisition Group, LLC
By:
/s/ Tim Brahm
Name: Tim Brahm
Title: Chairman
**** This material has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and
Exchange Commission.
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
by and among
DERMA SCIENCES, INC.
and
THE PARTIES LISTED ON SCHEDULE 1 HERETO
Dated as of July 27, 2016
CONFIDENTIAL
Stock Purchase Agreement
This Stock Purchase Agreement (this “Agreement”) is made and entered into as of July 27, 2016, by and among Derma
Sciences, Inc., a corporation organized under the laws of the state of Delaware (the “ Company ”), and the Investors listed on
Schedule 1 (each, an “ Investor ”, and collectively, the “ Investors ”).
WHEREAS, the Company desires to sell to the Investors, and the Investors desire to purchase from the Company, a number of
shares of the Company’s common stock, par value $0.01 per share (the “ Common Stock ”), in the amounts listed on Schedule 1
(the “ Securities ”), subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements
set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and each of the Investors, severally and not jointly, hereby agree as follows:
1.
Definitions. As used in this Agreement, unless the context otherwise requires, the following terms shall have the respective
meanings specified or referred to in this Section 1 :
“Affiliate” means, when used with respect to a specified Person, another Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with the Person specified. For purposes of this definition,
“control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or otherwise. The terms “controlling” and “controlled” have
meanings correlative to the foregoing.
“Court Order” means any judgment, order, award or decree of any foreign, federal, state, local or other court or administrative
or regulatory body and any award in any arbitration proceeding.
“Encumbrance” means any lien (statutory or other), encumbrance, claim, charge, security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, conditional sale or other title retention agreement, preference, priority or other security agreement
or preferential arrangement of any kind or nature, and any easement, encroachment, covenant, restriction, right of way, defect in title
or other encumbrance of any kind.
“Governmental Body” means any foreign, federal, state, local or other government, governmental, statutory or administrative
authority or regulatory body, self-regulatory organization or any court, tribunal or judicial or arbitral body.
“Person” means any individual, partnership, corporation, limited liability company, association, joint venture, joint-stock
company, trust, unincorporated organization, Governmental Body or other entity.
1
“Prospectus” means the prospectus included in, or pursuant to the rules and regulations of the Securities Act, deemed a part of,
a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any
prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and by all other amendments and supplements to such prospectus, and in each case
including any document incorporated by reference therein.
“Registrable Securities” means any Securities issued pursuant to this Agreement; provided, however, that shares of Common
Stock cease to be Registrable Securities upon the earlier of (i) when a Registration Statement of the Company with respect to such
Securities has become effective under the Securities Act and such Securities have been disposed of pursuant to the Registration
Statement, (ii) when such Securities cease to be outstanding or (iii) on the first anniversary following the Closing Date or, if earlier, on
the date upon which all such Securities beneficially owned by the applicable Investor or its permitted transferees on such date first
becomes eligible for resale under Rule 144 promulgated under the Securities Act without regard to the volume or manner of sale
restrictions set forth therein.
“Registration Statement” means any registration statement of the Company, including a Shelf Registration Statement, that
covers any of the Registrable Securities pursuant to the provisions of this Agreement and all amendments and supplements to any such
registration statement, including post-effective amendments, in each case including the Prospectus contained therein or deemed a part
thereof, all exhibits thereto and any document incorporated by reference therein.
“Requirements of Law” means any applicable foreign, federal, state and local laws, statutes, regulations, rules, codes,
ordinances, Court Orders and requirements enacted, adopted, issued or promulgated by any Governmental Body or common law or
any applicable consent decree or settlement agreement entered into with any Governmental Body.
“SEC Reports” means, collectively, all reports of the Company required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof.
“Shelf Registration Statement” means a “shelf” registration statement of the Company that covers all or a portion of the
Registrable Securities on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the
SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including
the Prospectus contained therein or deemed a part thereof, all exhibits thereto, and any documents incorporated by reference therein.
2
“Subsidiary” means any corporation or other entity in which the Company owns or controls more than fifty percent (50%) of
(i) the equity interests or (ii) the voting power of the voting equity securities of any such corporation or other entity.
2.
Subscription. Subject to the terms and conditions hereof, each Investor hereby irrevocably subscribes for the Securities set
forth on Schedule 1 for the aggregate purchase price set forth on Schedule 1 (the aggregate purchase price of such Securities, the
“ Purchase Price ”), which is payable as described in Section 4 . The obligations of each Investor hereunder are several and not
joint. Each Investor acknowledges that the Securities will be subject to restrictions on transfer as set forth in this Agreement.
3.
Acceptance of Subscription and Issuance of Securities. It is understood and agreed that the Company shall have the sole
right, at its complete discretion, to accept or reject any Investor subscription (each, a “ Subscription ” and collectively, the “
Subscriptions ”), in whole or in part, for any reason and that the same shall be deemed to be accepted by the Company only when this
Agreement is signed by a duly authorized officer of the Company and delivered to such Investor. Subscriptions need not be accepted
in the order received, and the Securities may be allocated among subscribers. Notwithstanding anything in this Agreement to the
contrary, the Company shall have no obligation to issue any of the Securities to any Person who is a resident of a jurisdiction in which
the issuance of Securities to such Person would constitute a violation of the securities, “blue sky” or other similar laws of such
jurisdiction (collectively referred to as the “ State Securities Laws ”).
4.
Payment and Settlement.
(a)
Signing. On or before 5:00 p.m., New York City time, on Wednesday, July 27, 2016, each Investor shall deliver to the
Company a copy of this Agreement executed by a duly authorized officer of such Investor. The Company shall indicate its acceptance
of such Subscription by providing each Investor with a countersigned copy of this Agreement on or before 11:59 p.m. New York City
time on July 27, 2016 (such date, the “ Signing Date ”).
(b)
Funding. Upon satisfaction or waiver of all of the conditions to funding set forth in Sections 8 and 9, on or prior to
10:00 a.m., New York City time, on such date (the “ Funding Time ”), each Investor shall make payment for its Subscription by wire
transfer of immediately available funds or other means approved by the Company in the amount set forth on Schedule 1 under the
column “Aggregate Purchase Price to be Paid” (such amounts, individually, the “ Funds ”).
(c)
Closing. Subject to the termination provisions set forth in Section 10, the closing of the transactions contemplated
hereby (the “ Closing ”) shall occur following the receipt of all Funds by the Company and the satisfaction or waiver of all of the
conditions set forth in Sections 8 and 9 (other than those conditions that by their nature are satisfied at the Closing); or at such
other time and date to be agreed between the Company and the Investors purchasing a majority of the Securities (such date and time of
delivery and payment for the Securities being herein called the “ Closing Date ”).
3
(d)
Settlement. At the Closing, to effect the purchase and sale of the Securities, (i) the Company shall have received the
Funds by wire transfer in immediately available U.S. federal funds to the account designated by the Company in writing in accordance
with the terms of this Agreement (such payment to constitute payment in full by each Non-Defaulting Investor (as defined below) for
its Subscription), (ii) the Company shall deliver, or cause to be delivered, to each Non-Defaulting Investor confirmation of
recordation, in book-entry form, of the Securities with the Company’s transfer agent, such recordation to include a notation, in the
form set forth in Section 7(g) , that the Securities were sold in reliance upon an exemption from registration under the Securities Act
of 1933, as amended (the “ Securities Act ”), and (iii) the Company and each Investor shall deliver all other documents and certificates
as required by this Agreement.
(e)
Defaulting Investor. If any Investor defaults in the payment of the applicable Purchase Price for such Investor’s
Securities at the Funding Time (including if such Investor is unable or unwilling to pay the Purchase Price, in which case such
Investor (a “ Defaulting Investor ”) shall notify the Company and the other Investors (each, a “ Non-Defaulting Investor ”) within
three (3) business days prior to the Funding Time), the Non-Defaulting Investors may make arrangements reasonably satisfactory to
the Company for the purchase of the Securities that were to be purchased by the Defaulting Investor by any of the Non-Defaulting
Investors or by any other Person reasonably acceptable to the Company; provided , that such arrangements and purchase by any
Non-Defaulting Investor or other Person shall in no way relieve such Defaulting Investor of any liability under this Agreement.
Notwithstanding anything to the contrary herein, the Company may proceed with the Closing with the Non-Defaulting Investors
and/or any other Person that, pursuant to the previous sentence, has agreed to purchase the Defaulting Investor(s) Subscriptions.
5.
Representations and Warranties of the Company. The Company represents and warrants that:
(a)
Organization. The Company and each of the Subsidiaries is duly incorporated or formed and validly existing and in
good standing under the law of its jurisdiction of incorporation or formation. The Company and each of the Subsidiaries is duly
qualified and in good standing as a foreign company in each other jurisdiction in which it owns or leases property or in which the
conduct of its business requires it to be so qualified or licensed, except where the failure to be so qualified and in good standing would
not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, properties, financial
condition, results of operations, or prospects of the Company and its Subsidiaries, taken as a whole (a “ Material Adverse Effect ”).
4
(b)
Authorization. The Company has all requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder in accordance with the terms hereof. The execution, delivery and performance of this Agreement by
the Company have been duly authorized by all necessary corporate action. This Agreement has been duly executed and delivered by
the Company, and this Agreement constitutes the legal, valid and binding obligation of the Company enforceable in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws relating to or affecting the enforcement of creditors’ rights generally and by general equitable principles.
(c)
No Violation; Consents and Approvals. The execution and delivery by the Company of this Agreement does not, and
the consummation by the Company of any of the transactions contemplated hereby and compliance by the Company with the terms,
conditions and provisions hereof (including the offer and sale of the Securities by the Company) will not:
(i)
conflict with, violate, result (with the giving of notice or passage of time or both) in a breach of the terms,
conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under, or result in the creation or imposition of any Encumbrance upon any of the material assets or
properties of the Company or any Subsidiary under (A) the articles of incorporation or certificate of formation or the by-laws or
limited liability company agreement, each as applicable, of the Company or any Subsidiary, (B) any note, instrument, agreement,
contract, mortgage, lease, license, franchise, guarantee, permit or other authorization, right, restriction or obligation to which the
Company or any Subsidiary is a party or any of their respective assets or properties is subject or by which the Company or any
Subsidiary is bound, (C) any Court Order to which the Company or any Subsidiary is a party or any of their respective assets or
properties is subject or by which the Company or any Subsidiary is bound, or (D) any Requirements of Law applicable to the
Company or any Subsidiary or any of their respective assets or properties; or
(ii)
require the approval, consent, authorization or act of, or the making by the Company or any Subsidiary of any
declaration, filing or registration with, any Person, including under the Securities Act or State Securities Laws, except for the
applicable reporting requirements of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), the filing of a notice of
an exempt offering on Form D for the transactions contemplated by this Agreement, as applicable and filings that may be required by
the rules and regulations of the NASDAQ Stock Market LLC.
(d)
Compliance with Laws.
(i)
The Company and each of the Subsidiaries is in material compliance with all laws and regulatory requirements
to which it is subject, including U.S. sanctions laws and the Foreign Corrupt Practices Act, 15 U.S.C. §78 et seq., as it may be
amended from time to time, except for such non-compliance that could not reasonably be expected to have a Material Adverse Effect.
(ii)
The Company shall not directly or, to the best of the Company’s knowledge, indirectly, use the proceeds of the
sale of the Securities to be issued pursuant to this Agreement, or lend, contribute or otherwise make available such proceeds directly
or, to the best of the Company’s knowledge (after due and careful inquiry), indirectly, to any subsidiary, joint venture partner or other
person in any manner or for any purpose prohibited by U.S. economic or trade sanctions.
5
(e)
Private Offering. No form of general solicitation or general advertising was used by the Company, or to the knowledge
of the Company, its authorized representatives, in connection with the offer or sale of the Securities to be issued under this Agreement.
Assuming the accuracy of the representations and warranties of the Investors contained in Section 6 , the issuance and sale of the
Securities pursuant to this Agreement is exempt from the registration requirements of the Securities Act, and neither the Company nor,
to the knowledge of the Company, any authorized representative acting on its behalf has taken or will take any action hereafter that
would cause the loss of such exemption. The Company agrees that neither it, nor, anyone authorized to act on its behalf, shall offer to
sell the Securities to be issued under this Agreement or any other securities of the Company so as to require the registration of the
Securities being offered hereby pursuant to the provisions of the Securities Act or any State Securities Laws or “blue sky” laws, unless
the offer and sale of the Securities to be issued under this Agreement or such other securities is so registered. Neither the Company nor
to its knowledge any Affiliate of the Company, directly or indirectly through any agent, sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of any security that is or will be integrated with the sale of the Securities in a manner that would
require registration of the Securities under the Securities Act.
(f)
Disclosure. The Company is in compliance with its reporting requirements under Section 13 of the Exchange Act. The
SEC Reports, when filed with the SEC (or in the case of registration statements, solely on the dates of effectiveness) (except to the
extent corrected by a subsequent SEC Report), conformed in all material respects to the requirements of the Exchange Act or the
Securities Act, as the case may be, and did not contain any untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made,
not misleading. There are no unresolved comment letters from the SEC in respect of any SEC Report. Except with respect to the
material terms and conditions of the transactions contemplated hereby, and the anticipated use of proceeds from the sale of the
Securities, which shall be publicly disclosed by the Company pursuant to the Exchange Act, the Company confirms that neither it nor
any person acting on its behalf has provided any Investor with any other information that the Company believes constitutes material,
non-public information. The Company understands that the Investors will rely on the foregoing representations in effecting
transactions in the securities of the Company.
(g)
Financial Statements. The historical audited consolidated financial statements included in the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2015 (the “ Audited Financial Statements ”) and the historical
unaudited consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q for the period ended March
31, 2016 (the “ Interim Financial Statements ” and, together with the Audited Financial Statements, the “ Financial Statements ”),
present fairly in all material respects the financial position of the Company and its consolidated subsidiaries as of the dates shown and
their results of operations and cash flows for the periods shown, and such financial statements have been prepared in all material
respects in conformity with the generally accepted accounting principles in the United States (“ GAAP ”) applied on a consistent basis
for the periods shown.
6
(h)
Absence of Changes. Since March 31, 2016 through the date hereof, there have been no events that would,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company.
6.
Representations and Warranties of the Investors. As an inducement to the Company to enter into this Agreement and to
consummate the transactions contemplated hereby, each Investor, severally and not jointly, represents and warrants as follows:
(a)
Organization. Such Investor is duly organized, validly existing and in good standing under the laws of the jurisdiction
in which it is organized.
(b)
Authorization. Such Investor has full power and authority to execute and deliver this Agreement and to perform its
obligations hereunder in accordance with the terms hereof. This Agreement has been, and at or prior to the Closing will have been,
duly executed and delivered by such Investor, and constitutes the legal, valid and binding obligation of such Investor, enforceable
against such Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting the enforcement of creditors’ rights generally
and by general equitable principles.
(c)
No Consents Required. No approval, authorization, consent or order of or filing with any federal, state, local or foreign
government or regulatory commission, board, body, authority or agency, or of or with any self-regulatory organization or other
non-governmental regulatory authority (including any national securities exchange), is required in connection with the execution,
delivery and performance of this Agreement by such Investor or the consummation by such Investor of the transactions contemplated
hereby, except for such approvals, authorizations, consents, orders or filings that have been obtained or made and are in full force and
effect.
(d)
No Violation. The execution, delivery and performance of this Agreement and the consummation of the transactions
contemplated hereby will not conflict with, result in any breach or violation of or constitute a default under (or constitute any event
which with notice, lapse of time or both would result in any breach or violation of or constitute a default under or give the holder of
any indebtedness (or a Person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a
part of such indebtedness under) (or result in the termination of, or in the creation or imposition of a lien, charge or Encumbrance on
any property or assets of such Investor pursuant to) (i) the organizational or other governing documents of such Investor, (ii) any
indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any license, lease, contract or
other agreement or instrument to which such Investor is a party or by which such Investor or any of its properties may be bound or
affected, (iii) any federal, state, local or foreign law, regulation or rule, (iv) any rule or regulation of any self-regulatory organization
or other non-governmental regulatory authority (including any national securities exchange) or (v) any Court Order applicable to such
Investor or any of its properties, except in the case of the foregoing clauses (ii), (iii), (iv) and (v) as would not individually or in the
aggregate, materially and adversely affect such Investor’s ability to perform its obligations under this Agreement or consummate the
transactions contemplated herein on a timely basis.
7
(e)
Financial Capability. At the Funding Time, the Investor will have available funds necessary to consummate the
Closing on the terms and conditions contemplated by this Agreement.
(f)
Accredited Investor and Qualified Institutional Buyer.
(i)
Such Investor is acquiring the Securities to be issued under this Agreement to such Investor for its own account,
not as nominee or agent, with the present intention of holding such securities for purposes of investment, and not with the view to the
public resale or distribution of any part thereof, and such Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same in violation of the U.S. federal securities laws or any applicable State Securities Laws or “blue sky”
laws. Such Investor is purchasing and holding any purchased Securities for its own account and is not party to any co-investment, joint
venture, partnership or other understandings or arrangements with any other party relating to the Securities or any other transactions
contemplated hereunder.
(ii)
Such Investor is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D under the
Securities Act or a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act or, in the case of an
Investor that is a non-U.S. Investor, is an entity acting on its own account that in the aggregate owns and invests on a discretionary
basis at least $100 million of securities of issuers that are not affiliated with such Investor.
(iii)
Such Investor acknowledges that it has completed the Investor Questionnaire contained in Appendix A and that
the information contained therein is complete and accurate as of the date thereof and is hereby affirmed as of each of the Signing Date
and the Closing Date. Any information that has been furnished or that will be furnished by such Investor to evidence its status as an
accredited investor is accurate and complete, and does not contain any misrepresentation or material omission.
(iv)
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 Company, and has so evaluated the merits and risks of
such investment, and understands that it may be required to bear the risks thereof. Such Investor has previously invested in securities
similar to the Securities and fully understands the limitations on transfer and restrictions on sales of the Securities. Such Investor
represents that it is able to bear the economic risk of its investment in the Securities and is able to afford the complete loss of any such
investment.
8
(v)
Such Investor has conducted its own independent evaluation, made its own analysis and consulted with advisors
as it has deemed necessary, prudent, or advisable in order for such Investor to make its own determination and decision to enter into
the transactions contemplated by this Agreement and to execute and deliver this Agreement.
(vi)
Such Investor is familiar with the business and financial condition and operations of the Company. Such
Investor has adequate information concerning the Company and the Securities to enable it to evaluate the transactions contemplated by
this Agreement and to make an informed investment decision concerning the Securities, and such Investor has had the opportunity to
discuss such information with a representative of the Company and to obtain and review information reasonably requested by such
Investor.
(vii)
Such Investor is not purchasing the Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio
or presented at any seminar or, to such Investor’s knowledge, any other general solicitation or general advertisement. Neither such
Investor nor its Affiliates or any person acting on its or any of their behalf has engaged, or will engage, in any form of general
solicitation or general advertising (within the meaning of Rule 502(c) under the Securities Act) in connection with the offering of the
Securities.
(g)
No Broker’s Fees. No brokerage or finder’s fees or commissions are or will be payable by such Investor or any of its
Affiliates or subsidiaries (if applicable) to any broker, financial advisor or consultant, finder, placement agent, investment banker,
bank or other Person with respect to the issuance of the Securities, and such Investor has not taken any action that could cause the
Company to be liable for any such fees or commissions. The Investor is not a broker-dealer registered with the SEC under the
Exchange Act or an entity engaged in a business that would require it to be so registered.
(h)
Compliance with Law. Such Investor will comply with all applicable laws and regulations in effect in any jurisdiction
in which such Investor purchases or sells Securities and obtain any consent, approval or permission required for such purchases or
sales under the laws and regulations of any jurisdiction to which such Investor is subject or in which the Investor makes such
purchases or sales, and the Company shall have no responsibility therefor.
(i)
Advisors. Such Investor acknowledges that, prior to entering into this Agreement, it was advised by Persons deemed
appropriate by the Investor concerning this Agreement and the transactions contemplated hereunder and conducted its own due
diligence investigation and made its own investment decision with respect to this Agreement, the transactions contemplated hereunder
and the purchase of the Securities.
9
(j)
Arm’s Length Transaction. Such Investor is acting solely in the capacity of an arm’s length contractual counterparty to
the Company with respect to the transactions contemplated hereby. Additionally, without derogating from or limiting the
representations and warranties of the Company, the Investor (i) is not relying on the Company for any legal, tax, investment,
accounting or regulatory advice; (ii) has consulted with its own advisors concerning such matters; and (iii) shall be responsible for
making its own independent investigation and appraisal of the transactions contemplated hereby.
(k)
No Further Reliance. Such Investor acknowledges that it is not relying upon any representation or warranty made by
the Company that is not set forth in this Agreement. Such Investor confirms that the Company has not (i) given any guarantee or
representation as to the potential success, return, effect or benefit (either legal, regulatory, tax, financial, accounting or otherwise) of
an investment in the Securities or (ii) made any representation to such Investor regarding the legality of an investment in the Securities
under applicable legal investment or similar laws or regulations. Such Investor confirms that (x) it has conducted a review and
analysis of the business, assets, condition, operations and prospects of the Company and its Subsidiaries, and the terms of the
Securities, and has access to such financial and other information regarding the Company, in each case that such Investor considers
sufficient for purposes of the purchase of the Securities; (y) at a reasonable time prior to its purchase of the Securities, it had an
opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the
Securities and to obtain additional information necessary to verify any information furnished to such Investor or to which such
Investor had access; and (z) it has not received any offering memorandum or offering document in connection with the offering of the
Securities. Such Investor acknowledges that the Company has the right in its sole and absolute discretion to abandon this private
placement at any time prior to the Signing Date.
(l)
Private Placement. Such Investor understands and acknowledges that:
(i)
The Securities that it is acquiring under this Agreement are being sold pursuant to an exemption from
registration under the Securities Act, including (but not limited to) Regulation D promulgated thereunder.
(ii)
Its representations and warranties contained herein are being relied upon by the Company as a basis for such
exemption under the Securities Act and under the securities laws of various other foreign and domestic jurisdictions. Such Investor
further understands that, unless it notifies the Company in writing to the contrary at or before the Closing Date, each of such Investor’s
representations and warranties contained in this Agreement will be deemed to have been automatically (and without any further action
of the Investor) reaffirmed and confirmed as of the Closing Date, as applicable, taking into account all information received by the
Investor.
10
(iii)
No U.S. state or federal agency or any other securities regulator of any state or country has passed upon the
merits or risks of an investment in the Securities or made any finding or determination as to the fairness of the terms of the offering of
the Securities or any recommendation or endorsement thereof.
(iv)
The Securities are “restricted securities” under applicable federal securities laws and that the Securities Act and
the rules of the SEC provide in substance that the Investor may dispose of the Securities only pursuant to an effective registration
statement under the Securities Act or an exemption therefrom, and the Investor understands that the Company has no obligation, other
than as disclosed in the SEC Reports, or intention to register any of the Securities, or to take action so as to permit sales pursuant to
the Securities Act (including Rule 144 thereunder). Accordingly, the Investor understands that under the SEC’s rules, the Investor may
dispose of the Securities principally only in “private placements” that are exempt from registration under the Securities Act, in which
event the transferee will acquire “restricted securities” subject to the same limitations as in the hands of the Investor. Consequently,
the Investor understands that the Investor must bear the economic risks of the investment in the Securities for an indefinite period of
time. The Investor will not sell, assign, pledge, give, transfer or otherwise dispose of the Securities or any interest therein, or make any
offer or attempt to do any of the foregoing, except pursuant to a registration of the Securities under the Securities Act and all
applicable State Securities Laws, or in a transaction which is exempt from the registration provisions of the Securities Act and all
applicable State Securities Laws. Such Investor understands that that the recordation of the Securities in book-entry form will include
a legend substantially in the form indicated in Section 7 (which such Investor has read and understands), and that the Company and
its Affiliates shall not be required to give effect to any purported transfer of such Securities except upon compliance with the
foregoing restrictions.
(m)
No ERISA Plans. Either (i) such Investor is not purchasing or holding Securities (or any interest in Securities) with
the assets of (A) an employee benefit plan that is subject to Title I of ERISA, (B) a plan, individual retirement account or other
arrangement that is subject to Section 4975 of the Code, (C) an entity whose underlying assets are considered to include “plan assets”
of any of the foregoing by reason of such plan’s, account’s or arrangement’s investment in such entity, or (D) a governmental, church,
non-U.S. or other plan that is subject to any similar laws; or (ii) the purchase and holding of such Securities by such Investor,
throughout the period that it holds such Securities, and the disposition of such Securities or an interest therein will not constitute (x) a
non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code, (y) a breach of fiduciary duty under
ERISA or (z) a similar violation under any applicable similar laws.
7.
Additional Agreements.
(a)
Conduct Prior to Closing. From and after the Signing Date until the earlier of the Closing Date and the date on which
this Agreement is terminated, the Company covenants and agrees as to itself and its Subsidiaries not to take any action that is intended
or would reasonably be expected to result in any condition in Sections 8 and 9 not being satisfied. Each Investor hereby
covenants and agrees to notify the Company upon the occurrence of any event prior to the Closing Date which would cause any
representation, warranty, or covenant of the Investors contained in this Agreement to be false or incorrect.
11
(b)
Use of Proceeds. The Company will use the net proceeds received by it from the sale of the Securities for working
capital to support future operations and potential targeted business development initiatives.
(c)
Existence and Compliance. The Company and each Subsidiary will maintain their respective existence, good standing
and qualification to do business where required and comply with all agreements, instruments, judgments, laws, regulations and
governmental requirements, applicable to them or to any of their respective properties, business operations and transactions, except for
such non-compliance with this Section 7 that could not reasonably be expected to have a Material Adverse Effect, and provided that
nothing in this Section 7 shall prevent the merger of a Subsidiary into the Company or another Subsidiary.
(d)
Short Selling Acknowledgement and Agreement. Each Investor understands and acknowledges, severally and not
jointly with any other Investor, that the SEC currently takes the position that coverage of Short Sales of securities “against the box”
prior to the effective date of a registration statement is a violation of Section 5 of the Securities Act and of Securities Act Compliance
Disclosure Interpretation 239.10. Each Investor agrees, severally and not jointly that it will abide by such interpretation and will not
engage in any Short Sales that result in the disposition of the Securities acquired hereunder by such Investor until such time as a resale
registration statement is declared or deemed effective by the SEC or such Securities are no longer subject to any restrictions on resale.
“ Short Sales ” means all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act, whether
or not against the box, and forward sale contracts, options, puts, calls, short sales, “put equivalent positions” (as defined in Rule
16a-1(h) under the Exchange Act) and similar arrangements, and sales and other transactions through non-U.S. broker dealers or
foreign regulated brokers.
(e)
Legend. The book-entry account maintained by the transfer agent evidencing ownership of the Securities sold pursuant
to this Agreement will bear the following restrictive legend in substantially the following form:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY
STATE. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (1) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903
OR RULE 904 UNDER THE SECURITIES ACT, PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL
IF THE ISSUER SO REQUESTS), OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT.”
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8.
Conditions to Obligations of the Company. The obligations of the Company to sell and issue the Securities being sold and
issued by it to any Investor on the Closing Date is subject to the fulfillment on or before the Closing Date, of the following conditions,
any of which may be waived (in whole or in part) by the Company in its sole discretion:
(a)
Closing of the BioD Merger. The Company’s purchase of all of the issued and outstanding equity interests of BioD,
LLC, a Delaware limited liability company (“ BioD ”), pursuant to that certain Agreement and Plan of Merger, dated as of July 27,
2016, between the Company, DP Merger Sub LLC, BioD, Cynthia Weatherly, and BD Acquisition Group, LLC (the “ Merger
Agreement ”), shall have been completed in accordance with and pursuant to the terms of the Merger Agreement, including,
specifically, Article VI thereof.
(b)
No Injunction. No Governmental Body nor any other Person shall have issued an order, injunction, judgment, decree,
ruling or assessment which shall then be in effect restraining or prohibiting the completion of the transactions contemplated by this
Agreement, nor to the Company’s knowledge, shall any such order, injunction, judgment, decree, ruling or assessment be threatened
or pending.
(c)
Securities Law Compliance. The offer and sale of the Securities to the Investors pursuant to this Agreement shall be
exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable
State Securities Laws.
(d)
Purchase Price Paid. Such Investor shall have paid the Purchase Price to the Company in the amount set forth on
Schedule 1 on the Funding Time.
(e)
Covenants and Agreements. Such Investor shall have performed and complied with the covenants and agreements
required to be performed or complied with by such Investor hereunder on or prior to the Closing Date.
(f)
Representations and Warranties. The representations and the warranties of such Investor contained in this Agreement
shall be true and correct as of the Signing Date and the Closing Date, with the same effect as though such representations and
warranties had been made on and as of such date.
9.
Conditions to Obligations of the Investors. The obligation of each Investor to pay the Company the Purchase Price in
respect of the Securities to be issued under this Agreement to such Investor in accordance with Schedule 1 is subject to the
fulfillment to the reasonable satisfaction of, or, to the extent permitted by law, waiver by, such Investor prior to the Closing Date, as
the case may be, each of the following conditions:
13
(a)
Closing of the BioD Merger. The Company’s purchase of all of the issued and outstanding equity interests of BioD,
pursuant to the Merger Agreement, shall have been completed in accordance with and pursuant to the terms of the Merger Agreement,
including, specifically, Article VI thereof.
(b)
Covenants and Agreements. The Company shall have performed and complied in all material respects with the
covenants and agreements required to be performed or complied with by it hereunder.
(c)
Legal Opinions. On the Closing Date, the Investors shall have received an opinion from in-house counsel to the
Company reasonably acceptable to the Investors.
(d)
Officer’s Certificate. The Investors shall have received a customary officer’s certificate, signed by an authorized
officer of the Company, in a form reasonably satisfactory to the Investors.
(e)
Secretary’s Certificate. The Investors shall have received a customary secretary’s certificate, in a form reasonably
satisfactory to the Investors.
(f)
No Injunction. No Governmental Body or any other Person shall have issued an order, injunction, judgment, decree,
ruling or assessment which shall then be in effect restraining or prohibiting the completion of the transactions contemplated by this
Agreement, nor to the Investor’s knowledge, shall any such order, injunction, judgment, decree, ruling or assessment be threatened or
pending.
(g)
Representations and Warranties. The representations and the warranties of the Company contained in this Agreement
shall be true and correct in all material respects, except with respect to provisions including the terms “material,” “Material Adverse
Effect” or words of similar import and except with respect to materiality, as reflected under GAAP, in the representations and
warranties contained in Section 5(g) relating to the financial statements, with respect to which such representations and warranties
shall be true and correct at and as of the applicable date, with the same effect as though such representations and warranties had been
made on and as of such date, except that representations and warranties made as of a specified date need be true and correct only as of
that date.
(h)
10.
No Material Adverse Effect. No Material Adverse Effect shall have occurred since the Signing Date.
Termination.
(a)
Termination and Effects. This Agreement may be terminated on an Investor-by-Investor basis by mutual consent
between the Company and such Investor evidenced in writing, provided that the party seeking to terminate this Agreement pursuant
to this Section 10 shall not have breached in any material respects its representations, warranties or covenants set forth in this
Agreement. If this Agreement is terminated by either the Company or an Investor pursuant to the provisions of this Section 10 , this
Agreement with respect to the Company and such Investor shall forthwith become void and there shall be no further obligations on the
part of the Company or such Investor or their respective stockholders, directors, officers, employees, agents or representatives, except
for the provisions of Section 13 , which shall survive any termination of this Agreement; provided , however , that nothing in this
Section 10 shall relieve any party from liability for any breach of any representation, warranty, covenant, or agreement under this
Agreement prior to such termination or for any willful breach of this Agreement.
14
(b)
Extension; Waiver. At any time prior to any applicable compliance time (including the termination provisions set forth
herein) the Company and any Investor may (a) extend the time for the performance of any of the obligations or other acts of the
Company or such Investor, respectively, (b) waive any inaccuracies in the representations and warranties contained herein and (c)
waive compliance with any of the agreements or conditions herein. Any agreement on the part of an Investor to any such extension or
waiver shall be valid if set forth in an instrument in writing signed on behalf of such Investor and the Company and shall be deemed to
modify the terms and conditions of this Agreement as between such Investor and the Company.
11.
Registration Rights.
(a)
Shelf Registration Statement.
(i)
Following the Closing Date, the Company shall as promptly as reasonably practicable, prepare, and not later
than the eightieth (80th) calendar day following the Closing Date (the “ Filing Deadline ”), file with the SEC a Shelf Registration
Statement relating to the offer and sale of the Registrable Securities by the Investors from time to time in accordance with the methods
of distribution elected by such Investors and set forth in such Shelf Registration Statement and, thereafter, shall use its reasonable best
efforts to cause such Shelf Registration Statement to be declared effective under the Securities Act as promptly as reasonably
practicable after the filing thereof, but in no event later than the one hundred and tenth (110th) calendar day following the Filing
Deadline (the “ Effectiveness Deadline ”).
(ii)
So long as there continue to be Registrable Securities, the Company shall use commercially reasonable efforts
to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming a part thereof to be lawfully
delivered by the Investors. Notwithstanding the foregoing, there may be periods of time in which the use of the Shelf Registration
Statement may be restricted due to applicable law, including the Securities Act. Upon the occurrence of any such restriction, the
Company shall give notice to the Investors of such restriction (using the electronic notice information provided pursuant to this
Agreement), and the Investors shall not utilize the Shelf Registration Statement until notified by the Company that its use is again
permitted.
(iii)
Notwithstanding any provisions of this Agreement to the contrary, the Company shall cause the Shelf
Registration Statement and the related Prospectus and any amendment or supplement thereto, as of the date on which the SEC declares
the Shelf Registration Statement effective, (A) to comply in all material respects with the applicable requirements of the Securities Act
and the rules and regulations of the SEC and (B) not to contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are
made, not misleading.
15
(b)
Registration Procedures. Subject to the provisions of Sections 11(a) hereof, in connection with the registration of the
sale of Registrable Securities hereunder, the Company will as promptly as reasonably practicable:
(i)
furnish to the Investors holding Registrable Securities, if requested, prior to the filing of the applicable
Registration Statement, copies of such applicable Registration Statement as is proposed to be filed, and thereafter such number of
copies of such applicable Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto
and documents incorporated by reference therein), the Prospectus, any and all transmittal letters or other correspondence with the SEC
relating to the applicable Registration Statement and such other documents as the Investors may reasonably request from time to time
in order to facilitate the disposition of the Registrable Securities;
(ii)
notify each Investor, 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 contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and the Company will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
(iii)
use commercially reasonable efforts to take such actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities;
(iv)
otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC,
and make generally available to its security holders, within the required time period, an earnings statement covering a period of twelve
months, beginning with the first fiscal quarter after the effective date of the applicable Registration Statement (as the term “effective
date” is defined in Rule 158(c) under the Securities Act), which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder or any successor provisions thereto; and
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(v)
use commercially reasonable efforts to cause all Registrable Securities to be listed or quoted on the exchange or
automated quotation system on which similar securities issued by the Company are listed quoted.
12.
Lock-up Agreement. Each Investor shall not, directly or indirectly, transfer any Securities for the period beginning on the
Closing Date and ending on the date that is forty-five (45) days from the Closing Date. Any transfer or attempted transfer of any of the
Securities in violation of this Section 12 shall, to the fullest extent permitted by law, be null and void ab initio, and the Company
shall not, and shall instruct its transfer agent and other third parties not to, record or recognize any such purported transfer on the share
register of the Company.
13.
Fees and Expenses.
(a)
Expenses and Reimbursement. On the Closing Date, and following the completion of the Closing, the Company shall
reimburse the Investors for their reasonable out-of-pocket expenses (including, but not limited to, the reasonable and documented fees
and disbursements of one counsel on behalf of the Investors) incurred in connection with the transactions contemplated hereby, in an
amount not to exceed $15,000.00; provided , however , that the Company shall not be liable for any fees or disbursements of more
than one counsel for the Investors, other than local counsel. The Company shall pay all delivery expenses and stamp, transfer, issue,
documentary and similar taxes, assessments and charges levied under the laws of any applicable jurisdiction in connection with the
issuance of the Securities. Each Investor shall be responsible for its own fees and expenses.
(b)
Registration Expenses. All fees and expenses incident to the Company’s performance of or compliance with the
registration obligations provided in Section 11 , including all fees and expenses of compliance with securities or blue sky laws,
printing expenses, messenger and delivery expenses of the Company, any registration or filing feds payable under any Federal or state
securities or blue sky laws, the feds and expenses incurred in connection with any listing or quoting of the securities to be registered
on any national securities exchange or automated quotation system, fees and disbursements of counsel for the Company and its
independent certified public accountants (including the expenses of any comfort letters required by or incident to such performance)
and the fees and expenses of other Persons retained by the Company, will be borne by Company. Any Investor registering Registrable
Securities will bear and pay any underwriting and placement discounts and commissions, agency and placement fees and brokers’
commissions applicable to securities offered for its or its affiliates’ account and transfer taxes, if any, relating the sale or disposition of
such securities.
17
14.
Indemnification.
(a)
Company Indemnity.
(i)
The Company will indemnify and hold harmless each Investor, each of its officers, directors, agents and
partners, and each person controlling each of the foregoing, within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or compliance has been effected pursuant to this Agreement,
against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus (including any related registration statement) incident to any
such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were
made, or any violation by the Company of the Securities Act or any state securities law or in either case, any rule or regulation
thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each Investor, each of its officers, directors, agents and partners, and each
person controlling each of the foregoing, for any legal and any other expenses reasonably incurred in connection with investigating
and defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to an
Investor to the extent that any such claim, loss, damage, liability or expense arises out of or is based (A) on any untrue statement or
omission based upon written information furnished to the Company by an Investor therefore, (B) the failure of an Investor to deliver at
or prior to the written confirmation of sale, the most recent prospectus, as amended or supplemented, or (C) the failure of an Investor
otherwise to comply with this Agreement. The indemnity agreement contained in this Section 14(a)(i) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company
(which consent will not be unreasonably withheld).
(ii)
Investor Indemnity. Each Investor will, severally and not jointly, if Registrable Securities held by it are
included in the securities as to which such registration, qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors, officers, agents and partners, each person who controls the Company within the meaning of Section 15
of the Securities Act and the rules and regulations thereunder, each other Investor (if any), and each of their officers, directors and
partners, and each person controlling such other Investor(s) against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make a statement therein not misleading in light of the circumstances under
which they were made, and will reimburse the Company and such other Investor(s) and their directors, officers and partners or control
persons for any legal or any other expenses reasonably incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement or prospectus in reliance upon and in conformity with written
information furnished to the Company by such Investor and stated to be specifically for use therein, and provided that the maximum
amount for which such Investor shall be liable under this indemnity shall not exceed the net proceeds received by such Investor from
the sale of the Registrable Securities pursuant to the registration statement in question. The indemnity agreement contained in this
Section 14(a)(ii) shall not apply to amounts paid in settlement of any such claims, losses, damages or liabilities if such settlement is
effected without the consent of such Investor (which consent shall not be unreasonably withheld).
18
(iii)
Procedure. Each party entitled to indemnification under this Section 14 (the “Indemnified Party ”) shall give
notice to the party required to provide indemnification (the “ Indemnifying Party ”) promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 14
except to the extent that the Indemnifying Party is materially and adversely affected by such failure to provide notice. No
Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such non-privileged information regarding itself or the claim in question as an Indemnifying Party may reasonably request in
writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom.
(b)
Contribution.
(i)
If the indemnification provided for in Section 14 herein is unavailable to the Indemnified Parties in respect of
any losses, claims, damages or liabilities referred to herein (other than by reason of the exceptions provided therein), then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities as between the Company on the one hand and any Investor
on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of such Investor in connection with
the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of any Investor on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or by such Investor.
(ii)
In no event shall the obligation of any Indemnifying Party to contribute under this Section 13(b) exceed the
amount that such Indemnifying Party would have been obligated to pay by way of indemnification if the indemnification provided for
under Section 14(a) hereof had been available under the circumstances.
19
(iii)
The Company and the Investors agree that it would not be just and equitable if contribution pursuant to this
Section 14 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately preceding paragraphs shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the provisions of this section, no Investor shall be required to
contribute any amount in excess of the amount by which the net proceeds received by such Investor from the sale of Registrable
Securities pursuant to the registration statement in question. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(c)
Survival. The indemnity and contribution agreements contained in Section 14 shall remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Indemnified Party or
by or on behalf of the Company, and (iii) the consummation of the sale or successive resales of the Registrable Securities.
(d)
Information by Investors. Each Investor shall promptly furnish to the Company such information regarding such
Investor and the distribution and/or sale proposed by such Investor as the Company may from time to time reasonably request in
writing in connection with any registration, filing qualification or compliance referred to in this Agreement, and the Company may
exclude from such registration the Registrable Securities of any Investor who unreasonably fails to furnish such information within a
reasonable time after receiving such request. The intended method or methods of disposition and/or sale of such securities as so
provided by such purchaser shall be included without alteration in the Registration Statement covering the Registrable Securities and
shall not be changed without written consent of such Investor. Each Investor agrees that, other than ordinary course brokerage
arrangements, in the event it enters into any arrangement with a broker dealer for the sale of any Registrable Securities through a
block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, such Investor shall
promptly deliver to the Company in writing all applicable information required in order for the Company to be able to timely file a
supplement to the Prospectus pursuant to Rule 424(b), or take any other action, under the Securities Act, to the extent that such
supplement or other action is legally required. Such information shall include a description of (i) the name of such Investor and of the
participating broker dealer(s), (ii) the number of Registrable Securities involved, (iii) the price at which such Registrable Securities
were or are to be sold, and (iv) the commissions paid or to be paid or discounts or concessions allowed or to be allowed to such broker
dealer(s), where applicable.
20
15.
Miscellaneous.
(a)
Survival of Obligations. All representations, warranties, covenants, agreements and obligations contained in
this Agreement shall survive (i) the acceptance of the Subscriptions by the Company and the Closing and (ii) the death or disability of
any of the Investors.
(b)
Notices. All notices or other communications required or permitted hereunder shall be in writing and shall be
deemed given or delivered (i) when delivered personally, (ii) when delivered by electronic mail (so long as notification of a failure to
deliver such electronic mail is not received by the sending party), (iii) if transmitted by facsimile when confirmation of transmission is
received by the sending party, (iv) if sent by registered or certified mail, postage prepaid, return receipt requested, on the third
business day after mailing or (v) if sent by reputable overnight courier when received; and shall be addressed to each Investor as set
forth on its respective signature pages and if to the Company as follows:
If to the Company:
Derma Sciences Inc.
214 Carnegie Center, Suite 300
Princeton, New Jersey 08540
Attention: Stephen T. Wills
Facsimile: 609.514.8554
Email: [email protected]
with a copy to:
Thompson Hine LLP
335 Madison Ave
New York, New York 10017
Attention: Todd Mason
Facsimile: 212.344.6101
Email: [email protected]
If to the Investors:
To the address specified on Schedule 1, or at such other address or
addresses as may have been furnished to the Company in writing in
accordance with this Agreement.
Any party hereto may, from time to time, change its address, facsimile number, e-mail address or other information for the
purpose of notices to that such party by giving notice specifying such change to the other parties hereto.
(c)
Execution in Counterparts; Effectiveness. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same instrument, and shall become binding
when one or more counterparts have been signed by and delivered to each of the parties hereto.
21
(d)
Amendments. Except as contemplated by Section 10(b), this Agreement shall not be amended, modified or
supplemented prior to the Closing except by a written instrument signed by all the parties hereto.
(e)
Waiver. Any term or provision of this Agreement may be waived, or the time for its performance may be extended,
by the party entitled to the benefit thereof. Any such waiver shall be validly and sufficiently authorized for the purposes of this
Agreement if, as to any party, it is in writing signed by an authorized representative of such party. The failure or delay of any party to
enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect
the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No
waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.
(f)
Severability. Wherever possible, each provision hereof shall be interpreted in such manner as to be effective and valid
under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal
or unenforceable in any respect, such provision shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or
unenforceability without invalidating the remainder of such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
(g)
Assignment; Successors and Assigns. Neither this Agreement nor any of the rights and obligations of any party
hereunder may be assigned, delegated or otherwise transferred by such party without the prior written consent of each other party;
provided , that any Investor may assign, in its sole discretion, any or all of its rights, interests and obligations under this Agreement to
any of its Affiliates or to any transferee of the Securities following the Closing. No such assignment, delegation or other transfer shall
relieve the assignor of any of its obligations or liabilities hereunder. This Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors and permitted assigns.
(h)
No Third Party Beneficiaries. Nothing in this Agreement, express or implied, is intended or shall be construed to
confer upon any third Person, other than the parties and their respective successors and assigns permitted by Section 15(g) , any
right, remedy or claim under or by reason of this Agreement.
(i)
Governing Law. This Agreement shall be governed by and construed in accordance with the substantive laws of the
State of New Jersey without regard to its conflict of laws principles.
22
(j)
Submission to Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the non-exclusive jurisdiction of the Supreme Court of the State of New Jersey sitting in Mercer County and of the United
States District Court of the District of New Jersey, and any appellate court from any thereof, in any action or proceeding arising out of
or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in the State of New
Jersey or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that any Investor may otherwise have to bring any action or
proceeding relating to this Agreement against the Company and its subsidiaries or their respective properties in the courts of any
jurisdiction or any right that the Company may otherwise have to bring any action or proceeding relating to this Agreement against
any Investor or its properties in the courts of any jurisdiction. Each party hereto irrevocably waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of venue of any such proceeding brought in such a court referred to
in the first sentence of this Section 15(j) and any claim that any such proceeding brought in such a court has been brought in an
inconvenient forum.
(k)
Waiver of Jury Trial. EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER THEORY). EACH PARTY (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO IT THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (ii) ACKNOWLEDGES THAT IT HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
(l)
Public Announcements. No Investor shall make any public announcements or otherwise communicate with the news
media with respect to this Agreement or the transactions contemplated hereby without the prior written consent of the Company.
Notwithstanding the forgoing, any Investor may make or cause to be made any press release or similar public announcement or
communication as may be required to comply with (i) the requirements of applicable law, including the Exchange Act or (ii) its
disclosure obligations or practices with respect to its investors; provided that prior to making any such disclosure under this clause
(ii), such Investor shall provide a copy of such proposed disclosure to the Company and shall only publicly make such disclosure with
the consent of the Company, which consent shall not be unreasonably withheld or delayed, if the Company has not previously made a
public announcement of the transactions contemplated hereby. For the avoidance of doubt, the Company may issue any such press
release or make any such announcement as may be required by law or the applicable rules or regulations of the NASDAQ Stock
Market LLC.
23
(m)
Right to Conduct Activities. The Company and each Investor acknowledge that some or all of the Investors are
professional investors, and as such invest in numerous portfolio companies, some of which may be competitive with the Company’s
business. No Investor shall be liable to the Company or to another Investor for any claim arising out of, or based upon, (i) the
investment by the Investor or any Affiliate of the Investor in any entity competitive to the Company or (ii) actions taken by the
Investor or any Affiliate of the Investor to assist any such competitive company, whether or not such action was taken as a board
member of such competitive company or otherwise, and whether or not such action has a detrimental effect on the Company, so long
as such Investor or such Affiliate does not use or permit the use of confidential or proprietary information of the Company or of its
affiliates.
(n)
Entire Agreement. This Agreement, the Appendices, Exhibits and the Schedules and the documents delivered pursuant
hereto and thereto constitute the entire agreement and understanding among the parties with respect to the subject matter contained
herein or therein, and supersede any and all prior agreements, negotiations, discussions, understandings, term sheets or letters of intent
between or among any of the parties with respect to such subject matter.
(o)
Interpretation.
In this Agreement, unless the context clearly indicates otherwise:
(i)
words used in the singular include the plural and words in the plural include the singular;
(ii)
reference to any gender includes the other gender;
(iii)
the word “including” (and with correlative meaning “include”) means “including but not limited to” or
“including without limitation”;
(iv)
reference to any Section, Exhibit or Schedule means such Section of, or such Exhibit or Schedule to, this
Agreement, as the case may be, and reference in any Section or definition to any clause means such clause of such Section or
definition;
(v)
the words “herein,” “hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to
this Agreement as a whole and not to any particular Section or other provision hereof;
(vi)
reference to any agreement, instrument or other document means such agreement, instrument or other document
as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement;
(vii)
reference to any law (including statutes and ordinances) means such law (including all rules and regulations
promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining
compliance or applicability;
24
(viii)
relative to the determination of any period of time, “from” means “from and including,” “to” means “to but
excluding” and “through” means “through and including”; and
(ix)
the titles and headings of Sections contained in this Agreement have been inserted for convenience of reference
only and shall not be deemed to be a part of or to affect the meaning or interpretation of this Agreement.
(p)
This Agreement was negotiated by the parties with the benefit of legal representation, and no rule of construction or
interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall apply to any construction or
interpretation hereof. Subject to Section 15(f) , this Agreement shall be interpreted and construed to the maximum extent possible so
as to uphold the enforceability of each of the terms and provisions hereof.
[SIGNATURE PAGES FOLLOW]
25
IN WITNESS WHEREOF, the undersigned has executed this Agreement this ______ OF JULY, 2016.
INVESTOR:
By
Legal Name of Entity
By:
Name:
Title:
Address:
E-mail Address:
State/Country of Domicile or Formation:
Purchase Price: US$
The offer to purchase Securities as set forth above is confirmed and accepted by the Company as to __________ shares of Common
Stock.
IN WITNESS WHEREOF, the undersigned has executed this Agreement this TWENTY SEVENTH DAY OF JULY, 2016.
DERMA SCIENCES, inc.
By:
Name: Stephen T. Wills
Title: Executive Chairman
SCHEDULE 1
INVESTORS
1.
2.
3.
4.
5.
6.
7.
Investor
[__]
[__]
[__]
[__]
[__]
[__]
[__]
Number of
Securities to be
Acquired
[__]
[__]
[__]
[__]
[__]
[__]
[__]
Aggregate Purchase
Price to be Paid
US$[__]
[__]
[__]
[__]
[__]
[__]
[__]
A-1
Address
[__]
[__]
[__]
[__]
[__]
[__]
[__]
APPENDIX A
INVESTOR QUESTIONNAIRE
Name of investor:
State or jurisdiction of residence:
With respect to a potential investment in Derma Sciences, Inc., a corporation organized under the laws of the State of Delaware
(the “ Company ”), the undersigned represents and warrants that he/she/it qualifies as an “ accredited investor ” as that term is defined
in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the “ Act ”), because (please check the box
that applies):

He/she is a natural person whose individual net worth, or joint net worth with his/her spouse, at the time of his/her purchase of
securities of the Company, exceeds $1,000,000, excluding the value of his/her primary residence; or

He/she is a natural person who had an individual income in excess of $200,000 in each of the two most recent years or had a joint
income with his/her spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same
income level in the current year; or

He/she is a director, executive officer or general partner of the Company or a director, executive officer or general partner of a
general partner of the Company; or

It is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, a corporation, Massachusetts
or similar business trust, or partnership that was not formed for the specific purpose of acquiring the securities of the Company
being offered in this offering, with total assets in excess of $5,000,000; or

It is a “private business development company” as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; or

It is a “bank” as defined in Section 3(a)(2) of the Act; or

It is a “savings and loan association” or other institution as defined in Section 3(a)(5)(A) of the Act, whether acting in its individual
or fiduciary capacity; or

It is a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended; or

It is an “insurance company” as defined in Section 2(a)(13) of the Act; or
A-2

It is an investment company registered under the Investment Company Act of 1940; or

It is a “business development company” as defined in Section 2(a)(48) of the Investment Company Act of 1940; or

It is a “Small Business Investment Company” licensed by the U.S. Small Business Administration under either Section 301(c) or (d)
of the Small Business Investment Act of 1958; or

It is a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; or

It is an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is one of the following:

A bank;

A savings and loan association;

An insurance company; or

A registered investment adviser; or

It is an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 with total assets in
excess of $5,000,000; or

It is an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 that is a self-directed
plan with investment decisions made solely by persons that are accredited investors; or

It is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered by the
Company in this offering, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii); or

It is an entity in which all of the equity owners are accredited investors.
A-3
Date:
PARTNERSHIP, CORPORATION, TRUST
OR OTHER ENTITY INVESTORS:
Print Name of Partnership, Corporation,
Trust or Other Entity
By:
Signature of Authorized Representative
Print Name of Authorized Representative
Title of Authorized Representative
Investor Questionnaire