Exhibit 10.2

EXECUTION

LOAN AGREEMENT

Dated as of February 26, 2019

Between

HEALTHCARE ROYALTY PARTNERS III, L.P.,

as Lender,

and

PARATEK ROYALTY CORPORATION,

as Borrower

 

 

 

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TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

ARTICLE I.

CERTAIN DEFINITIONS

 

 

 

 

SECTION 1.01

 

DEFINITIONS

1

SECTION 1.02

 

RULES OF CONSTRUCTION

19

 

ARTICLE II.

THE LOAN; DISBURSEMENT; CERTAIN FEES

 

 

 

 

SECTION 2.01

 

THE LOAN

21

SECTION 2.02

 

DISBURSEMENT AND BORROWING

20

SECTION 2.03

 

LOAN NOT REVOLVING

20

 

ARTICLE III.

REPAYMENT

 

 

 

 

SECTION 3.01

 

AMORTIZATION; MATURITY DATE

20

SECTION 3.02

 

MANDATORY PREPAYMENT; VOLUNTARY PREPAYMENT

21

SECTION 3.03

 

INCREASED COST

24

 

ARTICLE IV.

INTEREST; EXPENSES; MAKING OF PAYMENTS

 

 

 

 

SECTION 4.01

 

INTEREST RATE

25

SECTION 4.02

 

INTEREST RESERVE ACCOUNT

25

SECTION 4.03

 

COLLECTION ACCOUNT

25

SECTION 4.04

 

APPLICATION OF PAYMENTS

26

SECTION 4.05

 

INTEREST ON LATE PAYMENTS

27

SECTION 4.06

 

ADMINISTRATION AND ENFORCEMENT EXPENSES

27

SECTION 4.07

 

MAKING OF PAYMENTS

27

SECTION 4.08

 

SETOFF OR COUNTERCLAIM

27

 

ARTICLE V.

TAXES

 

 

 

 

SECTION 5.01

 

TAXES

27

SECTION 5.02

 

RECEIPT OF PAYMENT

29

SECTION 5.03

 

OTHER TAXES

29

SECTION 5.04

 

INDEMNIFICATION

30

 

 

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Page

 

 

 

 

SECTION 5.05

 

REGISTERED OBLIGATION

30

SECTION 5.06

 

TAX TREATMENT

30

SECTION 5.07

 

TREATMENT OF CERTAIN REFUNDS

31

 

ARTICLE VI.

CLOSING CONDITIONS

 

 

 

 

SECTION 6.01

 

CONDITIONS PRECEDENT TO THE LOAN

31

 

ARTICLE VII.

REPRESENTATIONS AND WARRANTIES

 

 

 

 

SECTION 7.01

 

REPRESENTATIONS AND WARRANTIES OF BORROWER

34

SECTION 7.02

 

REPRESENTATIONS AND WARRANTIES AS TO COMPANY, ETC

42

SECTION 7.03

 

SURVIVAL OF REPRESENTATIONS AND WARRANTIES

48

 

ARTICLE VIII.

AFFIRMATIVE COVENANTS

 

 

 

 

SECTION 8.01

 

MAINTENANCE OF EXISTENCE

48

SECTION 8.02

 

USE OF PROCEEDS

49

SECTION 8.03

 

FINANCIAL STATEMENTS AND INFORMATION

49

SECTION 8.04

 

BOOKS AND RECORDS

50

SECTION 8.05

 

GOVERNMENTAL AUTHORIZATIONS

51

SECTION 8.06

 

COMPLIANCE WITH LAWS AND CONTRACTS

51

SECTION 8.07

 

PLAN ASSETS

51

SECTION 8.08

 

NOTICES

51

SECTION 8.09

 

PAYMENT OF TAXES

52

SECTION 8.10

 

WAIVER OF STAY, EXTENSION OR USURY LAWS

52

SECTION 8.11

 

INTELLECTUAL PROPERTY

53

SECTION 8.12

 

SECURITY DOCUMENTS; FURTHER ASSURANCES

54

SECTION 8.13

 

INFORMATION REGARDING COLLATERAL

55

SECTION 8.14

 

ADDITIONAL COLLATERAL; NEW LICENSE ARRANGEMENT

55

 

ARTICLE IX.

NEGATIVE COVENANTS

 

 

 

 

SECTION 9.01

 

ACTIVITIES OF BORROWER

56

SECTION 9.02

 

MERGER; SALE OF ASSETS

58

SECTION 9.03

 

LIENS

58

 

 

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Page

 

 

 

 

SECTION 9.04

 

INVESTMENT COMPANY ACT

58

SECTION 9.05

 

LIMITATION ON ADDITIONAL INDEBTEDNESS

58

SECTION 9.06

 

LIMITATION ON TRANSACTIONS WITH CONTROLLED AFFILIATES

59

SECTION 9.07

 

ERISA

59

SECTION 9.08

 

DIVIDENDS AND DISTRIBUTIONS

59

 

ARTICLE X.

EVENTS OF DEFAULT

 

 

 

 

SECTION 10.01

 

EVENTS OF DEFAULT

59

SECTION 10.02

 

DEFAULT REMEDIES

59

SECTION 10.03

 

RIGHT OF SET-OFF; SHARING OF SET-OFF

60

SECTION 10.04

 

RIGHTS NOT EXCLUSIVE

60

 

ARTICLE XI.

INDEMNIFICATION

 

 

 

 

SECTION 11.01

 

LOSSES

61

SECTION 11.02

 

ASSUMPTION OF DEFENSE; SETTLEMENTS

61

 

ARTICLE XII.

MISCELLANEOUS

 

 

 

 

SECTION 12.01

 

ASSIGNMENTS

62

SECTION 12.02

 

SUCCESSORS AND ASSIGNS

63

SECTION 12.03

 

NOTICES

63

SECTION 12.04

 

ENTIRE AGREEMENT

64

SECTION 12.05

 

MODIFICATION

64

SECTION 12.06

 

NO DELAY; WAIVERS; ETC.

64

SECTION 12.07

 

SEVERABILITY

64

SECTION 12.08

 

DETERMINATIONS

65

SECTION 12.09

 

REPLACEMENT OF NOTE

65

SECTION 12.10

 

GOVERNING LAW

65

SECTION 12.11

 

JURISDICTION

65

SECTION 12.12

 

WAIVER OF JURY TRIAL

65

SECTION 12.13

 

WAIVER OF IMMUNITY

66

SECTION 12.14

 

COUNTERPARTS; DELIVERY

66

SECTION 12.15

 

LIMITATION ON RIGHTS OF OTHERS

66

 

 

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Page

 

 

 

 

SECTION 12.16

 

SURVIVAL

66

SECTION 12.17

 

CONFIDENTIALITY

66

SECTION 12.18

 

PATRIOT ACT NOTIFICATION

67

 

Exhibits

 

 

 

Exhibit A

Form of Assignment and Acceptance

Exhibit B

Form of Blocked Account Control Agreement (“Lending Control”)

Exhibit C

Form of Contribution Agreement

Exhibit D

License Agreement

Exhibit E

Form of Note

Exhibit F

Notice of Prepayment

Exhibit G

Form of Security Agreement

Exhibit H

Form of Stock Pledge Agreement

Exhibit I

Forms of Tax Certificates

Exhibit J

Form of Officer’s Certificate

 

Schedules

 

 

 

 

 

Schedule 7.01

Patents

 

Schedule 7.01(k)

Commissions or broker’s fees

 

Schedule 7.01(m)

Relevant non-United States jurisdictions

 

Schedule 7.02(j)

Commissions or broker’s fees

 

Schedule 7.02(m)

Material Contracts - Company

 

Schedule 7.02(z)

Scheduled Indebtedness and liabilities

 

 

 

 

 

 

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This LOAN AGREEMENT (this “Agreement”) dated as of February 26, 2019, is entered
into by and between the entities managed by HealthCare Royalty Partners III,
L.P., as lender (“Lender”), and PARATEK ROYALTY CORPORATION, a Delaware
corporation, as borrower (“Borrower”).

Capitalized terms not otherwise defined herein shall have the meanings set forth
in, or by reference in, Article I below.

RECITALS

WHEREAS, Borrower has requested that Lender make the Loan to Borrower on the
Closing Date and Lender is willing to make the Loan on the Closing Date, on the
terms and subject to the conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual promises of the Parties, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is mutually agreed by the Parties as follows:

Article I.
CERTAIN DEFINITIONS

 

Section 1.01

Definitions.  As used herein:

“Account Bank” means Bank of America, N.A. or such other bank or financial
institution approved by each of Lender and Borrower.

“Accreted Principal” has the meaning set forth in Section 3.01(c).

“Affiliate” means any Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
another Person.  

“Aggregate Accrual” has the meaning set forth in Section 3.02(a)(v).

“Agreement” has the meaning set forth in the preamble hereto.

“Amortization Payments” means the principal payments of the Loan due under
Section 4.04(a) hereof.

“Applicable Law” means, with respect to any Person, all laws, rules, regulations
and orders of Governmental Authorities applicable to such Person or any of its
properties or assets.

“Assignee” means any other Person to which a Lender has assigned or is assigning
its rights and obligations hereunder, whether or in whole or in part.

“Assignment and Acceptance” means a written instrument of assignment in the form
set forth in Exhibit A, executed by and between the parties to an assignment
under Section 12.01 hereof.

 

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“Bankruptcy Law” means Title 11 of the United States Code entitled “Bankruptcy”
and all other liquidation, conservatorship, bankruptcy, assignment for the
benefit of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief laws of the United States or other
applicable jurisdictions (domestic or foreign) from time to time in effect and
affecting the rights of creditors generally.

“Bill of Sale” means the Bill of Sale and Assumption Agreement, dated as of the
Closing Date, delivered by the Company to Borrower under the Contribution
Agreement with respect to the “Transferred Assets” (as such term is defined in
the Contribution Agreement).

“Blocked Account” means, collectively, any segregated deposit account
established and maintained at the Account Bank pursuant to a Blocked Account
Control Agreement, the Security Agreement and this Agreement.

“Blocked Account Control Agreement” means any agreement entered into by the
Account Bank, Borrower and Lender substantially in the form attached hereto as
Exhibit B or as otherwise in form and substance reasonably satisfactory to
Lender, pursuant to which, among other things, Lender shall have control over
the Blocked Account within the meaning of Section 9-104 of the UCC.

“Borrower” shall have the meaning set forth in the preamble hereto.

“Borrower’s Organizational Documents” means the certificate of formation and
operating agreement (or similar documents) of Borrower or the functional
equivalent of the foregoing.

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by Applicable
Law to remain closed.

“Calendar Quarter” means, for the first calendar quarter, the period beginning
on the Closing Date and ending on the last day of the calendar quarter in which
the Closing Date falls, and thereafter each successive period of three (3)
consecutive calendar months ending on March 31, June 30, September 30 or
December 31.  

“Capital Stock” of any Person means any and all shares, interests, memberships,
ownership interest units, rights to purchase, warrants, options, participations
or other equivalents of or interests in (however designated) equity of such
Person, including any preferred stock, and including, if such Person is a
partnership, partnership interests (whether general or limited) and any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of property of, such partnership,
and including, if such Person is a limited liability company, membership
interests and any other interest or participation that confers on a Person the
right to receive an interest in the profits and losses of, or distributions of
property of, such limited liability company, in each case whether outstanding on
the date hereof or issued after the date hereof, but excluding any Indebtedness
convertible into or exchangeable for such equity.

 

 

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“Change of Control” means any “person” or “group” (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit
plan of such person or its subsidiaries, and any person or entity acting in its
capacity as trustee, agent or other fiduciary or administrator of any such plan)
becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act) of more than thirty-five percent (35%) of the equity interests of
Borrower or Company entitled to vote for members of its board of directors on a
fully diluted basis (and taking into account all such securities that such
person or group has the right to acquire pursuant to any option right).

“Closing Date” means May 1, 2019.

“Co-owned Patents” means the Patents owned by Borrower and a Third Party.

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

“Collateral” means all of Borrower’s right, title and interest in, to and under,
the following property, whether now owned or hereafter acquired: (a) the
Collection Account; (b) all rights (contractual and otherwise and whether
constituting accounts, contract rights, financial assets, cash, investment
property or general intangibles) arising under, connected with or in any way
related to the Collection Account; (c) all proceeds resulting from the assets
described in the foregoing clauses (a) and (b); (d) Included Royalty Interest;
(e)[reserved]; (f) the right to receive the Quarterly Report; (g) the right to
audit the records of the Licensee as described in Section 7.5.5 of the License
Agreement; (h) the right to make claims against the Licensee for breach of the
License Agreement (other than indemnification claims pursuant to Section 12.2 of
the License Agreement); (i) the Contribution Agreement; (j) the Bill of Sale;
(k) all books and records of Borrower that at any time evidence or contain
information relating to any of the foregoing or are otherwise necessary or
helpful in the collection or realization thereof; and (l) all proceeds and
products of the foregoing, but in no event shall Collateral include any of the
following:   (i) any governmental licenses or state or local franchises,
charters and authorizations, to the extent a security interest in any such
license, franchise, charter or authorization is prohibited or restricted thereby
(after giving effect to the applicable anti-assignment provisions of the UCC or
other Applicable Law) or (ii) any license or agreement (or rights thereunder) to
the extent that a grant of a security interest therein would violate or
invalidate such license or agreement, result in a breach thereof or create a
right of termination in favor of any other party thereto (after giving effect to
the applicable anti-assignment provisions of the UCC or other Applicable Law).

“Collection Account” means the Blocked Account established and maintained at any
Account Bank solely for the purpose of receiving remittance of royalty
receivables of Borrower pursuant to the License Agreement and disbursement
thereof as provided herein, and any successor Collection Account entered into in
accordance with Section 4.03 and the related Blocked Account Control Agreement.

“Commercialization” means, on a country-by-country basis,  any and all
activities with respect to the distribution, marketing, detailing, promotion,
selling and securing of reimbursement of the Licensed Product in the Territory,
which shall include, as applicable, post-marketing approval studies, post-launch
marketing, promoting, detailing, marketing research, distributing, customer
service, selling the Licensed Product, importing, exporting or transporting the
Licensed Product for sale, and regulatory compliance with respect to the
foregoing.  When used as a verb, “Commercialize” means to engage in
Commercialization.

 

 

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“Commercially Reasonable and Diligent Efforts” means such efforts and resources
normally used by a reasonably prudent company in the biotechnology industry of a
size comparable to Borrower and its Affiliates, taken as a whole with respect to
a pharmaceutical product for which the same regulatory approval is held as that
received from the FDA in the United States with respect to the Product, which
pharmaceutical product is owned or licensed in the same manner as the Product,
which pharmaceutical product is at a similar stage in its product life and of
similar market and profit potential as the Product, taking into account
intellectual property protection, efficacy, safety, approved labeling, the
competitiveness of alternative products in such jurisdiction,
pricing/reimbursement for the pharmaceutical product and the profitability of
the pharmaceutical product, all as measured by the facts and circumstances in
existence at the time such efforts are due.

“Company” means Paratek Pharmaceuticals, Inc., a Delaware corporation, which is
the direct sole parent of Borrower.

“Confidential Information” means any and all technical and non-technical
non-public information provided by either Party to the other (including, without
limitation, any notices or other information provided pursuant to Section 8.08),
either directly or indirectly, whether in graphic, written, electronic or oral
form, and marked or identified at the time of disclosure as confidential, or
which by its context would reasonably be deemed to be confidential, including
without limitation information relating to a Party’s revenues, net sales, costs,
technology, products and services, and any business, financial or customer
information relating to a Party.  Confidential Information shall not include any
information that a Party can demonstrate was: (i) known to the general public at
the time of its disclosure to such Party or its Affiliates, or thereafter became
generally known to the general public, other than as a result of actions or
omissions of the receiving Party, its Affiliates, or anyone to whom the
receiving Party or its Affiliates disclosed such portion; (ii) known by the
receiving Party or its Affiliates prior to the date of disclosure by the
disclosing Party; (iii) disclosed to the receiving Party or its Affiliates on an
unrestricted basis from a source unrelated to the disclosing Party and not known
by the receiving Party or its Affiliates (after due inquiry) to be under a duty
of confidentiality to the disclosing Party; or (iv) independently developed by
the receiving Party or its Affiliates by personnel that did not use the
Confidential Information of the disclosing Party in connection with such
development.  For clarity, this Agreement shall supersede the Confidentiality
Agreement and the Confidentiality Agreement shall cease to be of any force and
effect following the execution of this Agreement; provided, however, that all
information falling within the definition of “Confidential Information” set
forth in the Confidentiality Agreement shall also be deemed Confidential
Information disclosed pursuant to this Agreement, and the use and disclosure of
such Confidential Information following the date of this Agreement shall be
subject to the provisions of Section 12.17.

“Confidentiality Agreement” means that certain Confidentiality Agreement by and
between Paratek Pharmaceuticals, Inc. and HealthCare Royalty Management, LLC,
dated August 24, 2016.

“Contract” means any agreement, contract, lease, commitment, license and other
arrangement that is legally binding.

 

 

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“Contribution” means the sale, transfer, assignment, contribution and conveyance
of the Transferred Assets pursuant to the Contribution Agreement.

“Contribution Agreement” means the Contribution and Servicing Agreement, dated
as of the Closing Date, between the Company and Borrower, in the form of Exhibit
C hereto.

“Contributor Event of Default” has the meaning set forth in the Contribution
Agreement.

“Controlled Affiliate” with respect to any Person means any other Person
directly or indirectly controlling, controlled by or under common control with,
such Person.  For the purposes of this Agreement, “control” (including, with
correlative meaning, the terms “controlling” and “controlled”) means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.

“Default” means any condition or event which constitutes an Event of Default or
which, with the giving of notice or the lapse of time or both (in each case to
the extent described in the relevant sub-clauses of the definition of “Event of
Default”) would, unless cured or waived, become an Event of Default.

“Default Rate” means, for any period for which an amount is overdue, a rate per
annum equal for each day in such period to the lesser of (i) 3% plus the rate of
interest otherwise applicable to the Loan as provided in Section 4.01 and the
definition of “Fixed Interest” and (ii) the maximum rate of interest permitted
under Applicable Law.

“Deficiency Amount” has the meaning set forth in Section 3.01(c).

“Dispute(s)” means any opposition, interference, reexamination, injunction,
claim, suit, action, citation, summons, subpoena, hearing, inquiry,
investigation (by the International Trade Commission or otherwise), complaint,
arbitration, mediation, demand, decree or other dispute, disagreement,
proceeding, claim or inter partes review (other than standard patent prosecution
before a Patent Office).

“Disqualified Capital Stock” of any Person means any class of Capital Stock of
such Person that, by its terms, or by the terms of any related agreement or of
any security into which it is convertible, puttable or exchangeable, is, or upon
the happening of any event (other than a Change of Control) or the passage of
time would be, required to be redeemed by such Person, whether or not at the
option of the holder thereof, or matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, in whole or in part, on or prior to
the date which is 91 days after the Scheduled Maturity Date; provided, however,
that any class of Capital Stock of such Person that, by its terms, authorizes
such Person to satisfy in full its obligations with respect to the payment of
dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise)
or repurchase thereof or otherwise by the delivery of Capital Stock that is not
Disqualified Capital Stock, and that is not convertible, puttable or
exchangeable for Disqualified Capital Stock or Indebtedness, will not be deemed
to be Disqualified Capital Stock so long as such Person satisfies its
obligations with respect thereto solely by the delivery of Capital Stock that is
not Disqualified Capital Stock.

 

 

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“Dollars” or “$” means lawful money of the United States of America.

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

“Event of Default” means the occurrence of one or more of the following:

(a)Borrower fails to pay any principal of the Loan within three (3) Business
Days after the same becomes due and payable, whether on the Maturity Date or
otherwise (excluding any prepayment of principal of the Loan pursuant to Section
3.02(b)).

(b)Except as permitted by Section 4.01, Borrower fails to pay any interest on
the Loan (including, without limitation, Fixed Interest) or make payment of any
other amounts payable under this Agreement within five (5) Business Days after
the same becomes due and payable.

(c)Any representation or warranty of Borrower in any Loan Document to which it
is party or in any certificate or other document delivered by Borrower in
connection with the Loan Documents to Lender proves to have been incorrect in
any material respect at the time it was made or deemed made (except that any
representation or warranty that is qualified as to “materiality” or “Material
Adverse Effect”, or by reference to an objective standard (e.g., a specified
dollar amount), shall be true and correct in all respects); provided, that if
the consequences of the failure of such representation or warranty to be true
and correct can be cured, such failure continues for a period of thirty (30)
days without such cure after the earlier of the date Borrower becomes aware of
such failure or the date Lender provides Notice of such failure to Borrower.

(d)Borrower fails to perform or observe any covenant or agreement contained in
Article IX (other than Section 9.03, which is covered under clause (e) below).  

(e)Borrower fails to perform or observe any other covenant or agreement
contained in the Loan Documents to which it is a party (other than those
referred to in the preceding clauses of this definition) if such failure is not
remedied on or before the 30th day after Notice thereof from Lender.

(f)A Contributor Event of Default occurs and is continuing.

(g)Borrower (i) fails to pay when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) any Indebtedness (other than the
Obligations hereunder) of $50,000 or more or (ii) fails to perform or observe
any covenant or agreement to be performed or observed by it contained in any
agreement or in any instrument evidencing any of its Indebtedness (other than
the Obligations hereunder) of $50,000 or more and, as a result of such failure,
any other party to that agreement or instrument is entitled to exercise the
right to accelerate the maturity of any Indebtedness thereunder.

 

 

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(h)Any uninsured judgment, decree or order in an amount in excess of $50,000
shall be rendered against Borrower and either (i) enforcement proceedings shall
have been commenced upon such judgment, decree or order or (ii) such judgment,
decree or order shall not have been stayed or bonded pending appeal, vacated or
discharged, within thirty (30) days from entry.

(i)An Insolvency Event shall occur.

(j)(i) Any of the Loan Documents shall cease to be in full force and effect,
(ii) the validity or enforceability of any Loan Document is disaffirmed or
challenged in writing by Borrower, the Company or any of their respective
Affiliates, or by any Person (other than Lender) asserting an interest in any
substantial portion of the Collateral and such written disaffirmation or
challenge is not withdrawn or disavowed by such Person within 30 days after its
communication or Borrower has not brought appropriate proceedings for
declaratory or other relief negating such disaffirmation or challenge within 30
days after such communication and has not obtained an order granting such relief
within 120 days after commencement of such proceedings, or (iii) this Agreement,
the Security Agreement or the Stock Pledge Agreement shall cease to give Lender
the rights purported to be created hereby or thereby (including a first priority
perfected Lien on the assets of Borrower that constitute Collateral (except as
otherwise expressly provided herein and therein)) other than as a direct result
of any action by Lender or failure of Lender to perform an obligation of Lender
hereunder.

(k)Borrower fails to perform or observe any covenant or agreement contained in
any Material Contract to which it is a party or any of Borrower’s Organizational
Documents, and such failure is not cured or waived within any applicable grace
period, and in the case of any provision in Borrower’s Organizational Documents,
if not cured, is not waived by Lender, or any Material Contract shall cease to
be in full force and effect, and in the case of any provision in a Material
Contract, such failure to perform or observe results in a termination of such
Material Contract and any such failure, cessation or termination could
reasonably be expected to have a Material Adverse Effect.

(l)The License Agreement is terminated or cancelled by the Licensee, in each
case prior to the Scheduled Maturity Date and is not replaced in accordance with
Section 8.14(b) hereof within two hundred and seventy (270) days after such
termination or cancellation; provided that such failure to replace shall not
constitute an Event of Default for so long as Borrower and Company are engaged
in discussions with a Third Party with respect to a New Arrangement, continue to
exert Commercially Reasonable and Diligent Efforts, as measured at the time, to
effect such New Arrangement and have a good faith reasonable belief that such
discussions will result in the entry into a New Arrangement within a reasonable
period of time thereafter.

(m)Any security interest purported to be created by the Security Agreement shall
cease to be in full force and effect, or shall cease to give the rights, powers
and privileges purported to be created and granted hereunder or thereunder
(including a perfected first priority security interest in and Lien on
substantially all of the Collateral (except as otherwise expressly provided
herein and therein)) in favor of Lender pursuant hereto or

 

 

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thereto (other than as a result of the failure by Lender of taking any action
required to maintain the perfection of such security interests), or shall be
asserted by Borrower not to be a valid, perfected, first priority (except as
otherwise expressly provided in this Agreement or such Security Agreement)
security interest in the Collateral and/or Borrower takes any action that could
reasonably be expected to impair Lender’s security interest in any of the
Collateral (other than granting Permitted Liens or permitting such Permitted
Liens to exist).

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

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
any Lender, (i) any Taxes imposed on (or measured by) net income (however
denominated), branch profits Taxes, or any franchise or similar Taxes imposed in
lieu thereof, imposed by any Governmental Authority, in each case (x) as a
result of such Lender being organized under the laws of, or having its principal
office or its applicable lending office located in, the jurisdiction imposing
such Tax (or any political subdivision thereof) or (y) that are Other Connection
Taxes, (ii) any U.S. federal withholding Tax imposed on amounts payable to or
for the account of such Lender with respect to an applicable interest in the
Loan or commitment pursuant to a law in effect on the date on which (x) such
Lender acquires such interest in such commitment or, if such Lender did not fund
the Loan pursuant to a prior commitment, on the date such Lender acquires the
applicable interest in the Loan or (y) such Lender designates a new lending
office, except in each case to the extent that amounts with respect to such
Taxes were payable pursuant to Section 5.01 or Section 5.04 either to such
Lender’s assignor immediately before such Lender acquired such applicable
interest in the Loan or commitment (as applicable) or to such Lender immediately
before it changed its lending office, as applicable, (iii) any Tax that is
attributable to such Lender’s failure to comply with Section 5.01(b) and (iv)
any Tax withheld pursuant to FATCA.

“Exclusively Licensed Patents” means the Patents exclusively licensed to
Borrower.

“Exploit” means, with respect to the Licensed Product, the manufacture, use,
sale, offer for sale (including marketing and promotion), importation,
distribution or other Commercialization; and “Exploitation” shall have the
correlative meaning.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof, any agreements entered into
pursuant to current Section 1471(b)(1) of the Code (or any amended or successor
version described above) and any fiscal or regulatory legislation, or official
administrative rules or practices adopted pursuant to any intergovernmental
agreement, treaty or convention among Governmental Authorities and implementing
such Sections of the Code.

“FCPA” means the United States Foreign Corrupt Practices Act.

“FDA” means the United States Food and Drug Administration.

 

 

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“Financial Statements” means, the consolidated balance sheets of the Company,
audited at December 31, 2017, December 31, 2016, December 31, 2015 and December
31, 2014 and the related consolidated statements of operations and comprehensive
loss, cash flows and changes in stockholders’ equity of the Company audited for
the years ended December 31, 2017, December 31, 2016, December 31, 2015 and
December 31, 2014, and the accompanying notes thereto, as filed within Forms
10-K and 10-Q with the SEC.

“Fixed Interest” means interest with respect to the Loan, accruing with respect
to the outstanding principal balance thereof at a rate per annum equal to 12.0%.

“Foreign Lender” means any Lender which is not a “United States person” within
the meaning of Section 7701(a)(30) of the Code.

“GAAP” means the generally accepted accounting principles in the United States
of America in effect from time to time; provided, that in the event such
principles change after the Closing Date in a manner which affects compliance
with this Agreement by Borrower (including without limitation in the
determination of payments in respect of the Included Royalty Interest), such
change shall be ignored for the purpose of determining such compliance.

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to,
government.

“Guarantee” or “Guaranty” means, as to any Person:  (a) any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation payable or
performable by another Person (the “primary obligor”) in any manner, whether
directly or indirectly, and including any obligation of such Person, direct or
indirect (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation, (ii) to purchase or lease
property, securities or services for the purpose of assuring the obligee in
respect of such Indebtedness or other obligation of the payment or performance
of such Indebtedness or other obligation, (iii) to maintain working capital,
equity capital or any other financial statement condition or liquidity or level
of income or cash flow of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation, or (iv) entered into for
the purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part); or
(b) any Lien on any assets of such Person securing any Indebtedness or other
obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person.

“Hercules” has the meaning set forth in the definition of “Venture Financing
Agreement.”  

“Included Royalty Interest” means, with respect to each Calendar Quarter, the
payments received during such Calendar Quarter in respect of the Royalty
Interest.

“Indebtedness” with respect to any Person means (i) indebtedness pursuant to an
agreement or instrument involving or evidencing money borrowed, the advance of
credit, a conditional sale or a transfer with recourse or with an obligation to
repurchase (but excluding trade

 

 

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credit and accounts payable in the ordinary course of business), (ii) any
capitalized lease, (iii)  any obligations with respect to Disqualified Capital
Stock, (iv)  indebtedness of a third party secured by (or for which the holder
of such indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on assets owned or acquired by such Person, whether or not
the indebtedness secured thereby has been assumed (but only to the extent of
such Lien), (v) net amounts owing pursuant to an interest rate protection
agreement, foreign currency exchange agreement or other hedging arrangement,
(vi) a reimbursement obligation under a letter of credit issued for the account
of such Person, or (vii) all Guarantees with respect to Indebtedness of the
types specified in clauses (i) through (vi) above of another Person.  For the
avoidance of doubt, the Indebtedness of any Person shall include the
Indebtedness of any other entity to the extent such Person is directly liable
therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.

“Indemnified Liabilities” means, collectively, any and all liabilities,
obligations, losses, damages, penalties, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including the reasonable fees
and disbursements of counsel for Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person whether or not any such Indemnitee shall be designated as a party or
a potential party thereto, and whether or not such Indemnitee is required by
Applicable Law to be involved therein, and any fees or expenses actually
incurred by Indemnitees in enforcing the indemnity provided herein), whether
direct, indirect or consequential, whether based on any federal, state or
foreign laws, statutes, rules or regulations (including securities and
commercial laws, statutes, rules or regulations), on common law or equitable
cause or on contract or otherwise, imposed on, incurred by, or asserted against
any such Indemnitee, in any manner relating to or arising out of this Agreement
or the other Loan Documents or the transactions contemplated hereby or thereby
(including any enforcement of any of the Loan Documents (including any sale of,
collection from, or other realization upon any of the Collateral)).

“Indemnified Taxes” means all (i) Taxes, other than Excluded Taxes, imposed on
or with respect to any payment made by or on account of any obligation of
Borrower under any Loan Documents and (ii) Other Taxes.

“Indemnitee” means each Lender and its Affiliates and their respective officers,
partners, directors, trustees, employees, agents and controlling Persons.

“Insolvency Event” means the occurrence of any of the following with respect to
Borrower or the Company:

(i)(A) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed in a court of competent jurisdiction seeking (x) relief in
respect of Borrower or the Company, or of a substantial part of the property of
Borrower or the Company, under any Bankruptcy Law now or hereafter in effect,
(y) the appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for Borrower or the Company for a substantial part of the
property of Borrower or the Company or (z) the winding-up or liquidation of
Borrower or the Company, which proceeding or petition shall continue undismissed
for sixty (60) calendar days or (B) an order of a court of competent
jurisdiction approving or ordering any of the foregoing shall be entered;

 

 

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(ii)Borrower or the Company shall (A) voluntarily commence any proceeding or
file any petition seeking relief under any Bankruptcy Law now or hereafter in
effect, (B) apply for the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official itself or for a substantial part
of its property, (C) fail to contest in a timely and appropriate manner any
proceeding or the filing of any petition described in clause (i) of this
definition, (D) file an answer admitting the material allegations of a petition
filed against it in any proceeding described in clause (i) of this definition,
(E) make a general assignment for the benefit of creditors or (F) wind up or
liquidate (except as permitted under this Agreement);

(iii)Borrower or the Company shall take any action in furtherance of or for the
purpose of effecting, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clause (i) or (ii) of this definition; or

(iv)Borrower or the Company shall become unable, admit in writing its inability,
or fail generally, to pay its debts as they become due.

“Intellectual Property” means all intellectual property covering the sale,
manufacture, use, importation or marketing of the Licensed Product in the United
States including but not limited to patents, patent applications, trademarks,
trademark applications and know-how, necessary for the sale, manufacture, use,
importation or marketing of the Licensed Product that is owned or controlled
(and if controlled, only to the extent of control) by Borrower (after giving
effect to the contribution under the Contribution Agreement) as of the Closing
Date and during term of this Agreement, including, but not limited to the
“Paratek Patent Rights” and Company’s rights in the “Product Trademark” (each as
defined under the License Agreement).

“Interest Payment Date” means, for each applicable Calendar Quarter, each
February 20, May 20, August 20 and November 20, or if any such day is not a
Business Day, on the next succeeding Business Day, beginning on August 20, 2019.

“Interest Reserve Account” means the Blocked Account established and maintained
at any Account Bank, and any successor Interest Reserve Account entered into in
accordance with Section 4.02 and the related Blocked Account Control Agreement.

“Interest Reserve Amount” means $4,000,000.

“Interest Reserve Release Event” means either (i) Net Sales for any calendar
quarter of the Licensed Product exceed $20,000,000 as determined by Lender based
upon the quarterly sales reports provided pursuant to Section 7.5.4 of the
License Agreement or (ii) January 15, 2022.

“Knowledge” means, with respect to Borrower or the Company, the actual
knowledge, after due inquiry, of the Chief Executive Officer, Chief Financial
Officer, Chief Commercial Officer, Chief Development Officer or General Counsel
of the Company, or to the extent such officer does not exist, the actual
knowledge of another person with similar responsibility, regardless of title, of
Borrower or Company, respectively, relating to a particular matter; provided,
however, that a person charged with responsibility for the aspect of the
business relevant or related to the matter at issue shall be deemed to have
knowledge of a particular matter if, in the prudent exercise of his or her
duties and responsibilities in the ordinary course of business, such person
should have known of such matter.

 

 

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“Law” means any federal, state, local or foreign law, including common law, and
any regulation, rule, requirement, policy, judgment, order, writ, decree,
ruling, award, approval, authorization, consent, license, waiver, variance,
guideline or permit of, or any agreement with, any Governmental Authority.

“Lender” means Lender (as defined in the preamble hereto) and any assignee under
Section 12.01(b).

“Lender Account” means such account of Lender maintained at such banking
institution as Lender may specify in its discretion from time to time in writing
to Borrower at least five (5) Business Day prior to any Interest Payment Date or
other date on which payments are to be made to Lender pursuant to the Loan
Documents.  

“Lender Expense Amount” means the reasonable and documented fees and
out-of-pocket expenses of Lender incurred in connection with the making of the
Loan, including legal fees and expenses and expenses incurred in connection with
Lender’s due diligence investigation, in an amount not to exceed $300,000 less
any amounts paid by Borrower prior to the Closing Date.

“License Agreement” means the License Agreement, dated as of July 2, 2007, by
and between Warner Chilcott Company, Inc. and the Company, together with such
amendments or other modifications attached thereto, in the form attached to this
Agreement as Exhibit D, as assigned, transferred and contributed to Borrower
pursuant to the Contribution Agreement.

“Licensed Product” means the “Product” as such term is defined in the License
Agreement.

“Licensee” means Aqua Pharmaceuticals, LLC, a Pennsylvania limited liability
company, or any successor thereto, as successor in interest to Warner Chilcott
Company, Inc., a party to the License Agreement.

“Lien” means any mortgage or deed of trust, pledge, hypothecation, lien, charge,
attachment, set-off, encumbrance or other security interest in the nature
thereof (including any conditional sale agreement, equipment trust agreement or
other title retention agreement, a lease with substantially the same economic
effect as any such agreement or a transfer or other restriction) or other
encumbrance, right or claim of any nature whatsoever.

“Loan” has the meaning set forth in Section 2.01(a).

“Loan Commitment” means the amount of $32,500,000.

“Loan Documents” means this Agreement, the Note, the Security Agreement, the
Stock Pledge Agreement, the Contribution Agreement, the Bill of Sale, each
Blocked Account Control Agreement and all other documents delivered in
connection therewith.

 

 

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“Material Adverse Effect” means (a) an Insolvency Event, (b) a material adverse
change in the business, operations, properties, results of operations or
financial condition of Borrower, taken as a whole; (c) a material adverse effect
on the validity or enforceability of the Loan Documents taken as a whole or any
material provision hereof or thereof; (d) a material adverse effect on the
ability of Borrower or the Company to consummate the transactions contemplated
by the Loan Documents, or on the ability of Borrower or the Company to perform
its obligations under the Loan Documents to which it is a party, in each case,
taken as a whole; or (e) a material adverse effect on the rights or remedies of
Lender under any of the Loan Documents, taken as a whole.

“Material Contract” means any Contract to which Borrower, the Company, or a
Subsidiary of the Company, as the case may be in the context in which used, is a
party or any of the respective assets or properties of Borrower, the Company or
such Subsidiary are bound or committed (other than the Transaction Documents)
and for which any breach, violation, nonperformance or early cancellation could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.  The Material Contracts as of the date hereof are identified on
Schedule 7.02(m).

“Material Contract Counterparty” means a counterparty to any Material Contract.

“Maturity Date” means the earlier of (i) the Scheduled Maturity Date and (ii)
the date of satisfaction in full of the Loan.

“Maximum Accrual” has the meaning set forth in Section 3.02(a)(v).

“Maximum Lawful Rate” means the highest rate of interest permissible under
Applicable Law.

“Net Sales” means “Net Sales” as such term is defined in the License Agreement.

“New Arrangement” has the meaning set forth in Section 8.14(b).

“Non-Exclusively Licensed Patents” means Patents licensed to Borrower on a
non-exclusive basis.

“Note” means the note, in the form attached hereto as Exhibit E, issued by
Borrower to Lender evidencing the Loan and any replacement(s) thereof issued in
accordance with Section 12.09.

“Notice of Prepayment” means the notice of prepayment, in the form of Exhibit F
hereto.

“Notices” means, collectively, notices, consents, approvals, reports,
designations, requests, waivers, elections and other communications.

 

 

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“Obligations” means, without duplication, the Loan, Fixed Interest and all
present and future Indebtedness, taxes, liabilities, obligations, covenants,
duties, and debts, owing by Borrower to Lender, arising under or pursuant to the
Loan Documents, including all principal, interest, premium, charges, expenses,
fees and any other sums chargeable to Borrower hereunder and under the other
Loan Documents (and including any interest, fees and other charges that would
accrue but for the filing of a bankruptcy action with respect to Borrower,
whether or not such claim is allowed in such bankruptcy action).

“Office” means, with respect to Lender, its Stamford, Connecticut office, and
with respect to any other Lender, the office of such Lender designated as its
“Office” in an Assignment and Acceptance, or such other office as may be
otherwise designated in writing from time to time by such Lender to Borrower.

“Organizational Document” means, with respect to any Person, (i) in the case of
any corporation, the certificate of incorporation and by-laws (or similar
documents) of such Person, (ii) in the case of any limited liability company,
the certificate of formation and operating agreement (or similar documents) of
such Person, (iii) in the case of any limited partnership, the certificate of
formation and limited partnership agreement (or similar documents) of such
Person, (iv) in the case of any general partnership, the partnership agreement
(or similar document) of such Person, and (v) in any other case, the functional
equivalent of the foregoing.

“Other Connection Taxes” means, with respect to any Lender, Taxes imposed as a
result of a present or former connection between such Lender and the
jurisdiction imposing such Tax (other than connections arising from such Lender
having executed, delivered, become a party to, performed its obligations under,
received payments under, received or perfected a security interest under,
engaged in any other transaction pursuant to or enforced any Loan Document, or
sold or assigned an interest in the Loan, commitment or Loan Document).

“Other Taxes” has the meaning set forth in Section 5.03.

“Owned Patents” means the Patents owned by Borrower.

“Party” and “Parties” means Lender and Borrower, individually and collectively.

“Patent” means any and all issued United States patents and pending United
States patent applications, including without limitation, all provisional
applications, substitutions, continuations, continuations-in-part, divisions,
and renewals, all letters patent granted thereon, and all patents-of-addition,
reissues, reexaminations and extensions or restorations by existing or future
extension or restoration mechanisms (including regulatory extensions), claiming
or covering the Licensed Product, or composition of matter, formulation, or
methods of manufacture or use thereof, that are issued or filed on or after the
date of this Agreement, including those identified in Schedule 7.01, in each
such case, which are owned, co-owned or controlled by, issued or licensed to,
licensed by, or hereafter acquired or licensed by, Borrower or any Subsidiary.

“Patent Office” means the respective patent office (foreign or domestic) for any
patent.

 

 

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“Patent Rights” means, collectively, with respect to a Person, all United States
patents issued or assigned to, and all United States patent applications and
registrations made by, such Person, together with any and all (i) rights and
privileges arising under Applicable Law with respect to such Person’s use of any
patents, (ii) inventions and improvements described and claimed therein, (iii)
reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof and amendments thereto, (iv) income, fees,
royalties, damages, claims and payments now or hereafter due and/or payable
thereunder and with respect thereto including damages and payments for past,
present or future infringements thereof, and (v) rights to sue for past, present
or future infringements thereof.

“Patriot Act” means the USA Patriot Act, Public Law No. 107-56.

“Payment in Full”  means the payment in full in good funds of the Loan and other
Obligations (other than contingent indemnification obligations for which such
claims have been reserved).

“Payments” means due and owing payments of Amortization Payments and Fixed
Interest (each under Section 4.04 hereof), including, in each case any default,
additional interest or prepayment premium charged hereunder.

“Permitted Liens” means:

(a)Liens created pursuant to any Loan Document;

(b)Liens in favor of a banking or other financial institution arising as a
matter of law or under customary contractual provisions encumbering deposits or
other funds maintained with such banking or other financial institution
(including the right of set off and grants of security interests in deposits
and/or securities held by such banking or other financial institution) and that
are within the general parameters customary in the banking industry;

(c)Liens securing Taxes, assessments, fees or other governmental charges or
levies, Liens securing the claims of materialmen, mechanics, carriers,
landlords, warehousemen and similar Persons, and attachment, judgment and other
similar Liens arising in connection with court proceedings so long as the
enforcement of such Liens is effectively stayed and the judgment claims secured
thereby do not otherwise constitute an Event of Default under clause (i) of the
definition of “Event of Default”;

(d)any right, title or interest of a licensor under a license or sublicense to
which Borrower is a party as licensee or sublicensee, and any restrictions under
a license to which Borrower is a party as licensee or sublicensee;

(e)(i) leases, subleases, licenses, or sublicenses of the assets or properties
of Borrower thereof, in each case entered into in the ordinary course of
business and not interfering in any material respect with the business of
Borrower and (ii) the License Agreement and any New Arrangement or other license
replacing the License Agreement in accordance with Section 8.14(b);

(f)inchoate Liens for ad valorem property Taxes not yet delinquent;

 

 

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(g)Liens in respect of property of Borrower imposed by Applicable Law which were
incurred in the ordinary course of business and do not secure Indebtedness for
borrowed money, such as carriers’, warehousemen’s, distributors’, wholesalers’,
materialmen’s and mechanics’ liens and other similar Liens arising in the
ordinary course of business; and

(h)banker’s liens for collection or rights of set off or similar rights and
remedies as to deposit accounts or other funds maintained with depositary
institutions; provided that such deposit accounts or funds are not established
or deposited for the purpose of providing collateral for any Indebtedness and
are not subject to restrictions on access by Borrower in excess of those
required by applicable banking regulations.

“Person” means any natural person, firm, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Authority or any other legal entity,
including public bodies, whether acting in an individual, fiduciary or other
capacity.

“Plan Assets” means assets of any (i) employee benefit plan (as defined in
Section 3(3) of ERISA) subject to the fiduciary responsibility provisions of
Title I of ERISA, (ii) plan (as defined in Section 4975(e)(1) of the Code)
subject to Section 4975 of the Code or (iii) entity whose underlying assets
include assets of any such employee benefit plan or plan by reason of the
investment by an employee benefit plan or plan in such entity.

“Prepayment Event Date” means the date of occurrence of a Prepayment Trigger or
the date fixed for a voluntary prepayment of the Loan pursuant to Section
3.02(b).

“Prepayment Trigger” means (i) the occurrence of any Event of Default and
(unless prohibited by operation of Law) the acceleration of the maturity of the
Loan or (ii) the occurrence of a Change of Control.

“Principal Amount” means, as of any date of determination, and without
duplication, the amount equal to the sum of: (i) the original amount of the Loan
Commitment, plus, (ii) any Accreted Principal accrued as of such date, minus,
(iii) any payment in respect of principal as provided for in Section 3.01, 3.02
or 4.04.

“Proceeding” means an action or proceeding brought against a Party as a
defendant, for purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby.

“Product” has the meaning set forth in the License Agreement.

“Purpose” has the meaning set forth in Section 12.17(a).

“Quarterly Interest Shortfall” has the meaning set forth in Section 4.04(a).

“Quarterly Report” means, with respect to the relevant Calendar Quarter of
Borrower, the quarterly reports provided for under Section 7.5.4 of the License
Agreement for the period thereunder corresponding to such quarter, together with
relevant supporting documentation.

 

 

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“Register” means a record of ownership in which Borrower registers by book entry
the interests (including any rights to receive payment hereunder) of each Lender
in the Loan and any assignment of any such interest, obligation or right.

“Regulatory Agency” means a Governmental Authority with responsibility for the
regulation of the research, development, marketing or sale of drugs or
pharmaceuticals in any jurisdiction, including the FDA and the European
Medicines Agency.

“Regulatory Change” means (i) the adoption after the date hereof of any
applicable law, rule or regulation or any change therein after the date hereof,
or (ii) any change after the date hereof in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, either generally or as
effected through compliance with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency.

“Representative” means, with respect to any Person, directors, officers,
employees, agents, co-investors, advisors, potential investors, underwriters,
rating agencies, permitted assignees, sources of financing and trustees of such
Person.

“Royalty Interest” means the royalties and other payments (together with the
right to receive such royalties and payments) payable to Borrower under Section
5.3 or Section 7.5 of the License Agreement (including in each case payments
constituting royalties, milestone payments, settlement payments, judgments,
securities, consideration or any other remuneration of any kind payable or
received in respect of, or in substitution or compensation for, or otherwise in
lieu of, such royalties under the License Agreement and all “accounts” (as such
term is defined in the New York Uniform Commercial Code) in respect of the
Royalty Interest evidencing or giving rise to any of the foregoing) relating to
Exploitation of the Licensed Product as provided in the License Agreement, and
any collections, recoveries, payments or other compensation made in lieu thereof
and any amounts paid or payable to Borrower and/or any of its Subsidiaries in
respect of such royalties pursuant to Section 365(n) of the United States
Bankruptcy Code derived from payments under the License Agreement since the
Closing Date.

“Scheduled Maturity Date” means May 1, 2029.

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

“Security Agreement” means the Security Agreement, substantially in the form of
Exhibit G hereto, between Lender and Borrower, securing the Obligations of
Borrower hereunder and the other Loan Documents, as supplemented by any
amendments or supplements thereto.

“Senior Officer” means (i) in the case of Borrower, the directors and (ii) in
the case of the Company, the Chief Executive Officer or Chief Financial Officer.

“Set-off” means any right of set off, rescission, counterclaim, reduction,
deduction or defense.

 

 

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“Stock Pledge Agreement” means the Pledge and Security Agreement, dated as of
the Closing Date, between the Company and Lender, in the form of Exhibit H
hereto, pursuant to which the Capital Stock of Borrower is pledged to Lender.

“Subsidiary” means, with respect to any Person, at any time, any entity of which
more than fifty percent (50%) of the outstanding voting stock or other equity
interest entitled ordinarily to vote in the election of the directors or other
governing body (however designated) is at the time beneficially owned or
controlled directly or indirectly by such Person, by one or more such entities
or by such Person and one or more such entities.

“Surviving Person” means, with respect to any Person involved in or that makes
any disposition, the Person formed by or surviving such disposition or the
Person to which such disposition is made.

“Taxes” means all present and future taxes, levies, duties, imposts, deductions,
charges, fees or withholdings (including backup withholdings), and all interest,
penalties and additions to tax with respect thereto, that are imposed by any
Governmental Authority.

“Territory” means the United States and its territories and possessions.

“Third Party” means any Person other than Borrower or its Affiliates.

“Transaction Documents” means the Loan Documents and the Organizational
Documents.

“Transferred Assets” has the meaning set forth in the Contribution Agreement.

“Transferred Contracts” has the meaning set forth in the Contribution Agreement.

“U.S.” means the United States of America.

“UCC” means the Uniform Commercial Code as in effect from time to time in New
York; provided, that, if, with respect to any financing statement or by reason
of any provisions of Applicable Law, the perfection or the effect of perfection
or non-perfection of the security interest or any portion thereof granted
pursuant to the Loan Documents is governed by the Uniform Commercial Code as in
effect in a jurisdiction of the United States other than New York, then “UCC”
means the Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions of this Agreement and any financing
statement relating to such perfection or effect of perfection or non-perfection.

“Valid Claim” means a claim of an issued and unexpired United States patent, or
a claim of a pending United States patent application, within the IP Rights,
which claim has not been held invalid, unpatentable or unenforceable by a court
of competent jurisdiction from which no further appeal can be further taken, and
has not been held admitted to be invalid, unpatentable or unenforceable, which
claim, but for a right to use such claim, would be infringed by the Product
and/or its Exploitation; provided however that if a claim of a pending patent
application shall not have issued as a claim of an issued patent within five (5)
years after the earliest filing date from which such claim claims priority, then
such claim shall not be a “Valid Claim” for purposes of this Agreement unless
and until such claim issues as a claim of an issued patent.

 

 

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“Venture Financing Agreement” means that certain Loan and Security Agreement
dated as of September 30, 2015, among, inter alios, the Company and Hercules
Capital, Inc., a Maryland corporation, in its capacity as administrative agent
thereunder (in such capacity, “Hercules”), as amended by that certain Amendment
No. 1 to Loan and Security Agreement dated as of November 10, 2015, that certain
Amendment No. 2 to Loan and Security Agreement dated as of December 12, 2016,
that certain Amendment No. 3 to Loan and Security Agreement dated as of June 27,
2017, that certain Amendment No. 4 to Loan and Security Agreement dated as of
April 17, 2018, and that certain Amendment No. 5 to Loan and Security Agreement
dated as of August 1, 2018, and as may be further amended, restated, amended and
restated, supplemented or otherwise modified from time to time.

 

Section 1.02

Rules of Construction.  Unless the context otherwise requires, in this
Agreement:

(a)An accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP.

(b)Words of the masculine, feminine or neuter gender shall mean and include the
correlative words of other genders.

(c)The definitions of terms shall apply equally to the singular and plural forms
of the terms defined.

(d)The terms “include”, “including” and similar terms shall be construed as if
followed by the phrase “without limitation”.

(e)Unless otherwise specified, references to an agreement or other document
include references to such agreement or document as from time to time amended,
restated, reformed, supplemented or otherwise modified in accordance with the
terms thereof (subject to any restrictions on such amendments, restatements,
reformations, supplements or modifications set forth herein or in any of the
other Transaction Documents) and include any annexes, exhibits and schedules
attached thereto.

(f)References to any Applicable Law shall include such Applicable Law as from
time to time in effect, including any amendment, modification, codification,
replacement or reenactment thereof or any substitution therefor.

(g)References to any Person shall be construed to include such Person’s
successors and permitted assigns (subject to any restrictions on assignment,
transfer or delegation set forth herein or in any of the other Transaction
Documents), and any reference to a Person in a particular capacity excludes such
Person in other capacities.

(h)The word “will” shall be construed to have the same meaning and effect as the
word “shall”.

 

 

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(i)The words “hereof”, “herein”, “hereunder” and similar terms when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision hereof, and Article, Section and Exhibit references herein are
references to Articles and Sections of, and Exhibits to, this Agreement unless
otherwise specified.

(j)In the computation of a period of time from a specified date to a later
specified date, the word “from” means “from and including” and each of the words
“to” and “until” means “to but excluding”.

(k)Where any payment is to be made, any funds are to be applied or any
calculation is to be made under this Agreement on a day that is not a Business
Day, unless this Agreement otherwise provides, such payment shall be made, such
funds shall be applied and such calculation shall be made on the succeeding
Business Day, and payments shall be adjusted accordingly.

Article II.

THE LOAN; DISBURSEMENT; CERTAIN FEES

Section 2.01The Loan.  On the terms and subject to the conditions set forth
herein, including the conditions set forth in Section 6.01 hereof, Lender shall
make a loan hereunder to Borrower in a principal amount equal to the Loan
Commitment on the Closing Date (together with any Accreted Principal, the
“Loan”) and Borrower shall accept and borrow such loan from Lender.

Section 2.02Disbursement and Borrowing.  On the terms and subject to the
conditions set forth herein, on the Closing Date, Lender shall wire transfer to
the account of Borrower that Borrower has designated for such purpose or to
Borrower’s order an amount equal to (A) the Loan Commitment, less (B) each of
(i) the Lender Expense Amount, (ii) $487,500, which shall be retained by Lender
as an original issue discount, and (iii) the Interest Reserve Amount, which
Lender shall deposit in the Interest Reserve Account (i.e., the Loan will be
funded on a net basis).

Section 2.03Loan Not Revolving.  The Loan is not revolving in nature, and any
amount of the Loan repaid or prepaid may not be reborrowed.

 

 

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Article III.

REPAYMENT

 

Section 3.01

Amortization; Maturity Date.

(a)If not earlier repaid in full, the unpaid balance of the outstanding
Principal Amount of the Loan, together with any accrued and unpaid interest, and
all other Obligations then outstanding, shall be due and payable in cash to the
Lender Account on the Maturity Date.

(b)The outstanding principal balance of the Loan and any interest or premium due
with respect thereto shall be repayable solely from Included Royalty Interest
except (i) in connection with voluntary prepayment of the Loan pursuant to
Section 3.02(b) or Section 3.03, (ii) in connection with prepayments required
pursuant to Section 3.02(a), and (iii) following the occurrence of a Prepayment
Trigger, in connection with mandatory prepayments of the Loan.

(c)If the amount in the Interest Reserve Account for any Interest Payment Date
is insufficient to satisfy the Quarterly Interest Shortfall (the difference
between the Quarterly Interest Shortfall and the amount in the Interest Reserve
Account, the “Deficiency Amount”), then any such Deficiency Amount shall
increase the outstanding Principal Amount of the Loan by an amount equal to the
Deficiency Amount for the applicable Interest Payment Date (rounded up to the
nearest whole dollar) and Lender shall be deemed to have made an additional term
loan in a Principal Amount equal to the aggregate amount of such Deficiency
Amount (such additional term loan, “Accreted Principal”).  Accreted Principal
shall be deemed to be part of the Loan made to Borrower for all purposes under
this Agreement, and the Loan shall bear interest on such increased Principal
Amount from and after the applicable Interest Payment Date in accordance with
Section 4.01. In the event of any repayment or prepayment of the Loan
(including, without limitation, principal payments due under Section
4.04(a)(ii)), accrued and unpaid Fixed Interest on the Principal Amount repaid
or prepaid shall be payable on the date of such repayment or prepayment.

 

Section 3.02

Mandatory Prepayment; Voluntary Prepayment.

(a)Mandatory Prepayment.

(i)If any Prepayment Trigger occurs, then Lender may declare the outstanding
Principal Amount of the Loan as of the date of the Prepayment Event Date plus
any accrued and unpaid interest thereon to be immediately due and payable
hereunder, in whole but not in part, to the extent permitted by law, together,
if applicable, with any additional amounts due in respect thereof pursuant to
clause (ii) below, and all other Obligations then outstanding together with all
other amounts in respect thereof to the Lender Account, and the provisions of
this Section 3.02(a) shall apply.

(ii)Any prepayment of the Loan pursuant to Section 3.02(a)(i) shall include (A)
with respect to any prepayment during the period commencing on the Closing Date
and ending on April 30, 2022, all interest accruing or that would have accrued
on the outstanding Principal Amount of the Loan during the period from the
Prepayment Event Date until April 30, 2022 and (B) a prepayment premium equal to
the amount indicated in the second column of the table below (determined as of
the Prepayment Event Date):

 

 

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Prepayment Event Date

Prepayment Premium

From the Closing Date to and including April 30, 2023

5.0% of the outstanding Principal Amount of the Loan as of the Prepayment Event
Date

From May 1, 2023 to and including April 30, 2024

2.5% of the outstanding Principal Amount of the Loan as at the Prepayment Event
Date

On and after May 1, 2024

1.0% of the outstanding Principal Amount of the Loan as at the Prepayment Event
Date

 

(iii)In addition to the amount in clause (ii) above, in connection with the
prepayment in full of the Loan outstanding, any unpaid amounts in respect of
such prepaid Loan not consisting of principal or Fixed Interest (i.e., any
unpaid amounts for indemnification, tax gross-up, default interest, expense
reimbursement and other amounts not consisting of principal or interest) shall
be immediately due and payable.

(iv)The date of prepayment of the Loan and any other amounts due to Lender under
this Section 3.02(a), shall be a Business Day not more than 10 Business Days
following the date the Prepayment Trigger has occurred.  Not less than 5
Business Days prior to such prepayment date, Borrower shall provide to Lender a
Notice of Prepayment showing the calculation of the amount to be prepaid and all
other amounts payable in connection therewith under this Section 3.02(a).  Such
Notice of Prepayment shall constitute Borrower’s irrevocable commitment to
prepay the Loan outstanding and all such other amounts on such prepayment date.

(v)Notwithstanding anything in this Agreement or in any other Loan Document to
the contrary, if the Loan shall remain outstanding after the fifth (5th)
anniversary of the initial issuance thereof and the aggregate amount that would
be includible in the gross income of a Lender with respect to the Loan (within
the meaning of Section 163(i) of the Code or any successor provision) for the
periods ending on or before any Interest Payment Date that occurs after such
fifth (5th) anniversary (the “Aggregate Accrual”) would otherwise exceed an
amount equal to the sum of (i) the aggregate amount of interest to be paid
(within the meaning of Section 163 (i) of the Code) under the Loan on or before
such Interest Payment Date, and (ii) the product of (A) the issue price (as
defined in Section 1273(b) of the Code) of the Loan and (B) the yield to
maturity (interpreted in accordance with Section 163(i) of the Code) of the Loan
(such sum, the “Maximum Accrual”), then Borrower shall pay on each applicable
Interest Payment Date occurring after such fifth (5th) anniversary that portion
of the outstanding Principal Amount of the Loan necessary to prevent the Loan
from constituting an “applicable high yield discount obligation” within the
meaning of Section 163(i) of the Code, up to an amount equal to the excess, if
any, of the Aggregate Accrual over the Maximum Accrual (each such payment, the
“AHYDO Payment”) and the amount of such AHYDO Payment and any interest thereon
shall be treated for U.S. federal income tax purposes as an amount of interest
to be paid (within the meaning of Section 163(i)(2)(B)(i) of the Code) under the
Loan.  This provision is intended to prevent the Loan from being classified as
an “applicable high yield discount obligation,” as defined in Section 163(i) of
the Code, and shall be interpreted consistently therewith.

 

 

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(b)Voluntary Prepayment.

(i)Borrower may prepay the outstanding Principal Amount of the Loan plus any
accrued and unpaid interest thereon, in whole but not in part, to the extent
permitted by law, together, if applicable, with any additional amounts due in
respect thereof pursuant to clause (ii) below, and all other Obligations then
outstanding together with all other amounts in respect thereof to the Lender
Account, and the provisions of this Section 3.02(b) shall apply.

(ii)Any prepayment of the Loan pursuant to Section 3.02(b)(i) shall include (A)
with respect to any prepayment during the period commencing on the Closing Date
and ending on April 30, 2022, all interest accruing or that would have accrued
on the outstanding Principal Amount of the Loan as of the Prepayment Event Date
during the period from the Prepayment Event Date until April 30, 2022 and (B) a
prepayment premium equal to the amount indicated in the second column of the
table below (determined as of the Prepayment Event Date):

Prepayment Event Date

Prepayment Premium

From the Closing Date to and including April 30, 2023

5.0% of the outstanding Principal Amount of the Loan as of the Prepayment Event
Date

From May 1, 2023 to and including April 30, 2024

2.5% of the outstanding Principal Amount of the Loan as at the Prepayment Event
Date

On and after May 1, 2024

1.0% of the outstanding Principal Amount of the Loan as at the Prepayment Event
Date

 

(iii)In addition to the amount in clause (ii) above, in connection with the
prepayment in full of the Loan outstanding, any unpaid amounts in respect of
such prepaid Loan not consisting of principal or Fixed Interest (i.e., any
unpaid amounts for indemnification, tax gross-up, default interest, expense
reimbursement and other amounts not consisting of principal or interest) shall
be immediately due and payable.

(iv)The date of prepayment of the Loan and any other amounts due to Lender under
this Section 3.02(b), shall be a Business Day not more than 10 Business Days
following the date Borrower has provided to Lender a Notice of Prepayment
showing the calculation of the amount to be prepaid and all other amounts
payable in connection therewith under this Section 3.02(b).  Such Notice of
Prepayment shall constitute Borrower’s irrevocable commitment to prepay the Loan
outstanding and all such other amounts on such prepayment date; provided,
however, that such Notice of Prepayment may state that such notice is
conditioned upon the effectiveness of any credit facilities or one or more other
events specified therein (including the occurrence of a Change of Control), in
which case such notice may be revoked by Borrower (by notice to Lender on or
prior to the specified effective date) if such condition is not satisfied.

 

 

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Section 3.03Increased Cost. (a) If any Regulatory Change occurs that has or
would have the effect of:

(i)imposing, modifying or deeming applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets of,
deposits with or for the account of, or credit extended or participated in by,
Lender;

(ii)subjecting Lender to any Taxes (other than (A) Indemnified Taxes or (B)
Excluded Taxes) with respect to the Loan, commitments, or other obligations, or
its deposits, reserves, other liabilities or capital attributable thereto; or

(iii)imposing on Lender any other condition, cost or expense (other than Taxes)
affecting this Agreement or Loan made by Lender;

and the result of any of the foregoing shall be to reduce the rate of return on
the capital of Lender as a consequence of its obligations hereunder or arising
in connection herewith to a level below that which Lender could have achieved
but for such introduction, change or compliance (taking into consideration the
policies of Lender with respect to capital adequacy) by an amount deemed by
Lender to be material, then from time to time, on the first Interest Payment
Date occurring at least thirty (30) days after demand by Lender (which demand
shall be accompanied by a statement setting forth the basis for such demand and
a description of the computation of such demand), Borrower shall pay directly to
Lender such additional amount or amounts as will compensate Lender for such
reduction.  Lender will take such actions reasonably requested by Borrower, at
the expense of Borrower, if such actions will avoid the need for, or reduce the
amount of, such compensation and will not, in the judgment of Lender, be
otherwise disadvantageous to it or inconsistent with its internal policies and
procedures.  In no event will Lender be expected or required to monitor the
occurrence of any of the events or contingencies described in this Section
3.03(a).  Notwithstanding the foregoing, in no event shall Borrower be required
to compensate Lender pursuant to this Section 3.03 for any amounts under this
Section 3.03 incurred more than one hundred-eighty (180) days prior to the date
that Lender notifies Borrower of such amount and of Lender’s intention to claim
compensation therefor.

(b)In determining any amount provided for in this Section 3.03, Lender shall use
commercially reasonable averaging and attribution methods.  If Lender makes a
claim under this Section, it shall submit to Borrower a certificate setting
forth the basis for such demand and a description of the computation of such
demand as to such additional or increased cost or reduction, which certificate
shall be conclusive absent manifest error.

(c)If Lender submits a demand to Borrower to pay any additional amounts pursuant
to this Section 3.03, Borrower may elect, in its sole discretion, to prepay the
Loan in full.  Borrower shall notify Lender in writing of such election no later
than thirty (30) days following its receipt of such demand and shall specify in
such notice the date upon which such prepayment shall be made which shall not be
later than sixty (60) days following the date of Lender’s demand.  Prepayment
pursuant to this Section 3.03 shall be made together with interest accrued and
unpaid on the Loan to date of prepayment and all other amounts then payable to
Lender hereunder, but shall not be subject to any prepayment amount pursuant to
Section 3.02.

 

 

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Article IV.

INTEREST; EXPENSES; MAKING OF PAYMENTS

 

Section 4.01

Interest Rate.

(a)The outstanding Principal Amount of the Loan shall bear interest consisting
of Fixed Interest, which shall be paid in cash as provided in this Section 4.01.

(b)All interest hereunder in respect of Fixed Interest shall be computed on the
basis of a 360-day year of twelve 30-day months.

(c)Fixed Interest on the Loan shall be payable solely from the Included Royalty
Interest, except (i) in connection with voluntary prepayment of the Loan
pursuant to Section 3.02(b) or Section 3.03, and (ii) following the occurrence
of a Prepayment Trigger, to the extent of capital contributions made by the
Company in its sole discretion to fund full prepayment of the Loan.

 

Section 4.02

Interest Reserve Account

(a)On or before the Closing Date, (i) Borrower shall establish with the Account
Bank the Interest Reserve Account; and (ii) the Parties shall enter into a
Blocked Account Control Agreement with the Account Bank.  In accordance with
Section 2.02, Lender shall deposit the Interest Reserve Amount into the Interest
Reserve Account on the Closing Date simultaneous with the funding of the Loan.

(b)Borrower shall pay for all fees, expenses and charges of the Account Bank
pursuant to the terms of the Blocked Account Control Agreement by depositing
sufficient funds into the Interest Reserve Account when such fees, expenses and
charges are due.

(c)Prior to the Payment in Full, Borrower shall have no right to terminate the
Interest Reserve Account without Lender’s prior written consent unless an
Interest Reserve Release Event has occurred.  Upon receipt from Borrower of an
officer’s certificate stating that an Interest Reserve Release Event has
occurred, Lender shall instruct the Account Bank to release all amounts in the
Interest Reserve Account at Borrower’s direction.

 

Section 4.03

Collection Account

(a)On or before the Closing Date or such later date as the Parties may agree,
(i) Borrower shall establish with the Account Bank the Collection Account; and
(ii) the Parties shall enter into a Blocked Account Control Agreement with the
Account Bank.

(b)Borrower shall pay for all fees, expenses and charges of the Account Bank
pursuant to the terms of the Blocked Account Control Agreement by depositing
sufficient funds into the Collection Account when such fees, expenses and
charges are due.

 

 

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(c)Prior to the Payment in Full, Borrower shall have no right to terminate the
Collection Account without Lender’s prior written consent; provided that,
without Lender’s consent to the change of location of such accounts (provided
such location is in the United States), Borrower shall have the right from time
to time to establish a replacement Collection Account with a replacement Account
Bank, provided that such replacement Account Bank entered into a Blocked Account
Control Agreement with respect to such replacement accounts effective no later
than the date of replacement, and Borrower instructs Licensee to make payments
to such new accounts.

For purposes of this Agreement, any reference to the “Blocked Account Control
Agreement,” or “Collection Account” shall refer to such replacement Blocked
Account Control Agreement, Collection Account or Account Bank, as the context
requires.

(d)On or before the Closing Date, Borrower shall deliver a written notice to the
Licensee specifying the assignment of the License Agreement to Borrower and
instructions for payment thereafter with respect to all payments that are due
and payable to Borrower in respect of or derived from the License Agreement
(which notice and instructions shall be in the form attached to the Contribution
Agreement or otherwise reasonably satisfactory to Lender) and shall provide that
Licensee is to remit all amounts payable to Borrower in respect thereof to the
Collection Account.

(e)To the extent any portion of the Included Royalty Interest is paid directly
to Borrower, Borrower shall (i) remit to the Collection Account all such amounts
within five (5) Business Days of receipt of any such funds, (ii) promptly
instruct such Licensee to remit any future payments to the Collection Account
(or other applicable account) and (iii) promptly provide to Lender a copy of
such notice.

 

Section 4.04

Application of Payments.

(a)On each Interest Payment Date, the Included Royalty Interest shall be applied
by payment in cash to Lender at the Lender Account in the following order of
priority:

(i)Accrued and unpaid Fixed Interest on the Loan for the period from and
including the prior Interest Payment Date to and including the day before the
current Interest Payment Date shall be payable in arrears on each Interest
Payment Date; provided, however, that if payments received with respect to the
Included Royalty Interest for such period are insufficient to pay all amounts of
Fixed Interest due on the Loan for such period (the amount of such shortfall,
the “Quarterly Interest Shortfall”), Lender shall instruct the Account Bank with
respect to the Interest Reserve Account to release to Lender an amount equal to
the Quarterly Interest Shortfall or, if the amount remaining in the Interest
Reserve Account is less than the Quarterly Interest Shortfall, all remaining
amounts in the Interest Reserve Account.  

(ii)To the extent the Included Royalty Interest for the immediately preceding
Calendar Quarter for such Interest Payment Date exceeds Fixed Interest accrued
and payable on such Interest Payment Date (such amount, the “Amortization
Payment”), the Amortization Payment shall be applied to repay principal on the
Loan outstanding at par.

 

 

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Section 4.05Interest on Late Payments.  If any amount payable by Borrower to
Lender hereunder is not paid when due (whether at stated maturity, by
acceleration or otherwise), interest shall accrue on any such unpaid amounts,
both before and after judgment during the period from and including the
applicable due date, to but excluding the day the overdue amount is paid in
full, at a rate per annum equal to the Default Rate.  Interest accruing under
this Section 4.05 shall be payable on demand of Lender.  For the avoidance of
doubt, Fixed Interest that is not paid in cash on the date due but that is added
to the Principal Amount of the Loan as Accreted Principal in accordance with
Section 3.01(c) shall accrue Fixed Interest from the date at which it is
incorporated as Accreted Principal and shall thereafter accrue interest at the
Default Rate in the event that the Principal Amount of the Loan generally bears
interest at the Default Rate.

Section 4.06Administration and Enforcement Expenses.  Borrower shall promptly
reimburse Lender on demand for all reasonable costs and expenses incurred by
Lender (including the reasonable fees and expenses of one outside counsel to
Lender) as a consequence of or in connection with any Default, Event of Default,
Prepayment Trigger or voluntary or mandatory prepayment of the Loan.

Section 4.07Making of Payments.  Notwithstanding anything to the contrary
contained herein, any Payment stated to be due hereunder or under any Note on a
given day in a specified month shall be made or shall end (as the case may be),
(i) if there is no such given day or corresponding day, on the last Business Day
of such month or (ii) if such given day or corresponding day is not a Business
Day, on the next succeeding Business Day.

Section 4.08Setoff or Counterclaim.  Each payment by Borrower under this
Agreement or under any Note shall be made without setoff or
counterclaim.  Lender shall have the right to set off any and all amounts owed
by Borrower and/or any of its Subsidiaries under this Agreement as provided in
Section 10.03.

Article V.

TAXES

Section 5.01Taxes.

(a)Except as otherwise required by Applicable Law, all payments by Borrower
under this Agreement or any other Loan Document (including payments with respect
to the Loan) shall be made free and clear of and without deduction for any
present or future Taxes.  If Borrower or any other applicable withholding agent
shall be required by Applicable Law to deduct any Taxes from or in respect of
any sum payable to a Lender under this Agreement or any other Loan Document, (i)
if such Taxes are Indemnified Taxes, the sum payable by Borrower shall be
increased as necessary so that after all required deductions for Indemnified
Taxes have been made by the applicable withholding agent (including deductions
applicable to additional sums payable under this Section 5.01(a)), Lender
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the applicable withholding agent shall make such
deductions and (iii) the applicable withholding agent shall pay the full amount
deducted to the relevant Governmental Authority in accordance with Applicable
Law.

 

 

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(b)Status of Lenders

(i)Any Lender that is entitled to an exemption from or reduction of withholding
Tax with respect to any payments made under any Loan Document shall deliver to
Borrower, at the time or times reasonably requested by Borrower, such properly
completed and executed documentation reasonably requested by Borrower as will
permit such payments to be made without withholding or at a reduced rate of
withholding.  In addition, any Lender, if reasonably requested by Borrower,
shall deliver such other documentation prescribed by Applicable Law or
reasonably requested by Borrower as will enable Borrower to determine whether or
not such Lender is subject to backup withholding or information reporting
requirements.

(ii)Without limiting the generality of the foregoing:

 

(1)

If a Lender is a Foreign Lender, then such Lender shall provide to Borrower (i)
in the case of a Foreign Lender claiming exemption from U.S. federal withholding
tax under Section 871(h) or 881(c) of the Code with respect to payments of
“portfolio interest,” (x) two accurate and complete original signed copies of
IRS Form W-8BEN-E or IRS Form W-8BEN (or a successor form), as applicable,
properly completed and duly executed by such Foreign Lender and (y) a
certificate substantially in the form of Exhibit I-1 to the effect that such
Foreign Lender is not (A) a “bank” within the meaning of Section 881(c)(3)(A) of
the Code, (B) a “10 percent shareholder” of Borrower within the meaning of
Section 881(c)(3)(B) of the Code or (C) a “controlled foreign corporation”
described in Section 881(c)(3)(C) of the Code, (ii) if the payments receivable
by the Foreign Lender are effectively connected with the conduct of a trade or
business in the United States, two accurate and complete original signed copies
of IRS Form W-8ECI (or a successor form), (iii) in the case of a Foreign Lender
that is entitled to benefits under an income tax treaty to which the United
States is a party, two accurate and complete original signed copies of IRS Form
W-8BEN-E or IRS Form W-8BEN, as applicable, establishing an exemption from, or
reduction of, U.S. federal withholding Tax pursuant to the applicable article(s)
of such tax treaty or (iv) to the extent a Foreign Lender is not the beneficial
owner, two accurate and complete original signed copies of IRS Form W-8IMY,
accompanied by two accurate and complete copies of IRS Form W-8ECI, IRS Form
W-8BEN, or IRS Form W-8BEN-E, as applicable, a certificate substantially in the
form of Exhibit I-2 or Exhibit I-3, IRS Form W-9, and/or other certification
documents from each beneficial owner, as applicable; provided that if the
Foreign Lender is a partnership (and not a participating Lender) and one or more
direct or indirect partners of such Foreign Lender are claiming the portfolio
interest exemption, such Foreign Lender may provide a certificate substantially
in the form of Exhibit I-4 on behalf of such direct and indirect
partner(s).  Such forms or certificates shall be delivered by such Foreign
Lender on or prior to the date that it becomes a Lender under this Agreement, at
any time thereafter if any form or certification previously delivered expires or
becomes obsolete or inaccurate in any respect, and upon a reasonable written
request of Borrower.  Notwithstanding any other provision of this Section
5.01(b), no Foreign Lender shall be required to deliver any form pursuant to
this Section 5.01(b) that such Foreign Lender is not legally eligible to
deliver.

 

 

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(2)

Each Lender that is not a Foreign Lender shall provide two properly completed
and duly executed copies of IRS Form W-9 (or successor form) certifying that
such Lender is exempt from U.S. federal backup withholding tax on or prior to
the date on which such Lender becomes a Lender under this Agreement, at any time
thereafter if any form or certification previously delivered expires or becomes
obsolete or inaccurate in any respect, and upon a reasonable written request of
Borrower.  

 

(3)

Any Foreign Lender shall, to the extent it is legally eligible to do so, deliver
to Borrower (in such number of copies as shall be requested by the recipient) on
or prior to the date on which such Foreign Lender becomes a Lender under this
Agreement (and from time to time thereafter upon the reasonable request of
Borrower), executed copies of any other form prescribed by Applicable Law as a
basis for claiming exemption from or a reduction in U.S. federal withholding
Tax, duly completed, together with such supplementary documentation as may be
prescribed by Applicable Law to permit Borrower to determine the withholding or
deduction required to be made; and

 

(4)

If a payment made to a Lender under any Loan Document would be subject to U.S.
federal withholding Tax imposed by FATCA if such Lender were to fail to comply
with the applicable reporting requirements of FATCA (including those contained
in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall
deliver to Borrower at the time or times prescribed by Applicable Law and at
such time or times reasonably requested by Borrower such documentation
prescribed by Applicable Law (including as prescribed by Section
1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably
requested by Borrower as may be necessary for Borrower to comply with its
obligations under FATCA, to determine whether such Lender has complied with such
Lender’s obligations under FATCA or to determine the amount, if any, to deduct
and withhold from such payment.  Solely for purposes of this clause (D), “FATCA”
shall include any amendments made to FATCA after the date of this Agreement.

(iii)Each Lender having assigned its rights and obligations hereunder in whole
or in part shall collect from such assignee at the time of the assignment the
documents described in Sections 5.01(b)(ii)(1) and (b)(ii)(2) as applicable.

Section 5.02Receipt of Payment.  Within thirty (30) days after the date of any
payment of Taxes by Borrower pursuant to this Article V, Borrower shall furnish
to Lender the original or a certified copy of a receipt evidencing payment
thereof or other evidence reasonably satisfactory to Lender.

Section 5.03Other Taxes.  Borrower shall promptly pay any registration,
transfer, stamp or documentary, recording or similar Taxes or any other excise
or property Taxes arising from any payment made under any Loan Document, or from
the execution, delivery, performance, enforcement or registration of, the
receipt or perfection of a security interest under, or otherwise with respect
to, any Loan Document, except any such Taxes with respect to an assignment by a
Lender that are Other Connection Taxes (all such non-excluded Taxes, “Other
Taxes”), to the relevant Governmental Authority in accordance with Applicable
Law.

 

 

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Section 5.04Indemnification.  If a Lender pays any Indemnified Taxes that
Borrower is required to pay pursuant to this Article V, Borrower shall indemnify
such Lender on demand in full (including any Indemnified Taxes imposed by any
jurisdiction on amounts payable under this Section 5.04), whether or not such
Taxes were correctly or legally asserted, together with interest thereon from
and including the date of payment to, but excluding, the date of reimbursement
at the Default Rate and any reasonable expenses arising therefrom.  A
certificate of an affected Lender claiming any compensation under this Section
5.04, setting forth the amounts to be paid thereunder and delivered to Borrower,
shall be conclusive, binding and final for all purposes, absent manifest error.

Section 5.05Registered Obligation.

(a)Borrower shall establish and maintain, at its address referred to in Section
12.03, (i) a Register in which Borrower agrees to register by book entry the
interests (including any rights to receive payment hereunder) of Lender in the
Loan, each of its obligations under this Agreement to participate in the Loan,
and any assignment of any such interest, obligation or right, and (ii) accounts
in the Register in accordance with its usual practice in which it shall record
(1) the names and addresses of Lender(s) (and each change thereto pursuant to
Sections 12.01 and 12.02), (2) the amount of the Loan described in clause (i)
above, (3) the amount of any principal or interest due and payable or paid, and
(4) any other payment received and its application to the Loan.  The entries in
the Register shall be conclusive, in the absence of manifest error, and Borrower
and each Lender shall treat each person whose name is recorded in the Register
as the owner of the Loans for all purposes of this Agreement, notwithstanding
notice to the contrary.  No error in the Register shall diminish any of
Borrower’s obligations to any Lender under this Agreement.

(b)Notwithstanding anything to the contrary contained in this Agreement or
elsewhere, the Loan (including any Note evidencing such Loan) are registered
obligations, the right, title and interest of Lender and its assignees in and to
the Loan shall be transferable only upon notation of such transfer in the
Register and no assignment thereof shall be effective until recorded
therein.  The parties hereto intend that the Loan will be at all times
maintained in “registered form” within the meaning of Section 5f.103-1(c) of the
U.S. Treasury Regulations, Sections 163(f), 871(h)(2) and 881(c)(2) of the Code
and any related regulations (and any successor provisions).  

Section 5.06Tax Treatment.  

(a)For U.S. federal income and applicable state and local income tax purposes,
the Parties shall treat the Loan and the Note as debt. Each Party agrees not to
take any position that is inconsistent with the foregoing sentence on any Tax
return or in any audit or other administrative or judicial proceeding unless (i)
each other Party has consented to such actions; or (ii) as a result of a
material change in Applicable Law following the date of this Agreement, counsel
for such Party has advised it in writing that taking such a position would,
notwithstanding compliance with all applicable reporting requirements and
disclosure obligations, subject such Party to penalties under the Code.

 

 

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(b)This Agreement is not intended to create a partnership, association or joint
venture between or among Lender and/or Borrower or any Subsidiary.  Each Party
agrees not to refer to the other as a “partner” or the relationship as a
“partnership” or “joint venture”.

Section 5.07Treatment of Certain Refunds.  If any party determines, in its sole
discretion exercised in good faith, that it has received a refund of any Taxes
as to which it has been indemnified pursuant to this Article V (including by the
payment of additional amounts pursuant to this Article V), it shall pay to the
indemnifying party an amount equal to such refund (but only to the extent of
indemnity payments made under this Article V with respect to the Taxes giving
rise to such refund), net of all out-of-pocket expenses (including Taxes) of
such indemnified party and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund).  Such indemnifying
party, upon the request of such indemnified party, shall repay to such
indemnified party the amount paid over pursuant to this Section 5.07 (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) in the event that such indemnified party is required to repay such
refund to such Governmental Authority.  Notwithstanding anything to the contrary
in this Section 5.07, in no event will the indemnified party be required to pay
any amount to an indemnifying party pursuant to this Section 5.07 the payment of
which would place the indemnified party in a less favorable net after-Tax
position than the indemnified party would have been in if the Tax subject to
indemnification and giving rise to such refund had not been deducted, withheld
or otherwise imposed and the indemnification payments or additional amounts with
respect to such Tax had never been paid.  This Section 5.07 shall not be
construed to require any indemnified party to make available its Tax returns (or
any other information relating to its Taxes that it deems confidential) to the
indemnifying party or any other Person.

Article VI.

CLOSING CONDITIONS

Section 6.01Conditions Precedent to the Loan.  The obligation of Lender to
advance the Loan on the Closing Date shall be subject to the fulfillment, to the
sole satisfaction of Lender, of all of the following conditions precedent in
addition to the conditions specified in Section 2.01 and Section 2.02:

(a)Borrower shall have executed and delivered to Lender the Note, dated the
Closing Date.

(b)Lender shall have received on or before the Closing Date an executed copy of:

(i)a certificate of each of Borrower and the Company, executed respectively by a
Senior Officer thereof, dated the Closing Date, substantially in the form of
Exhibit J hereto;

 

 

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(ii)an opinion of Cooley LLP, counsel to Borrower and the Company, dated the
Closing Date in form and substance reasonably satisfactory to Lender; and

(iii)evidence of the release of the Transferred Assets from any filing of any
UCC financing statement made by Hercules in connection with the Venture
Financing Agreement, in form and substance satisfactory to Lender.

(c)Borrower and the Company shall each have delivered to Lender a certificate,
dated the Closing Date, of a Senior Officer (the statements in which shall be
true and correct on and as of the Closing Date): (i) attaching copies, certified
by such officer as true and complete, of such party’s certificate of
incorporation or other organizational documents (together with any and all
amendments thereto) certified by the appropriate Governmental Authority as being
true, correct and complete copies; (ii) attaching copies, certified by such
officer as true and complete, of resolutions of the Board of Directors (or
similar governing body) of such party authorizing and approving the execution,
delivery and performance by such party of the Loan Documents to which it is a
party and the transactions contemplated herein and therein; (iii) setting forth
the incumbency of the officer of such party who executed and delivered such Loan
Documents, including therein a signature specimen of each such officer; and (iv)
attaching copies, certified by such officer as true and complete, of
certificates of the appropriate Governmental Authority of the jurisdiction of
formation, stating that such party was in good standing under the laws of such
jurisdiction as of the Closing Date (or a date immediately prior thereto
acceptable to Lender).

(d)This Agreement and the other Loan Documents shall have been executed and
delivered to Lender by each party thereto (other than Lender), and Borrower
shall have delivered, or caused to be delivered, such other documents as Lender
reasonably requested, in each case, in form and substance satisfactory to
Lender.

(e)The Transaction Documents shall be in full force and effect.

(f)No event shall have occurred and be continuing that (i) constitutes a Default
or an Event of Default or a Prepayment Trigger or (ii) could reasonably be
expected to constitute a Material Adverse Effect (without giving effect to the
cure period applicable to a Prepayment Trigger based thereon), in each case both
at the time of, and immediately after giving effect to, the making of the Loan
on the Closing Date.

(g)The representations and warranties made by Borrower and Company in Article
VII hereof and in the other Loan Documents shall be true and correct in all
material respects as of the Closing Date, except to the extent that such
representations and warranties specifically refer to an earlier date, in which
case they shall be true and correct in all material respects as of such earlier
date, before and after giving effect to the Loan (except that any representation
or warranty that is qualified as to “materiality” or “Material Adverse Effect”
shall be true and correct in all respects).

 

 

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(h)All necessary governmental and third-party approvals, consents and filings,
including in connection with the Loan, the Security Agreement, the Contribution
Agreement and the other Loan Documents shall have been obtained or made and
shall remain in full force and effect.

(i)Borrower shall have delivered to Lender certified copies of UCC, United
States Patent and Trademark Office and United States Copyright Office, tax and
judgment lien searches, or equivalent reports or searches, each of a recent date
listing all effective financing statements, lien notices or comparable documents
that name Borrower as debtor and that are filed in those state and county
jurisdictions in which Borrower is organized or maintains its principal place of
business and such other searches that Lender deems necessary or appropriate,
none of which encumber the Collateral covered or intended to be covered by the
Loan Documents (other than any Permitted Liens and other Liens acceptable to
Lender).

(j)Lender shall have received all UCC financing statements in appropriate form
for filing under the UCC, and all other certificates, agreements, instruments,
filings, recordings and other actions, including recordations in the United
States Patent and Trademark Office and the United States Copyright Office that
are necessary or reasonably requested by Lender in order to establish, protect,
preserve and perfect the security interest in the assets of Borrower
constituting Collateral as provided in the Security Agreement as a valid and
perfected first priority security interest with respect to such assets shall
have been duly effected (or arrangements therefor satisfactory to Lender shall
have been made).

(k)Lender shall have received all documentation and other information required
by bank regulatory authorities under applicable “know your customer” and
anti-money laundering rules and regulations, including without limitation, the
Patriot Act, including and the information described in Section 12.18.

(l)Borrower shall have filed its amended and restated certificate of
incorporation, substantially in the form attached to the Stock Pledge Agreement
or otherwise in form and substance reasonably satisfactory to Lender.

(m)During the period beginning on the date of this Agreement to and including
the Closing Date, Borrower shall have complied with and performed its
obligations under each Material Contract and shall not have amended, modified,
waived or terminated any provision of, or permitted or agreed to the amendment,
modification, waiver or termination of any provision of, any Material Contract
without the consent of Lender in its sole and absolute discretion.

(n)Lender shall have received such other approvals, opinions, documents or
materials as Lender may reasonably request.

 

 

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Article VII.

REPRESENTATIONS AND WARRANTIES

Section 7.01Representations and Warranties of Borrower.  Borrower hereby
represents and warrants to Lender as of the date of this Agreement (except for
any representations and warranties which speak as to a specific date, which
representations and warranties shall be made as of the date specified) as
follows:

(a)Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all powers and
authority, and all licenses, permits, franchises, authorizations, consents and
approvals of all Governmental Authorities, required to own its property and
conduct its business as now conducted.  Borrower is duly qualified to transact
business and is in good standing in every jurisdiction in which such
qualification or good standing is required by Applicable Law (except where the
failure to be so qualified or in good standing would not result in, and could
not reasonably be expected to have resulted in (a) a Material Adverse Effect, or
(b) an adverse effect, in any respect, on the timing, amount or duration of the
Included Royalty Interest or the right of Lender to receive the Included Royalty
Interest).

(b)None of the execution and delivery by Borrower of any of the Loan Documents
to which Borrower is party, the performance by Borrower of the obligations
contemplated hereby or thereby or the consummation of the transactions
contemplated hereby or thereby will: (i) contravene, conflict with, result in a
breach, violation, cancellation or termination of, constitute a default (with or
without notice or lapse of time, or both) under, require prepayment under, give
any Person the right to exercise any remedy (including termination, cancellation
or acceleration) or obtain any additional rights under, or accelerate the
maturity or performance of or payment under, in any material respect, (A) any
Applicable Law or any judgment, order, writ, decree, permit or license of any
Governmental Authority to which Borrower or any of its Subsidiaries or any of
their respective assets or properties may be subject or bound, (B) any term or
provision of any contract, agreement, indenture, lease, license, deed,
commitment, obligation or instrument to which Borrower or any of its
Subsidiaries is a party or by which Borrower or any of its Subsidiaries or any
of their respective assets or properties is bound or committed or (C) any term
or provision of any of the organizational documents of Borrower or any of its
Subsidiaries, except in the case of clause (A) or (B) where any such event would
not result in (1) a Material Adverse Effect, or (2) an adverse effect, in any
respect, on the timing, amount or duration of the Included Royalty Interest or
the right of Lender to receive payments based on the Included Royalty Interest;
or (ii), except as provided in or contemplated by any of the Transaction
Documents, result in or require the creation or imposition of any Lien on the
Patents, the Licensed Product or the Included Royalty Interest.

(c)Other than pursuant to the Loan Documents, Borrower has not granted, nor does
there exist, any Lien on the Loan Documents, the Patents or the Included Royalty
Interest (other than Permitted Liens).

 

 

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(d)Borrower has all powers and authority to execute and deliver, and perform its
obligations under, the Loan Documents to which it is party and to consummate the
transactions contemplated hereby and thereby.  The execution and delivery of
each of the Loan Documents to which Borrower is party and the performance by
Borrower of its obligations hereunder and thereunder have been duly authorized
by Borrower.  Each of the Loan Documents to which Borrower is party has been
duly executed and delivered by Borrower.  Each of the Loan Documents to which
Borrower is party constitutes the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
similar Applicable Laws affecting creditors’ rights generally, general equitable
principles and principles of public policy.

(e)Upon giving effect to the Contribution (and subject to the terms and
conditions thereof), Borrower shall be the exclusive owner of the entire right,
title (legal and equitable) and interest in, to and under  the Collateral, free
and clear of all Liens, other than Permitted Liens and  Borrower shall be
entitled to be the sole recipient of all payments in respect of the Included
Royalty Interest. The Included Royalty Interest constituting Collateral granted
to Lender on the Closing Date have not been pledged, sold, assigned,
transferred, conveyed or granted by Borrower to any other Person.  Upon granting
by Borrower of the security interests in the Included Royalty Interest to
Lender, Lender shall acquire a first priority security interest in the Included
Royalty Interest free and clear of all Liens, other than Permitted
Liens.  Borrower has not caused, and to the Knowledge of Borrower no other
Person has caused, the claims and rights of Lender created by any Loan Document
in and to the Included Royalty Interest, to be subordinated to any creditor or
any other Person.

(f)The execution and delivery by Borrower of the Loan Documents to which
Borrower is party, the performance by Borrower of its obligations hereunder and
thereunder and the consummation of any of the transactions contemplated
hereunder and thereunder (including the granting of security interests in the
Included Royalty Interest to Lender) do not require any consent, approval,
license, order, authorization or declaration from, notice to, action or
registration by or filing with any Governmental Authority or any other Person,
except for (i) the filing of any applicable notices under securities laws, (ii)
the filings necessary to perfect Liens created by the Loan Documents, (iii)
those previously obtained and in full force and effect, and (iv) consent,
filings and registrations in connection with the Contribution as contemplated by
the Contribution Agreement.

(g)Except as set forth in Schedule 7.01(v), to the Knowledge of Borrower there
is no action, suit, arbitration proceeding, claim, citation, summons, subpoena,
investigation or other proceeding (whether civil, criminal, administrative,
regulatory, investigative or informal, and including by or before a Governmental
Authority) pending or, to the Knowledge of Borrower, threatened in writing by or
against Borrower or any of its Subsidiaries, at law or in equity, that (i) if
adversely determined, would result in a Material Adverse Effect or (ii)
challenges or seeks to prevent or delay the consummation of any of the
transactions contemplated by any of the Loan Documents to which Borrower is
party.  

 

 

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(h)Upon consummation of the transactions contemplated by the Loan Documents and
the application of the proceeds therefrom, (a) the present fair saleable value
of the properties and assets of Borrower and its Subsidiaries, taken as a
consolidated group, on a going concern basis will be greater than the sum of its
debts, liabilities and other obligations, including contingent liabilities, (b)
the present fair saleable value of the properties and assets of Borrower on a
going concern basis will not be less than the amount that would be required to
pay its probable liabilities on its existing debts, liabilities and other
obligations, including contingent liabilities, as they become absolute and
matured, (c) Borrower will generally be able to realize upon its assets and pay
its debts, liabilities and other obligations, including contingent obligations,
as they become absolute and matured, (d) Borrower will not have unreasonably
small capital with which to engage in its business as now conducted,  (e)
Borrower has not incurred, will not incur and does not have any present plans or
intentions to incur debts or other obligations or liabilities beyond its ability
to pay such debts or other obligations or liabilities as they become absolute
and matured, (f) Borrower will not have become subject to any Insolvency Event
and (g) Borrower will not have been rendered insolvent within the meaning of any
Applicable Law.  No step has been taken by Borrower or, to its Knowledge, any
other Person to make Borrower subject to an Insolvency Event.

(i)No Default, Event of Default or Prepayment Trigger has occurred and is
continuing, and no such event will occur upon the making of the Loan.

(j)Borrower has filed (or caused to be filed) all Tax returns and reports
required by Applicable Law to have been filed by it and has paid all Taxes
required to be paid by it (including in its capacity as a withholding agent),
except any such Taxes that are being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP have been
set aside on its books or where any such failure to file or pay would not
result, individually or in the aggregate, in (a) a Material Adverse Effect, or
(b) an adverse effect, in any respect, on the timing, amount or duration of the
Included Royalty Interest or the right of Lender to receive the Included Royalty
Interest.

(k)Except as set forth on Schedule 7.01(k), Borrower has not taken any action
that would entitle any person or entity to any commission or broker’s fee in
connection with the transactions contemplated by this Agreement.

(l)Borrower (a) has not violated and is not in violation of, and to its
Knowledge, is not under investigation with respect to, and has not been
threatened to be charged with or been given notice of any violation of, any
Applicable Law or any judgment, order, writ, decree, injunction, stipulation,
consent order, permit or license granted, issued or entered by any Governmental
Authority and (b) is not subject to any judgment, order, writ, decree,
injunction, stipulation, consent order, permit or license granted, issued or
entered by any Governmental Authority, in each case, that would result in a
Material Adverse Effect.  Borrower is in compliance with the requirements of all
Applicable Laws, a breach of any of which would result in a Material Adverse
Effect.

 

 

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(m)To Borrower’s Knowledge, other than the Patent Rights licensed pursuant to
the License Agreement, and except as set forth in Schedule 7.01(vi), with
respect to the Licensed Product, no Third Party Patent Right has been, or is, or
will be, infringed by Exploitation of the Licensed Product. To Borrower’s
Knowledge, other than the Patent Rights licensed pursuant to the License
Agreement, no Patent Rights other than the Patents with respect to Licensed
Products would limit or prohibit in any material respect Exploitation of the
Licensed Product. Borrower has not received any notice of any claim by any Third
Party asserting that Exploitation of the Licensed Product infringes such Third
Party’s Patent Rights.  Borrower has not received any written opinion of counsel
regarding infringement or non-infringement of any Third Party’s Patent Rights by
Exploitation of the Licensed Product.  To Borrower’s Knowledge, there has been
no commercially significant infringement or interference by any Person, any
claims of invalidity or unenforceability or any prosecution or litigation action
relating to the Patents or patents relating to the Licensed Product granted
outside of the United States in any of the jurisdictions specified on Schedule
7.01(m).

 

(n)

With respect to the Licensed Product:

 

(1)

Schedule 7.01 sets forth a complete and accurate list of the United States
Patents, including the following:  Schedule 7.01(i) sets forth a complete and
accurate list of the Owned Patents;  Schedule 7.01(ii) sets forth a complete and
accurate list of the Co-Owned Patents; Schedule 7.01(iii) sets forth a complete
and accurate list of the Exclusively Licensed Patents; Schedule 7.01(iv) sets
forth a complete and accurate list of the Non-Exclusively Licensed Patents; and
Schedule 7.01(vi) sets forth a list of Patents owned by the Licensee to which
Borrower does not have a license.  For each Patent set forth on Schedule 7.01
Borrower has indicated: (i) the application number; (ii) the patent or
registration number, if any; and (iii) the registered owner thereof.

 

(2)

Borrower is the sole and exclusive owner of the entire right, title and interest
in each of the Owned Patents. Except as set forth in Schedule 7.01(v), the Owned
Patents are not subject to any encumbrance, lien or claim of ownership by any
Third Party, and there are no facts that would preclude Borrower from having
unencumbered title to the Owned Patents. Except as set forth in Schedule
7.01(v), Borrower has not received any notice of any claim by any Third Party
challenging the ownership of the rights of Borrower in and to the Owned Patents.

 

(3)

Borrower has a valid, exclusive license to use each of the Exclusively Licensed
Patents.  There have not been, nor are there any pending or threatened, disputes
relating to Borrower’s right to use the Exclusively Licensed Patents. All
Contracts relating to Borrower’s rights in the Exclusively Licensed Patents have
been provided to Lender prior to the Closing Date.

 

(4)

Borrower has a valid, non-exclusive license to use each of the Non-Exclusively
Licensed Patents. There have not been, nor are there any pending or threatened,
disputes relating to Borrower’s right to use the Non-Exclusively Licensed
Patents. All Contracts relating to Borrower’s rights in the Non-Exclusively
Licensed Patents have been provided to Lender prior to the Closing Date.

 

 

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(5)

To the Knowledge of Borrower, each Person who has or has had any rights in or to
the Patents, including each inventor named on the Patents, has executed a
Contract assigning their entire right, title and interest in and to such Patents
and the inventions embodied, described and/or claimed therein, to the owner
thereof, and each such Contract has been duly recorded at the United States
Patent and Trademark Office.

 

(6)

To the Knowledge of Borrower, no issued Patent has lapsed, expired or otherwise
been terminated. No Patent applications have lapsed, expired, been abandoned or
otherwise been terminated, other than by operation of law.

 

(7)

There are no unpaid maintenance fees, annuities or other like payments with
respect to the Patents.

 

(8)

Except as set forth in Schedule 7.01(v), to the Knowledge of Borrower each of
the Patents correctly identifies each and every inventor of the claims thereof
as determined in accordance with the laws of the jurisdiction in which such
Patent was issued or is pending. But for the events set forth in Schedule
7.01(v), to the Knowledge of Borrower, there is not any Person who is or claims
to be an inventor of any of the Patents who is not a named inventor thereof. But
for the events set forth in Schedule 7.01(v), neither Borrower nor Company has
received any notice from any Person who is or claims to be an inventor of any of
the Patents who is not a named inventor thereof.

 

(9)

Each of the Patents is valid, enforceable and subsisting. Neither Borrower nor
Company has received any opinion of counsel that any of the Patents is invalid
or unenforceable. Neither Borrower nor Company has received any written notice
of any claim by any Third Party challenging the validity or enforceability of
any of the Patents.

 

(10)

To the Knowledge of Borrower, each individual associated with the filing and
prosecution of the Patents has complied, in all material respects with all
applicable duties of candor and good faith in dealing with any Patent Office,
including any duty to disclose to any Patent Office all information known by
such individual to be material to patentability of each such Patent, in those
jurisdictions where such duties exist.

 

(11)

There is at least one valid claim in each of the IP Rights that would be
infringed by Borrower’s or any Subsidiary’s Exploitation of the Products but for
Borrower’s and the Subsidiaries’ rights in the IP Rights.

 

(12)

Except for information disclosed to the applicable Patent Office during
prosecution of the Patents, to Borrower’s Knowledge, there are no Patents,
published patent applications, articles, abstracts or other prior art deemed
material to patentability of any of the inventions claimed in such Patents, or
that would otherwise reasonably be expected to materially adversely affect the
validity or enforceability of any of the claims of such Patents.

 

 

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(13)

There are no pending or threatened proceedings before a Governmental Authority
(other than normal course patent examinations, if any) that could (i) impact the
validity and/or enforceability of any of the claims of the IP Rights, or (ii)
otherwise impact whether any claim within the IP Rights is a Valid Claim.

 

(14)

Except as set forth in Schedule 7.01(v), there is no pending, decided or settled
Dispute, including without limitation any International Trade Commission
investigations, and, to the Knowledge of Borrower, no such Dispute been
threatened in writing, in each case challenging the legality, validity,
enforceability, scope or ownership of any Patent, or adjudicating whether any
Patent is or would be infringed by the Exploitation of a Product by a Third
Party.

 

(15)

Except as set forth in Schedule 7.01(v), to the Knowledge of Borrower there have
not been nor are there any pending Disputes or like procedures involving any of
the Patents.  

 

(16)

Except as set forth in Schedule 7.01(v), to the Knowledge of Borrower, none of
the conception, development and reduction to practice of the inventions claimed
in the Patents has constituted or involved the misappropriation of trade secrets
or other rights or property of any Third Party.

 

(17)

Neither Borrower nor Company has filed any disclaimer, other than a terminal
disclaimer, or made or permitted any other voluntary reduction in the scope of
any Patent.

 

(18)

Neither Borrower nor any other Person has undertaken or omitted to undertake any
acts, and no circumstances or grounds exist, that would void, invalidate, reduce
or eliminate, in whole or in part, the enforceability or scope of any of the
Patents.

 

(19)

To Borrower’s Knowledge, no Third Party Patent Right has been, or is, or will
be, infringed by Borrower’s Exploitation of the Products. To Borrower’s
Knowledge, no Patent Right other than the Patents would limit or prohibit in any
material respect Borrower’s Exploitation of any Product. Except as set forth in
Schedule 7.01(v), Borrower has not received any notice of any claim by any Third
Party asserting that Borrower’s Exploitation of any Product infringes such Third
Party’s Patents Rights. Borrower has not received any opinion of counsel
regarding infringement or non-infringement of any Third Party Patent Rights by
Borrower’s Exploitation of any Product.

 

(20)

To Borrower’s Knowledge, there are no pending, published patent applications
owned by any Third Party, which Borrower does not have the right to use, which
if issued, would limit or prohibit in any material respect Borrower’s
Exploitation of any Product.

 

 

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(21)

Except as set forth in Schedule 7.01(v), there are no Disputes between Borrower
and a Third Party relating to Borrower’s Exploitation of any Product. Borrower
has not received or given notice of any such Dispute, and to Borrower’s
Knowledge, there exists no circumstances or grounds upon which any such claims
could be asserted. The Patents are not subject to any outstanding injunction,
judgment or other decree, ruling, charge settlement or other disposition of any
Dispute.

 

(22)

To Borrower’s Knowledge, no Third Party is infringing any of the issued
Patents.  Borrower has not put any Third Party on notice of any of the issued
Patents.

 

(23)

There are no copyrights, trademarks, trade secrets or net names, other than the
Product Trademark, material to Borrower’s Exploitation of any Product.

(o)Borrower is not engaged in the business of extending credit for the purpose
of buying or carrying margin stock, and no portion of the Loan shall be used by
Borrower for a purpose that violates Regulation T, U or X promulgated by the
Board of Governors of the Federal Reserve System from time to time.

(p)As of the Closing Date, Borrower is not a party to any Material Contract
(other than, after giving effect to the Contribution thereof under the
Contribution Agreement, the Material Contracts specified on Schedule
2.01(a)(iii) to the Contribution Agreement).

(q)Neither Borrower nor, to the Knowledge of Borrower, the Licensee, as
applicable, has taken any action or omitted to take any action that would
adversely impact the right of Lender to take a security interest in the License
Agreement with respect to the Royalty Interest; provided that neither Borrower
nor the Company shall obtain any consent from the Licensee to the grant of any
Lien to Lender pursuant to the Loan Documents.

(r)The License Agreement is in full force and effect and has not been waived,
altered or modified in any respect, whether by consent or otherwise.  The
Licensee has not been released, in whole or in part, from any of its obligations
under the License Agreement.  The License Agreement has not been satisfied in
full, discharged, canceled, terminated, subordinated or rescinded, in whole or
in part.  The License Agreement is the entire agreement among the parties
thereto relating to the subject matter thereof.

(s)Neither Borrower nor, to the Knowledge of Borrower, the Licensee, as
applicable, has taken any action or omitted to take any action that would
adversely impact the right of Lender to take a security interest in the License
Agreement or the Royalty Interest.

(t)Borrower  has not received (A) any written notice or, to the Knowledge of
Borrower, oral communication of the Licensee’s intention to terminate the
License Agreement in whole or in part, or (B) any written notice or, to the
Knowledge of Borrower, oral communication requesting any amendment, alteration
or modification to the License Agreement.

 

 

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(u)Neither Borrower nor Company has received (A) any notice or other written or,
to the Knowledge of Borrower, oral communication of the Licensee’s intention to
terminate the License Agreement in whole or in part, or (B) any notice or other
written or, the Knowledge of Borrower, oral communication requesting any
amendment, supplement, alteration or modification to the License Agreement that
would, in the case of this sub-clause (B), reasonably be expected to have an
adverse effect, in any respect, on the timing, amount or duration of the
Included Royalty Interest or the right of Lender to receive the Included Royalty
Interest.

(v)To the Knowledge of Borrower, nothing has occurred and no condition exists
that would adversely impact the right of Borrower to receive any payments
payable to Borrower under the License Agreement.  Neither Borrower nor, to the
Knowledge of Borrower, the Licensee, has taken any action or omitted to take any
action that would adversely impact the right of Lender to take a security
interest in the License Agreement or the Royalty Interest.

(w)To the Knowledge of Borrower, all payments required to be made under the
License Agreement have been made.  To the Knowledge of Borrower, no payment
required to be made under the terms of the License Agreement has been subject to
any claim pursuant to any right of rescission, set-off, counterclaim, reduction
or defense.

(x)The execution, delivery and performance of the License Agreement was and is
within the corporate powers or other organizational power of the Company and its
Affiliates and, to the Knowledge of Borrower, the Licensee.  The License
Agreement was duly authorized by all necessary action on the part of, and
validly executed and delivered by, the Company and its Affiliates and, to the
Knowledge of Borrower, the Licensee.  There is no breach or default, or event
which upon notice or the passage of time, or both, could give rise to any breach
or default, in the performance of the License Agreement by Borrower, the Company
or its Affiliate or, to the Knowledge of Borrower, the Licensee, that could
reasonably be expected to have a Material Adverse Effect.

(y)Except as otherwise expressly provided under the License Agreement, the
Licensee has no right of set-off, rescission, counterclaim, reduction, deduction
or defense against the Royalty Interest or any other amounts payable to Borrower
thereunder.

(z)Except as separately disclosed in writing to Lender referencing this Section
7.01, neither Borrower nor, to Borrower’s Knowledge, any Material Contract
Counterparty is in breach or default of any Material Contract and no
circumstances or grounds exist that would, upon the giving of notice, the
passage of time or both, give rise (i) to a claim by Borrower or any Material
Contract Counterparty of a breach or default of any Material Contract, or (ii)
to a right of rescission, termination, revision, setoff, or any other rights, by
any Person, in, to or under any Material Contract.  Borrower has not received
from, or delivered to, any Material Contract Counterparty, any notice alleging a
breach or default under any Material Contract, which breach or default has not
been cured as of the date hereof.

 

 

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(aa)Upon the Contribution thereof to, and assumption thereof by, Borrower, each
Material Contract shall be a valid and binding obligation of Borrower and, to
the Knowledge of Borrower, of the applicable Material Contract Counterparty,
enforceable against each of Borrower and, to the Knowledge of Borrower, each
applicable Material Contract Counterparty in accordance with its terms, except
as may be limited by general principles of equity (regardless of whether
considered in a proceeding at law or in equity) and by applicable bankruptcy,
insolvency, moratorium and other similar laws of general application relating to
or affecting creditors’ rights generally.  Borrower has not received any notice
from any Material Contract Counterparty or any other Person challenging the
validity or enforceability of any Material Contract.  Neither Borrower, nor to
the Knowledge of Borrower, any other Person, has delivered or intends to deliver
any written notice to Borrower or a Material Contract Counterparty challenging
the validity or enforceability of any Material Contract.

(bb)Neither Borrower nor to the Knowledge of Borrower, any Material Contract
Counterparty, is contemplating to commence any case, proceeding or other action
relating to Material Contract Counterparty’s bankruptcy, insolvency, liquidation
or dissolution or reorganization by any of the foregoing means.

(cc)No Capital Stock has been issued by Borrower other than the Capital Stock
issued to the Company that is subject to the pledge to Lender under the Stock
Pledge Agreement.

(dd)The chief place of business, the chief executive office and each office
where Borrower keeps its records regarding the Included Royalty Interest are, as
of the date hereof, each located at 75 Park Plaza, 4th Floor, Boston, MA 02116.

(ee)Borrower (or any predecessor by merger or otherwise) has not, within the
five (5) year period preceding the date hereof, had a name that differs from its
name as of the date hereof.

(ff)All written information heretofore or herein supplied by or on behalf of
Borrower or the Company to Lender is accurate and complete in all material
respects; provided that all written information heretofore or herein  supplied
by or on behalf of Borrower to Lender and produced by any Third Party  is
accurate and complete in all material respects to the Knowledge of Borrower.
There is no fact or circumstance known to Borrower that could reasonably be
expected to have a Material Adverse Effect that has not been expressly disclosed
to Lender.

Section 7.02Representations and Warranties as to Company, Etc.  Borrower hereby
represents and warrants to Lender as of the date of this Agreement (except for
any representations and warranties which speak as to a specific date, which
representations and warranties shall be made as of the date specified), with
respect to the Company and other matters, as follows:

 

 

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(a)The Company is a corporation duly organized, validly existing and in good
standing under the laws of Delaware and has all powers and authority, and all
licenses, permits, franchises, authorizations, consents and approvals of all
Governmental Authorities, required to own its property and conduct its business
as now conducted.  The Company is duly qualified to transact business and is in
good standing in every jurisdiction in which such qualification or good standing
is required by Applicable Law (except where the failure to be so qualified or in
good standing would not result in, and could not reasonably be expected to have
resulted in (a) a Material Adverse Effect, or (b) an adverse effect, in any
respect, on the timing, amount or duration of the Included Royalty Interest or
the right of Lender to receive the Included Royalty Interest).

(b)None of the execution and delivery by the Company of any of the Transaction
Documents to which the Company is party, the performance by the Company of the
obligations contemplated hereby or thereby or the consummation of the
transactions contemplated hereby or thereby will: (i) contravene, conflict with,
result in a breach, violation, cancellation or termination of, constitute a
default (with or without notice or lapse of time, or both) under, require
prepayment under, give any Person the right to exercise any remedy (including
termination, cancellation or acceleration) or obtain any additional rights
under, or accelerate the maturity or performance of or payment under, in any
respect, (A) any Applicable Law or any judgment, order, writ, decree, permit or
license of any Governmental Authority to which the Company or any of its
Subsidiaries or any of their respective assets or properties may be subject or
bound, (B) any term or provision of any contract, agreement, indenture, lease,
license, deed, commitment, obligation or instrument to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective assets or properties is bound or
committed or (C) any term or provision of any of the organizational documents of
the Company or any of its Subsidiaries, except in the case of clause (A) or (B)
where any such event would not result in (1) a Material Adverse Effect, or (2)
an adverse effect, in any respect, on the timing, amount or duration of the
Included Royalty Interest or the right of Lender to receive the payments based
on Included Royalty Interest; or (ii) except as provided in or contemplated by
any of the Transaction Documents, result in or require the creation or
imposition of any Lien on the Patents, the Licensed Product or the Included
Royalty Interest.

(c)Except pursuant to, or as contemplated by, the Transaction Documents, the
Company has not granted, nor does there exist, any Lien (other than Permitted
Liens) on the Transaction Documents, the Patents or the Included Royalty
Interest.  

(d)The Company has all powers and authority to execute and deliver, and perform
its obligations under, the Transaction Documents to which it is party and to
consummate the transactions contemplated hereby and thereby.  The execution and
delivery of each of the Transaction Documents to which the Company is party and
the performance by the Company of its obligations hereunder and thereunder have
been duly authorized by the Company.  Each of the Transaction Documents to which
the Company is party has been duly executed and delivered by the Company.  Each
of the Transaction Documents to which the Company is party constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or similar Applicable Laws
affecting creditors’ rights generally, general equitable principles and
principles of public policy.

 

 

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(e)The execution and delivery by the Company of the Transaction Documents to
which the Company is party, the performance by the Company of its obligations
hereunder and thereunder and the consummation of any of the transactions
contemplated hereunder and thereunder (including granting of security interests
in the Included Royalty Interest to Lender) do not require any consent,
approval, license, order, authorization or declaration from, notice to, action
or registration by or filing with any Governmental Authority or any other
Person, except for the filing of (i) any applicable notices under securities
laws, (ii) the filings necessary to perfect Liens created by the Loan Documents,
(iii) those previously obtained and in full force and effect, and (iv) consents,
filings and registrations in connection with the Contribution as contemplated by
the Contribution Agreement.

(f)There is no action, suit, arbitration proceeding, claim, citation, summons,
subpoena, investigation or other proceeding (whether civil, criminal,
administrative, regulatory, investigative or informal, and including by or
before a Governmental Authority) pending or, to the Knowledge of the Company,
threatened in writing (or, in the case of a threat by a Governmental Authority,
threatened orally or in writing) by or against the Company or any of its
Subsidiaries, at law or in equity, that (i) if adversely determined, would
result in (A) a Material Adverse Effect, or (B) an adverse effect, in any
respect, on the timing, amount or duration of the Included Royalty Interest or
the right of Lender to receive the Included Royalty Interest, or (ii) challenges
or seeks to prevent or delay the consummation of any of the transactions
contemplated by any of the Transaction Documents to which the Company is
party.  

(g)Upon consummation of the transactions contemplated by the Transaction
Documents and the application of the proceeds therefrom, (a) the present fair
saleable value of the Company’s assets will be greater than the sum of its
debts, liabilities and other obligations, including contingent liabilities, (b)
the present fair saleable value of the properties and assets of Company and its
Subsidiaries, taken as a whole, will not be less than the amount that would be
required to pay its probable liabilities on its existing debts, liabilities and
other obligations, including contingent liabilities, as they become absolute and
matured, (c) the Company will be generally  able to realize upon its assets and
pay its debts, liabilities and other obligations, including contingent
obligations, as they become absolute and matured, (d) the Company will not have
unreasonably small capital with which to engage in its business as now
conducted, (e) the Company has not incurred, will not incur and does not have
any present plans or intentions to incur debts or other obligations or
liabilities beyond its ability to pay such debts or other obligations or
liabilities as they become absolute and matured, (f) the Company will not have
become subject to any Insolvency Event and (g) the Company will not have been
rendered insolvent within the meaning of any Applicable Law.  No step has been
taken by the Company or, to its Knowledge, any other Person to make the Company
subject to an Insolvency Event.

(h)No Default, Event of Default or Prepayment Trigger has occurred and is
continuing, and no such event will occur upon the making of the Loan.

 

 

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(i)The Company has timely filed (or caused to be filed) all tax returns and
reports required by Applicable Law to have been filed by it and has paid all
taxes required to be paid by it (including in its capacity as a withholding
agent), except any such taxes that are being contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
have been set aside on its books or where any such failure to file or pay would
not result, individually or in the aggregate, in (a) a Material Adverse Effect,
or (b) an adverse effect, in any respect, on the timing, amount or duration of
the Included Royalty Interest or the right of Lender to receive the Included
Royalty Interest.  None of the payments received (or to be received) by the
Company or Borrower in respect of the Royalty Interest has been, or under
current Law will be, subject to any deduction or withholding of any Tax.

(j)Except as disclosed on Schedule 7.02(j), the Company has not taken any action
that would entitle any person or entity to any commission or broker’s fee in
connection with the transactions contemplated by this Agreement.

(k)None of the Company or any of its Subsidiaries (a) has violated or is in
violation of, is under investigation with respect to or has been threatened to
be charged with or been given notice of any violation of, any Applicable Law or
any judgment, order, writ, decree, injunction, stipulation, consent order,
permit or license granted, issued or entered by any Governmental Authority or
(b) is subject to any judgment, order, writ, decree, injunction, stipulation,
consent order, permit or license granted, issued or entered by any Governmental
Authority, in each case, that would result in (i) a Material Adverse Effect, or
(ii) an adverse effect, in any respect, on the timing, amount or duration of the
Included Royalty Interest or the right of Lender to receive the payments based
on Included Royalty Interest.  Each of the Company and any Subsidiary of the
Company is in compliance with the requirements of all Applicable Laws, a breach
of any of which would result in a Material Adverse Effect.  

(l)The Company is not engaged in the business of extending credit for the
purpose of buying or carrying margin stock, and no portion of the Loan shall be
used by the Company for a purpose that violates Regulation T, U or X promulgated
by the Board of Governors of the Federal Reserve System from time to time.

(m)Schedule 7.02(m) hereto contains a list of each Material Contract to which
Company is a party.  As of the Closing Date, there has been provided a true and
complete copy of each of the Material Contracts to Lender in the electronic data
room.

(n)To Company’s Knowledge, except as separately disclosed in writing to Lender
referencing this Section 7.02, neither Company nor any Material Contract
Counterparty is in breach or default of any Material Contract and no
circumstances or grounds exist that would, upon the giving of notice, the
passage of time or both, give rise (i) to a claim by Company or any Material
Contract Counterparty of a breach or default of any Material Contract, or (ii)
to a right of rescission, termination, revision, setoff, or any other rights, by
any Person, in, to or under any Material Contract.  Company has not received
from, or delivered to, any Material Contract Counterparty, any notice alleging a
breach or default under any Material Contract, which breach or default has not
been cured as of the date hereof.

 

 

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(o)Each Material Contract is a valid and binding obligation of Company and, to
the Knowledge of Company, of the applicable Material Contract Counterparty,
enforceable against each of Company and, to the Knowledge of Company, each
applicable Material Contract Counterparty in accordance with its terms, except
as may be limited by general principles of equity (regardless of whether
considered in a proceeding at law or in equity) and by applicable bankruptcy,
insolvency, moratorium and other similar laws of general application relating to
or affecting creditors’ rights generally.  Company has not received any written
notice from any Material Contract Counterparty or any other Person challenging
the validity or enforceability of any Material Contract.  

(p)Company has not received any notice from any Material Contract Counterparty
or any other Person threatening or commencing any case, proceeding or other
action relating to Material Contract Counterparty’s bankruptcy, insolvency,
liquidation or dissolution or reorganization by any of the foregoing means.

(q)To the Knowledge of Company, all payments required to be made under the
License Agreement have been made.  To the Knowledge of Company, no payment
required to be made under the terms of the License Agreement has been subject to
any claim pursuant to any right of rescission, set-off, counterclaim, reduction
or defense.

(r)The License Agreement is in full force and effect and has not been waived,
altered or modified in any respect, whether by consent or otherwise.  The
Licensee has not been released, in whole or in part, from any of its obligations
under the License Agreement.  The License Agreement has not been satisfied in
full, discharged, canceled, terminated, subordinated or rescinded, in whole or
in part.  The License Agreement is the entire agreement among the parties
thereto relating to the subject matter thereof.  

(s)Neither Company nor, to the Knowledge of Company, the Licensee, as
applicable, has taken any action or omitted to take any action that would
adversely impact the right of Lender to take a security interest in the License
Agreement or the Royalty Interest.

(t)The execution, delivery and performance of the License Agreement was and is
within the corporate powers or other organizational power of the Company and, to
the Knowledge of Company, the Licensee.  The License Agreement was duly
authorized by all necessary action on the part of, and validly executed and
delivered by, Company and, to the Knowledge of Company, the Licensee.  There is
no breach or default, or event which upon notice or the passage of time, or
both, could give rise to any breach or default, in the performance of the
License Agreement by Borrower, the Company or, to the Knowledge of Company, the
Licensee, that could reasonably be expected to have a Material Adverse Effect.

(u)Except as otherwise expressly provided under the License Agreement, the
Licensee has no right of set-off, rescission, counterclaim, reduction, deduction
or defense against the Royalty Interest or any other amounts payable to Company
thereunder.

 

 

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(v)Company has not received (A) any written notice or, to the Knowledge of
Company, oral communication of the Licensee’s intention to terminate the License
Agreement in whole or in part, or (B) any written notice or, the Knowledge of
Company, oral communication requesting any amendment, supplement, alteration or
modification to the License Agreement.

(w)Company (or any predecessor by merger or otherwise) has not, within the five
(5) year period preceding the date hereof, had a name that differs from its name
as of the date hereof.

(x)Neither Company nor to the Knowledge of Company any of Company’s directors,
officers, employees, Affiliates or agents, has taken any action, directly or
indirectly, that would result in a violation by such Persons of the FCPA,
including making use of the mails or any means or instrumentality of interstate
commerce corruptly in furtherance of an offer, payment, promise to pay or
authorization of the payment of any money, or other property, gift, promise to
give, or authorization of the giving of anything of value to any “foreign
official” (as such term is defined in the FCPA) or any foreign political party
or official thereof or any candidate for foreign political office, in
contravention of the FCPA.  Company, and, to the Knowledge of Company, its
Affiliates have conducted their respective businesses in compliance with the
FCPA and have instituted and maintain policies and procedures designed to
ensure, and which are reasonably expected to continue to ensure, continued
compliance therewith.

(y)Company maintains a system of accounting controls that is sufficient, in the
opinion of the management of Company, to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain accountability
for assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

(z)The Financial Statements of Company are complete and accurate in all material
respects, were prepared in conformity with GAAP applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and present fairly in all material respects, in accordance with applicable
requirements of GAAP, the consolidated financial position and the consolidated
financial results of the operations of Company and its Subsidiaries as of the
dates and for the periods covered thereby and the consolidated statements of
cash flows of Company and its Subsidiaries for the periods presented therein.
Since December 31, 2017, there has been no Material Adverse Effect. Company and
its Subsidiaries have no Indebtedness (or other liabilities) other than (i)
identified in the Financial Statements, (ii) incurred by Company or its
Subsidiaries in the ordinary course of business since December 31, 2017 or (iii)
otherwise listed and described on Schedule 7.02(z).

(aa)The Stock Pledge Agreement, when executed and delivered by the parties
thereto, is effective to create in favor of Lender, legal, valid and enforceable
(subject to bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting creditors' rights generally or general equitable principles
(regardless of whether enforcement is sought in equity or at law)) Liens on, and
security interests in, the Capital Stock of Borrower, and, when (x) financing

 

 

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statements and other filings in appropriate form are filed in the offices of the
Secretary of State of the State of Delaware and (y) upon the taking of
possession or control by Lender of the Capital Stock certificates (if
certificated) with duly executed instruments of transfer in blank, the Liens
created by the Stock Pledge Agreement shall constitute fully perfected Liens on,
and security interests in, all right, title and interest of the Company in the
Capital Stock of Borrower, subject to no Liens other than Permitted Liens.

(bb)The claims and rights of Lender created by the Stock Pledge Agreement in and
to the Capital Stock of Borrower and by the Security Agreement in the
Collateral, will be senior to any Indebtedness or other obligation of Company,
with respect to such Collateral.

(cc)Company is not an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940.

(dd)To the Knowledge of Company, there has been no indication that the FDA or
any other Regulatory Agency has any material concerns with the Licensed Product
or may not approve or may withdraw approval of the Licensed Product, nor has the
Licensed Product, to the Knowledge of Company, suffered any material adverse
events in any clinical trial.

(ee)Company does not beneficially own or control more than 10% of the
outstanding voting stock or any other equity interest entitled ordinarily to
vote in the election of the directors or other governing body (however
designated) of any Person that is not a wholly-owned Subsidiary.  

Section 7.03Survival of Representations and Warranties.  All representations and
warranties by Borrower, whether with respect to Borrower, Company, any
respective Affiliate or any asset or property, contained in this Agreement shall
survive the execution, delivery and acceptance thereof by the Parties and the
closing of the transactions described in this Agreement and continue in effect
until payment of all amounts due to Lender under the Loan Documents.

Article VIII.

AFFIRMATIVE COVENANTS

Borrower covenants and agrees with Lender that, until Payment in Full:

Section 8.01Maintenance of Existence.  Borrower shall at all times (a) preserve,
renew and maintain in full force and effect its legal existence (except as
otherwise permitted pursuant to Section 9.02(a) hereof) and good standing as a
corporation under the Laws of the jurisdiction of its organization; (b) not
change its name or its chief executive office as set forth herein without having
given Lender the notice thereof required under Section 8.13; and (c) take all
reasonable action to maintain all rights, privileges, permits, licenses and
franchises necessary or desirable in the normal conduct of its business, except
to the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect.

 

 

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Section 8.02Use of Proceeds.  Borrower shall use the net proceeds of the Loan
received by it to acquire assets from the Company pursuant to the Contribution
Agreement and for general corporate purposes.

Section 8.03Financial Statements and Information.

(a)In the event that any such information need not be filed with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act, Borrower shall furnish to
Lender, on or before the forty-fifth (45th) day after the close of each of the
first three quarters of each fiscal year, the unaudited consolidated balance
sheet of the Company as at the close of such quarter and unaudited consolidated
statement of operations and comprehensive loss and cash flows of the Company for
such quarter, duly certified by the chief financial officer of the Company as
having been prepared in accordance with GAAP.  In the event that such quarterly
financial statement is required to be filed with the SEC pursuant to Section 13
or 15(d) of the Exchange Act, Borrower shall furnish such statement to Lender
concurrently with such filing (which requirement may be satisfied by Borrower
sending Lender a hyperlink to the EDGAR website where such information is
available). Concurrently with the delivery or filing of the statements described
in the preceding two sentences, Borrower shall furnish to Lender a certificate
of the chief financial officer of the Company, which certificate shall include a
statement that such officer has no knowledge, except as specifically stated, of
any condition, event or act which constitutes a Default, Event of Default or
Prepayment Trigger.  

(b)Borrower shall furnish to Lender, on or before the 135th day after the close
of each fiscal year, the Company’s audited financial statements as at the close
of such fiscal year, including the consolidated balance sheet as at the end of
such fiscal year and consolidated statement of operations and cash flows of the
Company for such fiscal year, in each case accompanied by the report thereon of
independent registered public accountant of nationally recognized standing
reasonably satisfactory to Lender.  Concurrently with the delivery or filing of
the documents described in the preceding sentence, Borrower shall furnish to
Lender a certificate of the chief financial officer of the Company, which
certificate shall include a statement that such officer has no knowledge, except
as specifically stated, of any condition, event or act which constitutes a
Default, Event of Default or Prepayment Trigger.  

(c)Borrower shall, promptly upon receipt thereof, forward or cause to be
forwarded to Lender copies of all Notices, reports, updates and other data or
information (i) pertaining to the Included Royalty Interest and other Collateral
(ii) received from the Licensee or any Third Party which relate to events or
circumstances that could reasonably be expected to have a Material Adverse
Effect, or (iii) received from any Person that relate to the Intellectual
Property and that could reasonably be expected to have a Material Adverse
Effect, or that Lender reasonably requests.

(d)For each quarter ending after the Closing Date, Borrower shall, within five
(5) Business Days following receipt thereof, deliver or cause to be delivered to
Lender a true copy of the Quarterly Report for such quarter, together with a
certificate of a Senior Officer of Borrower, certifying that to the Knowledge of
Borrower such Quarterly Report is a true, correct and accurate copy of the
Quarterly Report as provided to Borrower by the Licensee, and such additional
information as is reasonably requested by Lender.  Lender and Borrower each
shall be

 

 

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entitled to exercise the audit rights under Section 7.5.5 of the License
Agreement (subject to all restrictions and limitations thereon contained in the
License Agreement).  The party exercising such rights shall pay the costs of the
respective audit and shall be entitled to any reimbursement of the costs thereof
by the Licensee as provided under Section 7.5.5 of the License Agreement.  Any
additional payments of the Royalty Interest due from the Licensee, together with
interest thereon as provided under the License Agreement, shall be paid by the
Licensee to the Collection Account, and any refund due to the Licensee from any
overpayment in respect of the Royalty Interest determined in any such audit
shall be paid by Borrower in accordance with the License Agreement.  Borrower
and Lender will each provide reasonable prior written notice of its intent to
exercise such audit rights and will reasonably cooperate in the exercise of such
audit rights in order to avoid unnecessary limitations on the timing, scope and
conduct of such audits within the parameters specified in the License Agreement.

(e)Lender and its Representatives shall have the right, from time to time, not
more than once per calendar quarter, during normal business hours and upon at
least ten (10) Business Days’ prior written notice to Borrower (provided that,
after the occurrence and during the continuance of an Event of Default, Lender
shall have the right, as often, at such times and with such prior notice, as
Lender determines in its reasonable discretion), to visit the offices and
properties of Borrower and Company where books and records relating or
pertaining to the Included Royalty Interest and the Collateral are kept and
maintained (or, at Lender’s option, to conduct a meeting by telecommunications),
to discuss, with officers of Borrower and the Company, the business, operations,
properties and financial and other condition of Borrower and the Company, to
discuss the License Agreement and the Licensed Product, to discuss the Quarterly
Report, to verify compliance with the provisions of the Loan Documents regarding
receipt and application of the Included Royalty Interest and, upon physical
visits, to inspect and make extracts from and copies of the books and records of
Borrower and Company relating or pertaining to the Included Royalty Interest and
the Collateral.

(f)All written information supplied by or on behalf of Borrower to Lender
pursuant to this Section 8.03 (other than Sections 8.03(a) and 8.03(b)) shall be
accurate and complete in all material respects as of its date or the date so
supplied and the financial statements provided pursuant to Sections 8.03(a) and
8.03(b) fairly present in all material respects the financial positions and
results of operations as of the dates indicated therein.  For the avoidance of
doubt, Borrower makes no representations or warranties regarding the accuracy or
completeness of any information it receives from a Third Party that it is
required to furnish to Lender pursuant to this Section 8.03, unless to the
Knowledge of Borrower or the Company such information is inaccurate or
incomplete, in which case Borrower or the Company shall specify such inaccuracy
or incompleteness.

Section 8.04Books and Records.  Borrower shall keep proper books, records and
accounts in which entries in conformity with sound business practices and all
requirements of Law applicable to it shall be made of all dealings and
transactions in relation to its business, assets and activities and as shall
permit the preparation of the consolidated financial statements of Borrower in
accordance with GAAP.

 

 

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Section 8.05Governmental Authorizations.  Borrower shall obtain, make and keep
in full force and effect all authorizations from and registrations with
Governmental Authorities that may be required for the validity or enforceability
against Borrower of this Agreement and the other Loan Documents to which it is a
party.

Section 8.06Compliance with Laws and Contracts.

(a)Borrower shall comply with all Applicable Laws and perform its obligations
under all Material Contracts, if any, entered into after the Closing Date
relative to the conduct of its business, except where the failure to comply
could not reasonably be expected to result in a Material Adverse
Effect.  Borrower shall use commercially reasonable efforts to take all actions
necessary to enforce its rights under each Material Contract, and perform all of
its material obligations under each Material Contract, except to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect (subject to Section 9.01(a)).

(b)Borrower shall at all times comply with the margin requirements set forth in
Section 7 of the Exchange Act and any regulations issued pursuant thereto,
including, without limitation, Regulations T, U and X of the Board of Governors
of the Federal Reserve System, 12 C.F.R., Chapter II.

Section 8.07Plan Assets.  Borrower shall not take any action that causes its
assets to be deemed to be Plan Assets at any time.

Section 8.08Notices.

(a)Borrower shall promptly after an officer becomes aware thereof, give written
Notice to Lender of each Default, Event of Default or Prepayment Trigger and
each other event that has or could reasonably be expected to have a Material
Adverse Effect; provided that in any of the foregoing situations where Borrower
knows a press release or other public disclosure is to be made, Borrower shall
use all commercially reasonable efforts to provide such information to Lender as
early as possible but in no event later than simultaneously with such release or
other public disclosure.

(b)Borrower shall promptly give written Notice to Lender upon receiving notice,
or an officer otherwise becomes aware, of any default or event of default under
any Material Contracts.

(c)Borrower shall, promptly (and in any event within four (4) Business Days)
after an officer becomes aware thereof, give written Notice to Lender of any
litigation or proceedings to which Borrower is a party or which could reasonably
be expected to have a Material Adverse Effect.

(d)Borrower shall, promptly after an officer becomes aware thereof, give written
Notice to Lender of any litigation or proceedings challenging the validity of
the License Agreement or otherwise required under the License Agreement, the
Transaction Documents or any of the transactions contemplated therein.

 

 

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(e)Borrower shall, promptly after an officer becomes aware thereof, give written
Notice to Lender of any representation or warranty made or deemed made by
Borrower in any of the Loan Documents or in any certificate delivered to Lender
pursuant hereto shall prove to be untrue, inaccurate or incomplete in any
material respect on the date as of which made or deemed made.

(f)Borrower shall promptly after an officer becomes aware thereof give written
Notice to Lender of the occurrence of any Material Adverse Effect.

(g)Borrower shall, promptly after receipt of any written notice from the
Licensee pursuant to the License Agreement of an event which has had, or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, provide a copy of such notice to Lender together with a summary
of Borrower’s  intended response to Licensee.

Section 8.09Payment of Taxes.  Borrower or the Company, as applicable, shall pay
all material Taxes imposed on or in respect of Borrower’s income or assets that
are due and payable and before any Lien on any of its assets exists as a result
of nonpayment except as provided in Section 9.03 hereof and except for Taxes
contested in good faith by appropriate proceedings and for which adequate
reserves are maintained in accordance with GAAP.  

Section 8.10Waiver of Stay, Extension or Usury Laws.  Notwithstanding any other
provision of this Agreement or the other Loan Documents, if at any time the rate
of interest payable by any Person under the Loan Documents exceeds the Maximum
Lawful Rate, then, so long as the Maximum Lawful Rate would be exceeded, such
rate of interest shall be equal to the Maximum Lawful Rate.  If at any time
thereafter the rate of interest so payable is less than the Maximum Lawful Rate,
such Person shall continue to pay interest at the Maximum Lawful Rate until such
time as the total interest received from such Person is equal to the total
interest that would have been received had applicable law not limited the
interest rate so payable.  In no event shall the total interest received by
Lender under this Agreement and the other Loan Documents exceed the amount which
such Lender could lawfully have received, had the interest due been calculated
from the Closing Date at the Maximum Lawful Rate.  Without limiting the
foregoing, Borrower will not at any time, to the extent that it may lawfully not
do so, insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or other law that would
prohibit or forgive Borrower from paying all or any portion of the principal of
or premium, if any, or interest on the Loan as contemplated herein, wherever
enacted, now or at any time hereafter in force, or that may affect the covenants
or the performance of this Agreement; and, to the extent that it may lawfully do
so, Borrower hereby expressly waives all benefit or advantage of any such law
and expressly agrees that it will not hinder, delay or impede the execution of
any power herein granted to Lender, but will suffer and permit the execution of
every such power as though no such law had been enacted.

 

 

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Section 8.11Intellectual Property.

(a)Borrower shall, at its sole expense, exercise its rights under the
Contribution Agreement to cause the Company to prepare, execute, deliver and
file any and all agreements, documents or instruments which are necessary and/or
desirable to (i) prosecute and maintain the material Intellectual Property
(including Patents therein); and (ii) defend or assert such material
Intellectual Property against commercially significant infringement or
interference by any other Persons, and against any claims of invalidity or
unenforceability (including by bringing any legal action for infringement or
defending any counterclaim of invalidity or action of a Third Party for
declaratory judgment of non-infringement or non-interference) to the extent the
Company has the right to do so.  Borrower shall keep Lender informed of all of
such actions and Lender shall have the opportunity to participate and
meaningfully consult with Borrower and the Company with respect to the direction
thereof and Borrower shall, and shall cause the Company to, consider all of
Lender’s comments in good faith.  For clarity, this subsection (a) shall apply
only to the extent of Borrower’s or any Affiliate’s rights (including rights to
review and comment) to prosecute, maintain and/or enforce the Intellectual
Property.

(b)To the extent permitted under the License Agreement, Borrower shall not, and
shall not permit or suffer the Company or any of its Affiliates to, consent to
any judgment or settlement in any action, suit or proceeding referred to in
Section 9.2.1 of the License Agreement, without the prior written consent of
Lender, which consent shall not be withheld, delayed or conditioned by Lender if
doing so would result in Borrower breaching its obligation to not unreasonably
withhold, delay or condition its consent under Section 9.2.1 of the License
Agreement.

(c)Borrower shall cause the Company to use commercially reasonable efforts to
prosecute all pending Patent applications within the Patent Rights for which the
Company or its Affiliates has rights to prosecute such Patents consistent with
standards in the biotechnology industry (as applicable) for similarly situated
entities.

(d)Borrower and the Company and its Affiliates shall:

(i)take reasonable measures to protect the proprietary nature of material
Intellectual Property and to maintain in confidence all trade secrets and
confidential information comprising a part thereof;

(ii)not disclose and use commercially reasonable efforts to prevent any
distribution or disclosure by others (including their employees and contractors)
of any item that contains or embodies material Intellectual Property; and

(iii)take reasonable physical and electronic security measures to prevent
disclosure of any item that contains or embodies material Intellectual Property.

 

 

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(e)Borrower shall cause the Company to use commercially reasonable efforts to
cause each individual associated with the filing and prosecution of the Patents
material to the conduct of the business of Borrower and its Subsidiaries to
comply in all material respects with all applicable duties of candor and good
faith in dealing with any Patent Office, including any duty to disclose to any
Patent Office all information known by such individual to be material to
patentability of each such Patent, in those jurisdictions where such duties
exist.

(f)Borrower shall furnish Lender from time to time upon Lender’s reasonable
written request therefor, but in any event not more than once in any six
(6)-month period so long as no Event of Default is continuing, reasonably
detailed statements and schedules further identifying and describing the
Intellectual Property and such other materials evidencing or reports pertaining
to any Intellectual Property as Lender may reasonably request.

(g)Borrower shall, promptly upon obtaining Knowledge thereof, give written
notice to Lender of any commercially significant infringement or interference by
any Person, any claims of invalidity or unenforceability or any prosecution or
litigation action relating to the Patents or patents relating to the Licensed
Product granted outside of the United States in any of the jurisdictions
specified on Schedule 7.01(m).

Section 8.12Security Documents; Further Assurances.

(a)Subject to Section 8.12(b), Borrower shall promptly, upon the reasonable
request of Lender, at Borrower’s expense, (a) execute, acknowledge and deliver,
or cause the execution, acknowledgment and delivery of, and thereafter register,
file or record, or cause to be registered, filed or recorded, in an appropriate
governmental office, any document or instrument supplemental to or confirmatory
of the Loan Documents or otherwise deemed by Lender reasonably necessary or
desirable for the continued validity, perfection and priority of the Liens on
the Collateral covered thereby subject to no other Liens except as permitted by
the applicable Loan Document, or obtain any consents or waivers as may be
necessary or appropriate in connection therewith; (b) deliver or cause to be
delivered to Lender from time to time such other documentation, consents,
authorizations, approvals and orders in form and substance reasonably
satisfactory to Lender and Lender shall reasonably deem necessary to perfect or
maintain the Liens on the Collateral pursuant to the Loan Documents; and (c)
upon the exercise by Lender of any power, right, privilege or remedy pursuant to
any Loan Document which requires any consent, approval, registration,
qualification or authorization of any Governmental Authority execute and deliver
all applications, certifications, instruments and other documents and papers
that Lender may require.  In addition, subject to Section 8.12(b), Borrower
shall promptly, at its sole cost and expense, execute and deliver to Lender such
further instruments and documents, and take such further action, as Lender may,
at any time and from time to time, reasonably request in order to carry out the
intent and purpose of this Agreement and the other Loan Documents to which it is
a party and to establish and protect the rights, interests and remedies created,
or intended to be created, in favor of Lender hereby and thereby.

 

 

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(b)Notwithstanding anything to the contrary herein or in any other Loan
Document, Borrower shall not have any obligation to (i) perfect or record any
security interest or lien in any intellectual property included in the
Collateral in any jurisdiction other than in the United States (or to enter into
any foreign law governed charges, debentures, pledges or other security
agreements in respect thereof), (ii)  obtain any landlord waivers, estoppels or
collateral access letters, or (iii) obtain any consent of the Licensee to the
assignment and pledge to Lender of the rights under the License Agreement that
are included in the Collateral.

Section 8.13Information Regarding Collateral.  Borrower shall not effect any
change (i) in its legal name, (ii) in the location of its chief executive
office, (iii) in its identity or organizational structure, (iv) in its federal
Taxpayer Identification Number or organizational identification number, if any,
or (v) in its jurisdiction of organization (in each case, including by merging
with or into any other entity, reorganizing, dissolving, liquidating,
reorganizing or organizing in any other jurisdiction), until (A) it shall have
given Lender not less than ten (10) days prior written notice (in the form of an
certificate of a duly authorized officer of Borrower), or such lesser notice
period agreed to by Lender, of its intention so to do, clearly describing such
change and providing such other information in connection therewith as Lender
may reasonably request and (B) it shall have taken all action reasonably
satisfactory to Lender to maintain the perfection and priority of the security
interest of Lender in the Collateral, if applicable (subject to the limitations
set forth in Section 8.12(b)).  Borrower agrees to provide promptly Lender with
certified Borrower’s Organizational Documents reflecting any of the changes
described in the preceding sentence.  Borrower also agrees to notify promptly
Lender of any change in the location of any office in which it maintains books
or records relating to Collateral owned by it or any office or facility at which
any portion of Collateral is located (including the establishment of any such
new office or facility), other than (a) changes in location to a mortgaged
property, (b) Collateral which is in-transit or in the possession of employees,
and (c) Collateral which is out for repair or processing.

Section 8.14Additional Collateral; New License Arrangement(a)

(a)With respect to any Collateral acquired after the Closing Date by Borrower
that is not already subject to the Lien created by any of the Loan Documents or
specifically excluded from the requirement to be subject to such Lien in the
Loan Documents, Borrower shall promptly (and in any event within 30 days after
the acquisition thereof) (i) execute and deliver to Lender such amendments or
supplements to the relevant Loan Documents or such other documents as Lender
shall deem necessary or advisable to grant for its benefit, a Lien on such
property subject to no Liens other than Permitted Liens, and (ii) take all
actions necessary to cause such Lien to be duly perfected in accordance with all
applicable requirements of Law, including the filing of financing statements in
such jurisdictions as may be reasonably requested by Lender.  Subject to Section
8.12(b), Borrower shall otherwise take such actions and execute and/or deliver
to Lender such documents as Lender shall reasonably require to confirm the
validity, perfection and priority of the Lien of the Security Agreement on such
after-acquired properties.

 

 

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(b)Without limiting any other rights or remedies Lender may have under this
Agreement, the Security Agreement or the Stock Pledge Agreement, if (i) Licensee
terminates or provides written notice of termination of the License Agreement or
the License Agreement terminates as to Licensee by operation of law or (ii)
Borrower terminates the License Agreement in violation of its covenants herein
or the License Agreement terminates as to Borrower by operation of law, then
Borrower, in consultation with Lender, or Lender (in the case of a termination
under preceding subclause (ii) or in the event that Borrower fails to so consult
with Lender), in each case at Lender’s option and at all times in consultation
with Lender and subject to the further requirements of this Section 8.14(b),
shall identify and use commercially reasonable efforts to consummate a licensing
opportunity with a Third Party that has rights (from, by or through Licensee or
any successor or assignee thereof) to Commercialize the Licensed Product,
covering the Intellectual Property that had been licensed to Licensee, for such
Third Party’s use of the Intellectual Property in the development, manufacture,
use and Commercialization of the Licensed Product.  Borrower shall cooperate
with Lender, at Borrower’s cost and expense, including Borrower’s fees, if any,
in connection therewith, in such efforts to identify and consummate such
licensing opportunity, which license shall (i) become effective as soon as
practicable but in any event not earlier than the effective date of such
termination, (ii) expire not earlier than the Maturity Date and (iii) include,
without Lender’s prior written consent, terms, conditions and limitations that
are not materially less favorable to Borrower or Lender (other than economic
terms, which shall be no less favorable to Borrower or Lender), than those
contained in the License Agreement applicable to the Licensed Product at the
effective date of termination, including with respect to obligations and costs
imposed on Borrower, disclaimers of Borrower’s liability, intellectual property
ownership and control and indemnification of Borrower (any such license, a “New
Arrangement”).  If Borrower (in consultation with Lender) is the party pursuing
such New Arrangement, Borrower and Lender shall mutually agree on the Third
Party with which to enter into such New Arrangement.  Should such New
Arrangement be identified, Borrower agrees to use Commercially Reasonable and
Diligent Efforts to execute and deliver a new license agreement effecting such
New Arrangement.

Article IX.

NEGATIVE COVENANTS

Borrower covenants and agrees with Lender that, until Payment in Full:

Section 9.01Activities of Borrower.  (a) Borrower shall not amend, modify, waive
or terminate (other than expiration in accordance with its terms) any provision
of, or permit or agree to the amendment, modification, waiver or termination
(other than expiration in accordance with its terms) of any provision of, any of
the Transaction Documents or the License Agreement, without the consent of
Lender (x) in its sole and absolute discretion, if the related amendment,
modification, waiver or termination could reasonably be expected to have an
adverse effect, in any respect, on the timing, amount or duration of the
Included Royalty Interest or the right of Lender to receive the Included Royalty
Interest and (y) with respect to any other matters, such consent not to be
unreasonably withheld or delayed. Borrower shall not establish or acquire any
Subsidiaries.  

 

 

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(b)Borrower shall not:

(i)fail to hold itself out to the public and all other persons as a legal entity
separate from the owners of its Capital Stock and from any other person;

(ii)commingle its assets with assets of any other Person except in connection
with, and for the limited purposes of, operation of the Blocked Account;

(iii)fail to conduct its business only in its own name, nor fail to comply with
all organizational formalities necessary to maintain its separate existence;

(iv)fail to maintain separate financial statements, showing its assets and
liabilities separate and apart from those of any other person nor have its
assets listed on any financial statement of any other person; provided, however,
that Borrower’s assets may be included in a consolidated financial statement of
its Affiliates in conformity with applicable provisions of GAAP (provided that
such assets shall also be listed on Borrower’s own separate balance sheet);

(v)fail to pay its own liabilities and expenses only out of its own funds;
provided that the foregoing shall not prohibit the payment of any liabilities
and expenses by Company on behalf of Borrower so long as such payments are
subject to reimbursement or are otherwise recorded as capital contributions or
intercompany loans;

(vi)enter into any transaction with an Affiliate except transactions that are at
prices and on terms and conditions that could be obtained on an arm’s-length
basis from unrelated Third Parties;

(vii)issue any securities of any kind except as contemplated by this Agreement
and the other Transaction Documents;

(viii)fail to correct any known misunderstanding regarding its separate identity
and not identify itself as a department or division of any other Person;

(ix)fail to maintain adequate capital in light of its contemplated business
purpose, transactions and liabilities; provided, however, that the foregoing
shall not require the holders of its Capital Stock to make additional capital
contributions to Borrower;

(x)fail to cause the representatives of Borrower to act at all times with
respect to Borrower consistently and in furtherance of the foregoing and in the
best interests of Borrower;

(xi)make any payment or distribution of assets with respect to any obligation of
any other person other than as required under trade or commercial agreements
entered into in the ordinary course of business;

 

 

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(xii)engage in any business activity other than Exploitation of the License
Agreement, any New Arrangement that is implemented hereunder and the borrowing,
payment and repayment of amounts provided for hereunder and under the other Loan
Documents and any activities ancillary or related thereto; or

(xiii)fail to file any tax returns and pay any taxes as may be required under
Law (except for taxes contested in good faith by appropriate proceedings and for
which adequate reserves are maintained in accordance with GAAP).

(c)Borrower shall not issue any Capital Stock in certificated form.

Section 9.02Merger; Sale of Assets.

(a)Borrower shall not merge or consolidate with or into (whether or not Borrower
is the Surviving Person) any other Person and Borrower will not sell, convey,
assign, transfer, lease, sublease, license, sublicense or otherwise dispose of
all or substantially all of Borrower’s assets to any Person in a single
transaction or series of related transactions; provided that nothing in this
Section 9.02(a) shall prohibit a Change of Control.

(b)Borrower shall not sell, assign, convey, transfer, lease, sublease, license,
sublicense or otherwise dispose of (including by way of merger or consolidation)
any right, title or interest in or to, the License Agreement or the Included
Royalty Interest, other than pursuant to Permitted Liens, or pursuant to a
Change of Control.

Section 9.03Liens.  Borrower shall not create or suffer to exist any Lien on or
with respect to Collateral, except for Permitted Liens.

Section 9.04Investment Company Act.  Neither Borrower nor any of its
Subsidiaries shall be or become an investment company subject to registration
under the Investment Company Act of 1940.

Section 9.05Limitation on Additional Indebtedness.  Borrower shall not, directly
or indirectly, incur or suffer to exist any Indebtedness; provided that Borrower
may incur:

(a)Indebtedness under this Agreement;

(b)Indebtedness representing obligations for the payment of money  incurred in
the ordinary course of business for goods or services rendered, unsecured, not
overdue (unless subject to a good faith dispute);

(c)Indebtedness secured by Liens of any of the types described under clause (d)
of the definition of Permitted Liens; and

(d)Indebtedness consisting of the financing of insurance premiums with the
providers of such insurance or their affiliates in the ordinary course of
business.

 

 

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Section 9.06Limitation on Transactions with Controlled Affiliates.  Borrower
shall not, directly or indirectly, enter into any transaction or series of
related transactions or participate in any arrangement (including any purchase,
sale, lease or exchange of assets or the rendering of any service) with any
Controlled Affiliate other than the Transaction Documents or in the ordinary
course of business of Borrower upon fair and reasonable terms no less favorable
to Borrower than it would obtain in a comparable arm’s-length transaction with a
non-Controlled Affiliate.

Section 9.07ERISA.

(a)Borrower shall not sponsor, maintain or contribute to, or agree to sponsor,
maintain or contribute to, any employee benefit plan (as defined in Section 3(3)
of ERISA) whether or not subject to ERISA, that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

(b)Borrower shall not engage in a non-exempt prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code or in any transaction that,
assuming that no assets of Lender are or are deemed to be Plan Assets, would
cause any obligation or action taken or to be taken hereunder (or the exercise
by Lender of any of its rights under the Notes, this Agreement or the other Loan
Documents) to be a non-exempt prohibited transaction under such provisions.

(c)Borrower shall not incur any liability with respect to any obligation to
provide medical benefits with respect to any person beyond their retirement or
other termination of service, other than coverage mandated by law, that could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

Section 9.08Dividends and Distributions.  Borrower will not, directly or
indirectly, make any dividends or other distributions to holders of its Capital
Stock (i) except as permitted under Borrower’s Organizational Documents and the
Stock Pledge Agreement or (ii) while an Event of Default or Prepayment Trigger
has occurred and is continuing.

Article X.

EVENTS OF DEFAULT

Section 10.01Events of Default.  If one or more of Events of Default occurs and
is continuing, Lender shall be entitled to the remedies set forth in Section
10.02.

Section 10.02Default Remedies.  If any Event of Default shall occur and be
continuing, Lender may, by Notice to Borrower, (a) exercise all rights and
remedies available to Lender hereunder and under the other Loan Documents and
applicable law (which exercise may be determined in its sole discretion and
which such exercise shall not constitute an election of remedies), including
enforcement of the security interests created thereby, (b) declare the Loan, all
interest thereon and all other Obligations to be immediately due and payable,
whereupon all such amounts shall become immediately due and payable, all without
diligence, presentment, demand of payment, protest or fur

 

 

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ther notice of any kind, which are expressly waived by Borrower and (c) declare
the obligations of Lender hereunder to be terminated, whereupon such obligations
shall terminate; provided, however, that if any event of any kind referred to in
clause (i) of the definition of “Event of Default” herein occurs, the
obligations of Lender hereunder shall immediately terminate, all amounts payable
hereunder by Borrower shall become immediately due and payable and Lender shall
be entitled to exercise rights and remedies under the Loan Documents and
applicable law without diligence, presentment, demand of payment, protest or
notice of any kind (including any notice by Lender of a declaration requiring
prepayment of the Loan under Section 3.02(a), should Lender so elect), all of
which are hereby expressly waived by Borrower.  Each Notice delivered pursuant
to this Section 10.02 shall be effective when sent.

Section 10.03Right of Set-off; Sharing of Set-off.

(a)If any amount payable hereunder is not paid as and when due, Borrower
irrevocably authorizes Lender (i) to proceed, to the fullest extent permitted by
Applicable Law, without prior notice, by right of set-off, bankers’ lien,
counterclaim or otherwise, against any assets of Borrower in any currency that
may at any time be in the possession of Lender or any Affiliate of Lender, to
the full extent of all amounts payable to Lender hereunder or (ii) to charge to
Borrower’s account with Lender or any Affiliate of Lender the full extent of all
amounts payable by Borrower to Lender hereunder; provided, however, that Lender
shall notify Borrower of the exercise of such right promptly following such
exercise.

(b)If any Lender shall, by exercising any right of setoff or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on the Loan
or other obligations owed to such Lender resulting in such Lender’s receiving
payment of a proportion of the aggregate amount of the Loan and accrued interest
thereon or other obligations owed to such Lender greater than its pro rata share
thereof as provided herein, then Lender receiving such greater proportion shall
(a) notify the other Lenders of such fact, and (b) purchase (for cash at face
value) participations in the Loan and such other obligations of the other
Lenders, or make such other adjustments as shall be equitable, so that the
benefit of all such payments shall be shared by Lenders ratably in accordance
with the aggregate amount of principal of and accrued interest on their
respective Loan and other amounts owing them; provided that the provisions of
this Section 10.03(b) shall (x) not be construed to apply to (A) any payment
made by Borrower pursuant to and in accordance with the express terms of this
Agreement or (B) any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in the Loan to any assignee and (y)
only be applicable if there is more than one Lender.

Section 10.04Rights Not Exclusive.  The rights provided for herein are
cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by Law.

 

 

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Article XI.

INDEMNIFICATION

Section 11.01Losses.

(a)Borrower agrees to defend (subject to Indemnitees’ selection of counsel),
indemnify, pay and hold harmless, each Indemnitee from and against any and all
Indemnified Liabilities, in all cases, arising, in whole or in part, out of or
relating to any claim, notice, suit or proceeding commenced or threatened in
writing (including, without limitation, by electronic means) by any Person
(including any Governmental Authority) other than Borrower, the Company or any
of Lender’s Affiliates; provided Borrower shall not have any obligation to any
Indemnitee hereunder with respect to any Indemnified Liabilities to the extent
such Indemnified Liabilities arise from the gross negligence or willful
misconduct of such Indemnitee or the breach by Lender of its obligations to make
the Loan.  To the extent that the undertakings to defend, indemnify, pay and
hold harmless set forth in this Section 11.01 may be unenforceable in whole or
in part because they violate of any law or public policy, Borrower shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them. This Section 11.01 shall not apply with
respect to Taxes other than any Taxes that represent losses, claims, damages,
etc. arising from any non-Tax claim.

(b)To the extent permitted by applicable law, no Party shall assert, and each
Party hereby waives, any claim against each other Party and such Party’s
Affiliates, directors, employees, attorneys or agents, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) (whether or not the claim therefor is based on
contract, tort or duty imposed by any applicable legal requirement) arising out
of, in connection with, as a result of, or in any way related to, this Agreement
or any Loan Document or any agreement or instrument contemplated hereby or
thereby or referred to herein or therein, the transactions contemplated hereby
or thereby, the Loan or the use of the proceeds thereof or any act or omission
or event occurring in connection therewith, and each Party hereby waives,
releases and agrees not to sue upon any such claim or any such damages, whether
or not accrued and whether or not known or suspected to exist in its favor.

Section 11.02Assumption of Defense; Settlements.  If Lender is entitled to
indemnification under this Article XI with respect to any action or proceeding
brought by a third party that is also brought against Borrower, Borrower shall
be entitled to assume the defense of any such action or proceeding with counsel
reasonably satisfactory to Lender.  Upon assumption by Borrower of the defense
of any such action or proceeding, Lender shall have the right to participate in
such action or proceeding and to retain its own counsel but Borrower shall not
be liable for any legal expenses of other counsel subsequently incurred by
Lender in connection with the defense thereof unless (i) Borrower has otherwise
agreed to pay such fees and expenses, (ii) Borrower shall have failed to employ
counsel reasonably satisfactory to Lender in a timely manner or (iii) Lender
shall have been advised by counsel that there are actual or potential
conflicting interests between Borrower and Lender, including situations in which
there are one or more legal defenses available to Lender that are different from
or additional to those available to Borrower; provided, however, that Borrower
shall not, in connection with any one such action or

 

 

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proceeding or separate but substantially similar actions or proceedings arising
out of the same general allegations, be liable for the fees and expenses of more
than one separate firm of attorneys at any time for Lender, except to the extent
that local counsel, in addition to its regular counsel, is required in order to
effectively defend against such action or proceeding.  Borrower shall not
consent to the terms of any compromise or settlement of any action defended by
Borrower in accordance with the foregoing without the prior written consent of
Lender unless such compromise or settlement (x) includes an unconditional
release of Lender from all liability arising out of such action and (y) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of Lender.  Borrower shall not be required to indemnify
Lender for any amount paid or payable by Lender in the settlement of any action,
proceeding or investigation without the written consent of Borrower, which
consent shall not be unreasonably withheld, conditioned or delayed.

Article XII.

MISCELLANEOUS

Section 12.01Assignments.

(a)Borrower shall not be permitted to assign this Agreement without the prior
written consent of Lender (in the event such assignment is to be to an Affiliate
of Borrower, such consent not to be unreasonably withheld) and any purported
assignment in violation of this Section 12.01 shall be null and void.

(b)Lender may at any time assign its rights and obligations hereunder, in whole
or in part, to an Assignee and Lender may at any time pledge its rights and
obligations hereunder to an Assignee.

(c)The parties to each assignment shall execute and deliver to Borrower an
Assignment and Acceptance.  Upon the effectiveness of a permitted assignment
pursuant to Section 12.01(a) or an assignment pursuant to Section 12.01(b)
hereunder, (i) each reference in this Agreement to “Lender” shall be deemed to
be a reference to the assignor and the assignee to the extent of their
respective interests, (ii) such assignee shall be a Lender party to this
Agreement and shall have all the rights and obligations of a Lender and (iii)
the assignor shall be released from its obligations hereunder to a corresponding
extent of the assignment, and no further consent or action by any party shall be
required.

(d)In the event there are multiple Lenders, all payments of principal, interest,
fees and any other amounts payable pursuant to the Loan Documents shall be
allocated on a pro rata basis among Lenders according to their proportionate
interests in the Loan.

(e)Borrower and Lender shall, from time to time at the request of the other
party hereto, execute and deliver any documents that are necessary to give full
force and effect to an assignment permitted hereunder, including a new Note in
exchange for the Note held by Lender.

 

 

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Section 12.02Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and
permitted assigns.

Section 12.03Notices.  All Notices authorized or required to be given pursuant
to this Agreement shall be given in writing and either personally delivered to
the Party to whom it is given or delivered by an established delivery service by
which receipts are given or mailed by registered or certified mail, postage
prepaid, or sent by electronic mail with a copy sent on the following Business
Day by one of the other methods of giving notice described herein, addressed to
the Party at its address listed below:

 

(a)

If to Borrower:

Paratek Royalty Corporation
Attention:  Chief Financial Officer

75 Park Plaza, 4th Floor

Boston, MA 02116

Facsimile:  617-275-0039

Telephone:  617-807-6600

With a copy to:

Paratek Royalty Corporation
Attention:  General Counsel

75 Park Plaza, 4th Floor

Boston, MA 02116

 

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

Cooley LLP

1299 Pennsylvania Avenue, NW, Suite 700

Washington, DC 20004-2400

Attention:  Michael Tollini

Email: mtollini@cooley.com

 

 

(b)

If to Lender:

HealthCare Royalty Partners III, L.P.
300 Atlantic Street, Suite 600
Stamford, CT  06901
Attention:  John Urquhart
                  Partner
Email:  John.Urquhart@hcroyalty.com

 

 

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

HealthCare Royalty Partners III, L.P.
300 Atlantic Street, Suite 600
Stamford, CT  06901
Attention:  Chief Legal Officer
Email: royalty-legal@hcroyalty.com

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

Cadwalader, Wickersham & Taft LLP
200 Liberty Street
New York, New York 10281
Attn:  Ira J. Schacter
E-mail:  ira.schacter@cwt.com

Any Party may change its address for the receipt of Notices at any time by
giving Notice thereof to the other Party.  Except as otherwise provided herein,
any Notice authorized or required to be given by this Agreement shall be
effective when received.

Section 12.04Entire Agreement.  This Agreement, together with the Exhibits and
Schedules hereto (which are incorporated herein by reference), and the other
Loan Documents constitute the entire agreement between the Parties with respect
to the subject matter hereof and supersede all prior agreements (including the
Confidentiality Agreement), understandings and negotiations, both written and
oral, between the Parties with respect to the subject matter of this Agreement.

Section 12.05Modification.  No Loan Document or provision thereof may be waived,
amended or modified except, in the case of this Agreement, by an agreement or
agreements in writing executed by Borrower and Lender or, in the case of any
other Loan Document, by an agreement or agreements in writing entered into by
the parties thereto with the prior written consent of Lender.

Section 12.06No Delay; Waivers; etc.  No delay on the part of Lender in
exercising any power or right hereunder shall operate as a waiver thereof nor
shall any single or partial exercise of any power or right hereunder preclude
other or further exercise thereof or the exercise of any other power or
right.  Lender shall not be deemed to have waived any rights hereunder unless
such waiver shall be in writing and signed by Lender.

Section 12.07Severability.  If any provision of this Agreement is held to be
invalid or unenforceable, the remaining provisions shall nevertheless be given
full force and effect.  Any provision of this Agreement held invalid or
unenforceable only in part or degree by a court of competent jurisdiction shall
remain in full force and effect to the extent not held invalid or
unenforceable.  

 

 

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Section 12.08Determinations.  Each determination or calculation by Lender
hereunder shall, in the absence of manifest error, be conclusive and binding on
the Parties.

Section 12.09Replacement of Note.  Upon the loss, theft, destruction, or
mutilation of any Note and (a) in the case of loss, theft or destruction, upon
receipt by Borrower of indemnity or security reasonably satisfactory to it
(except that if the holder of such Note is Lender or any other financial
institution of recognized responsibility, the holder’s own agreement of
indemnity shall be deemed to be satisfactory) or (b) in the case of mutilation,
upon surrender to Borrower of any mutilated Note, Borrower shall execute and
deliver in lieu thereof a new Note, dated the Closing Date, in the same
Principal Amount.

Section 12.10Governing Law.  THIS AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING
GENERAL OBLIGATIONS LAW SECTIONS 5-1401 AND 5-1402 BUT OTHERWISE WITHOUT GIVING
EFFECT TO LAWS CONCERNING CONFLICT OF LAWS OR CHOICE OF FORUM THAT WOULD REQUIRE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

Section 12.11Jurisdiction.  Each of Borrower and Lender irrevocably submits to
the jurisdiction of the courts of the State of New York and of the United States
sitting in the State of New York, and of the courts of its own corporate
domicile with respect to any and all Proceedings.  Each of Borrower and Lender
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of venue of any Proceeding and any
claim that any Proceeding has been brought in an inconvenient forum.  Any
process or summons for purposes of any Proceeding may be served on Borrower by
mailing a copy thereof by registered mail, or a form of mail substantially
equivalent thereto, addressed to it at its address as provided for Notices
hereunder.

Section 12.12Waiver of Jury Trial.  Each Party hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any action, proceeding, claim or counterclaim arising out of or relating to
any Transaction Document or the transactions contemplated under any Transaction
Document (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO ANY TRANSACTION DOCUMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY HERETO WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.12.

 

 

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Section 12.13Waiver of Immunity.  To the extent that Borrower has or hereafter
may be entitled to claim or may acquire, for itself or any of its assets, any
immunity from suit, jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, or otherwise) with respect to itself or any of its property, Borrower
hereby irrevocably waives such immunity in respect of its obligations hereunder
and under the Notes to the fullest extent permitted by law.

Section 12.14Counterparts; Delivery.  This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.  Delivery of an executed
counterpart of a signature page of this Agreement in Portable Document Format
(PDF) or by facsimile transmission shall be effective as delivery of a manually
executed original counterpart of this Agreement.

Section 12.15Limitation on Rights of Others.  Except for the Indemnitees
referred to in Section 11.01, no Person other than a Party shall have any legal
or equitable right, remedy or claim under or in respect of this Agreement.

Section 12.16Survival.  The obligations of Borrower contained in Sections 4.05,
4.06, Article V, Article XI and this Section 12.16 shall survive the repayment
of the Loan and the cancellation of the Note and the termination of the other
obligations of Borrower hereunder.

Section 12.17Confidentiality.  

(a)Until the payment of all amounts required pursuant to Section 3.01, and for a
period of three (3) years thereafter, each Party shall maintain in strict
confidence all Confidential Information and materials disclosed or provided to
it by the other Party, except as approved in writing in advance by the
disclosing Party, and shall not use or reproduce the disclosing Party’s
Confidential Information for any purpose other than as required to carry out its
obligations and exercise its rights pursuant to this Agreement (the
“Purpose”).  Notwithstanding the foregoing, the obligations of confidentiality
and non-use set forth in Section 12.17 shall not apply to the extent that the
receiving Party or its Affiliates: (a) discloses such Confidential Information
solely on a “need to know basis” to its employees, consultants and Affiliates as
well as any actual or potential acquirers, merger partners, licensees, permitted
assignees, collaborators (including licensees), subcontractors, investment
bankers, investors, limited partners, partners, lenders, or other financial
partners, and its and their respective directors, employees, contractors and
agents, on a confidential basis to the extent requested by an authorized
representative of a U.S. or foreign tax authority, or (b) discloses Confidential
Information in response to a routine audit or examination by, or a blanket
document request from, a Governmental Authority. A Party receiving any such
Confidential Information hereunder agrees to institute measures to protect the
Confidential Information in a manner consistent with the measures it uses to
protect its own most sensitive proprietary and confidential information, which
in any event must not be less than a reasonable standard of care.  Each Party
shall be responsible for the breach of this Section 12.17 by its employees,
consultants or Third Parties to whom such disclosure is made pursuant to this
Section 12.17.  Each Party shall immediately notify the other Party upon
discovery of any loss or unauthorized disclosure of the other Party’s
Confidential Information.  

 

 

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(b)The obligations of confidentiality and non-use set forth in Section 12.17(a)
shall not apply to the extent that the receiving Party or its Affiliates is
required to disclose Confidential Information pursuant to: (i) an order of a
court of competent jurisdiction; (ii) Applicable Laws; (iii) regulations or
rules of a securities exchange; or (iv) requirement of a Governmental Authority.

(c)This Agreement supersedes the Confidentiality Agreement and the
Confidentiality Agreement shall cease to be of any force and effect as of the
Closing Date; provided, however, that all information falling within the
definition of “Confidential Information” set forth in the Confidentiality
Agreement shall also be deemed Confidential Information disclosed pursuant to
this Agreement and subject to the provisions of Section 12.17.

Section 12.18Patriot Act Notification.  Lender hereby notifies Borrower that,
consistent with the Patriot Act, regulations promulgated thereunder and under
other Applicable Law, Lender’s procedures and customer due diligence standards
may require it to obtain, verify and record information that identifies
Borrower, including among other things name, address, information regarding
Persons with authority or control over Borrower, and other information regarding
Borrower, its operations and transactions with Lender.  Borrower agrees to
provide such information and take such actions as are reasonably requested by
Lender in order to assist Lender in maintaining compliance with its procedures,
the Patriot Act and any other Applicable Laws.

[remainder of page intentionally left blank]

 

 

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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the day
and year first above written.

 

HEALTHCARE ROYALTY PARTNERS III, L.P.,
as Lender

 

 

 

 

 

By:

 

HealthCare Royalty GP III, LLC,
its general partner

 

 

 

 

 

 

 

 

 

 

By:

 

/s/ Clarke B. Futch

 

 

Name:

 

Clarke B. Futch

 

 

Title:

 

Managing Partner

 

PARATEK ROYALTY CORPORATION,
as Borrower

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

Loan Agreement

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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the day
and year first above written.

 

HEALTHCARE ROYALTY PARTNERS III, L.P.,
as Lender

 

 

 

 

 

By:

 

HealthCare Royalty GP III, LLC,
its general partner

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

Clarke B. Futch

 

 

Title:

 

Managing Partner

 

PARATEK ROYALTY CORPORATION,
as Borrower

 

 

 

 

 

By:

 

/s/ Douglas W. Pagán

 

 

Name:

 

Douglas W. Pagán

 

 

Title:

 

President

 

 

Loan Agreement

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EXHIBIT A

FORM OF

ASSIGNMENT AND ACCEPTANCE

Reference is made to that certain Loan Agreement, dated as of February 26, 2019
(as amended, supplemented or otherwise modified from time to time, the "Loan
Agreement") between HealthCare Royalty Partners III, L.P., a Delaware limited
partnership (“Lender”) and Paratek Royalty Corporation, a Delaware corporation
(“Borrower”), and the Notes and other Loan Documents related thereto.  Terms
defined in the Loan Agreement and not otherwise defined herein are used herein
with the same meaning.

The Assignor and the Assignee referred to on Schedule 1 attached hereto agree as
follows:

1. The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases from the Assignor, [all] [a [n] percent] interest in the
Assignor's rights and obligations under the Loan Agreement and the other Loan
Documents, and Assignee hereby accepts such assignment and assumes [all] [such
proportion] of the Assignor's obligations thereunder, in each case, to the
extent first arising on or after the date hereof. After giving effect to such
sale and assignment, the amount of the Loan owing to the Assignee will be as set
forth on Schedule 1 attached hereto.

2. The Assignor (i) represents and warrants that it is the sole legal and
beneficial owner of the entire Loan that is the subject of the assignment
hereunder; (ii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Documents, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of, or the
perfection or priority of any lien or security interest created or purported to
be created under or in connection with the Loan Documents or any other
instrument or document furnished pursuant thereto; (iii) makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of Borrower or the performance or observance by Borrower of any of its
obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; and (iv) requests that Borrower record in the
Register the assignment of such Note or Notes in an amount equal to the
Principal Amount of the Loan assigned to the Assignee pursuant hereto, as
specified on Schedule 1 attached hereto, and if requested by the Assignor,
Borrower shall issue to the Assignee a new Note or Notes representing the
Principal Amount of the Loan assigned to the Assignee and return a new Note or
Notes representing the Principal Amount of the Loan retained by the Assignor, if
any, upon which issuances the Note or Notes attached hereto shall be cancelled.

3. The Assignee (i) confirms that it has received a copy of the Loan Agreement,
the Note or Notes and the other Loan Documents, together with such documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (ii) agrees that it will,
independently and without reliance upon Lender or the Assignor based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Agreement or the Note or Notes and the other Loan Documents; and (iii) agrees
that it will perform in accordance with their terms all of the obligations first
arising on or after the date hereof that by the terms of the Loan Agreement and
the other Loan Documents are required to be performed by it as an assignee of an
interest therein, to the extent of the interest assigned to it by Assignor.

A-1

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4.  The effective date for this Assignment and Acceptance (the "Effective Date")
shall be the date set forth on Schedule 1 attached hereto.

5.  As of the Effective Date, (i) the Assignee shall be a party to (or the
holder of) the Loan Agreement, the Note or Notes and the other Loan Documents
(or the portion thereof assigned to the Assignee) and have the rights and, to
the extent provided in this Assignment and Acceptance, obligations of an
assignee thereof, to the extent of the portion thereof assigned to Assignee by
Assignor, and (ii) the Assignor shall relinquish its rights and, to the extent
provided in the Loan Agreement and this Assignment and Acceptance, be released
from its obligations under the Loan Agreement and the Note (or the portion
thereof assigned by Assignor to Assignee).

6. From and after the Effective Date, Borrower shall continue to make or cause
to be made all payments under the Loan Agreement, the Note or Notes and all
other Loan Documents in respect of the interest assigned hereby (including,
without limitation, all payments of principal, interest and any other fees or
expenses due from time to time thereunder with respect thereto) in accordance
with Articles 3, 4 and 5 of the Agreement. The Assignor and Assignee shall make
all appropriate adjustments in payments under the Loan Agreement, the Note or
Notes and the other Loan Documents for all periods from and after the Effective
Date directly between themselves.

7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of New York, including but not limited to
General Obligations Law Section 5-1401 but otherwise without regard to any laws
of such jurisdiction concerning conflicts or choice of law.

8. This Assignment and Acceptance may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of
this Assignment and Acceptance and of Schedule 1 hereto by telecopier shall be
effective as delivery of a manually executed counterpart of this Assignment and
Acceptance.

* * *

 

 

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IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment
and Acceptance and Schedule 1 to this Assignment and Acceptance to be executed
by their officers thereunto duly authorized as of the date specified on Schedule
1.

ASSIGNOR:

ASSIGNEE:

 

 

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SCHEDULE 1 TO

ASSIGNMENT AND ACCEPTANCE

As to the Loan which is being assigned:

Aggregate outstanding Principal Amount of the Loan assigned:

Principal Amount of Loan payable to Assignee:

Effective Date:  [n], 20[n]

 

 

 

ASSIGNOR:

 

 

 

ASSIGNEE:

 

 

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EXHIBIT B

 

 

FORM OF

 

 

BLOCKED ACCOUNT CONTROL AGREEMENT

(“LENDING CONTROL”)

 

 

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FORM OF DEPOSIT ACCOUNT

CONTROL AGREEMENT

DEPOSIT ACCOUNT CONTROL AGREEMENT

 

 

This Deposit Account Control Agreement (this “Agreement”) is entered into as of
[                         ], 2019, among Paratek Royalty Corporation
(“Company”), a wholly-owned subsidiary of Paratek Pharmaceuticals, Inc.;
HealthCare Royalty Partners III, L.P. (“Lender”); and Bank of America, N.A.
(“Bank”) with respect to the following:

RECITALS:

A.Bank has agreed to establish and maintain for Company certain deposit accounts
identified as numbers [***] and [***] (referred to individually and
collectively, as the “Account”).  

B.Company has assigned to Lender a security interest in the Account and in any
checks, automated clearinghouse (“ACH”) transfers, wire transfers, instruments
and other payment items (collectively, “Funds”) deposited in the Account.

C.Company and Lender have requested Bank to enter into this Agreement to
evidence Lender’s security interest in the Account and to provide for the
disposition of the Funds deposited in the Account.

D.Bank is willing to enter into this Agreement for the benefit of Company and
Lender pursuant to the terms and conditions set forth herein.

Accordingly, Company, Lender and Bank agree as follows:

1.Lender’s Control over the Account.

(a)This Agreement evidences Lender’s control over the Account.  Notwithstanding
any contrary duties owed by Bank to Company under any other deposit account
agreements, terms and conditions or other documentation entered into by and
between Bank and Company governing the Account and any cash management or
similar services provided by Bank or an affiliate of Bank in connection with the
Account, including without limitation, services in connection with any “Lockbox”
(as defined below) (collectively, the “Account Related Agreements”), Bank will
comply with instructions originated by Lender as set forth herein directing the
disposition of Funds in the Account without further consent of Company.  Bank
may follow such instructions even if doing so results in the dishonoring by Bank
of items presented for payment from the Account or Bank otherwise not complying
with any instruction from Company directing the disposition of any Funds in the
Account.

(b)Company represents and warrants to Lender and Bank that it has not assigned
or granted a security interest in the Account or any Funds deposited in the
Account, except to Lender and Bank.

B-2

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(c)Company will not permit the Account to become subject to any other pledge,
assignment, lien, charge or encumbrance of any kind (“Charges”), other than
Lender’s security interest referred to herein, Bank’s setoffs and the Charges
permitted hereinafter.

(d) Company covenants to Lender that it will not close the Account prior to the
termination of this Agreement.  Bank shall have no liability in the event
Company breaches this covenant to Lender.

2.Company Access to the Account.  Except as otherwise provided in this Section 2
of this Agreement, prior to the “Activation Effective Time” (as defined below)
Bank may honor withdrawal, payment, transfer, or other instructions originated
by Company concerning the disposition of Funds in the Account (collectively,
“Company Instructions”).  On and after the Activation Effective Time, Bank shall
only honor instructions originated by Lender concerning the disposition of Funds
in the Account (“Lender Instructions”) without further consent from Company and
Company shall have no right or ability to access, withdraw or transfer Funds
from the Account.  Except as provided herein, no Lender Instructions may be
rescinded or modified without Bank’s consent.  Both Lender and Company
acknowledge that Bank may, without liability, (i) comply with any Company
Instructions or otherwise complete a transaction involving the Account that Bank
or an affiliate had started to process before the Activation Effective Time and
(ii) commence to solely honor Lender Instructions at any time or from time to
time after Bank becomes aware that Lender has sent to Bank the “Activation
Notice” (as defined below) even if prior to the Activation Effective Time
(including without limitation halting, reversing or redirection of any
transaction), which actions (under (i) and/or (ii)) shall not, in any way,
affect the commencement of the Activation Effective Time.  The Account may
receive merchant card deposits and chargebacks.  Company acknowledges and agrees
that upon commencement of the Activation Effective Time, chargebacks may be
blocked from debiting the Account.

For purposes hereof, and notwithstanding anything to the contrary in this
Agreement, the “Activation Effective Time” shall commence upon the opening of
business on the second “Banking Day” (as defined below)  following the Banking
Day on which the receipt of a notice purporting to be signed by Lender in
substantially the form of Exhibit A and sent to the location of Bank to which
Lender is required hereunder to send the Activation Notice, with a copy of this
Agreement attached (the “Activation Notice”), is acknowledged by Bank, which
acknowledgment shall occur within a reasonable time after Bank’s receipt of the
Activation Notice, not to exceed one Banking Day; provided, however, that if
such receipt is acknowledged on any day after 12:00 noon, Eastern Time, the
acknowledgment shall be deemed to have occurred on the next Banking Day.  A
“Banking Day” is any day other than a Saturday, Sunday or other day on which
Bank is authorized or is required by law to be closed.

Within a reasonable time, not to exceed one Banking Day, after commencement of
the Activation Effective Time and continuing on each Banking Day thereafter,
Bank shall wire transfer all immediately available Funds in the Account to the
account specified by Lender in the Activation Notice.  In the event Lender
requests in writing a change to the wire transfer instructions provided to Bank
in the Activation Notice by sending a written notice in substantially the form
of Exhibit B and sent to the location of Bank to which Lender is required
hereunder to send the Activation Notice, any such change requested by Lender
shall commence upon the opening of business on the second Banking Day following
the Banking Day on which receipt of such notice is

B-3

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acknowledged by Bank, which acknowledgment shall occur within a reasonable time
after Bank’s receipt of the written notice, not to exceed two Banking Days;
provided, however, that if such receipt is acknowledged on any day after 12:00
noon, Eastern Time, the acknowledgment shall be deemed to have occurred on the
next Banking Day.  Funds are not available if (i) they are not available
pursuant to Bank’s funds availability policy as set forth in the Account Related
Agreements or (ii) in the reasonable determination of Bank, (A) they are subject
to hold, dispute or a binding order, judgment, decree or injunction or a
garnishment, restraining notice or other legal process directing or prohibiting
or otherwise restricting, the disposition of the Funds in the Account or (B) the
transfer of such Funds would result in Bank failing to comply with a statute,
rule or regulation.

3.Returned Items. Lender and Company understand and agree that the face amount
(“Returned Item Amounts”) of each “Returned Item” (as defined herein) may be
paid by Bank by debiting the Account to which the Returned Item was originally
credited, without prior notice to Lender or Company.  As used in this Agreement,
the term “Returned Item” means (i) any item deposited to the Account and
returned unpaid or otherwise uncollected, whether for insufficient funds or for
any other reason, and without regard to timeliness of the return or the
occurrence or timeliness of any drawee’s notice of non-payment; (ii) any item
subject to a claim against Bank for breach of transfer or presentment warranty
under the Uniform Commercial Code (as adopted in the applicable state),
Regulation CC (12 C.F.R. §229), or clearing house operating rules of the
National Automated Clearing House Association as in effect from time to time;
(iii) any ACH entry credited to the Account and returned unpaid or subject to an
adjustment entry under applicable clearing house rules, whether for insufficient
funds or for any other reason, and without regard to timeliness of the return or
adjustment; (iv) any credit to the Account from a merchant card transaction,
against which a contractual demand for chargeback has been made; and (v) any
credit to the Account made in error and any other adjustments including those
due to encoding errors or other items posted to the Account in error.

4.Settlement Items.  Lender and Company understand and agree that Bank may pay
the face amount (“Settlement Item Amounts”) of each “Settlement Item” (as
defined herein) by debiting the applicable Account, without prior notice to
Lender or Company.  As used in this Agreement, the term “Settlement Item” means
(i) each check or other payment order drawn on or payable against any controlled
disbursement account, a “Controlled Balance Account” (as defined below) or other
deposit account at any time linked to the Account by a controlled balance
arrangement (each a “Linked Account”), which Bank takes for deposit or value,
cashes or exchanges for a cashier’s check or official check in the ordinary
course of business prior to the Activation Effective Time, and which is
presented for settlement against the Account (after having been presented
against the Linked Account) after the Activation Effective Time, (ii) each check
or other payment order drawn on or payable against the Account, which, prior to
the Activation Effective Time, Bank takes for deposit or value, assures payment
pursuant to a banker’s acceptance, cashes or exchanges for a cashier’s check or
official check in the ordinary course of business after Bank’s cutoff time for
posting, (iii) each ACH credit entry initiated by Bank, as originating
depository financial institution, on behalf of Company, as originator, prior to
the Activation Effective Time, which ACH credit entry settles after commencement
of the Activation Effective Time, and (iv) any other payment order drawn on or
payable against the Account, which Bank has paid or funded prior to the
Activation Effective Time, and which is first presented for settlement against
the Account in the ordinary course of business after the Activation Effective
Time.

B-4

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Company and Lender acknowledge and agree that, if there is a Linked Account not
subject to this Agreement, upon commencement of the Activation Effective Time
any such Linked Account will be de-linked and will no longer transfer balances
to or from the Account.  “Controlled Balance Account” is a deposit account that
is linked to one or more other deposit accounts in order to allow transfers to
be made between such accounts on an automated basis, pursuant to Company
Instructions, in order to maintain a specified balance in one or more of any
Linked Account, including, without limitation, zero balance arrangements where
transfers are made to a subaccount from a master account or from a subaccount to
a master account at the end of each Banking Day in order to maintain a zero
balance in such subaccount at the end of such Banking Day.  

5.Account Related Agreements.  This Agreement supplements, rather than replaces,
the Account Related Agreements.  The Account Related Agreements will continue to
apply to the Account, Lockbox, and cash management or similar services provided
by Bank or any affiliate of Bank in connection with the Account to the extent
not directly in conflict with the provisions of this Agreement (provided,
however, that in the event of any such conflict, the provisions of this
Agreement shall control).  

6.Lockboxes.  To the extent that any Funds to be deposited to the Account have
been received in one or more post office lockboxes maintained for Company by
Bank (each a “Lockbox”) and have been or will be processed by Bank for deposit
to the Account in accordance with the terms of the applicable Account Related
Agreement (the “Remittances”), Company acknowledges that Company has granted to
Lender a security interest in all Remittances.  Company agrees that after Bank
receives the Activation Notice, Company will not instruct Bank regarding the
receipt, processing or deposit of Remittances nor will it attempt to change or
redirect the items deposited in the Lockbox. Company and Lender acknowledge and
agree that Bank’s operation of each Lockbox, and the receipt, retrieval,
processing and deposit of Remittances, will at all times be governed by the
Account Related Agreements.  

7.Bank Subordination and Permitted Debits.Bank agrees that, after the Activation
Effective Time, Bank shall not offset, charge, deduct, debit or otherwise
withdraw funds from the Account, except as permitted by this Section 7, until
Bank has been advised in writing by Lender that this Agreement has been
terminated.  Lender shall notify Bank promptly in writing upon payment in full
of Company’s obligations by means of the “Termination Notice” (as defined
below).

Continuing after commencement of the Activation Effective Time, Bank is
permitted to debit the Account for:

(a)Bank’s fees and charges relating to the Account or associated with this
Agreement and any other charges, fees, expenses, payments and other amounts for
treasury management services or card services provided by Bank to Company,
including, without limitation, funds transfer (origination or receipt), trade,
merchant card, lockbox, stop payment, positive pay, automatic investment,
imaging, and information services (collectively “Bank Fees”);

(b)any Returned Item Amounts;

B-5

--------------------------------------------------------------------------------

 

(c)any Settlement Item Amounts; and

(d)chargebacks regarding merchant card deposits, merchant card fees and debits
related to cash vault coin and currency requests (“Permitted Debits”).

Bank’s right to debit the Account under this Section 7 shall exist
notwithstanding any obligation of Company or Lender to reimburse or indemnify
Bank.

8.Company and Lender Responsibilities.

(a)If the balances in the Account are not sufficient to compensate Bank for any
Bank Fees, Company agrees to pay Bank on demand the amount due Bank.  If Company
fails to so pay Bank and such Bank Fees are incurred on or after the Activation
Effective Time, Lender agrees, without prejudice to Lender’s rights against
Company, to pay Bank within five days after Bank’s demand to Lender with respect
to such Bank Fees.  The failure of Company or Lender to so pay Bank shall
constitute a breach of this Agreement.

(b)If the balances in the Account are not sufficient to compensate Bank for any
Returned Item Amounts or Settlement Item Amounts, Company agrees to pay Bank on
demand the amount due Bank.  If Company fails to so pay Bank immediately upon
demand, Lender agrees, without prejudice to Lender’s rights against Company, to
pay Bank the amount due within 10 days after Bank’s demand to Lender to pay such
amount up to any amount transferred to an account designated by Lender.  The
failure by Company or Lender to so pay Bank shall constitute a breach of this
Agreement.

(c)Bank is authorized, without prior notice and without regard to the Activation
Notice under this Agreement or any other control agreement with Lender, from
time to time to debit any other account Company may have with Bank for the
amount or amounts due Bank under this Agreement or any other Account Related
Agreement.

(d)At the request of Bank, Company agrees to provide Bank with monthly unaudited
and annual audited financial statements within a reasonable period of time after
the end of each month or year-end, as applicable, to Bank’s address set forth
below.

9.Bank Statements.   Upon written request by Lender, in addition to the original
bank statement for the Account provided to Company, Bank will provide Lender
with a duplicate of such statement.  Bank acknowledges that Lender hereby
requests receipt of such duplicate statement on a continuous basis throughout
the term of this Agreement.

10.Bank’s Responsibility/Limitation of Liability.

(a)Bank will not be liable to Company or Lender for any expense, claim, loss,
damage or cost (“Damages”) arising out of or relating to its performance or
failure to perform under this Agreement other than those Damages that result
solely and directly from Bank’s acts or omissions constituting gross negligence
or intentional misconduct as determined in a court of competent jurisdiction in
a final non-appealable order.  Bank’s obligations hereunder shall be that of a
depository bank, and nothing in this Agreement shall create custodial or bailee
obligations.  

(b)In no event will Bank be liable for any special, indirect, exemplary,
punitive or consequential damages, including but not limited to lost profits.

B-6

--------------------------------------------------------------------------------

 

(c)Bank will be excused from any failure to act or delay in acting, and no such
failure or delay shall constitute a breach of this Agreement or otherwise give
rise to any liability of Bank, if (i) such failure or delay is caused by
circumstances beyond Bank’s reasonable control, including but not limited to
legal constraint, emergency conditions, action or inaction of governmental,
civil or military authority, fire, strike, lockout or other labor dispute, war,
riot, theft, acts of terrorism, flood, earthquake or other natural disaster,
breakdown of public or private or common carrier communications or transmission
facilities, equipment failure, or negligence or default of Company or Lender or
(ii) such failure or delay resulted from Bank’s reasonable belief that the
action would have violated any of Bank’s guidelines or policies, or rule or
regulation of any governmental authority.

(d)Bank shall have no duty to inquire or determine whether Company’s obligations
to Lender are in default or whether Lender is entitled to provide the Activation
Notice or any Lender Instructions to Bank.  Bank may rely on notices and
communications it believes in good faith to be genuine and given by the
appropriate party.  Bank may accept, acknowledge or act upon any notice,
instructions or other directions hereunder that contain minor mistakes or other
irregularities, including notices that fail to attach an accurate copy of this
Agreement.

(e)Notwithstanding any of the other provisions in this Agreement, in the event
of the commencement of a case pursuant to Title 11, United States Code, filed by
or against Company, or in the event of the commencement of any similar case
under then applicable federal or state law providing for the relief of debtors
or the protection of creditors by or against Company, Bank may act as Bank deems
reasonably necessary to comply with all applicable provisions of governing
statutes and shall not be in violation of this Agreement as a result.

(f)Bank shall be permitted to comply with any writ, levy, order or other similar
judicial or regulatory order or process concerning the Account or any Funds and
shall not be in violation of this Agreement for so doing.

11.Indemnities.

(a)Company shall indemnify, defend and hold harmless Bank against all
liabilities, expense, claim, loss, damage or cost of any nature (including but
not limited to allocated costs of in-house legal services and other reasonable
attorney’s fees) and any other fees and expenses, whether to Bank or to third
parties (“Losses”) in any way arising out of or relating to this Agreement,
including all costs of settlement of claims.  This section does not apply to any
Losses solely attributable to gross negligence or intentional misconduct of Bank
as determined by a court of competent jurisdiction in a final non-appealable
order.

(b)Lender shall indemnify, defend and hold harmless Bank against all Losses
arising out of or relating to this Agreement after Bank’s receipt of the
Activation Notice from Lender other than Losses solely attributable to Bank’s
gross negligence or intentional misconduct as determined by a court of competent
jurisdiction in a final non-appealable order.  

B-7

--------------------------------------------------------------------------------

 

(c)Company shall pay to Bank, upon receipt of Bank’s invoice, all documented
costs, expenses and attorneys’ fees (including allocated costs for in‑house
legal services) incurred by Bank in connection with the enforcement of this
Agreement or any related instrument or agreement, including but not limited to
any costs, expenses and fees arising out of the resolution of any conflict,
dispute, motion regarding entitlement to rights or rights of action, or other
action relating to Bank’s rights or obligations in a case arising under Title
11, United States Code.  Company agrees to pay Bank, upon receipt of Bank’s
invoice, all documented costs, expenses and attorneys’ fees (including allocated
costs for in-house legal services) incurred by Bank in the preparation and
administration of this Agreement or any related instrument or agreement
(including any amendments thereto).

(d)Lender shall pay to Bank, upon receipt of Bank’s invoice, all documented
costs, expenses and attorneys’ fees (including allocated costs for in‑house
legal services) incurred by Bank in connection with the enforcement against
Lender of its obligations hereunder.

12.Termination and Assignment of this Agreement.

(a)Lender may terminate this Agreement by providing notice substantially in the
form of Exhibit C (the “Termination Notice”) together with a copy of this
Agreement to Company and Bank, provided that Bank shall have a reasonable time
to act on such termination.  Lender may assign this Agreement by providing 30
days’ prior written notice of such assignment and assumption together with a
copy of this Agreement to Company and Bank.  Bank may terminate this Agreement
upon 30 days’ prior written notice to Company and Lender.  Company may not
terminate this Agreement except with the written consent of Lender and upon
prior written notice to Bank.

(b)Notwithstanding subsection 12(a), Bank may terminate this Agreement at any
time by written notice to Company and Lender if either Company or Lender
breaches any of the terms of this Agreement, or (upon 5 days’ prior written
notice to Lender) if Company breaches any other agreement with Bank.

(c)Sections 8, 10 and 11 shall survive any termination of this Agreement.

13.Representations and Warranties.

(a)Each party represents and warrants to the other parties that (i) this
Agreement constitutes its duly authorized, legal, valid, binding and enforceable
obligation; (ii) the performance of its obligations under this Agreement and the
consummation of the transactions contemplated hereunder will not (A) constitute
or result in a breach of its certificate or articles of incorporation or
organization, by-laws, limited liability company operating agreement, charter,
partnership agreement, or other formation or organizational documents, as
applicable, or the provisions of any material contract to which it is a party or
by which it is bound or (B) result in the violation of any law, regulation,
judgment, decree or governmental order applicable to it; and (iii) all approvals
and authorizations required to permit the execution, delivery, performance and
consummation of this Agreement and the transactions contemplated hereunder have
been obtained.

B-8

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(b)Company agrees that it shall be deemed to make and renew each representation
and warranty in subsection 13(a) on and as of each day on which Company uses the
services set forth in this Agreement. Lender agrees it shall be deemed to make
and renew each representation and warranty in subsection 13(a) upon sending the
Activation Notice or sending any Lender Instructions to Bank.

14.Miscellaneous.

(a)This Agreement may be amended only by a writing signed by Company, Lender and
Bank; except that Bank Fees are subject to change by Bank upon 30 days’ prior
written notice to Company.

(b)This Agreement may be executed in counterparts; all such counterparts shall
constitute but one and the same agreement.  This Agreement shall become
effective when it shall have been executed by Bank and when Bank shall have
received counterparts hereof that, when taken together, bear the signatures of
each of the other parties hereto.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopy or other electronic imaging means
shall be effective as delivery of a manually executed counterpart of this
Agreement.

(c)This Agreement controls in the event of any conflict between this Agreement
and any other document or written or oral statement.  This Agreement supersedes
all prior understandings, writings, proposals, representations and
communications, oral or written, of any party relating to the subject matter
hereof.

(d)This Agreement shall be interpreted in accordance with New York law, without
reference to that state’s conflict of law principles.

(e)Any written notice or other written communication to be given under this
Agreement shall be addressed or faxed to each party at its address or fax number
set forth on the signature page of this Agreement or to such other address or
fax numbers a party may specify in writing in accordance with this Section
14.  Except as otherwise expressly provided herein, any such notice sent via (i)
mail or overnight courier shall be effective upon receipt or (ii) fax
transmission shall be effective upon successful transmission thereof, provided
such notice is also sent via overnight courier.

(f)Nothing contained in this Agreement shall create any agency, fiduciary, joint
venture or partnership relationship among any of Bank, Company or Lender, and
nothing in this Agreement shall create custodial or bailee obligations of Bank
to any party.  Company and Lender agree that nothing contained in this
Agreement, nor any course of dealing among the parties to this Agreement, shall
constitute a commitment or other obligation on the part of Bank to extend credit
or services to Company or Lender.

(g)Each party hereto intentionally, knowingly and voluntarily irrevocably waives
any right to trial by jury in any proceeding related to this Agreement.

The remainder of this page is intentionally left blank.

B-9

--------------------------------------------------------------------------------

 

In Witness Whereof, the parties hereto have executed this Agreement by their
duly authorized officers as of the day and year first above written.

 

Paratek Royalty Corporation

 

Address for notices:

 

 

 

 

 

 

 

 

 

Paratek Pharmaceuticals, Inc.

 

 

 

 

75 Park Plaza

By:

 

 

 

Boston, MA 02116

Name:

 

William Haskel

 

 

Title:

 

Director

 

Facsimile: 617.275.0039

 

 

 

 

 

Bank of America, N.A.

(“Bank”)

 

Address for notices:

 

 

 

 

Bank of America, N.A.

 

 

 

 

2000 Clayton Rd, Building D - 6th Floor

 

 

 

 

Concord, CA, 94520-2425

By:

 

 

 

Attn:  Blocked Account Support

Name:

 

 

 

Mail Code:  CA4-704-06-08

Title:

 

 

 

 

 

 

 

 

Facsimile:  877.207.2524

 

 

 

 

 

HealthCare Royalty Partners III, L.P.

(“Lender”)

 

Address for notices:

 

 

 

 

HealthCare Royalty Partners III, L.P.

By:

 

HealthCare Royalty GP III, LLC,

 

300 Atlantic Street, Suite 600

its general partner

 

Stamford, CT  06901

 

 

 

 

Attention:  John Urquhart

 

 

 

 

Partner

By:

 

 

 

Email: John.Urquhart@hcroyalty.com

Name:

 

 

 

 

Title:

 

 

 

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

 

 

 

 

 

 

 

 

 

HealthCare Royalty Partners III, L.P.

 

 

 

 

300 Atlantic Street, Suite 600

 

 

 

 

Stamford, CT  06901

 

 

 

 

Attention:  Chief Legal Officer

 

 

 

 

Email: royalty-legal@hcroyalty.com

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cadwalader, Wickersham & Taft LLP

 

 

 

 

200 Liberty Street

 

 

 

 

New York, New York 10281

 

 

 

 

Attn:  Ira J. Schacter

 

 

 

 

E-mail:  ira.schacter@cwt.com

B-10

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EXHIBIT A

DEPOSIT ACCOUNT CONTROL AGREEMENT

[Letterhead of Lender]

______________, 20__

To:

Bank of America, N.A.

[Address]

 

Re:

ACTIVATION NOTICE

Paratek Royalty Corporation

Account Nos. [***] and [***]

Ladies and Gentlemen:

Reference is made to the Deposit Account Control Agreement dated
__________________ (the “Agreement”) among Paratek Royalty Corporation, us and
you regarding the above-described accounts (individually and collectively, the
“Account”), a copy of which is attached hereto.  In accordance with Section 2 of
the Agreement, we hereby give you notice of our exercise of control of the
Account and we hereby instruct you to transfer funds to the below account as
follows:

 

Bank Name:                           
                                                           

Bank Address:                       
                                                           

City, State, Zip, Country:      
                                                           

ABA No.:                               
                                                           

Beneficiary Account Name:  
                                                           

Beneficiary Account No.:     
                                                           

Beneficiary Address:             
                                                           

City, State, Zip, Country:      
                                                           

Reference:                             
                                                           

 

Very truly yours,

 

HEALTHCARE ROYALTY PARTNERS III, L.P.,

as Lender

 

 

 

 

 

 

By:

 

HealthCare Royalty GP III, LLC,

 

 

its general partner

 

By:

 

 

Name:

 

 

Title:

 

 

 

B-11

--------------------------------------------------------------------------------

 

 

ACKNOWLEDGED AND AGREED:

 

BANK OF AMERICA, N.A., as Bank

 

 

 

By

 

 

Name:

 

 

Title:

 

 

Date:

 

 

 

B-12

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EXHIBIT B

DEPOSIT ACCOUNT CONTROL AGREEMENT

[Letterhead of Lender]

 

______________, 20__

To:

Bank of America, N.A.

[Address]

 

Re:

Wire change instruction

Paratek Royalty Corporation

Account Nos. [***] and [***]

Ladies and Gentlemen:

Reference is made to the Deposit Account Control Agreement dated
__________________ (the “Agreement”) among Paratek Royalty Corporation, us and
you regarding the above-described accounts (individually and collectively, the
“Account”).  In accordance with Section 2 of the Agreement, we hereby give you
notice of our request to change the wire transfer instructions provided to Bank
in the Activation Notice, and we hereby instruct you to transfer funds to the
below account as follows:

 

Bank Name:                           
                                                           

Bank Address:                       
                                                           

City, State, Zip, Country:      
                                                           

ABA No.:                               
                                                           

Beneficiary Account Name:  
                                                           

Beneficiary Account No.:     
                                                           

Beneficiary Address:             
                                                           

City, State, Zip, Country:      
                                                           

Reference:                             
                                                           

 

Very truly yours,

 

HEALTHCARE ROYALTY PARTNERS III, L.P.,

as Lender

 

 

 

 

 

 

By:

 

HealthCare Royalty GP III, LLC,

 

 

its general partner

 

By:

 

 

Name:

 

 

Title:

 

 

B-13

--------------------------------------------------------------------------------

 

 

ACKNOWLEDGED AND AGREED:

 

BANK OF AMERICA, N.A., as Bank

 

 

 

By

 

 

Name:

 

 

Title:

 

 

Date:

 

 

B-14

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EXHIBIT C

DEPOSIT ACCOUNT CONTROL AGREEMENT

[Letterhead of Lender]

 

 

______________, 20__

Bank of America, N.A.

 

 

 

Attn:

Re:

Termination of Deposit Account Control Agreement

Accounts:

[***] and [***] (individually and collectively, the “Account”)

Ladies and Gentlemen:

Reference is made to that certain Deposit Account Control Agreement dated as of
             , 2019 (as amended, supplemented, amended and restated or otherwise
modified from time to time, the “Agreement”) among you, Paratek Royalty
Corporation ( “Company”), and us (“Lender”), a copy of which is attached
hereto.  

You are hereby notified that the Agreement is terminated with respect to the
undersigned, and you have no further obligations to the undersigned thereunder
and we are terminating our security interest in the Account.  Notwithstanding
any previous instructions to you, you are hereby instructed to accept all future
directions with respect to the Account from Company.  

This notice terminates any obligations you may have to the undersigned with
respect to the Account.

 

Very truly yours,

 

HEALTHCARE ROYALTY PARTNERS III, L.P.,

as Lender

 

 

 

 

 

 

By:

 

HealthCare Royalty GP III, LLC,

 

 

its general partner

 

By:

 

 

Name:

 

 

Title:

 

 

 

cc:  Paratek Pharmaceuticals, Inc.

199632509 v1

 

 

B-15

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EXHIBIT C

 

FORM OF CONTRIBUTION AGREEMENT

 

 

C-1

--------------------------------------------------------------------------------

 

FORM OF CONTRIBUTION AND

SERVICING AGREEMENT

 

 

 

 

 

 

CONTRIBUTION AND SERVICING AGREEMENT

Dated as of [_______], 2019

Between

PARATEK PHARMACEUTICALS, INC.,

as Contributor,

and

PARATEK ROYALTY CORPORATION,

as Company

 

 

 

 

--------------------------------------------------------------------------------

Table of Contents

 

 

 

 

 

 

Page

 

 

 

 

 

ARTICLE I

 

DEFINITIONS

 

 

 

 

 

 

 

Section 1.01.

 

Definitions.

 

1

Section 1.02.

 

General Interpretive Principles.

 

3

 

 

 

 

 

ARTICLE II

 

ASSIGNMENT OF THE TRANSFERRED ASSETS

 

 

 

 

 

 

 

Section 2.01.

 

Assignment of Transferred Assets on the Closing Date.

 

4

Section 2.02.

 

Required Financing Statements; Marking of Records; Licensee Notice and
Instruction.

 

5

Section 2.03.

 

General Provisions Regarding the Transfer of the Transferred Assets.

 

6

Section 2.04.

 

Intent.

 

6

 

 

 

 

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

 

 

 

 

 

 

 

Section 3.01.

 

Representations and Warranties of the Contributor.

 

7

Section 3.02.

 

Survival of Representations and Warranties

 

7

 

 

 

 

 

ARTICLE IV

 

COVENANTS OF THE CONTRIBUTOR AND COMPANY; CONTRIBUTOR EVENT OF DEFAULT

 

 

 

 

 

 

 

Section 4.01.

 

Contributor Covenants.

 

8

Section 4.02.

 

Company Covenants.

 

12

Section 4.03.

 

Consequences of Contributor Event of Default.

 

12

 

 

 

 

 

ARTICLE V

 

SERVICING

 

 

 

 

 

 

 

Section 5.01.

 

Appointment of Contributor.

 

13

Section 5.02.

 

Certain Contributor Actions.

 

14

Section 5.03.

 

Compliance with the Loan Agreement.

 

14

Section 5.04.

 

Services as Servicer.

 

14

Section 5.05.

 

Replacement Servicer.

 

17

 

 

 

 

 

ARTICLE VI

 

TERMINATION; SURVIVAL

 

 

 

 

 

 

 

Section 6.01.

 

Termination.

 

17

Section 6.02.

 

Effect of Termination.

 

17

Section 6.03.

 

Survival.

 

17

 

 

 

 

 

 

 

-i-

 

 

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Table of Contents

(continued)

 

 

 

 

 

Page

 

 

 

 

 

ARTICLE VII

 

INDEMNIFICATION PAYMENTS

 

 

 

 

 

 

 

Section 7.01.

 

Indemnification.

 

18

 

 

 

 

 

ARTICLE VIII

 

MISCELLANEOUS PROVISIONS

 

 

 

 

 

 

 

Section 8.01.

 

Amendment.

 

19

Section 8.02.

 

Governing Law; Waiver of Trial by Jury; Jurisdiction.

 

19

Section 8.03.

 

Notices.

 

20

Section 8.04.

 

Severability of Provisions.

 

22

Section 8.05.

 

Assignment.

 

22

Section 8.06.

 

Further Assurances.

 

22

Section 8.07.

 

Waiver; Cumulative Remedies; Waiver of Immunities.

 

22

Section 8.08.

 

Counterparts.

 

22

Section 8.09.

 

Binding.

 

22

Section 8.10.

 

Merger and Integration.

 

23

Section 8.11.

 

Headings.

 

23

Section 8.12.

 

Schedules and Exhibits.

 

23

Section 8.13.

 

Non-Petition.

 

23

Section 8.14.

 

Intended Third Party Beneficiaries.

 

23

 

 

 

 

 

 

 

 

 

 

Exhibit A

 

Form of Notice and Instruction Letter

 

 

 

 

 

 

- ii -

 

 

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CONTRIBUTION AND SERVICING AGREEMENT

This CONTRIBUTION AND SERVICING AGREEMENT (this “Agreement”), dated as of
[________], 2019, is entered into between PARATEK PHARMACEUTICALS, INC., a
Delaware corporation (together with its permitted successors and assigns, the
“Contributor”), and PARATEK ROYALTY CORPORATION, a Delaware corporation
(together with its permitted successors and assigns, “Company”).

WITNESSETH:

WHEREAS, the Contributor owns 100% of the equity interests of Company;

WHEREAS, the Contributor desires to transfer and convey to Company all its
right, title and interest in, to and under the License Agreement in exchange for
receiving from Company the Purchase Price;

WHEREAS, Company desires to acquire all of the Contributor’s right, title and
interest in, to and under the Transferred Assets on the Closing Date in exchange
for paying to the Contributor the cash portion of the Purchase Price and
accepting and reflecting in its financial accounts a capital contribution from
the Contributor of the additional value of the Transferred Assets in excess of
the cash portion of the Purchase Price; and

WHEREAS, Company desires the Contributor to manage, on behalf of Company,
Company’s relationship with the Licensee under the License Agreement, to
administer, on Company’s behalf, Company’s performance under, compliance with
and enforcement of the License Agreement (including the collection and
enforcement of all payments due to Company under the License Agreement from time
to time) and to take all such actions on behalf of Company as are necessary or
desirable to Commercialize and Exploit the Licensed Product, and the Contributor
desires to perform such services on Company’s behalf.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01.Definitions.  Unless otherwise defined herein, capitalized terms
used herein shall have the meanings set forth in the Loan Agreement (the “Loan
Agreement”) dated as of February 26, 2019 between Company and HealthCare Royalty
Partners III, L.P., a Delaware limited partnership (the “Lender”), as such Loan
Agreement may be amended, restated, supplemented or otherwise modified from time
to time, in accordance with the terms thereof.

As used herein, the following terms have the following respective meanings:

“Assumed Obligations” means all of Contributor’s liabilities and obligations
under the Transferred Contracts from and after the Effective Date.

 

 

 

--------------------------------------------------------------------------------

 

“Contributor Event of Default” means the occurrence of one or more of the
following:

(a)Any representation or warranty of the Contributor in any Transaction Document
to which it is party or in any certificate or other document delivered by the
Contributor in connection with the Transaction Documents proves to have not been
true and correct in all material respects at the time it was made or deemed
made  (except that any representation or warranty that is qualified as to
“materiality” or “Material Adverse Effect” shall be true and correct in all
respects); provided, that if the consequences of the failure of such
representation or warranty to be true and correct can be cured, such failure
continues for a period of thirty (30) days without such cure after the earlier
of the date the Contributor becomes aware of such failure or the date Company,
or the Lender on behalf of Company, provides Notice of such failure to the
Contributor.

(b)The Contributor fails to perform or observe any covenant or agreement
contained in Sections 4.01(f), (g) or (m).

(c)The Contributor fails to perform or observe any covenant or agreement
contained in the Transaction Documents to which it is a party (other than those
referred to in preceding subclause (b)) if such failure is not remedied on or
before the 30th day after Notice thereof from the Lender.

(d)(i) Any of the Transaction Documents to which the Contributor is a party
shall cease to be in full force and effect, or (ii) the validity or
enforceability of any of the Transaction Documents to which the Contributor is a
party is disaffirmed or challenged in writing by the Contributor or any of its
Affiliates or any Person (other than the Lender) asserting an interest in any of
the Collateral and such written disaffirmation or challenge is not withdrawn or
disavowed by such Person within 30 days after its communication or the
Contributor has not brought appropriate proceedings for declaratory or other
relief negating such disaffirmation or challenge within 30 days after such
communication and has not obtained an order granting such relief within 90 days
after commencement of such proceedings, or (iii) this Agreement or the Stock
Pledge Agreement shall cease to give the Lender (directly or as assignee of the
Company) the rights purported to be created hereby or thereby (including a first
priority perfected Lien on all of the Collateral in the event of a
Recharacterization or on the Capital Stock of the Company) other than as a
direct result of any action by the Lender or failure of the Lender to perform an
obligation of the Lender under the Loan Agreement.

(e)Any security interest purported to be created by this Agreement or the Pledge
Agreement shall cease to be in full force and effect, or shall cease to give the
rights,  powers and privileges purported to be created and granted hereunder or
thereunder (including a perfected first priority security interest in and Lien
on the substantially all of the Collateral in the event of a Recharacterization
(except as otherwise expressly provided herein and therein)) in favor of Company
pursuant hereto or thereto, or shall be asserted by the Contributor not to be a
valid, perfected, first priority (except as otherwise expressly provided in this
Agreement or the Stock Pledge Agreement) security interest in the Collateral,
and/or Contributor takes any action which could reasonably be expected to impair
Lender’s security interest in any of the Capital Stock of Company or any of the
Collateral.

 

 

- 2 -

 

 

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(f)An Insolvency Event with respect to the Contributor shall occur.

“Effective Date” means the date hereof or, as to Restricted Assets, the later
date such Restricted Asset is contributed to Company under Section 2.01(c).

“Indemnified Party” has the meaning set forth in Section 7.01.

“Permitted Contribution Liens” means Liens created in favor of Lender under the
Loan Documents and Liens consisting of rights of any Third Party licensee of
Intellectual Property.

“Purchase Price” means an amount equal to the sum of the cash net proceeds of
the Loan received by Company on the Closing Date under the Loan Agreement and a
capital contribution of the additional value of the Transferred Assets in excess
of such cash portion of the Purchase Price.

“Restricted Asset” has the meaning set forth in Section 2.01(c).

“Servicer” has the meaning set forth in Section 5.01.

“Servicer Termination Event” has the meaning set forth in Section 5.05.

“Servicing Fee” means, with respect to each calendar quarter, an amount equal to
$25,000.

“Servicing Standard” has the meaning set forth in Section 5.01.

“Transferred Assets” has the meaning set forth in Section 2.01(a).

“Transferred Contracts” has the meaning set forth in Section 2.01(a).

Section 1.02.General Interpretive Principles.  For purposes of this Agreement
except as otherwise expressly provided or unless the context otherwise requires:

(a)the terms defined in this Agreement have the meanings assigned to them in
this Agreement and include the plural as well as the singular, and the use of
any gender herein shall be deemed to include the other gender;

(b)accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with GAAP;

(c)references herein to “Articles”, “Sections”, “Subsections”, “paragraphs”, and
other subdivisions without reference to a document are to designated Articles,
Sections, Subsections, paragraphs and other subdivisions of this Agreement;

(d)a reference to a Subsection without further reference to a Section is a
reference to such Subsection as contained in the same Section in which the
reference appears, and this rule shall also apply to paragraphs and other
subdivisions;

 

 

- 3 -

 

 

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(e)the words “herein”, “hereof”, “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular provision; and

(f)the term “include” or “including” shall mean without limitation by reason of
enumeration.

ARTICLE II

Assignment OF THE TRANSFERRED ASSETS

Section 2.01.Assignment of Transferred Assets on the Closing Date.

(a)On the Closing Date, and subject to Section 2.01(b), Section 2.01(c) and
Section 2.01(d), the Contributor shall sell, transfer, assign, contribute and
otherwise convey (collectively, “Contribute”) to Company, and Company shall
purchase, acquire and accept from the Contributor, without recourse except to
the extent provided in this Agreement, all of the Contributor’s rights, title
and interest in and to, and obligations under, the following assets, in each
case, solely with respect to the Territory:

(i)the License Agreement (including the right to all payments in respect of the
Royalty Interest from time to time);

(ii)the Intellectual Property and the regulatory approvals set forth on Schedule
2.01(a)(ii) (including all rights of Contributor to Commercialize and Exploit
the Licensed Product); and

(iii) the contracts, agreements and instruments set forth on Schedule
2.01(a)(iii) and all contracts, agreement and instruments entered into by
Contributor on behalf of Company pursuant to Section 5.01(d) (the “Transferred
Contracts”);

in each case free and clear of any and all Liens except Permitted Contribution
Liens (together, such rights, title, interest and all proceeds thereof, and
obligations, the “Transferred Assets”).  

The Contributor and Company intend and agree that the sale, assignment,
transfer, contribution and conveyance of the Transferred Assets under this
Agreement shall be, and are, true, complete, absolute and irrevocable
assignments and, sales and true, complete, absolute and irrevocable
contributions by the Contributor to Company of the Transferred Assets and that
such assignments and sales and such contributions shall provide Company with all
of the Contributor’s rights, title and interest in and to the Transferred
Assets.

(b)In full consideration of the sale, transfer, assignment, contribution and
conveyance to Company of the Transferred Assets, Company shall (i) pay (or cause
to be paid) the Purchase Price to the Contributor on the Closing Date, by
transferring (or causing to be transferred) the cash portion of the Purchase
Price to the Contributor to the account of the Contributor specified by it in
writing and accepting and reflecting in its financial accounts a capital
contribution from the Contributor of the additional value of the Transferred
Assets in excess of the cash

 

 

- 4 -

 

 

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portion of the Purchase Price, and (ii) assume the Assumed Obligations; provided
that Contributor shall remain jointly and severally liable with Company under
the License Agreement.  The Contributor, concurrently with execution and
delivery of this Agreement, hereby Contributes to Company all of the value of
the Transferred Assets in excess of the cash portion of the Purchase Price, as a
contribution to the capital of Company.  Company acknowledges receipt of such
capital contribution and its entry in the financial records of Company as a
capital contribution.

(c) Notwithstanding anything to the contrary in this Agreement to the extent
that the Contribution of any Transferred Assets requires the consent of any
third party or any filing or registration with a Governmental Authority (other
than recordings to reflect the transfer of Intellectual Property that are not
required under Applicable Law to be made prior to such Contribution) (such
Transferred Asset, a “Restricted Asset”), neither this Agreement nor any action
taken pursuant to it shall constitute a Contribution or an agreement to assign
if such Contribution or attempted Contribution would constitute a breach thereof
or result in the loss or diminution thereof or the acceleration of obligations
thereunder or under any other Restricted Assets; provided that (i) no later than
eighteen months from the date hereof, Contributor shall have obtained any
required consents or effected any required filings or registration to effect the
Contribution of each Restricted Asset, (ii) effective upon receipt of any such
consent or the effectiveness of such registration or filing with respect to a
Restricted Asset, the Contribution of such Restricted Asset shall automatically
occur, without further action by the Contributor or Company, (iii) to the extent
permitted by Applicable Law, pending the receipt of any such consent, filing or
registration, the Contributor shall hold the applicable Restricted Asset for the
benefit of Company, and (iv) the Contributor shall cooperate with Company in any
reasonable arrangement designed to provide Company and its assigns, including
the Lender, the benefits of all Restricted Assets, including enforcement, for
the account and benefit of Company, of any and all rights of Contributor in
connection with any Restricted Assets.  For the avoidance of doubt, this clause
(c) shall not apply to the License Agreement.

(d)Company hereby acknowledges and confirms that from and after the Effective
Date, Company shall be bound by the License Agreement as if it were a party to
it as and to the identical extent applicable to the Contributor.

Section 2.02.Required Financing Statements; Marking of Records; Licensee Notice
and Instruction.

(a)In connection with the transfers made by the Contributor to Company under
this Article II on the Closing Date, the Contributor will file (or cause to be
filed), at its own expense, all UCC financing statements in appropriate form for
filing under the UCC, and all other certificates, agreements, instruments,
filings, recordings and other actions that are necessary or reasonably requested
by or on behalf of Company in order to establish, protect, preserve and perfect
the transfer of the Transferred Assets to Company.

(b)All financing statements (or documents of similar import) shall meet the
requirements of Applicable Law.  The Contributor irrevocably authorizes Company
and its assigns at any time and from time to time in the sole discretion of
Company or its assigns, and appoints Company and its assigns as its
attorney-in-fact, to act on behalf of the Contributor (i) to

 

 

- 5 -

 

 

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execute on behalf of the Contributor as debtor and to file financing statements
necessary or appropriate in Company or its assign’s sole discretion to perfect
and to maintain the perfection and priority of the interest of Company in the
Transferred Assets and (ii) to file a carbon, photographic or other reproduction
of this Agreement or any financing statement with respect to the Transferred
Assets as a financing statement in such offices as Company or its assigns in
their sole discretion deem necessary or appropriate to perfect and to maintain
the perfection and priority of Company’s interests in such Transferred
Assets.  Company shall provide the Contributor with copies of any such
filings.  This appointment is coupled with an interest and is irrevocable.  

(c)In view of the intention of the parties hereto that the assignment and
transfer of the Transferred Assets made hereunder shall constitute outright
sales or contributions of the Transferred Assets rather than loans secured
thereby, in connection with the transfer and conveyance of the Transferred
Assets the Contributor has, at its own expense caused its records to be marked
on the Closing Date to show that the Transferred Assets have been transferred to
Company in accordance with this Agreement.

(d)On the Closing Date, the Contributor and Company shall jointly deliver a
notice to the Licensee substantially in the form set forth in Exhibit A.  The
Contributor and Company further agree that delivery of the notice to the
Licensee shall be in compliance with the notice provisions provided for under
the License Agreement.

Section 2.03.General Provisions Regarding the Transfer of the Transferred
Assets.

(a)The assignment of the Transferred Assets pursuant to this Agreement shall be
without recourse to the Contributor; it being understood that the Contributor
shall be liable to Company for all representations, warranties, covenants and
indemnities made by the Contributor pursuant to the terms of this Agreement.

Section 2.04.Intent.

(a)The Contributor and Company intend that the transfer by the Contributor to
Company of the Transferred Assets pursuant to Section 2.01 hereof shall be true,
absolute and irrevocable, shall constitute a valid transfer and conveyance by
the Contributor of the Transferred Assets and shall provide Company with the
full benefits of ownership of the Transferred Assets, and that the Transferred
Assets shall be removed from the estate of the Contributor and shall not be part
of the Contributor’s estate in the event of the insolvency or bankruptcy of the
Contributor.

(b)Without limiting the provisions of Section 2.04(a), as a precaution to
address the possibility that, notwithstanding that the Contributor and Company
expressly intend and expect that the sale, assignment, transfer, contribution
and conveyance of the Transferred Assets hereunder shall be a true, absolute and
irrevocable sale and assignment and a true, absolute and irrevocable
contribution for all purposes, to protect the interest of Company in the event
that such sale and assignment is recharacterized as other than a true sale or
true contribution or such sale, transfer or contribution will for any reason be
ineffective or unenforceable as such, as determined in a judicial,
administrative or other proceeding (any of the foregoing being a
“Recharacterization”), the Contributor does hereby grant to Company a continuing
security interest

 

 

- 6 -

 

 

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(which shall be of first priority) in all of the Contributor’s right, title and
interest in, to and under the Transferred Assets, whether now or hereafter
existing, and any and all “proceeds” thereof (as such term is defined in the
UCC), in each case, for the benefit of Company as security for the prompt and
complete payment of a loan deemed to have been made in an amount equal to the
Purchase Price together with the performance when due of all of Company’s
obligations now or hereafter existing under this Agreement and the other
Transaction Documents, which security interest will, upon the filing of a duly
prepared financing statement in the appropriate filing office, be perfected and
prior to all other Liens on the rights of the Contributor under the License
Agreement to the extent of the Transferred Assets.  In the event of a
Recharacterization, Company will have, in addition to the rights and remedies
which it may have under this Agreement, all other rights and remedies provided
to a secured creditor after default under the UCC and other Applicable Law,
which rights and remedies will be cumulative.  This Agreement shall constitute a
security agreement in respect of such security interest.  

(c)The Contributor and Company intend that their operations and business would
not be substantively consolidated in the event of an Insolvency Event with
respect to the Contributor and that the separate existence of the Contributor
and Company would not be disregarded in the event of an Insolvency Event with
respect to the Contributor.  Company and the Contributor acknowledge that the
Organizational Documents of Company contains provisions intended to maintain the
separate existence and identity of Company and the parties agree that they will
duly observe such provisions and Applicable Law in support of such separate
existence and identity.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.01.Representations and Warranties of the Contributor.  The Contributor
represents and warrants that the representations and warranties set forth under
Section 7.02 of the Loan Agreement are true and correct, and such
representations and warranties are hereby made herein by Contributor as though
set forth in full herein.  Company has relied upon such representations and
warranties in accepting the conveyance of the Transferred Assets and the other
parties to the transactions contemplated hereby have relied upon such
representations and warranties in executing each of the Transaction Documents to
which it is a party.  Such representations and warranties shall survive until
the Obligations have been paid in full.

Section 3.02.Survival of Representations and Warranties.  All representations
and warranties by the Contributor contained in this Agreement shall survive the
execution, delivery and acceptance thereof by the Parties and the closing of the
transactions contemplated in this Agreement.

 

 

- 7 -

 

 

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ARTICLE IV

COVENANTS OF THE CONTRIBUTOR AND Company; CONTRIBUTOR EVENT OF DEFAULT

Section 4.01.Contributor Covenants.  Contributor hereby covenants and agrees
with Company, in connection with the assignment and transfer of the Assigned
Assets, as follows:

(a)Financial Statements and Information.  The Contributor will comply with and
facilitate Company undertakings regarding financial statements and other
information relating to the Contributor set forth in Section 8.03 of the Loan
Agreement.

(b)All written information supplied by or on behalf of the Contributor to
Company pursuant to this Section 4.01 (other than pursuant to Sections 8.03(a)
and 8.03(b) of the Loan Agreement) shall be accurate and complete in all
material respects as of its date or the date so supplied and the financial
statements provided pursuant to Sections 8.03(a) and 8.03(b) of the Loan
Agreement fairly present in all material respects the financial positions and
results of operations as of the dates indicated therein.  For the avoidance of
doubt, the Contributor makes no representations or warranties regarding the
accuracy or completeness of any information it receives from a Third Party that
it is required to furnish to Company pursuant to this Section 4.01, unless to
the actual Knowledge of the Contributor such information is inaccurate or
incomplete, in which case the Contributor shall specify such inaccuracy or
incompleteness.

(c)Books and Records.  The Contributor shall keep proper books, records and
accounts in which entries in conformity with sound business practices and all
requirements of Law applicable to it shall be made of all dealings and
transactions in relation to its business, assets and activities and as shall
permit the preparation of the consolidated financial statements of the
Contributor in accordance with GAAP.

(d)Maintenance of Insurance.  The Contributor will maintain coverage under its
general liability and property damage insurance policies naming Company and its
assigns (including the Lender) as additional insured (in the case of liability
insurance) and loss payee (in the case of property insurance).  The Contributor
shall furnish to Company from time to time upon written request full information
as to the insurance carried.

(e)Governmental Authorizations.  The Contributor shall obtain, make and keep in
full force and effect all authorizations from and registrations with
Governmental Authorities that may be required for the validity or enforceability
against the Contributor of this Agreement and the other Transaction Documents to
which it is a party.

(f)Compliance with Laws and Contracts.  

(i)The Contributor shall comply with all Applicable Laws applicable to the
Transferred Assets, and perform its obligations under all Material Contracts, if
any, entered into after the date of execution of the Loan Agreement relative to
the conduct of its business, except where the failure to comply could not
reasonably be expected to result in a Material Adverse Effect.  

 

 

- 8 -

 

 

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(ii)The Contributor will comply, in all material respects, with all acts, rules,
regulations, orders, decrees and directions of any Governmental Authority
applicable to the Transferred Assets.  

(g)Conveyance of Transferred Assets; Security Interests.  Except for the
transfers and conveyances hereunder and any Permitted Lien and the Liens in
favor of the Lender, the Contributor will not pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any Lien on the
Transferred Assets or any interest therein and the Contributor shall defend the
right, title, and interest of Company and its successors and assigns in, to, and
under the Transferred Assets, against all claims of third parties claiming
through or under the Contributor.  The Contributor acknowledges and agrees that,
having assigned and transferred the Transferred Assets to Company, the
Contributor has no right to, and shall not, on its own behalf waive, modify or
amend any provision of the License Agreement.

(h)Notices.  

(i)The Contributor shall promptly upon obtaining Knowledge of the same give
written Notice to Company and its assigns (including the Lender) of each
Default, Event of Default, Prepayment Trigger or Servicer Termination Event and
each other event that has or could reasonably be expected to have a Material
Adverse Effect; provided that in any of the foregoing situations where the
Contributor knows a press release or other public disclosure is to be made by
the Contributor or any of its Affiliates, the Contributor shall use all
commercially reasonable efforts to provide such information to Company and its
assigns (including the Lender) as early as possible but in no event later than
simultaneously with such release or other public disclosure.

(ii)The Contributor shall promptly give written Notice to Company and its
assigns (including the Lender) upon receiving notice, or otherwise obtaining
Knowledge, of any default or event of default under any Material Contract that
is a Transferred Contract.

(iii)The Contributor shall, promptly (and in any event within four (4) Business
Days) after obtaining Knowledge thereof, give written Notice to Company and its
assigns (including the Lender) of any litigation or proceedings to which the
Contributor is a party or which could reasonably be expected to have a Material
Adverse Effect.

(iv)The Contributor shall, promptly upon obtaining Knowledge thereof, give
written Notice to Company and its assigns (including the Lender) of any
litigation or proceedings challenging the validity of the License Agreement, the
Intellectual Property, the Transaction Documents or any of the transactions
contemplated therein.

 

 

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(v)The Contributor shall, promptly upon obtaining Knowledge thereof, give
written Notice to Company and its assigns (including the Lender) of any
representation or warranty made or deemed made by the Contributor in any of the
Transaction Documents or in any certificate delivered pursuant thereto shall
prove to be untrue, inaccurate or incomplete in any material respect on the date
as of which made or deemed made.

(vi)The Contributor shall promptly upon obtaining Knowledge thereof give written
Notice to Company and its assigns (including the Lender) of the occurrence of
any Material Adverse Effect.

(i)Payment of Taxes.  The Contributor shall pay all material taxes of any kind
imposed on or in respect of its income or assets before any Lien on any of the
Transferred Assets exists as a result of nonpayment except for Permitted Liens.

(j)Intellectual Property.  

(i)The Contributor shall prepare, execute, deliver and file any and all
agreements, documents or instruments which are necessary to enable Company to
(A) prosecute and maintain the material Intellectual Property (including Patents
therein) in accordance with the terms of the License Agreement to the extent
that the Contributor has the right to prosecute and maintain such material
Intellectual Property; and (B) defend or assert such material Intellectual
Property against commercially significant infringement or interference by any
other Persons, and against any claims of invalidity or unenforceability, in the
United States, in each case, in accordance with the terms of the License
Agreement (including by bringing any legal action for infringement or defending
any counterclaim of invalidity or action of a Third Party for declaratory
judgment of non-infringement or non-interference) solely to the extent that the
Contributor has the right to do so.  until completion of the assignments
hereunder.  

(ii)The Contributor shall use commercially reasonable efforts to inform counsel
to the Contributor responsible for the prosecution, maintenance and enforcement,
if any, of the Intellectual Property, of the transfer of the Intellectual
Property to Company, and that the attorney-client privilege be further
transferred to Company.  

(k)Security Documents; Further Assurances.  Subject to Section 4.01(i)(ii), the
Contributor shall promptly, upon the reasonable request of Company or its
assigns (including the Lender), at the Contributor’s sole cost and expense, (a)
execute, acknowledge and deliver, or cause the execution, acknowledgment and
delivery of, and thereafter register, file or record, or cause to be registered,
filed or recorded, in an appropriate governmental office, any document or
instrument supplemental to or confirmatory of the Loan Documents or otherwise
deemed by Company or its assigns (including the Lender) reasonably necessary or
desirable for the continued validity, perfection and priority of the assignment
of the Transferred Assets or the Liens thereon secured pursuant to Section 2.04
subject to no other Liens except as permitted by the applicable Loan Document,
or obtain any consents or waivers as may be necessary or appropriate

 

 

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in connection therewith; (b) deliver or cause to be delivered to Company and its
assigns (including the Lender) from time to time such other documentation,
consents, authorizations, approvals and orders in form and substance reasonably
satisfactory to Company and such assigns as Company or such assigns shall
reasonably deem necessary to perfect or maintain the assignment of the
Transferred Assets or the Liens thereon secured pursuant to Section 2.04; and
(c) upon the exercise by Company or any of its assigns (including the Lender) of
any power, right, privilege or remedy pursuant to any Loan Document which
requires any consent, approval, registration, qualification or authorization of
any Governmental Authority execute and deliver all applications, certifications,
instruments and other documents and papers that Company or such assigns may
require.  In addition, Subject to Section 4.01(i)(ii), the Contributor shall
promptly, at its sole cost and expense, execute and deliver to Company and its
assigns (including the Lender) such further instruments and documents, and take
such further action, as Company or such assigns may, at any time and from time
to time, reasonably request in order to carry out the intent and purpose of this
Agreement and the other Transaction Documents to which it is a party and to
establish and protect the rights, interests and remedies created, or intended to
be created, in favor of Company and its assigns (including the Lender) hereby
and thereby.  Notwithstanding anything to the contrary herein or in any other
Transaction Document, the Contributor shall not have any obligation to perfect
or record any security interest or lien in, or reflect the transfer of, any
Intellectual Property included in the Transferred Assets in any jurisdiction
other than in the United States (or to enter into any foreign law governed
charges, debentures, pledges or other security agreements in respect thereof).

(l)Certain Information Regarding Contributor, Etc..  The Contributor shall
provide information that Company or its assigns (including the Lender) requires
or may reasonably request from the Contributor with respect to the Transferred
Assets relating to any period prior to the Effective Date, including information
that may be reasonably requested under the Loan Agreement.  

(m)New Arrangement.  If the License Agreement terminates as described in Section
8.14(b) of the Loan Agreement, the Contributor shall use commercially reasonable
efforts to cooperate with Company and the Lender to facilitate the
identification and implementation of a New Arrangement as provided in Section
8.14(b) of the Loan Agreement.

(n)Certain Company Covenants and Organizational Documents.  The Contributor
shall, so long as it is the sole shareholder of Company and prior to Payment in
Full, cause Company to be managed and operated in a manner consistent with the
negative covenants contained in Section 9.01 of the Loan Agreement and the
Organizational Documents of Company.

(o)Capital Contributions.  So long as any Obligation to Lender is outstanding
under the Loan Agreement, the Contributor will limit capital contributions to
Company to no more than three (3) in succession and no more than six (6) in
total, other than a capital contribution effected to facilitate Company’s
payment of all amounts due upon a prepayment under Article III of the Loan
Agreement; provided that the foregoing shall not create an obligation to effect
capital contributions, which shall be in the Contributor’s sole discretion, and
provided further that the following shall not be included in such limits and
shall be permitted without restriction: (i) capital contribution effected
pursuant to Section 2.01(b), Section 2.01(c) or Section  5.01(d)

 

 

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hereof, (ii) capital contributions to pay any Obligations in full, and (iii)
capital contributions to make principal payments pursuant to Section 3.02(a)(vi)
of the Loan Agreement.

Section 4.02.Company Covenants.  Company hereby covenants and agrees with the
Contributor as follows:

(a)Financial Statements and Information. For each quarter ending after the
Closing Date, Company shall, promptly following receipt thereof under Section
6.5 of the License Agreement, deliver or cause to be delivered (or otherwise
made available) to the Contributor a true copy of the reports contemplated
thereunder for such quarter.  The Contributor shall conduct on behalf of Company
the exercise by Company of the audit rights of Company under Section 7.5.5 of
the License Agreement (subject to all restrictions and limitations thereon
contained in the License Agreement and the Loan Agreement), provided that
Company will not independently exercise (nor waive) such rights and Company will
cooperate at its own expense with the Contributor in such exercise, and the
Contributor acknowledges the rights of the Lender in respect of Section 7.5.5 of
the License Agreement and will comply with the provisions of the Loan Agreement
regarding such rights.

(b)No Merger, Consolidation or Reorganization of the Company.  The Company shall
not merge or consolidate with any other entity and shall not enter into any
other transaction that results in a reorganization of the Company.

(c)Limitations on Additional Indebtedness of the Company.  The Company shall not
incur any indebtedness other than as contemplated in this Agreement or in the
other Transaction Documents.

(d)Compliance with Law.  The Company will comply, in all material respects, with
all acts, rules, regulations, orders, decrees and directions of any Governmental
Authority applicable to the Transferred Assets or any part thereof; provided,
however, that the Company may contest any act, regulation, order, decree or
direction of any Governmental Authority in any reasonable manner which shall not
have a Material Adverse Effect.

(e)No Amendment to the License Agreement.  The Company shall not amend, modify
or supplement the License Agreement or waive any of its rights under the
foregoing or permit any amendment, modification or supplementing of the License
Agreement with respect to the foregoing, without the prior written consent of
the Contributor.

Section 4.03.Consequences of Contributor Event of Default.  If a Contributor
Event of Default has occurred and is continuing, in addition to any other action
that the Lender may be entitled to take in connection with an Event of Default,
the parties acknowledge that damages may be difficult to establish and
accordingly the Lender, so long as any Obligations are outstanding, shall be
entitled to take such legal action and exercise such legal or equitable
remedies, including seeking injunctive or other equitable relief without being
required to prove actual damages or post any bond, as the Lender may determine
in its sole discretion in order to correct or prevent the continuation of such
Contributor Event of Default.  

 

 

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ARTICLE V

SERVICING

Section 5.01. Appointment of Contributor.  Company shall maintain a servicer
(the “Servicer”) to perform certain servicing, management and administrative
functions on behalf of Company with respect to the Transferred Assets.  

(a)Company hereby appoints the Contributor as the initial Servicer hereunder,
and the Contributor hereby accepts such appointment hereunder, to perform the
duties described in or by reference in this Article V.  

(b)Company hereby grants the Contributor, in connection with and for so long as
Contributor remains as the Servicer hereunder, a co-exclusive (with Company),
royalty-free, United States license under the Transferred Assets solely to
perform the duties of Servicer pursuant to this Agreement, and such Contributor
co-exclusive rights are not sublicenseable or assignable in any
circumstances.  For clarity, the license granted pursuant to this Section 5.01
shall terminate effective upon the termination of Contributor as Servicer for
any reason.

(c)In consideration for its performing such duties hereunder, the Contributor,
as initial Servicer, shall be entitled to receive the Servicing Fee, if any,
from Company.  Payment of the Servicing Fee, if any, with respect to each
calendar quarter shall be made by Company no later than two (2) Business Days
following the Interest Payment Date with respect to such calendar quarter and
shall be made only to the extent of amounts received by Company in respect of
the Included Product Payments since the immediately preceding Interest Payment
Date in excess of the amount payable by Company (whether in respect of
principal, interest, fees, expenses of indemnities) on the Interest Payment Date
with respect to such calendar quarter in accordance with the terms of the Loan
Agreement.  Any unpaid portions of the Servicing Fee shall bear interest at a
rate agreed upon by the Contributor and Company, acting reasonably and in good
faith.  In performing such duties hereunder, the Contributor shall have full
power and authority to do or cause to be done, on behalf of Company, any and all
things in connection with such servicing, management and administration which it
may deem necessary or desirable, consistent with the terms hereof (including
Section 5.03), the License Agreement, any Borrower License Agreement, any New
Arrangement, and the Loan Agreement.  The Contributor agrees that it shall
service, manage, administer, and perform on behalf of Company under the License
Agreement and any Borrower License Agreement and enforce the rights of Company
thereunder in good faith, with reasonable care, in accordance with Applicable
Law, in compliance with Company’s obligations under the Transaction
Documents,  using substantially the same degree of diligence and skill that it
uses to service and perform agreements such as the License Agreement and any
other license arrangements, and generally to Commercialize and Exploit
pharmaceutical products for its own account (such standards and requirements of
performance, the “Servicing Standard”).  The Contributor, as Servicer on behalf
of Company, shall maintain any licenses or authorizations necessary to service
the Transferred Assets and any Borrower License Agreement.  The Contributor
shall administer and perform under the License Agreement and any Borrower
License Agreement and manage and maintain the Intellectual Property in such a
manner as will, in its reasonable judgment and at all times in accordance with
the Servicing Standard, preserve and protect the Royalty Interest and the
Revenue Interest.  

 

 

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(d)Without limiting the foregoing, the Contributor as Servicer shall administer
and perform on behalf of Company its obligations under Sections 8.14 (regarding
any New Arrangement and regarding Commercialization and Exploitation of the
Licensed Product) of the Loan Agreement, and to the extent any such arrangements
are executed and entered into by Contributor, Contributor shall forthwith
Contribute all of its right, title and interest therein to Company, subject to
the Company’s assumption of the Assumed Obligations in respect thereof.

Section 5.02.Certain Contributor Actions.  So long as it is the Servicer, the
Contributor will take such actions on behalf of Company, in accordance with the
Servicing Standard, as are necessary to cause Company to perform its obligations
under the License Agreement, any Borrower License Agreement and any other
arrangements for the Commercialization and Exploitation of the Licensed Product.

Section 5.03.Compliance with the Loan Agreement.  Notwithstanding anything to
the contrary herein, the Contributor’s servicing obligations hereunder shall at
all times be subject to the terms of the Loan Agreement.  The Contributor and
Company agree that the Contributor shall take no action with respect to the
License Agreement, any New Arrangement, any Borrower License Agreement or any
other arrangement relating to the Commercialization and Exploitation of the
Licensed Product  on behalf of Company, nor instruct Company to take any such
action, that is inconsistent with the terms of the Loan Agreement, the
obligations of Company thereunder or the rights of the Lender thereunder.  For
the avoidance of doubt, the Contributor will not, and will not instruct Company
to, take any action without the consent of the Lender where such consent is
required pursuant to the Loan Agreement and the Contributor shall not agree to,
or cause or permit any amendment, waiver, termination or modification of the
License Agreement, any Borrower License Agreement or any Material Contract
except as permitted to be effected by Company under the Loan Agreement.   The
Contributor and Company agree that (i) following the occurrence of any Event of
Default or (ii) with respect to any instance in which the Lender has provided a
direction to Company under the Loan Agreement that the Contributor is to
effectuate under this Agreement and Company fails to follow such direction
promptly, the Contributor shall service, administer, manage and perform under
the License Agreement, any New Arrangement, any Borrower License Agreement or
any other arrangement relating to the Commercialization and Exploitation of the
Licensed Product.

Section 5.04.Services as Servicer.  In addition to (and not in limitation of)
the provision of Section 5.01, the Contributor shall perform the following
services on behalf of Company:

(a)review all documents, notices and other communications under the License
Agreement, any New Arrangement, any Borrower License Agreement and any other
arrangement relating to the Commercialization and Exploitation of the Licensed
Product  and provide such copies to the Lender as are required under the Loan
Agreement, together with any responses as Company is required to provide in
respect thereof;

(b)prepare, forward and process any statements or billing materials that Company
is required to provide to the Licensee or any other Person in order to receive
payment of amounts due to Company under the License Agreement, any New
Arrangement, any Borrower License Agreement and any other arrangement relating
to the Commercialization and Exploitation of the Licensed Product;

 

 

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(c)monitor the performance of the Licensee under the License Agreement, any New
Arrangement, any Borrower License Agreement and any other arrangement relating
to the Commercialization and Exploitation of the Licensed Product, and take such
actions as may be necessary to enforce the rights of Company thereunder and
collect amounts due to Company thereunder, on behalf of Company, and procure and
supervise the services of any third parties necessary or appropriate in
connection with the monitoring, enforcement, collection and remittance of the
proceeds of the Transferred Assets;

(d)maintain each of the Blocked Accounts in accordance with Company’s
obligations under the Loan Agreement and the related Blocked Account Control
Agreement, and maintain and enforce the instructions to the Licensee or
subsequent licensee to pay amounts due to Company under the License Agreement or
any New Arrangement or under any Borrower License or to any other Person to pay
amounts due to Company relating to Commercialization and Exploitation of the
Licensed Product into the Collection Account;

(e)cause Company to maintain its organizational existence by filing all returns
required in its jurisdiction of organization, and providing for its general
administrative needs and overhead relating to the Transferred Assets, subject to
Section 9.01 of the Loan Agreement and its Organizational Documents; and

(f)identify and forward as required under the Loan Agreement any payments that
are to be made to a Blocked Account but when made are made to Company, the
Contributor or any misdirected account, and in consultation with the Lender,
effect the transfer thereof as required under the Loan Agreement; and

(g)make on behalf of Company any security filings or other actions required to
perfect or ensure the continued perfection of Company’s rights in the
Transferred Assets and the Lender’s rights in Collateral; and

(h)with respect to Intellectual Property:  

(i)prepare, execute, deliver and file any and all agreements, documents or
instruments which are necessary to (A) prosecute and maintain the material
Intellectual Property (including Patents therein) in accordance with the terms
of the License Agreement to the extent that the Contributor has the right to
prosecute and maintain such material Intellectual Property; and (B) defend or
assert such material Intellectual Property against commercially significant
infringement or interference by any other Persons, and against any claims of
invalidity or unenforceability, in the United States, in each case, in
accordance with the terms of the License Agreement (including by bringing any
legal action for infringement or defending any counterclaim of invalidity or
action of a Third Party for declaratory judgment of non-infringement or
non-interference) to the extent that the Contributor has the right to do
so.  The Contributor shall keep Company and its assigns informed of all of such
actions and Company and its assigns (including the Lender) shall have the
opportunity to participate and meaningfully consult with the Contributor with
respect to the direction thereof and the Contributor shall consider all of
Company’s or such assign’s comments in good faith.  For clarity, this subsection
(i) shall apply only to the extent of the Contributor’s or any Affiliate’s
rights (including rights to review and comment) to prosecute, maintain and/or
enforce the Intellectual Property.  

 

 

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(ii)not permit or suffer any of its Affiliates to, consent to any judgment or
settlement in any action, suit or proceeding referred to in Section 9.2.1 of the
License Agreement, without the prior written consent of Company and its assigns
(including the Lender), which consent shall not be withheld, delayed or
conditioned by Company or such assign if doing so would result in the breach of
the obligation to not unreasonably withhold, delay or condition its consent
under Section 9.2.1 of the License Agreement.

(iii)use commercially reasonable efforts to prosecute all pending Patent
applications within the Intellectual Property for which the Contributor or its
Affiliates has rights to prosecute such Patents consistent with standards in the
pharmaceutical industry (as applicable) for similarly situated entities.

(iv)take commercially reasonable measures to protect the proprietary nature of
material Intellectual Property and maintain in confidence all trade secrets and
confidential information compromising a part thereof;

(v)not disclose and use commercially reasonable efforts to prevent any
distribution or disclosure by others (including their employees and contractors)
of any item that contains or embodies material, non-public Intellectual
Property;

(vi)take reasonable physical and electronic security measures to prevent
disclosure of any item that contains or embodies material, non-public
Intellectual Property.

(vii)use commercially reasonable efforts to cause each individual associated
with the filing and prosecution of the Patents material to the conduct of the
business of the Contributor to comply in all material respects with all
applicable duties of candor and good faith in dealing with any Patent Office,
including any duty to disclose to any Patent Office all information known by
such individual to be material to patentability of each such Patent, in those
jurisdictions where such duties exist, in each case to the extent that the
Contributor has the right to file and prosecute such Patents, including to the
extent permissible under the License Agreement.

(viii)furnish Company and its assigns (including the Lender) from time to time
upon Company’s or such assign’s reasonable written request therefor reasonably
detailed statements and schedules further identifying and describing the
Intellectual Property and such other materials evidencing or reports pertaining
to any Intellectual Property as Company or such assign may reasonably request.

In performing as Servicer, the Contributor shall not instruct the Licensee or
any other Person to pay amounts in respect of the Transferred Assets to any
account other than the respective Blocked Account required under the Loan
Agreement or cause any such payments to be paid to any account other than such
Blocked Account.

 

 

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Section 5.05.Replacement Servicer.  The Contributor may be terminated as
Servicer hereunder and replaced with a new Servicer by Company (or by the Lender
on behalf of Company in the event that Company shall fail to replace the
Servicer within 5 Business Days after a Servicer Termination Event, or in the
event that an Event of Default has occurred and is continuing) following the
occurrence of any of the following events (each, a “Servicer Termination
Event”):

(a)any default by the Contributor under this Article V that continues unremedied
for (i) in the case of Sections 5.01(d), 5.04(d)-(g) and 5.04(h)(i)-(iii),
fifteen (15) Business Days, and (ii) in the case of other provisions under this
Article V, thirty (30) Business Days, in each case after notice of such default
from Company or the Lender to the Contributor;

(b)an Insolvency Event of the Contributor; or

(c)a Contributor Event of Default shall occur and be continuing.

Termination of the Contributor as Servicer hereunder shall be without prejudice
to any rights of Company or the Lender that may have accrued through such
date.  In the event that the Contributor is terminated as Servicer, (i) a
replacement Servicer shall be appointed by Company in consultation with, and
with the prior written consent of, the Lender, or by the Lender on behalf of
Company as provided in the first sentence of this Section 5.05) and (ii) the
Contributor shall cooperate reasonably with Company and the Lender and any
replacement Servicer designated by Company or the Lender, to transfer any
information and materials to such replacement Servicer or undertake any other
reasonable actions to ensure an effective transition of services required in the
servicing of the Transferred Assets to the successor Servicer.

ARTICLE VI

TERMINATION; SURVIVAL

Section 6.01.Termination.  The respective obligations and responsibilities of
the Contributor and Company created by this Agreement shall not terminate prior
to Payment in Full.

Section 6.02.Effect of Termination.  No termination or rejection or failure to
assume the executory obligations of this Agreement in the bankruptcy of the
Contributor or Company shall be deemed to impair or affect the obligations
pertaining to any executed conveyance or executed obligations, including without
limitation breaches of representations and warranties by the Contributor or
Company occurring prior to the date of such termination.

Section 6.03. Survival.  Notwithstanding Section 6.01 hereof, the obligations of
the Contributor contained in Sections 4.01(f), 4.01(i),  Article VII, Section
8.13 and this Section 6.03 shall survive the termination of this Agreement and
the payment in full of all Obligations.

 

 

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ARTICLE VII

INDEMNIFICATION PAYMENTS

Section 7.01.Indemnification.  (a) The Contributor agrees to indemnify and hold
harmless Company, the Lender and their respective officers, directors, members,
partners, employees and agents (each, an “Indemnified Party”) against any and
all liabilities, losses, damages, penalties, costs and expenses (including
reasonable and documented, out of pocket costs of defense and legal fees and
expenses) which may be incurred or suffered by such Indemnified Party (except to
the extent caused by the gross negligence or willful misconduct of the
Indemnified Party) awarded against, or incurred or suffered by, such Indemnified
Party, whether or not involving a third party claim, demand, action, suit or
proceeding, arising out of (i) the failure of any representation, warranty or
certification of the Contributor in the Transaction Documents or any certificate
given by the Contributor pursuant to any of the Transaction Documents, to be
true when made; (ii) a breach of any covenant by the Contributor set forth in,
or failure by the Contributor to perform its duties under or otherwise comply
with, the Transaction Documents (whether or not a Contributor Event of Default
or Servicer Termination Event), or the Contributor’s engaging in intentional
misconduct, bad faith or negligence in the performance of such duties; or (iii)
the transfer by the Contributor of any interest in the Transferred Assets to any
Person other than Company, or any attempt by any Person to void the transfer of
the Transferred Assets to Company.

It is the intention of the parties hereto that the above indemnities shall not
be interpreted to provide indemnification for any damages, losses or costs that
have the effect of recourse for non-payment or insufficient payment under the
Transferred Assets and factors affecting the performance of the Transferred
Assets and payments generated thereby that are not specifically represented,
warranted or agreed to in the Transaction Documents which may include but are
not limited to product obsolescence, competition, changes in government
healthcare policies or other healthcare provider reimbursement, patent
invalidity (other than to the extent that the Contributor had Knowledge of such
patent invalidity as of the date of any related representation or warranty), and
withholding taxes related to the Transferred Assets.  This Section 7.01(a) shall
not apply to Taxes other than any Taxes that represent losses, claims, damages,
etc. arising from any non-Tax claim.

(b)The provisions of this indemnity shall run directly to, and be enforceable
by, an injured party and shall survive the termination of this
Agreement.  Without limiting the foregoing or Section 8.15 hereof, Company’s
rights under this Section shall be assignable by Company on a non-exclusive
basis to the Lender pursuant to the terms of the Loan Agreement and the Security
Agreement.

(c)If any claim, demand, action or proceeding (including any investigation by
any Governmental Authority) shall be brought or alleged against an Indemnified
Party in respect of which indemnity is to be sought pursuant to this Section,
the Indemnified Party shall, promptly after receipt of notice of the
commencement of any such claim, demand, action or proceeding, notify the
Contributor in writing of the commencement of such claim, demand, action or
proceeding, enclosing a copy of all papers served, if any; provided, that the
omission to so notify the Contributor will not relieve the Contributor from any
liability that it may have to any Indemnified Party under this Section unless,
and only to the extent that, the Contributor is actually

 

 

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materially prejudiced by such omission.  In case any such action is brought
against an Indemnified Party and it notifies the Contributor of the commencement
thereof, the Contributor will be entitled, at the Contributor’s sole cost and
expense, to participate therein and, to the extent that it may wish, to assume
the defense thereof, with counsel reasonably satisfactory to such Indemnified
Party (who shall not, except with the consent of the Indemnified Party, be
counsel to the Contributor), and, after notice from the Contributor to such
Indemnified Party of its election so to assume the defense thereof, the
Contributor will not be liable to such Indemnified Party under this Section for
any legal or other expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation.  In any such proceeding, an Indemnified Party shall have the
right to retain its own counsel, but the reasonable fees and expenses of such
counsel shall be at the expense of such Indemnified Party unless (a) the
Contributor and the Indemnified Party shall have mutually agreed to the
retention of such counsel, (b) the Contributor has assumed the defense of such
proceeding and has failed within a reasonable time to retain counsel or (c) the
named parties to any such proceeding (including any impleaded parties) include
both the Contributor and the Indemnified Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
conflicts of interests between them.  It is agreed that the Contributor shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate law firm (in addition to local counsel where necessary) for all such
Indemnified Parties.  The Contributor shall not be liable for any settlement of
any proceeding effected without its written consent, but, if settled with such
consent or if there be a final judgment for the plaintiff, the Contributor
agrees to indemnify the Indemnified Party from and against any Loss by reason of
such settlement or judgment.  The Contributor shall not, without the prior
written consent of the Indemnified Party, effect any settlement, compromise or
discharge of any claim or pending or threatened proceeding in respect of which
any Indemnified Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party, unless such settlement,
compromise or discharge, as the case may be, (i) includes an unconditional
written release of such Indemnified Party from all liability on claims that are
the subject matter of such claim or proceeding, (ii) does not include any
statement as to an admission of fault, culpability or failure to act by or on
behalf of any Indemnified Party and (iii) does not impose any continuing
material obligation or restrictions on any Indemnified Party.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

Section 8.01.Amendment.  This Agreement may be amended from time to time only by
the written agreement of the Contributor and Company and, so long as any
Obligations remain outstanding, the Lender.

Section 8.02.Governing Law; Waiver of Trial by Jury; Jurisdiction.  (A) THIS
AGREEMENT AND ANY AMENDMENTS HEREOF SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING GENERAL OBLIGATIONS
LAW SECTIONS 5-1401 AND 5-1402 BUT OTHERWISE WITHOUT GIVING EFFECT TO LAWS
CONCERNING CONFLICT OF LAWS OR CHOICE OF FORUM THAT WOULD REQUIRE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION.

 

 

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(B)EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING,
CLAIM OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT OR
THE TRANSACTIONS CONTEMPLATED UNDER ANY TRANSACTION DOCUMENT (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY).  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO ANY TRANSACTION DOCUMENT.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY
HERETO WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.02(B).

(c)Each of Company and the Contributor irrevocably submits to the jurisdiction
of the courts of the State of New York and of the United States sitting in the
State of New York, and of the courts of its own corporate domicile with respect
to any and all Proceedings.  Each of Company and the Contributor irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of venue of any Proceeding and any claim that
any Proceeding has been brought in an inconvenient forum.  Any process or
summons for purposes of any Proceeding may be served on Company or the
Contributor by mailing a copy thereof by registered mail, or a form of mail
substantially equivalent thereto, addressed to it at its address as provided for
Notices hereunder.

Section 8.03.Notices.  All demands, notices, and communications under this
Agreement shall be in writing personally delivered, or sent by facsimile (with
subsequent telephone confirmation of receipt thereof) or sent by internationally
recognized overnight courier service, at the following address:

Contributor:

Paratek Pharmaceuticals, Inc.

Attention: Chief Financial Officer
75 Park Plaza, 4th Floor
Boston, MA 02116
Facsimile:  617-275-0039
Telephone:  617-807-6600

 

With a copy to:

 

Paratek Pharmaceuticals, Inc.
Attention:  General Counsel
75 Park Plaza, 4th Floor
Boston, MA 02116

 

 

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Company:

Paratek Royalty Corporation

c/o Paratek Pharmaceuticals, Inc.

Attention: Chief Financial Officer
75 Park Plaza, 4th Floor
Boston, MA 02116
Facsimile:  617-275-0039
Telephone:  617-807-6600

With a copy to:

 

Paratek Royalty Corporation
c/o Paratek Pharmaceuticals, Inc.
Attention:  General Counsel
75 Park Plaza, 4th Floor
Boston, MA 02116

Lender:

HealthCare Royalty Partners III, L.P.
300 Atlantic Street, Suite 600
Stamford, CT  06901
Attention:  Clarke B. Futch
                   Founding Managing Partner
Email:  Clarke.Futch@hcroyalty.com

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

HealthCare Royalty Partners III, L.P.
300 Atlantic Street, Suite 600
Stamford, CT  06901
Attention:  Chief Legal Officer
Email: royalty-legal@hcroyalty.com

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

Cadwalader, Wickersham & Taft LLP
One World Financial Center
New York, New York 10281
Attn:  Ira J. Schacter
E-mail:  ira.schacter@cwt.com

 

 

- 21 -

 

 

--------------------------------------------------------------------------------

 

or at other such address as shall be designated by such party in a written
notice to the other parties. Notice shall be effective and deemed received (a)
two days after being delivered to the courier service, if sent by courier, (b)
upon receipt of confirmation of transmission, if sent by telecopy, or (c) when
delivered, if delivered by hand.

Wherever notice or a report is required to be given or delivered to Company, a
copy of such notice or report shall also be given or delivered concurrently to
the Lender.

Section 8.04.Severability of Provisions.  If any one or more of the covenants,
agreements, provisions, or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions, or terms
shall be deemed severable from the remaining covenants, agreements, provisions,
or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.

Section 8.05.Assignment.  Notwithstanding anything to the contrary contained in
this Agreement, this Agreement may not be assigned by the Contributor except as
provided in Section 4.01(a), without the prior written consent of Company and
this Agreement may not be assigned by Company without the prior written consent
of the Lender and, so long as no Contributor Event of Default has occurred and
is continuing, the Contributor.

Section 8.06.Further Assurances.  Each of the Contributor and Company agrees to
do such further acts and things and to execute and deliver such additional
assignments, agreements, powers and instruments as are reasonably required to
carry into effect the purposes of this Agreement.

Section 8.07.Waiver; Cumulative Remedies; Waiver of Immunities.  No failure to
exercise and no delay in exercising, on the part of Company or the Contributor,
any right, remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise hereof or the
exercise of any other right, remedy, power or privilege.  The rights, remedies,
powers and privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privilege provided by law.  To the extent that the
Contributor has or hereafter may be entitled to claim or may acquire, for itself
or any of its assets, any immunity from suit, jurisdiction of any court or from
any legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, or otherwise) with respect to itself
or any of its property, the Contributor hereby irrevocably waives such immunity
in respect of its obligations hereunder to the fullest extent permitted by law.

Section 8.08.Counterparts.  This Agreement may be executed in two or more
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which shall constitute one and the same
instrument.

Section 8.09.Binding.  This Agreement will inure to the benefit of and be
binding upon the parties hereto, subject to Section 8.14.

 

 

- 22 -

 

 

--------------------------------------------------------------------------------

 

Section 8.10.Merger and Integration.  Except as specifically stated otherwise
herein, this Agreement sets forth the entire understanding of the parties
relating to the subject matter hereof, and all prior understandings, written or
oral, are superseded by this Agreement.  This Agreement may not be modified,
amended, waived or supplemented except as provided herein.

Section 8.11.Headings.  The headings herein are for purposes of reference only
and shall not otherwise affect the meaning or interpretation of any provision
hereof.

Section 8.12.Schedules and Exhibits.  The schedules and exhibits attached hereto
and referred to herein shall constitute a part of this Agreement and are
incorporated into this Agreement for all purposes.

Section 8.13.Non-Petition.  Each of the parties hereto covenants and agrees
that, prior to the date that is one year and one day after the Payment in Full,
no party hereto shall institute against, or join any other Person in instituting
against, either of Company or the Contributor any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under any federal, state or foreign bankruptcy or similar law.

Section 8.14.Intended Third Party Beneficiaries.  The Lender is a third party
beneficiary of this Agreement and, as such, shall have full power and authority
to enforce the provisions of this Agreement against the parties hereto.  In
addition, the parties hereto acknowledge that the Lender is entitled under the
Loan Documents to make claims directly to the Contributor for indemnities in
favor of Company, without prejudice to its rights as an Indemnified Party
hereunder; and nothing herein limits the rights of the Lender under the Stock
Pledge, which rights may be exercised in the Lender’s sole discretion from time
to time whether or not it has exercised or is then exercising its rights as a
third party beneficiary or its rights and remedies under Applicable Law.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

- 23 -

 

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Contributor and Company have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.

 

PARATEK PHARMACEUTICALS, INC.,
as the Contributor

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

PARATEK ROYALTY CORPORATION,
as Company

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT A

Form of Notice and Instruction Letter

[n], 2019

[NOTICE ADDRESS]

Ladies and Gentlemen:

Reference is hereby made to that certain License Agreement, dated as of July 2,
2007, by and between Warner Chilcott Company, Inc. (“Licensee”) and Paratek
Pharmaceuticals, Inc. (the “Company”), (the “License Agreement”) and Section
12.7 thereunder.

Effective as of [●], 2019, the Company has sold, assigned, transferred, granted,
contributed and conveyed to its wholly owned subsidiary, Paratek Royalty
Corporation (“PRC”), all of its right, title and interest to the License
Agreement.  In connection therewith, PRC acknowledges and confirms that
effective as of such date, PRC shall be bound by the License Agreement as if it
were a party to it as and to the identical extent applicable to the Company.

Accordingly, you are hereby irrevocably and unconditionally directed to make all
payments pursuant to Sections 6.4 (and interest relating thereto pursuant to
Section 6.9) of the License Agreement, and all payments due to PRC in respect of
indemnification claims pursuant to Section 12.2 of the License Agreement,
together with any interest on late payments thereof , by wire transfer of
immediately available funds in United States dollars to the following account:

 

Bank

[n]

Address

[n]

Beneficiary

[n]

Routing #

[n]

Account #

[n]

 

PRC may from time to time designate a new account to which you should thereafter
make all such payments.  You are to provide to PRC at its address below, a copy
of the reports that are to be provided under Section 7.5.5 of the License
Agreement.

Your obligation to make payments of the above amounts to PRC shall be discharged
only by payment in accordance with the preceding instructions regarding payment
of such amount to the account listed directly above, unless instructed otherwise
by PRC.

 

 

 

 

 

--------------------------------------------------------------------------------

 

In addition, commencing immediately, and until instructed otherwise by PRC, you
are hereby irrevocably and unconditionally instructed to send a copy of all
reports (including quarterly reports contemplated under Section 7.5.5 of the
License Agreement) sent or required to be sent to the Company under the License
Agreement, to PRC at the following address:

Contributor:

Paratek Pharmaceuticals, Inc.

Attention: Chief Financial Officer
75 Park Plaza, 4th Floor
Boston, MA 02116
Facsimile:  617-275-0039
Telephone:  617-807-6600

 

With a copy to:

 

Paratek Pharmaceuticals, Inc.
Attention:  General Counsel
75 Park Plaza, 4th Floor
Boston, MA 02116

 

Company:

Paratek Royalty Corporation

c/o Paratek Pharmaceuticals, Inc.

Attention: Chief Financial Officer
75 Park Plaza, 4th Floor
Boston, MA 02116
Facsimile:  617-275-0039
Telephone:  617-807-6600

 

With a copy to:

 

Paratek Royalty Corporation
c/o Paratek Pharmaceuticals, Inc.

Attention:  General Counsel
75 Park Plaza, 4th Floor
Boston, MA 02116

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

If you have any questions or require additional information, please feel free to
contact the Company or PRC at any time.  Thank you for your cooperation
regarding this matter.

 

 

Very truly yours,

 

PARATEK PHARMACEUTICALS, INC.

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

PARATEK ROYALTY CORPORATION

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

Schedule 2.01(a)(ii)

Regulatory Approvals

None

 

 

 

 

 

--------------------------------------------------------------------------------

 

Schedule 2.01(a)(iii)

Transferred Contracts

 

1.

The License Agreement

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT D

 

LICENSE AGREEMENT

 

Filed with the United States Securities and Exchange Commission as Exhibit 10.16
to the

Annual Report on Form 10-K of Paratek Pharmaceuticals, Inc.

filed on April 2, 2015 (File No. 001-36066)

 

 

 

D-1

--------------------------------------------------------------------------------

 

EXHIBIT E

 

FORM OF NOTE

 

 

 

E-1

--------------------------------------------------------------------------------

 

FORM OF SECURED PROMISSORY NOTE

THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE LOAN AGREEMENT REFERRED TO
BELOW.  TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE BORROWER PURSUANT TO THE TERMS OF THE
LOAN AGREEMENT.  IN ADDITION, THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED,
HEDGED OR OTHERWISE TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT OF THE
BORROWER, WHICH CONSENT SHALL, FOR PURPOSES OF THIS SENTENCE, BE DEEMED TO HAVE
BEEN GIVEN UPON THE REQUEST OF THE HOLDER HEREOF.

THIS NOTE HAS BEEN ISSUED WITH “ORIGINAL ISSUE DISCOUNT” (WITHIN THE MEANING OF
SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED). UPON WRITTEN
REQUEST, THE BORROWER WILL PROMPTLY MAKE AVAILABLE TO ANY HOLDER OF THIS NOTE
THE FOLLOWING INFORMATION: (1) THE ISSUE PRICE AND ISSUE DATE OF THE NOTE, (2)
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THE NOTE AND (3) THE YIELD TO MATURITY
OF THE NOTE. HOLDERS SHOULD CONTACT THE CHIEF FINANCIAL OFFICER OF THE BORROWER
AT 75 PARK PLAZA, 4TH FLOOR, BOSTON, MASSACHUSETTS 02116.

 

 

New York, New York

$32,500,000.00

Dated:  [____], 2019

 

FOR VALUE RECEIVED, the undersigned, Paratek Royalty Corporation, a Delaware
corporation, with offices located at 75 Park Plaza, 4th Floor, Boston,
Massachusetts (“Borrower”) HEREBY PROMISES TO PAY to HEALTHCARE ROYALTY PARTNERS
III, L.P. (“Lender”), or its registered assigns, the principal amount of
THIRTY-TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($32,500,000.00) or such other
amount as shall equal the outstanding principal balance of the Loan made to
Borrower by Lender, plus interest on the aggregate unpaid principal amount of
such Loan, at the rates and in accordance with the terms of the Loan Agreement,
dated as of February 26, 2019 by and between Borrower and Lender (as amended,
restated, supplemented or otherwise modified from time to time, the “Loan
Agreement”).  If not sooner paid, the entire principal amount and all accrued
and unpaid interest hereunder shall be due and payable on the Maturity Date as
set forth in the Loan Agreement.  Any capitalized term not otherwise defined
herein shall have the meaning attributed to such term in the Loan Agreement.

Principal, interest, and all other amounts (including but not limited to
additional amounts, if any, payable under Section 3.02 of the Loan Agreement)
due with respect to the Loan under the Loan Agreement or the other Loan
Documents, are payable in lawful money of the United States of America to Lender
as set forth in the Loan Agreement and this Secured Promissory Note (this
“Note”).  The principal amount of this Note and the interest rate applicable
thereto, and all payments made with respect thereto, shall be recorded by Lender
and, prior to any transfer hereof, endorsed on the grid attached hereto which is
part of this Note.

This Note is a Loan Document, is entitled to the benefits of the Loan Documents,
is subject to the Loan Agreement and evidences the Indebtedness incurred
thereunder.

 

 

E-2

 

 

--------------------------------------------------------------------------------

 

 

The Loan Agreement, among other things, (a) provides for the making of a Loan by
Lender to Borrower, and (b) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for prepayments on
account of the principal hereof, together with interest and other amounts, upon
the terms and conditions specified therein.

This Note may not be prepaid except as set forth in Section 3.02 of the Loan
Agreement.

This Note and the obligation of Borrower to repay the unpaid principal amount of
the Loan, interest on the Loan and all other amounts due Lender under the Loan
Agreement and other Loan Documents, is secured under the Security Agreement and
by the pledge under the Stock Pledge Agreement.

Presentment for payment, demand, notice of protest and all other demands and
notices of any kind in connection with the execution, delivery, performance and
enforcement of this Note are hereby waived.

This Note is a registered obligation, transferable only upon notation in the
Register, and no assignment hereof shall be effective until recorded therein in
accordance with Section 5.05 of the Loan Agreement.

This Note shall be governed by, and construed in accordance with, the laws of
the State of New York, including General Obligations Law Sections 5-1401 and
5-1402 but otherwise without giving effect to laws concerning conflicts of laws
or choice of forum that would require application of the laws of another
jurisdiction.  

Sections 1.02 (Rules of Construction), 4.05 (Interest on Late Payments), 4.07
(Administration and Enforcement Expenses), 8.10 (Waiver of Stay, Extension or
Usury Laws), 12.11 (Jurisdiction), 12.12 (Waiver of Jury Trial) and 12.13
(Waiver of Immunity) of the Loan Agreement shall be deemed incorporated herein
mutatis mutandis.

The ownership of an interest in this Note shall be registered on a record of
ownership maintained by Borrower or its agent.  Notwithstanding anything else in
this Note to the contrary, the right to the principal of, and stated interest
on, this Note may be transferred only if the transfer is registered on such
record of ownership and the transferee is identified as the owner of an interest
in the obligation.  Borrower shall be entitled to treat the registered holder of
this Note (as recorded on such record of ownership) as the owner in fact thereof
for all purposes and shall not be bound to recognize any equitable or other
claim to or interest in this Note on the part of any other person or entity.

[Balance of Page Intentionally Left Blank]

 

 

 

E-3

 

 

--------------------------------------------------------------------------------

 

 

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of
its officers thereunto duly authorized on the date hereof.

 

BORROWER:

 

PARATEK ROYALTY CORPORATION

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

E-4

 

 

--------------------------------------------------------------------------------

 

LOAN INTEREST AND PAYMENTS OF PRINCIPAL

 

Date

 

Principal

Amount

 

Interest

 

Payment Amount

 

Notation By

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E-5

 

 

--------------------------------------------------------------------------------

 

 

EXHIBIT F

FORM OF

NOTICE OF PREPAYMENT

 

Date:  [n], 20[n]

 

HealthCare Royalty Partners III, L.P.

300 Atlantic Street, Suite 600

Stamford, CT  06901

Attention: John Urquhart
                  Partner
Email:  John.Urquhart@hcroyalty.com

 

Dear Sirs:

Paratek Royalty Corporation, a Delaware corporation (“Borrower”), pursuant to
Section 3.02(b) of the Loan Agreement, dated as of February 26, 2019, between
Borrower and HealthCare Royalty Partners III, L.P. (“Lender”) does hereby give
Lender notice that on [n], 20[n] (the “Prepayment Date”), Borrower shall prepay
all amounts outstanding with respect to the Loan under the Loan Agreement, in
cash, including all accrued but unpaid interest and any premium payable under
the Loan Agreement, as required pursuant to Section 3.02(b) of the Loan
Agreement.  The amount to be prepaid, and all other amounts payable in
connection therewith under Section 3.02 of the Loan Agreement, is calculated and
determined as set forth in detail on Exhibit A hereto.

Borrower shall make the prepayment specified above by [wire transfer] [Automated
Clearing House transfer] to the Lender Account.

This Notice of Prepayment is irrevocable.1

 

 

1

This Notice of Prepayment may state that such notice is conditioned upon the
effectiveness of any credit facilities or one or more other events specified
therein (including the occurrence of a Change of Control), in which case such
notice may be revoked by Borrower (by notice to Lender on or prior to the
specified effective date) if such condition is not satisfied.

F-1

 

--------------------------------------------------------------------------------

 

PARATEK ROYALTY CORPORATION

 

By:___________________________

Name:

Title:

 

CC:

HealthCare Royalty Partners III, L.P.
300 Atlantic Street, Suite 600
Stamford, CT  06901
Attention:  Chief Legal Officer
Email: royalty-legal@hcroyalty.com

Cadwalader, Wickersham & Taft LLP
200 Liberty Street
New York, New York 10281
Attn:  Ira J. Schacter
E-mail:  ira.schacter@cwt.com

 

 

 

-F-2-

 

 

--------------------------------------------------------------------------------

 

EXHIBIT A
TO
NOTICE OF PREPAYMENT

 

 

-F-3-

 

 

--------------------------------------------------------------------------------

 

 

EXHIBIT G

 

FORM OF SECURITY AGREEMENT

 

 

G-1

 

--------------------------------------------------------------------------------

FORM OF SECURITY

AGREEMENT

 

 

 

SECURITY AGREEMENT

dated as of [________], 2019

by and between

PARATEK ROYALTY CORPORATION,
as Grantor,

and

HEALTHCARE ROYALTY PARTNERS III, L.P.,
as Secured Party

 

 

 

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

Table of Contents

 

Page

 

 

Article 1    RULES OF CONSTRUCTION AND DEFINED TERMS

 

1

 

 

 

 

Section 1.01

Rules of Construction and Defined Terms

 

1

 

 

 

 

Section 1.02

UCC Definitions

 

1

 

 

 

 

Section 1.03

Powers of Attorney

 

1

 

 

 

 

Section 1.04

Heading; Captions

 

1

 

 

 

 

Section 1.05

Additional Defined Terms

 

2

 

 

 

 

Article 2    GRANT OF SECURITY INTEREST

 

2

 

 

 

 

Section 2.01

Grant of Security Interest

 

2

 

 

 

 

Section 2.02

Validity and Priority of Security Interest

 

2

 

 

 

 

Section 2.03

Maintenance of Status of Security Interest

 

3

 

 

 

 

Section 2.04

Establishment of Pledged Accounts

 

3

 

 

 

 

Section 2.05

Grantor Remains Liable

 

3

 

 

 

 

Article 3    CERTAIN REPRESENTATIONS AND WARRANTIES

 

3

 

 

 

 

Section 3.01

Ownership

 

3

 

 

 

 

Section 3.02

Security Interest and Priority

 

4

 

 

 

 

Section 3.03

Consents

 

4

 

 

 

 

Section 3.04

No Restrictions

 

4

 

 

 

 

Article 4    CERTAIN COVENANTS

 

4

 

 

 

 

Section 4.01

Ownership and Defense of Collateral

 

4

 

 

 

 

Section 4.02

Existence

 

5

 

 

 

 

Section 4.03

Taxes; Compliance

 

5

 

 

 

 

Section 4.04

No Disposition of Collateral

 

5

 

 

 

 

Section 4.05

Pledged Accounts Withdrawals

 

5

 

 

 

 

Section 4.06

Change of Name, Locations, etc

 

5

 

 

 

 

Section 4.07

Further Assurances

 

5

 

 

 

 

Article 5    RIGHTS UPON EVENTS OF DEFAULT

 

6

 

 

 

 

Section 5.01

Remedies

 

6

 

 

 

 

Section 5.02

Application to Court

 

8

 

 

 

 

 

-i-

 

 

--------------------------------------------------------------------------------

Table of Contents

(continued)

Page

 

Section 5.03

Application of Proceeds

 

8

 

 

 

 

Article 6    RIGHTS OF THE SECURED PARTY

 

8

 

 

 

 

Section 6.01

The Secured Party; Standard of Care

 

8

 

 

 

 

Section 6.02

Power of Attorney

 

9

 

 

 

 

Section 6.03

Assignment by the Secured Party

 

10

 

 

 

 

Article 7    TERMINATION AND RELEASE

 

10

 

 

 

 

Section 7.01

Termination and Release

 

10

 

 

 

 

Article 8    MISCELLANEOUS

 

11

 

 

 

 

Section 8.01

Expenses and Right to Perform

 

11

 

 

 

 

Section 8.02

Expenses; Indemnification

 

11

 

 

 

 

Section 8.03

No Waivers of Rights Hereunder; Rights Cumulative

 

11

 

 

 

 

Section 8.04

Governing Law

 

11

 

 

 

 

Section 8.05

LIMITATION OF LIABILITY

 

12

 

 

 

 

Section 8.06

Severability of Provisions

 

13

 

 

 

 

Section 8.07

Counterparts

 

13

 

 

 

 

Section 8.08

Survival of Obligations

 

13

 

 

 

 

Section 8.09

Survival of Representations and Warranties

 

13

 

 

 

 

Section 8.10

Successors and Assigns

 

13

 

 

 

 

Section 8.11

Notices

 

13

 

 

 

 

-ii-

 

 

--------------------------------------------------------------------------------

 

SECURITY AGREEMENT

This SECURITY AGREEMENT (this “Security Agreement”), dated as of [________],
2019, is by and between PARATEK ROYALTY CORPORATION, a Delaware corporation
(“Grantor”), and HEALTHCARE ROYALTY PARTNERS III L.P., a Delaware limited
partnership (the “Secured Party”).

Grantor has entered into the Loan Agreement, dated as of the date hereof (as the
same may be amended, restated, supplemented or otherwise modified from time to
time, the “Loan Agreement”) with the Secured Party, as initial Lender
thereunder, providing, inter alia, for the making of the Loan to Grantor (to be
evidenced by the Note issued thereunder) on the terms and conditions set forth
therein.

To secure the payment and performance of all of the Obligations under the Loan
Agreement and the Note, Grantor has agreed (i) to grant to the Secured Party a
security interest in the Collateral and (ii) to execute and deliver this
Security Agreement.

IT IS HEREBY COVENANTED AND AGREED among the parties hereto as follows:

Article 1

RULES OF CONSTRUCTION AND DEFINED TERMS

Section 1.01Rules of Construction and Defined Terms.  The rules of construction
set forth in Section 1.02 to the Loan Agreement shall apply to this Security
Agreement and are hereby incorporated by reference into this Security Agreement
as if set forth fully in this Security Agreement.  Capitalized terms used herein
and not otherwise defined in this Security Agreement shall have the respective
meanings given to such terms in Section 1.01 of the Loan Agreement, and such
terms are hereby incorporated by reference into this Security Agreement as if
set forth fully in this Agreement.

Section 1.02UCC Definitions.  All lowercase terms used herein that are defined
in Article 1, 8 or 9 of the UCC, as in effect on the date of this Security
Agreement, are used herein with the meanings therein ascribed to them.

Section 1.03Powers of Attorney.  Each power of attorney, license and other
authorization in favor of the Secured Party or any other Person granted by or
pursuant to this Agreement shall be deemed to be irrevocable and coupled with an
interest.

Section 1.04Heading; Captions.  Headings and captions to Articles and Sections
of, and Schedules to, this Agreement are included for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose or
in any way affect the meaning or construction of any provision of this
Agreement.

 

--------------------------------------------------------------------------------

 

Section 1.05Additional Defined Terms.  For purposes of this Agreement, the
following terms shall have the meanings set forth below:

“Grantor” has the meaning specified in the introductory paragraph of this
Security Agreement.

“Indemnified Person” means any Person that is, or at any time was, and
Indemnitee.

“Pledged Account” means (a) each of the Collection Account and the Interest
Reserve Account, and any other Blocked Account or other account established
pursuant to Section 2.04 of this Security Agreement, (b) each deposit,
securities, custody or other account (whether, in any case, time or demand or
interest or non-interest bearing and whether maintained at a branch or office
located within or without the United States) that is a successor to the
Collection Account, the Interest Reserve Account or any such other Blocked
Account, (c) all amounts from time to time credited to the Pledged Account, (d)
all cash, financial assets, investment property, instruments, documents, chattel
paper, general intangibles, accounts and other property (i) from time to time
credited to the Pledged Account or (ii) representing investments and
reinvestments of amounts from time to time credited to the Pledged Account, and
(e) (i) dividends (whether or not payable in cash), interest, principal payments
and other distributions (including cash and securities payable in connection
with calls, conversions, redemptions and the like), on, and all rights,
contractual and otherwise (whether such dividends, interest, principal payments
and other distributions and rights constitute accounts, contract rights,
investment property or general intangibles), arising under or connected with,
and (ii) proceeds (including cash and securities receivable in connection with
tender and other offers) of, the Pledged Account.  The Pledged Accounts on the
date hereof are listed in Schedule 2.04.  

“Security Interest” means the continuing security interest of the Secured Party
in, and the continuing Lien of the Secured Party upon, the Collateral intended
to be effected by the terms of this Security Agreement.

Article 2

GRANT OF SECURITY INTEREST

Section 2.01Grant of Security Interest.  To secure the payment, observance and
performance of the Obligations, Grantor hereby pledges to the Secured Party, and
grants a continuing security interest in and a continuing Lien upon all of
Grantor’s right, title and interest in and to the Collateral.

Section 2.02Validity and Priority of Security Interest.  Grantor agrees that the
Security Interest shall at all times prior to the termination or release thereof
in accordance with Section 7.01 of this Security Agreement be valid, perfected
and enforceable against Grantor, in accordance with the terms hereof, as
security for the full and prompt payment, at any time and from time to time as
and when due, of the Obligations, and that the Collateral shall not at any time
be subject to any Lien that is prior to, on a parity with or junior to such
Security Interest, other than Permitted Liens.

-2-

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Section 2.03Maintenance of Status of Security Interest.

(a)Grantor shall take all reasonable action, that may be necessary, or that the
Secured Party may reasonably request, so as at all times prior to the
termination or release thereof in accordance with Section 7.01 of this Security
Agreement (i) to maintain the validity, perfection, enforceability and priority
of the Security Interest in the Collateral in conformity with the requirements
of Section 2.02 of this Security Agreement, (ii) to protect and preserve the
Collateral and (iii) to protect and preserve, and to enable the exercise or
enforcement of, the rights of the Secured Party therein and hereunder.

(b)The Secured Party is hereby authorized from time to time to file one or more
financing or continuation statements or amendments thereto in the name of
Grantor in such jurisdictions with such descriptions of collateral and other
information set forth therein, or take any other action to perfect its Security
Interests, in each case as the Secured Party may reasonably deem necessary or
desirable for the purpose of obtaining or preserving the full benefits of this
Security Agreement and of the rights and powers herein granted, including by
describing the collateral as “all assets” of the Grantor.

Section 2.04Establishment of Pledged Accounts.  On or before the Closing Date,
Grantor shall establish and maintain the Collection Account and the Interest
Reserve Account at the Account Bank in the name of Grantor and subject to the
terms and conditions of the related Blocked Account Control Agreement, the Loan
Agreement and this Security Agreement.  Each of the Collection Account and the
Interest Reserve Account and any sub-account thereof shall bear a designation
clearly indicating that the funds or other assets deposited therein from time to
time are subject to the Liens granted under this Security Agreement and held for
the benefit of the Secured Party.  The Pledged Accounts shall be subject to
Blocked Account Control Agreements and Grantor shall take all actions necessary
or as reasonably requested by the Secured Party to ensure that the Secured Party
shall have a perfected Security Interest in each of the Pledged Accounts;
provided that as to any successor Blocked Account the Grantor shall not
discontinue the use of the then-existing Blocked Account hereunder until the
execution and delivery of necessary Blocked Account Control Agreement covering
such successor account such that there is no gap in perfection of the Liens
covering Blocked Accounts hereunder.

Section 2.05Grantor Remains Liable.  The grant by Grantor to the Secured Party
of the Security Interest shall not relieve Grantor of any obligations owing to
any Person under or in respect of the Collateral.

Article 3

CERTAIN REPRESENTATIONS AND WARRANTIES

Grantor hereby represents and warrants as of the date hereof as follows:

Section 3.01Ownership.  Grantor has good title to, and is the sole owner of,
each asset that is Collateral, free and clear of any Lien other than Permitted
Liens, and has the right to pledge and grant a Security Interest in the
Collateral.  No currently effective security agreement, financing statement or
other public notice with respect to all or any part of the Collateral is on file
or of record in any government or public office, and Grantor has not filed or
consented to the filing of any such statement or notice, except as may be
otherwise permitted by the Loan Agreement.

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Section 3.02Security Interest and Priority.  Upon (a) in the case of Security
Interests that may be perfected by filing of a financing statement under the
UCC, the filing of a financing statement under the UCC naming Grantor as
“debtor”, naming Secured Party as “secured party” and describing the Collateral,
in the filing office of the Secretary of State of the State of Delaware, (b) in
the case of any Intellectual Property Collateral, in addition to the filing of
such UCC financing statement, the recordation of a grant with the U.S. Patent
and Trademark Office or the U.S. Copyright Office, as applicable, and (c) in the
case of the Blocked Accounts, the entry into the Blocked Account Control
Agreements, this Security Agreement shall create a valid and perfected
first-priority Security Interest (subject to Permitted Liens) in favor of the
Secured Party in the Collateral.

Section 3.03Consents.  (a) No approval, consent, exemption, authorization or
other action by, notice to, or filing with, any United States Governmental
Authority or any other Person (including any stockholder, member or creditor of
Grantor) is necessary or required for (i) the grant by Grantor of the Security
Interest in the Collateral granted hereby or for the execution, delivery or
performance of this Security Agreement by Grantor or (ii) the perfection of such
Security Interest (to the extent such security interest can be perfected by the
filing of a financing statement under the UCC, the granting of control or filing
an appropriate notice with the U.S. Patent and Trademark Office or the U.S.
Copyright Office), and (b) no approval, consent, exemption, authorization or
other action by, notice to, or filing with any Person (including any
stockholder, member or creditor of Grantor) on the part of Grantor is necessary
for the exercise by the Secured Party of the rights and remedies provided for in
this Security Agreement, except, in each case, (i) filing UCC financing
statements or other filings under the Assignment of Claims Act, obtaining
control or filing notices with the U.S. Patent and Trademark Office or the U.S.
Copyright Office to perfect the Liens created by this Security Agreement and
(ii) consents, authorizations, filings or other actions that have been obtained
or made.

Section 3.04No Restrictions.  There are no statutory or regulatory restrictions,
prohibitions or limitations on Grantor’s ability to grant to the Secured Party a
Lien upon and Security Interest in the Collateral pursuant to this Security
Agreement or (except as imposed by Applicable Law) on the exercise by the
Secured Party of its rights and remedies hereunder (including any foreclosure
upon or collection of the Collateral), and there are no contractual restrictions
on Grantor’s ability to grant such Lien and Security Interest.

Article 4

CERTAIN COVENANTS

Section 4.01Ownership and Defense of Collateral.  Grantor shall at all times
(a) have good title to, and be the sole owner of, each asset that is Collateral,
free of (i) in the case of any Collateral that is a financial asset, any adverse
claim (as defined in Section 8-102(a)(1) of the UCC), (ii) in the case of any
Collateral that is an instrument, any claim referred to in Section 3-305(1) of
the UCC, in each case other than claims hereunder and (iii) in the case of any
Collateral that is an account (as defined in Section 9-102(a)(2) of the UCC) or
is a payment intangible (as defined in Section 9-102(a)(61) of the UCC) any
claim referred to in Section 9-404(a)(2) of the UCC and (b) defend the
Collateral against the claims and demands of all third persons.

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Section 4.02Existence.  Grantor shall (a) preserve and maintain its corporate
existence (except as otherwise permitted pursuant to Section 9.02(a) of the Loan
Agreement), (b) preserve and maintain its rights, franchises, permits, licenses,
approvals and privileges, in the case of its rights, franchises, permits and
privileges, except to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect and (c) qualify and remain qualified
in good standing in each jurisdiction, in each case except to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect.

Section 4.03Taxes; Compliance.  Except as otherwise permitted or required in the
Loan Agreement, Grantor shall pay all material Taxes of any kind imposed on or
in respect of its income or assets that are due and payable and before any Lien
on any of its assets exists as a result of nonpayment except as provided in
Section 9.03 of the Loan Agreement and except for Taxes contested in good faith
by appropriate proceedings and for which adequate reserves are maintained in
accordance with GAAP.

Section 4.04No Disposition of Collateral.  Except as permitted herein or in the
Loan Agreement, Grantor shall not sell, lease, transfer or otherwise dispose of
any Collateral, including (a) if the Collateral includes any securities
accounts, any financial asset carried therein, or (b) if the Collateral includes
any security entitlements, any financial asset subject thereto, or any interest
therein.

Section 4.05Pledged Accounts Withdrawals.  Grantor shall not draw against or
otherwise attempt to withdraw any funds or other property from or credited to
the Pledged Account.

Section 4.06Change of Name, Locations, etc.  The provisions of Section 8.13 of
the Loan Agreement are incorporated herein as though set out herein in full.

Section 4.07Further Assurances. Promptly upon the reasonable request of the
Secured Party and at the sole expense of Grantor, Grantor shall duly execute and
deliver, and have recorded, such further instruments, financing statements and
documents and take such further actions as the Secured Party may reasonably
request for the purpose of obtaining or preserving the full benefits of this
Security Agreement and of the rights and powers herein granted, including to
enable the Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Collateral, as may be required by Applicable Law.
Notwithstanding anything to the contrary herein or in any other Loan Document,
Grantor shall not have any obligation to (i) perfect or record any security
interest or lien (x) in any Collateral in any jurisdiction other than in the
United States (or to enter into any foreign law governed charges, debentures,
pledges or other security agreements in respect thereof) or (y) in connection
with the Assignment of Claims Act, (ii)  obtain any landlord waivers, estoppels
or collateral access letters, or (iii) obtain any consent of the Licensee to the
assignment and pledge to Secured Party of the rights under the License Agreement
that are included in the Collateral.

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Article 5

RIGHTS UPON EVENTS OF DEFAULT

Section 5.01Remedies.  Upon the occurrence and during the continuance of one or
more Events of Default, the Secured Party is hereby authorized to exercise in
respect of the Collateral all of the rights, powers and remedies provided for
herein or otherwise available to it under any other Transaction Document, or by
Applicable Law, or in equity or otherwise, including all rights and remedies of
a secured party under the UCC, and shall be entitled in particular, but without
limitation of the foregoing, to exercise the following rights to the extent not
prohibited by Applicable Law, which Grantor agrees are commercially reasonable:

(a)To change the name in which any Pledged Account is maintained, or the number
or other designation thereof, or both, including, if not already in such name or
bearing such a number or other designation, a change into the name of, a number
designating, or a designation of, the Secured Party; change the number of
signatures required to make an authorized withdrawal from any Pledged Account;
cancel any outstanding signature authorization entitling any Person to draw on
any Pledged Account; and issue or cause to be issued a new signature
authorization entitling any Person to draw upon any Pledged Account, including,
as such a Person, itself or any Person or Persons designated by it;

(b)To take possession of, receive, endorse, assign and deliver, in its own name
or in the name of Grantor, all checks, notes, drafts and other instruments
relating to any Collateral; to verify with contract parties the validity, amount
or any other matter relating to any Collateral, in its own name or in the name
of Grantor; to accelerate any Indebtedness or other obligation constituting
Collateral that may be accelerated in accordance with its terms; to take or
bring all actions and suits deemed necessary or appropriate by the Secured Party
to effect collections and to enforce payment of any Collateral; to settle,
compromise or release in whole or in part any amounts owing on Collateral; and
to extend the time of payment of any and all amounts owing under any Collateral
and to make allowances and adjustments with respect thereto, all in the same
manner and to the same extent as Grantor might have done;

(c)To transfer to or register in its name or the name of any of its agents or
nominees all or any part of the Collateral, without notice to Grantor and with
or without disclosing that such Collateral is subject to the Security Interest
created hereunder;

(d)To require Grantor to, and Grantor hereby agrees that it will at its expense
and upon request of the Secured Party forthwith, assemble all or any part of the
Collateral as directed by the Secured Party and make it available to the Secured
Party at a place designated by the Secured Party that is reasonably convenient
to Secured Party and Grantor;

(e)To obtain the appointment of a receiver of the Collateral as provided in
Section 5.02 of this Security Agreement and Grantor consents to and waives any
right to notice of any such appointment;

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(f)To the extent applicable, to enter and remain upon the premises of Grantor
and take possession of all or any part of the Collateral, with or without
judicial process; to use the materials, services, books and records of Grantor
for the purpose of liquidating or collecting the Collateral, whether by
foreclosure, auction or otherwise; and to remove the same to the premises of the
Secured Party or any designated agent for such time as the Secured Party may
desire, in order to effectively collect or liquidate the Collateral;

(g)(i) To demand, and enforce payment and performance of, and exercising any or
all of Grantor’s rights and remedies with respect to the collection, enforcement
and prosecution of, any or all of the Collateral (including the Included Royalty
Interest and all accounts and payment intangibles relating thereto), in each
case by legal proceedings or otherwise, (ii) settle, adjust, compromise, extend,
renew, discharge and release any or all of, and any legal proceedings brought to
collect or enforce any portion or all of, the Included Royalty Interest (and all
accounts and payment intangibles relating thereto) and otherwise under the
Transaction Documents, and (iii) prepare, file and sign in the name of Grantor
on (A) any proof of claim or similar document to be filed in any bankruptcy or
similar proceeding involving the Collateral (including the Royalty Interest and
all accounts and payment intangibles relating thereto that constitute
Collateral), and (B) any notice of Lien, assignment or satisfaction of Lien, or
similar document in connection with the Collateral (including the Royalty
Interest and all accounts and payment intangibles relating thereto that
constitute Collateral);

(h)In compliance with UCC Sections 9-620 and 9-621 or otherwise in compliance
with Applicable Law, to accept or retain the Collateral in satisfaction of the
Obligations (provided that unless and until the Secured Party shall have
provided the notices required under such Sections, the Secured Party shall not
be deemed to have retained any Collateral in satisfaction of any Obligations for
any reason);

(i)Instead of exercising the power of sale conferred upon it pursuant to clause
(j) below, to proceed by suit or suits at law or in equity to foreclose on the
Security Interest and sell all or any portion of the Collateral under a judgment
or a decree of a court or courts of competent jurisdiction; and

(j)To sell, resell, assign and deliver, in its sole discretion, all or any of
the Collateral, in one or more parcels, at public or private sale, at any of the
Secured Party’s offices or elsewhere, for cash, upon credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as the Secured Party may deem satisfactory.  If any of the Collateral is
sold by the Secured Party upon credit or for future delivery, the Secured Party
shall not be liable for the failure of the purchaser to purchase or pay for the
same and, in the event of any such failure, the Secured Party may resell such
Collateral.  In no event shall Grantor be credited with any part of the proceeds
of sale of any Collateral until and to the extent cash payment in respect
thereof has actually been received by the Secured Party.  Each purchaser at any
such sale shall hold the property sold absolutely, free from any claim or right
of whatsoever kind, including any equity or right of redemption of Grantor, and
Grantor hereby expressly waives all rights of redemption, stay or appraisal, and
all rights to require the Secured Party to marshal any assets in favor of
Grantor or any other party or against or in payment of any or all of the
Obligations, that it has or may have under any rule of law or statute now
existing or hereafter adopted.  No demand, presentment, protest, advertisement
or notice of any kind (except any notice required by

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Applicable Law, as referred to below), all of which are hereby expressly waived
by Grantor, shall be required in connection with any sale or other disposition
of any part of the Collateral.  If any notice of a proposed sale or other
disposition of any part of the Collateral shall be required under Applicable
Law, the Secured Party shall give Grantor at least 10 (ten) days’ prior notice
of the time and place of any public sale and of the time after which any private
sale or other disposition is to be made, which notice Grantor agrees is
commercially reasonable.  The Secured Party shall not be obligated to make any
sale of Collateral if it shall determine not to do so, regardless of the fact
that notice of sale may have been given.  The Secured Party may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned.  Upon each public sale and, to the extent
permitted by Applicable Law, upon each private sale, the Secured Party may
purchase all or any of the Collateral being sold, free from any equity, right of
redemption or other claim or demand, and may make payment therefor by
endorsement or assignment and application (without recourse) of the Note or
other Obligations in lieu of cash as a credit on account of the purchase price
for such Collateral.

For the avoidance of doubt, the Secured Party may maintain a proceeding even if
it does not possess the Note or does not produce it in the proceeding.

Section 5.02Application to Court.  The Secured Party may at any time after the
acceleration of the Loan pursuant to Section 10.02 of the Loan Agreement apply
to any court of competent jurisdiction for an order that the terms of the
Transaction Documents be carried into execution under the direction of such
court and for the appointment of a receiver of the Collateral or any part
thereof and for any other order in relation to the administration of the
Transaction Documents as the Secured Party shall deem fit.

Section 5.03Application of Proceeds.  Upon the occurrence and during the
continuance of an Event of Default and after the acceleration of the Loan
pursuant to Section 10.02 of the Loan Agreement or the Note, or of the other
Obligations, all cash proceeds received by the Secured Party upon any sale of,
collection of, or other realization upon, all or any part of the Collateral and
all amounts credited to the Pledged Account shall be applied in accordance with
the Loan Agreement and the other Loan Documents.

Article 6

RIGHTS OF THE SECURED PARTY

Section 6.01The Secured Party; Standard of Care.  The Secured Party will hold
all items of the Collateral at any time received under this Security Agreement
in accordance with the provisions hereof and Applicable Law.  The obligations of
the Secured Party as holder of the Collateral and interests therein and with
respect to the disposition thereof, and otherwise under this Security Agreement
and the other Transaction Documents, are only those expressly set forth in this
Security Agreement and the other Transaction Documents.  The powers conferred on
the Secured Party hereunder are solely to protect its interest in the
Collateral, and shall not impose any duty upon it to exercise any such
powers.  Except for treatment of the Collateral in its pos

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session in a manner substantially equivalent to that which the Secured Party, in
its individual capacity, accords its own property of a similar nature, the
Secured Party’s sole duty with respect to the custody, safekeeping and physical
preservation of Collateral in its possession, if any, under Section 9‑207 of the
UCC or otherwise, shall be to deal with it in a commercially reasonable manner
as Lender deals with similar property for its own account, and to account for
moneys actually received by it hereunder, and the Secured Party shall have no
duty as to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or preserve any other rights pertaining to the
Collateral.  The Secured Party shall not be liable to Grantor (a) for any loss
or damage sustained by Grantor, or (b) for any loss, damage, depreciation or
other diminution in the value of any of the Collateral that may occur as a
result of or in connection with or that is in any way related to any exercise by
the Secured Party of any right or remedy under this Security Agreement, any
failure to demand, collect or realize upon any of the Collateral or any delay in
doing so, or any other act or failure to act on the part of the Secured Party,
except to the extent that the same is caused by its own gross negligence or
willful misconduct.

Section 6.02Power of Attorney.  In addition to other powers of attorney
contained herein, and notwithstanding anything to the contrary contained herein
or in the other Transaction Documents, Grantor hereby designates and appoints
the Secured Party, and each of its designees or agents, as attorney-in-fact of
Grantor, irrevocably and with power of substitution, with authority to take any
or all of the following actions upon the occurrence and during the continuance
of an Event of Default:

(a)to demand, collect, settle, compromise, adjust and give discharges and
releases, all as the Secured Party may reasonably determine;

(b)to commence and prosecute any actions at any court for the purposes of
collecting any Collateral and enforcing any other right in respect thereof;

(c)to defend, settle or compromise any action brought and, in connection
therewith, give such discharge or release as the Secured Party may deem
reasonably appropriate;

(d)to sell, assign, transfer, make any agreement in respect of, or otherwise
deal with or exercise rights in respect of, any Collateral or the goods or
services that have given rise thereto, as fully and completely as though the
Secured Party were the absolute owner thereof for all purposes;

(e)to execute and deliver all assignments, conveyances, statements, financing
statements, continuation financing statements, security agreements, affidavits,
notices and other agreements, instruments and documents that the Secured Party
may determine necessary in order to perfect and maintain the Security Interests
and Liens granted in this Security Agreement and in order to fully consummate
all of the transactions contemplated herein;

(f)to institute any foreclosure proceedings that the Secured Party may deem
appropriate;

(g)to sign and endorse any drafts, assignments, proxies, stock powers,
verifications, notices and other documents relating to the Collateral;

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(h)to pay or discharge Taxes, Liens, security interests or other encumbrances
levied or placed on or threatened against the Collateral;

(i)to direct any parties liable for any payment in connection with any of the
Collateral to make payment of any and all monies due and to become due
thereunder directly to the Secured Party or as the Secured Party shall direct;

(j)to receive payment of and receipt for any and all monies, claims and other
amounts due and to become due at any time in respect of or arising out of any
Collateral; and

(k)to do and perform all such other acts and things as the Secured Party may
reasonably deem to be necessary, proper or convenient in connection with the
Collateral.

This power of attorney is a power coupled with an interest and shall be
irrevocable until the Obligations are satisfied and paid in full.  This power of
attorney is conferred on the Secured Party solely to protect, preserve and
realize upon its Security Interest in the Collateral and shall not impose any
duty upon the Secured Party to exercise any such powers.

Section 6.03Assignment by the Secured Party.  The Secured Party may from time to
time assign any or all of its rights with respect to the Loan in accordance with
the Loan Agreement, and such assignee shall be entitled to all of the rights and
remedies of the Secured Party under this Security Agreement in relation thereto
in accordance with the Secured Party’s agreement with such assignee.

Article 7

TERMINATION AND RELEASE

Section 7.01Termination and Release.

(a)Upon the Payment in Full, the Security Interest and Liens granted hereby
shall automatically terminate hereunder and of record, and all rights to the
Collateral shall revert to Grantor.  Upon any such termination Secured Party
shall promptly, at Grantor’s expense, transfer and/or deliver to, or as directed
by, Grantor, any monies or other assets that had constituted Collateral then
remaining in the possession of the Secured Party, authorize the Account Bank to
disburse any funds then remaining in the Collection Account and/or Interest
Reserve Account to the Person entitled thereto, and execute and deliver to
Grantor or otherwise authorize the filing of such documents as Grantor shall
reasonably request, including financing statement amendments to evidence such
termination.

(b)Upon any disbursement of any funds from the Collection Account to the
Borrower, any security interest hereunder granted in Grantor’s right, title and
interest in, to and under such funds shall be automatically released and
terminated.

(c)The Secured Party will, at Grantor’s expense, execute and deliver to Grantor
such documents as Grantor may reasonably request to enter into non-disturbance
or similar agreements in connection with the licensing of Intellectual Property
permitted pursuant to the terms of the Loan Agreement in form and substance
reasonably satisfactory to the Secured Party and the applicable licensor.

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Article 8

MISCELLANEOUS

Section 8.01Expenses and Right to Perform.

(a)Grantor’s agreements and duties hereunder shall be performed by it at its
sole cost and expense.

(b)If Grantor shall fail to do any act or thing that it has covenanted to do
hereunder, the Secured Party may (but shall not be obligated to) do the same or
cause it to be done, either in its name or in the name and on behalf of Grantor,
and Grantor hereby irrevocably authorizes the Secured Party to act in such case.

Section 8.02Expenses; Indemnification.  The parties hereto agree that the
Secured Party shall be entitled to (a) reimbursement for its reasonable costs
and expenses incurred hereunder, as provided in Section 4.06 of the Loan
Agreement, and (b) indemnity for its actions in connection herewith, as provided
in Article XI of the Loan Agreement.

Section 8.03No Waivers of Rights Hereunder; Rights Cumulative.

(a)No course of dealing or performance by the Secured Party, including any delay
or forbearance by it in exercising any right hereunder or under any of the other
Loan Documents, shall operate as a waiver by it of such right or the amendment,
release or novation of any provision hereof, nor shall any single or partial
exercise of any right preclude other or further exercises thereof or the
exercise of any other right.  No waiver or amendment of any provision of this
Security Agreement or of any of the other Transaction Documents shall be
enforceable against the Secured Party unless in writing and signed by an officer
of the Secured Party and unless it expressly refers to the provision affected,
and such waiver shall be limited solely to the specific event waived.

(b)All rights granted the Secured Party hereunder shall be cumulative and shall
be supplementary of and in addition to those otherwise granted or available to
the Secured Party with respect to the Obligations under the Loan Documents or
under Applicable Law, and nothing herein shall be construed as limiting any such
other right.

Section 8.04Governing Law.  

(a)THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, INCLUDING GENERAL OBLIGATIONS LAW SECTIONS
5-1401 AND 5-1402 BUT OTHERWISE WITHOUT GIVING EFFECT TO LAWS CONCERNING
CONFLICT OF LAWS OR CHOICE OF FORUM THAT WOULD REQUIRE APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION.

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(b)Each of Grantor and Secured Party irrevocably submits to the jurisdiction of
the courts of the State of New York and of the United States sitting in the
State of New York, and of the courts of its own corporate domicile with respect
to any and all Proceedings.  Each of Grantor and Secured Party irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of venue of any Proceeding and any claim that
any Proceeding has been brought in an inconvenient forum.  Any process or
summons for purposes of any Proceeding may be served on Grantor by mailing a
copy thereof by registered mail, or a form of mail substantially equivalent
thereto, addressed to it at its address as provided for Notices hereunder.

(c)Each Party hereby irrevocably waives, to the fullest extent permitted by
Applicable Law, any and all right to trial by jury in any action, proceeding,
claim or counterclaim arising out of or relating to THIS SECURITY AGREEMENT or
the transactions contemplated under THIS SECURITY AGREEMENT (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY).  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS SECURITY AGREEMENT.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY
HERETO WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.04(c).

Section 8.05LIMITATION OF LIABILITY.

(a)NEITHER THE SECURED PARTY NOR ANY OTHER INDEMNIFIED PERSON SHALL HAVE ANY
LIABILITY WITH RESPECT TO, AND GRANTOR HEREBY WAIVES, RELEASES AND AGREES NOT TO
SUE FOR ANY LOSS OR DAMAGE SUSTAINED BY GRANTOR, OR ANY LOSS, DAMAGE,
DEPRECIATION OR OTHER DIMINUTION IN THE VALUE OF ANY COLLATERAL, THAT MAY OCCUR
AS A RESULT OF, IN CONNECTION WITH, OR THAT IS IN ANY WAY RELATED TO, ANY
EXERCISE OR NON-EXERCISE OF ANY RIGHT OR REMEDY HEREUNDER, EXCEPT FOR ANY SUCH
LOSS, DAMAGE, DEPRECIATION OR DIMINUTION TO THE EXTENT THAT THE SAME IS FINALLY
DETERMINED BY A COURT OF COMPETENT JURISDICTION TO BE THE RESULT OF ACTS OR
OMISSIONS ON THE PART OF THE SECURED PARTY OR SUCH OTHER INDEMNIFIED PERSON
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT; OR

(b)NO PARTY HERETO SHALL HAVE ANY LIABILITY WITH RESPECT TO, AND EACH PARTY
HERETO HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE FOR, ANY SPECIAL, INDIRECT
OR CONSEQUENTIAL DAMAGES AND, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW,
PUNITIVE DAMAGES SUFFERED BY ANY PARTY HERETO IN CONNECTION WITH ANY CLAIM
RELATED TO THE COLLATERAL, THIS SECURITY AGREEMENT, ANY BLOCKED ACCOUNT CONTROL
AGREEMENT OR ANY OTHER CONTROL AGREEMENT.

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Section 8.06Severability of Provisions.  Any provision of this Security
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof in that
jurisdiction or affecting the validity or enforceability of such provision in
any other jurisdiction.  To the extent permitted by Applicable Law, Grantor
hereby waives any provision of Applicable Law that renders any provision of this
Security Agreement prohibited or unenforceable in any respect.

Section 8.07Counterparts.  This Security Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto were upon the same instrument.

Section 8.08Survival of Obligations.  Except as otherwise expressly provided
herein, the rights and obligations of Grantor, the Secured Party and the other
Indemnified Persons under Section 8.02 and Section 8.05 of this Security
Agreement shall survive the termination of the Security Interest.

Section 8.09Survival of Representations and Warranties.  All representations and
warranties contained herein shall survive the execution and delivery of this
Security Agreement and the other Loan Documents, and may be relied upon by any
subsequent lender under the Loan Agreement, regardless of any investigation made
at any time by or on behalf of any such Person.  All statements contained in any
certificate or other instrument delivered by or on behalf of Grantor pursuant to
this Security Agreement shall be deemed representations and warranties of
Grantor under this Security Agreement.

Section 8.10Successors and Assigns.  All of the provisions of this Security
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.

Section 8.11Notices.  All notices and other communications hereunder shall be
given pursuant to Section 12.03 of the Loan Agreement.

{Signature Page Follows}

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed as of the date first above written.

 

Grantor

PARATEK ROYALTY CORPORATION

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

Title:

 

Secured Party

HEALTHCARE ROYALTY PARTNERS III, L.P.

 

 

 

By:

 

HealthCare Royalty GP III, LLC,
its general partner

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

Title: Founding Managing Director

 

 

 

 

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Schedule 2.04

PLEDGED ACCOUNT

 

Account No.

Account Name

Location

[***]

Paratek Royalty Corporation

Bank of America
100 North Tryon Street,
Charlotte, NC 28255

[***]

Paratek Royalty Corporation

Bank of America
100 North Tryon Street,
Charlotte, NC 28255

 

 

 

 

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EXHIBIT H

 

 

FORM OF STOCK PLEDGE AGREEMENT

 

 

 

H-1

 

--------------------------------------------------------------------------------

FORM OF PLEDGE AND

SECURITY AGREEMENT

 

PLEDGE AND SECURITY AGREEMENT

Dated as of [______], 2019

Between

PARATEK PHARMACEUTICALS, INC.,

as Pledgor,

and

HEALTHCARE ROYALTY PARTNERS III, L.P.,

as Lender

 

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TABLE OF CONTENTS

 

ARTICLE I

 

 

 

 

CERTAIN DEFINITIONS

 

 

 

 

ARTICLE II

 

 

 

 

PLEDGED COLLATERAL:  GENERAL TERMS

 

 

 

 

SECTION 2.01

SECURITY INTEREST.

 

4

SECTION 2.02

DELIVERY OF CERTIFICATES, INSTRUMENTS, ETC.

 

5

SECTION 2.03

RELEASE OF SECURITY INTEREST.

 

5

SECTION 2.04

PLEDGOR REMAINS LIABLE.

 

6

 

 

 

 

ARTICLE III

 

 

 

 

REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR

 

 

 

 

SECTION 3.01

REPRESENTATIONS AND WARRANTIES.

 

6

SECTION 3.02

COVENANTS.

 

7

SECTION 3.03

PROTECTION OF PLEDGED COLLATERAL.

 

8

SECTION 3.04

NO PLEDGOR SALE OR PLEDGE OF PLEDGED COLLATERAL.

 

8

SECTION 3.05

FURTHER ASSURANCES, PRESERVATION AND PERFECTION OF SECURITY INTEREST.

 

8

SECTION 3.06

RIGHTS OF PLEDGOR.

 

8

SECTION 3.07

PRESERVATION OF PLEDGED COLLATERAL.

 

9

 

 

 

 

ARTICLE IV

 

 

 

 

NEGATIVE PLEDGE AGREEMENT

 

 

 

 

SECTION 4.01

NEGATIVE COVENANTS.

 

9

 

 

 

 

ARTICLE V

 

 

 

 

LENDER RIGHTS AND REMEDIES

 

 

 

 

SECTION 5.01

REMEDIES.

 

10

SECTION 5.02

LIMITATION ON DUTIES REGARDING PLEDGED COLLATERAL.

 

11

SECTION 5.03

PREJUDGMENT REMEDY PROVISION.

 

12

SECTION 5.04

APPLICATION OF PROCEEDS.

 

12

SECTION 5.05

NON-RECOURSE.

 

12

SECTION 5.06

APPOINTMENT OF LENDER AS PLEDGOR’S LAWFUL ATTORNEY.

 

12

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SECTION 5.07

REIMBURSEMENT.

 

13

SECTION 5.08

LENDER’S POWERS FOR LENDER’S SOLE BENEFIT.

 

13

SECTION 5.09

WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS.

 

13

 

 

 

 

ARTICLE VI

 

MISCELLANEOUS

 

 

 

 

SECTION 6.01

SECURITY AGREEMENT.

 

13

SECTION 6.02

REMEDIES CUMULATIVE.

 

13

SECTION 6.03

SECURITY INTEREST ABSOLUTE.

 

13

SECTION 6.04

NO DELAY; WAIVERS.

 

14

SECTION 6.05

FURTHER ASSURANCES.

 

14

SECTION 6.06

WAIVERS AND AMENDMENTS.

 

14

SECTION 6.07

NOTICES.

 

14

SECTION 6.08

GOVERNING LAW.

 

14

SECTION 6.09

WAIVER OF JURY TRIAL.

 

15

SECTION 6.10

BINDING AGREEMENT; ASSIGNMENTS.

 

15

SECTION 6.11

ADDITIONAL COVENANTS OF PLEDGOR.

 

15

SECTION 6.12

RESTORATION OR SET ASIDE.

 

15

SECTION 6.13

SEVERABILITY.

 

16

SECTION 6.14

SECTION HEADINGS.

 

16

SECTION 6.15

COUNTERPARTS; DELIVERY.

 

16

SECTION 6.16

NO THIRD PARTY BENEFICIARIES.

 

16

SECTION 6.17

ENTIRE AGREEMENT.

 

16

SECTION 6.18

ADDITIONAL CONSENTS.

 

16

 

Exhibits

Exhibit AAmended and Restated Certificate of Incorporation

Exhibit BControl Acknowledgment

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THIS PLEDGE AND SECURITY AGREEMENT (as amended, restated, supplemented or
otherwise modified from time to time, this “Agreement”) dated as of [_________],
2019, made by PARATEK PHARMACEUTICALS, INC., a Delaware corporation, as pledgor
(together with its successors and permitted assigns, “Pledgor”), in favor of
HEALTHCARE ROYALTY PARTNERS III, L.P., a Delaware limited partnership, as lender
(together with its successors and assigns, “Lender”).

RECITALS:

WHEREAS, pursuant to the Loan Agreement, dated as of the date hereof (as
amended, restated, supplemented or otherwise modified from time to time, the
“Loan Agreement”), entered into by and between Paratek Royalty Corporation, a
Delaware corporation (the “Borrower”), and the Lender, Lender has agreed to make
a loan (the “Loan”) in the principal amount on the Closing Date of $32,500,000,
such Loan being evidenced by the Note, made by the Borrower in favor of Lender;

WHEREAS, Pledgor is the sole beneficial holder of all Capital Stock in the
Borrower; and

WHEREAS, it is a condition precedent to the obligation of Lender to make the
Loan on the Closing Date that Pledgor pledge as additional collateral for the
performance of the Obligations, all of the Capital Stock of the Borrower
pursuant to the terms of this Agreement;

NOW, THEREFORE, to induce Lender to make the Loan, Pledgor hereby agrees with
Lender as follows:

ARTICLE I

CERTAIN DEFINITIONS

(a)Unless otherwise specified in this Agreement, capitalized terms used and not
otherwise defined in this Agreement shall have the respective meanings given to
such terms in the Loan Agreement.  In addition, as used in this Agreement, the
following terms have the meanings set forth in or incorporated by reference
below:

“Accounts” means, as to Pledgor, all “accounts” (as defined in the UCC) now
owned or hereafter acquired by Pledgor relating to the Pledged Collateral,
including all accounts receivable, contract rights, debts, notes, drafts and
other obligations or indebtedness owing to Pledgor relating to the Pledged
Collateral (including any such obligation which might be characterized as an
account, contract right or general intangible relating to the Pledged Collateral
under the UCC), and all of Pledgor’s rights to any goods, services or other
property represented by any of the foregoing.

“Borrower” has the meaning specified in the recitals to this Agreement.

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“Bylaws” means the bylaws of the Borrower, in the form delivered to the Lender
under the Loan Agreement and as the same may be amended, restated, supplemented
or otherwise modified from time to time in accordance with this Agreement and
the Loan Agreement.

“Capital Stock” of any Person means any and all shares, interests, memberships,
ownership interest units, rights to purchase, warrants, options, participations
or other equivalents of or interests in (however designated) equity of such
Person, including any preferred stock, and including, if such Person is a
partnership, partnership interests (whether general or limited) and any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of property of, such partnership,
and including, if such Person is a limited liability company, membership
interests and any other interest or participation that confers on a Person the
right to receive an interest in the profits and losses of, or distributions of
property of, such limited liability company, in each case whether outstanding on
the date hereof or issued after the date hereof, but excluding any Indebtedness
convertible into or exchangeable for such equity.

“Certificate of Incorporation” means the certificate of incorporation of the
Borrower, in the form as initially filed in its jurisdiction of incorporation,
as amended and restated substantially in the form attached hereto as Exhibit A
hereto (or as otherwise in form and substance reasonably satisfactory to Lender)
prior to the date hereof and delivered to Lender on the date hereof under the
Loan Agreement, and as same may be amended, restated, supplemented or otherwise
modified from time to time in accordance with the Loan Documents.

“Documents” means all “documents” (as defined in the UCC) or other receipts
covering, evidencing or representing any of the Pledged Collateral now owned or
hereafter acquired by Pledgor.

“Equity and Other Interests” has the meaning specified in Section 2.01(a).

“General Intangibles” means all “general intangibles” (as defined in the UCC)
now owned or hereafter acquired by Pledgor relating to the Pledged Collateral,
including (i) all obligations or indebtedness owing to Pledgor (other than
Accounts) with respect to the Pledged Collateral from whatever source arising
and (ii) all rights or claims in respect of refunds for taxes paid with respect
to the Pledged Collateral.

“Instruments” means all “instruments,” “chattel paper” or “letters of credit”
(each as defined in the UCC) evidencing, representing, arising from or existing
in respect of, relating to, securing or otherwise supporting the payment of, any
of the Accounts, including promissory notes, drafts, bills of exchange and trade
acceptances, now owned or hereafter acquired by Pledgor with respect to the
Pledged Collateral.

“Investment Property” has the meaning assigned to such term in the UCC.

“Monies” means all cash, checks, notes, drafts or similar items of payment.

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“Organizational Documents” means the Certificate of Incorporation, the Bylaws,
and any agreements affecting the rights, limitations, preferences or obligations
of Pledgor with respect to any of the foregoing or with respect to the Pledged
Collateral, in each case, as the same may be amended or modified from time to
time in accordance with this Agreement and the Loan Agreement.

“Permitted Liens” means:

(a)Liens created in favor of the Lender pursuant to any Loan Document;

(b)Liens for taxes not yet delinquent or which are being contested in good faith
and by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP;

(c)Liens in respect of property of Pledgor imposed by Applicable Law which were
incurred in the ordinary course of business and do not secure Indebtedness for
borrowed money, such as carriers’, warehousemen’s, distributors’, wholesalers’,
materialmen’s and mechanics’ liens and other similar Liens arising in the
ordinary course of business and securing payment obligations not yet delinquent;
and

(d)(i) banker’s liens for collection or rights of set off or similar rights and
remedies as to deposit accounts or other funds maintained with depositary
institutions; provided that such deposit accounts or funds are not established
or deposited for the purpose of providing collateral for any Indebtedness and
are not subject to restrictions on access by Pledgor in excess of those required
by applicable banking regulations; and (ii) customary liens incurred in the
ordinary course of business to secure obligations in respect of payment
processing services, business credit card programs, and netting services,
overdrafts and related liabilities arising from treasury, depositary and cash
management services.

“Pledged Collateral” has the meaning specified in Section 2.01.

“Pledged Interests” means, collectively, the Equity and Other Interests,
together with all economic or voting rights with respect to any of the
foregoing.

“Pledgor” has the meaning specified in the first paragraph hereof.

“Proceeds” means all “proceeds” as such term is defined in Section 9‑102 of the
UCC and shall include, in any event, without limitation, all dividends and other
income from the Pledged Interests, collections thereon or distributions with
respect thereto.

“UCC” means at any time the Uniform Commercial Code as in effect in the State of
New York; provided, that if, by reason of mandatory provisions of law, the
validity or perfection of Lender’s security interest in the Pledged Collateral
or any part thereof is governed by the Uniform Commercial Code or other similar
law as in effect in a jurisdiction other than New York, “UCC” means the Uniform
Commercial Code or such similar law as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such validity or perfection.

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(b)

(i) The words “hereby”, “herein” and “hereunder” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement and section, subsection, schedule and
exhibit references are to this Agreement unless otherwise specified.

(ii)The word “including” when used in this Agreement shall be deemed to be
followed by the words “but not limited to”.

ARTICLE II

PLEDGED COLLATERAL:  GENERAL TERMS

Section 2.01Security Interest.  As security for the full payment and performance
of the Obligations by the Borrower, Pledgor hereby grants to Lender a continuing
first-priority security interest in, Lien on and right of set-off against, and
hereby assigns to Lender as security, all of Pledgor’s right, title and
interest, if any, in, to and under the following property and interests in
property (save insofar as otherwise expressly excluded by the terms of this
Agreement), whether now owned or hereafter acquired or existing and wherever
located (collectively, the “Pledged Collateral”):

(a)all of the issued and outstanding common stock of the Borrower, any other
equity interests in the Borrower and any other Capital Stock in or relating to
the Borrower, including, for the avoidance of doubt, all voting rights connected
therewith or related thereto, and the certificates, if any, representing any of
the foregoing (collectively, the “Equity and Other Interests”), and together
with all cash, securities, dividends, Proceeds and other property whether
constituting Investment Property, Accounts, Documents, General Intangibles
and/or Instruments or otherwise at any time and from time to time received,
receivable or otherwise distributed or distributable in respect of or in
exchange for any and all of the Equity and Other Interests;

(b)to the extent not included in clause (a) above, any and all rights and
remedies of Pledgor under any of the Organizational Documents of Borrower,
including the right to enforce any and all representations, warranties,
covenants, obligations, agreements and indemnities of any party thereto made to
or for the benefit of, or that otherwise inure to the benefit of, Pledgor;

(c)all securities hereafter delivered in substitution for or in addition to any
and all of the Equity and Other Interests, and all certificates and instruments
representing or evidencing such securities and all cash, securities, dividends,
Proceeds and other property at any time and from time to time received,
receivable or otherwise distributed or distributable in respect of or in
exchange for any or all of the Equity and Other Interests;

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(d)all additional equity interests of the Borrower or other Capital Stock of the
Borrower, as applicable, from time to time acquired by Pledgor in any manner,
and the certificates (if any) representing such additional equity interests or
other Capital Stock, as applicable (all of which shall constitute part of the
Pledged Interests), and all options, warrants, dividends, cash instruments and
other rights and options from time to time received, receivable or otherwise
distributed or distributable in respect of or in exchange for any or all of such
equity interests or other Capital Stock, as applicable;

(e)all books and records (including credit files, computer programs, printouts
and other computer materials and records) of Pledgor pertaining to any of the
Pledged Collateral;

(f)the profits and losses of Borrower and Pledgor’s right as a shareholder of
the Borrower, and as a holder of any other Capital Stock of the Borrower, in
each case, to receive distributions of the assets of the Borrower upon complete
or partial liquidation or otherwise; and

(g)all cash and non-cash Proceeds and products of the foregoing, and all
dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed or distributable when Pledged Collateral or
Proceeds are sold, leased, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes, without
limitation, all rights to payment, including return premiums, with respect to
any insurance relating thereto.

Section 2.02Delivery of Certificates, Instruments, Etc.  Pledgor shall deliver
to Lender concurrently with the execution and delivery of this Agreement, all
original certificates, instruments and other documents then held, if any,
evidencing or representing the Pledged Collateral or any part thereof, together
with copies of the respective Organizational Documents in each case accompanied
by, if applicable, a duly executed instrument of transfer executed in blank in
respect of each of the respective Pledged Interests and shall deliver to Lender
such UCC financing statements as Lender deems necessary to ensure Lender the
benefits of the first priority Lien on and to the Pledged Collateral.

Section 2.03Release of Security Interest.  Upon the Payment in Full, the
security interest and Liens granted hereby shall automatically terminate, all
rights to the Pledged Collateral granted hereunder shall revert to the Pledgor
and Lender shall promptly return the original certificate(s) then being held by
Lender, together with any original instruments of transfer and other similar
documents then being held by Lender, if any; provided that Lender may retain
copies of any of the foregoing documents.  When so released, the Pledged
Collateral shall be free and clear of any Lien created hereunder or under the
other Loan Documents in favor of Lender.  Upon such termination and at the
written request of the Pledgor, and at the reasonable cost and expense of
Pledgor, Lender shall promptly execute or otherwise authorize a satisfaction of
this Agreement and such instruments, documents or agreements as are reasonably
necessary or desirable to terminate, discharge and remove of record any
documents constituting public notice of this Agreement and the security
interests and assignment granted hereunder and shall deliver or cause to be
delivered to Pledgor all property (if any), including Monies, of Pledgor
constituting Pledged Collateral then held by Lender.

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Section 2.04Pledgor Remains Liable.  Anything herein to the contrary
notwithstanding, (a) Pledgor shall remain liable under the respective
Organizational Documents to the extent set forth therein and shall perform all
of its respective duties and obligations thereunder to the same extent as if
this Agreement had not been executed; (b) the exercise by Lender of any of the
rights hereunder shall not release Pledgor from any of its duties or obligations
under any of the Organizational Documents; and (c) Lender shall not have any
obligation or liability under any of the Organizational Documents by reason of
this Agreement, nor shall Lender be obligated to perform any of the obligations
or duties of the Pledgor thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder; provided that, upon foreclosure of the
Pledged Interests, Lender and any other transferee of the Pledged Collateral
shall take the same subject to the Organizational Documents.

ARTICLE III

REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR

Section 3.01Representations and Warranties.  Pledgor makes the representations
and warranties set forth below to Lender on the date hereof:

(a)General Representations and Warranties.  Pledgor hereby represents and
warrants that the representations and warranties set forth in Sections 7.02(a)
through (f) of the Loan Agreement are true and correct and such representations
and warranties are hereby made herein by Pledgor as though set forth herein in
full.

(b)Title to Pledged Collateral.

(i)Pledgor is the sole owner of all of the Pledged Collateral, beneficially and
of record, free and clear of any Liens other than Permitted Liens.  The Pledged
Collateral is not subject to any option to purchase or similar rights of any
kind.

(ii)Pledgor has full power and authority to enter into this Agreement.

(iii)There are no restrictions upon the voting rights connected with or relating
to, or upon the transfer of, the Pledged Interests other than as arising
pursuant to this Agreement and the other Loan Documents.

(iv)Pledgor has the right to vote, pledge and grant a security interest in or
otherwise transfer the respective Pledged Interests free of any Liens other than
Permitted Liens.

(c)Perfection.

(i)Upon (x) the execution and delivery of this Agreement, (y) the filing of UCC
financing statements naming Pledgor as the debtor and Lender as the secured
party in the office of the Secretary of State of Delaware, and (z) in the case
of certificated Pledged Collateral, in addition to the filing of the UCC
financing statements, the delivery to Lender of the certificates representing
the Pledged Collateral and instruments of transfer relating thereto required
hereunder and, if applicable, the delivery to the Lender of

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each Control Acknowledgment required hereunder, Lender will have a valid,
perfected, continuing, first-priority security interest in or lien on,
respectively, the Pledged Collateral.

(ii)All instruments of transfer referred to in Sections 2.01(a) and 2.02, if any
as of the date hereof, are duly executed and give the Lender the authority they
purport to confer.

(iii)The grant and perfection of the security interests in the Pledged Interests
and other Pledged Collateral for the benefit of Lender, in accordance with the
terms hereof are not made in violation of the registration requirements of the
Securities Act 1933 (the “Securities Act”), any applicable provisions of other
federal securities laws, state securities or “Blue Sky” laws, foreign securities
law, or applicable general corporation law or any other Applicable Law.

(d)Principal Place of Business.  The sole chief executive office and sole
principal place of business of Pledgor, as of the date hereof, is located at 75
Park Plaza, 4th Floor, Boston, MA 02116.  Pledgor’s State of formation or
organization, as of the date hereof, is as set forth in the preamble hereto.

Section 3.02Covenants.  Pledgor covenants and agrees with Lender as set forth
below:

(a)Defense of Title.  Pledgor shall defend its title to the Pledged Collateral
against all claims of all Persons whomsoever, except with respect to Permitted
Liens.

(b)Additional Liens.  Pledgor shall not (i) permit any Lien to be created or
exist with respect to the Pledged Collateral other than Permitted Liens, or
(ii) agree to amend, modify or supplement any Organizational Document, except as
expressly permitted under the Loan Agreement.

(c)Change in Location of Principal Place of Business.  Pledgor shall not
relocate its chief executive office and/or principal place of business to a new
location except in accordance with the Loan Agreement.

(d)Payment of Taxes.  Pledgor shall pay all material Taxes of any kind imposed
on or in respect of its income or assets that are due and payable except for
Taxes being contested in good faith by appropriate proceedings and for which
adequate reserves are maintained in accordance with GAAP.

(e)Deliveries.  Pledgor agrees to execute and deliver to Borrower a control
acknowledgment (“Control Acknowledgment”) substantially in the form of Exhibit B
hereto.  Pledgor shall cause Borrower to acknowledge in writing its receipt and
acceptance thereof and, if applicable, shall deliver a copy of such Control
Acknowledgment and the receipt and acceptance thereof to the Lender.  Such
Control Acknowledgment shall instruct Borrower to follow instructions from
Lender without Pledgor’s consultation or consent after the occurrence and during
the continuance of an Event of Default.

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Section 3.03Protection of Pledged Collateral.  Pledgor will not create, permit
or suffer to exist, and will defend the Pledged Collateral against and take such
other action as is necessary to remove, any Lien on such Pledged Collateral
other than Permitted Liens, and if Pledgor fails to do so, Lender may, without
waiving or releasing any obligation or liability of Pledgor hereunder or any
Event of Default, at any time thereafter (but shall be under no obligation to),
make such payment or any part thereof, obtain such discharge or otherwise defend
Pledgor’s title to such Pledged Collateral.  All sums so paid by Lender and any
reasonable expenses incurred by Lender in connection therewith, including
reasonable attorneys’ fees, court costs, expenses and other charges relating
thereto, shall be payable by Pledgor to Lender promptly and shall be deemed
additional obligations secured by the Pledged Collateral and to the extent not
paid shall be reimbursable as expenses of administration and enforcement as
provided for under Section 4.06 of the Loan Agreement.

Section 3.04No Pledgor Sale or Pledge of Pledged Collateral. Pledgor shall not
sell, assign, transfer or otherwise dispose of, or pledge, hypothecate or
otherwise encumber, directly or indirectly, whether by operation of law or
otherwise (except with respect to Permitted Liens or to the extent expressly
permitted by this Agreement or the other Loan Documents), any of the Pledged
Collateral or any interest therein.  

Section 3.05Further Assurances, Preservation and Perfection of Security
Interest.  (a)  At its own expense, Pledgor shall do all such acts, and shall
execute and deliver to Lender all such certificates, instruments and other
documents and shall do and perform or cause to be done all matters and such
other things necessary or advisable to be done as Lender may reasonably request
from time to time in order to give full effect to this Agreement, and for the
purpose of effectively perfecting, maintaining and preserving Lender’s security
interest and the benefits intended to be granted to Lender hereunder.  To the
extent permitted by Applicable Law, Pledgor hereby authorizes Lender, during the
term of this Agreement, to file, in the name of Pledgor or otherwise, UCC
financing statements, including continuation statements, which Lender in its
reasonable discretion may deem necessary or appropriate for the purpose
specified above; provided, however, that such financing statements shall
indicate the Pledged Collateral as defined herein or words of similar effect, or
as being of an equal or lesser scope, or with greater detail, all as reasonably
determined by Lender.

(b)If Pledgor fails to perform any act required by this Agreement, Lender may,
but shall not be obligated to, perform or cause the performance of such act, and
the reasonable expenses of Lender incurred in connection therewith shall be
governed by Section 5.07 hereof.

Section 3.06Rights of Pledgor.  Unless an Event of Default shall have occurred
and be continuing and except as otherwise prohibited, limited or otherwise
governed by the Loan Agreement and other Loan Documents, Pledgor shall be
entitled to (a) exercise any and all voting and other consensual rights
pertaining to the Pledged Interests or any part thereof for any purpose not
inconsistent with the terms of this Agreement or the other Loan Documents and
which, in the Lender’s reasonable judgment, shall not impair the Pledged
Collateral, (b) receive and use, free and clear of any Lien created hereby or
any security interest granted by Pledgor to Lender hereunder, for any purpose,
any distributions actually made, and any allocations actually made, with respect
to the Pledged Interests (whether as a distribution of net cash flow or
otherwise), (c) retain its books and records pertaining to the Pledged
Collateral and (d) all rights and benefits of a shareholder, in the Borrower,
subject to the limitations set forth in this Agreement.

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Section 3.07Preservation of Pledged Collateral.  Pledgor will not allow any
Contributor Event of Default (as defined in the Contribution Agreement) under
clause (d) of the definition thereof to occur in respect of the Pledged
Collateral, and shall fully perform or cause to be performed when due all of its
obligations under and in respect of the Pledged Collateral.

(a)Maintenance.  Pledgor shall acquire and shall assemble, maintain and have
available a complete file relating to the Pledged Interests, including all
material statements and other information delivered to Pledgor pursuant to the
Organizational Documents.  Pledgor shall maintain all such papers, records and
files not in the possession of Lender in good and complete condition and shall
preserve them against loss.

(b)Pledgor to Hold Records for Lender.  For so long as Lender has a security
interest in any Pledged Collateral, Pledgor will hold or cause to be held any
paper, record or file related to such Pledged Collateral for Lender.

(c)Lender’s Rights of Inspection.  Upon reasonable advance notice from Lender,
and during regular business hours, Pledgor shall make any or all such papers,
records or files related to the Pledged Collateral available to Lender in order
that Lender may examine any such papers, records and files, either by its
employees or by agents or contractors, or both, and make copies of all or any
portion thereof; provided that, excluding any such examinations during the
continuation of an Event of Default, Lender shall not exercise such rights more
often than once during any calendar quarter.

The representations and warranties set forth in this Article III shall survive
the execution and delivery of this Agreement, but, subject to Section 6.12 of
this Agreement, shall terminate upon the Payment in Full.

ARTICLE IV

NEGATIVE PLEDGE AGREEMENT

Section 4.01Negative Covenants.  Pledgor covenants and agrees that until the
Payment in Full, Pledgor will not, without the written consent of Lender:

(i)sell, assign, pledge, grant any Lien (other than Permitted Liens) on,
transfer, dispose of or otherwise encumber the Pledged Collateral or any part
thereof, including, without limitation, entering into any lock-up or any other
arrangement with respect to the Pledged Collateral, except as permitted by
Section 3.06 of this Agreement;

(ii)vote or take any other action to amend or modify the Borrower’s
Organizational Documents, except as expressly permitted under the Loan
Agreement; or

(iii)vote to enable, or take any other action to permit, or fail to take any
available action to prevent, Borrower to issue any equity interests or other
Capital Stock, or to issue any other securities convertible into or granting the
right to purchase or exchange for any equity interests or other Capital Stock,
as applicable, provided that at all times all Equity and Other Interests shall
be covered by the pledge hereunder.

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ARTICLE V

LENDER RIGHTS AND REMEDIES

Section 5.01Remedies.  (a)  Should any Event of Default occur and be continuing,
Lender is hereby authorized and empowered, at its election, to do any of the
following without liability (except to the extent liability results from the
gross negligence or willful misconduct of Lender) except to account for money
and other property actually received by it, but Lender shall have no duty to
exercise any such right, privilege or options and shall not be responsible for
any failure to so or delay in so doing:

(i)to transfer and register in its or its nominee’s name the whole or any part
of the Pledged Collateral, including by means of the completion of the
instruments of transfer referred to in Sections 2.01, 2.02 or 3.02(e) or a
Control Acknowledgment;

(ii)to exercise all voting rights with respect to the Pledged Collateral or a
Control Acknowledgment;

(iii)to demand, sue for, collect, receive and give acquittance for any and all
cash distributions (including distributions to which Pledgor would otherwise be
entitled pursuant to Section 3.06 of this Agreement) or monies due or to become
due upon or by virtue thereof, and to settle, prosecute or defend any action or
proceeding with respect thereto;

(iv)to sell in one or more sales (public or private) the whole or any part of
the Pledged Collateral or otherwise to transfer or assign the same, in each
case, however, to the extent permitted and in the manner provided in the UCC;

(v)to receive and retain all distributions on the Pledged Collateral;

(vi)to otherwise enforce and act with respect to the Pledged Collateral or the
Proceeds as though Lender were the outright owner thereof;

(vii)to exercise all other rights and remedies available under law or in equity;
and

(viii)upon the exercise by Lender of any right, privilege or option pertaining
to the Pledged Interests, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Interests with any committee, depository,
transfer agent, registrar or other designated agency upon such terms and
conditions as it may determine.  Lender is hereby granted a power of attorney to
effect the aforesaid registration in the name of the Lender or its nominee of
the Pledged Interests.

(b)In the event of any proposed disposition of the Pledged Collateral as
provided in Section 5.01(a)(iv), Lender shall give to Pledgor at least ten (10)
Business Days prior written notice of the time and place of any public sale of
the Pledged Collateral or of the time after which any private sale (to the
extent permitted by Applicable Law) or any other intended disposition is to be
made, unless a longer period is required by Applicable Law.  Pledgor hereby
acknowledges that ten (10) Business Days prior written notice of such sale or
sales shall be reasonable notice.  Except as otherwise expressly provided in the
Loan Documents or the UCC,

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Lender may enforce its rights hereunder without any other notice and without
compliance with any other condition precedent now or hereunder imposed by
statute, rule of law or otherwise (all of which are hereby expressly waived by
Pledgor, to the fullest extent permitted by law).  Lender may buy any part or
all of the Pledged Collateral at any public sale conducted in accordance with
the UCC and as set forth herein.

(c)Pledgor recognizes that Lender may be unable to effect a public sale of the
Pledged Collateral, or any part thereof by reason of certain prohibitions
contained in the Securities Act, and other Applicable Laws, but may be compelled
to resort to one or more private sales thereof (to the extent permitted by
Applicable Law) to a restricted group of purchasers and may otherwise be
required to impose additional limitations on sales as a result thereof.  Pledgor
agrees that any such private sales may be at prices and other terms less
favorable to the seller than if sold at public sales and that such private sales
shall not by reason thereof be deemed not to have been made in a commercially
reasonable manner.  Pledgor agrees to use its commercially reasonable efforts to
cause the Borrower to execute and deliver all such instruments and documents and
to do or cause to be done all such other acts and things as may be necessary or,
in the reasonable opinion of Lender, advisable (i) to cause the Pledged
Collateral, or any part thereof, to be exempt from registration under the
provisions of the Securities Act, (ii) to amend such instruments and documents
which, in the opinion of Lender, are necessary or advisable to meet the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto, and (iii) to make any
sales of any portion or all of the Pledged Collateral pursuant to this
Section 5.01 valid and binding and in compliance with any and all Applicable
Laws, provided that nothing herein shall require or imply that the Pledged
Interests are to be registered under the Securities Act or other similar
laws.  Pledgor further agrees to use its commercially reasonable efforts to
cause Borrower to comply with the provisions of the state securities or “Blue
Sky” laws of any jurisdiction which the Lender shall designate, to the extent
that any such laws apply under circumstances under which the Pledged Collateral
is exempt from registration under the provisions of the Securities Act.

Section 5.02Limitation on Duties Regarding Pledged Collateral.  Lender’s sole
duty with respect to the custody, safekeeping and physical preservation of the
Pledged Collateral in its possession, if any, under Section 9‑207 of the UCC or
otherwise, shall be to deal with it in a commercially reasonable manner as
Lender deals with similar shares of a corporation and equity interests,
certificates, securities and other similar property for its own
account.  Neither Lender nor any of its directors, officers, partners, members,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Pledged Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Pledged Collateral upon
the request of Pledgor or otherwise, except to the extent liability results from
the gross negligence or willful misconduct of Lender.  Nothing in this Agreement
shall require the Lender to demand, collect or realize upon any of the Pledged
Collateral in any order of priority and Pledgor acknowledges and agrees that the
Lender, acting on its behalf, may seek to demand, collect or realize on the
whole or any part of the Pledged Collateral, without first seeking such demand,
collection, or realization upon any other collateral for the Loan.

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Section 5.03Prejudgment Remedy Provision.  After the occurrence and during the
continuance of an Event of Default, in the event of any legal action between
Pledgor and Lender hereunder, Pledgor expressly waives, to the extent permitted
by law, any and all rights Pledgor may have under the law as now constituted or
hereafter amended that may constitute a limitation on prejudgment remedies, and
Lender may invoke any prejudgment remedy available to it, including garnishment,
attachment, foreign attachments and replevin, with respect to the Pledged
Collateral, to enforce the provisions of this Agreement.

Section 5.04Application of Proceeds.  Except as otherwise herein or in the other
Loan Documents provided, Lender shall apply any Proceeds from time to time held
by it and the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable out-of-pocket
costs and expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Pledged Collateral or in any way relating to the
Pledged Collateral or the rights of Lender hereunder, including, without
limitation, reasonable attorney’s fees and disbursements, to the payment in
whole or in part of the Obligations, in such order as Lender may elect, and only
after such application and after the payment by Lender of any other amount
required by any provision of law, including, without limitation, Section 9‑615
of the UCC, need Lender account for the surplus, if any, to Pledgor.

Section 5.05Non-Recourse.  Except as otherwise provided in this Agreement or in
any other of the Loan Documents, no recourse shall be had against Pledgor or any
incorporator, affiliate, shareholder, stockholder, member, officer, employee or
director of Pledgor by the enforcement of any assessment or by any legal or
equitable proceeding, in respect of any of the Obligations, it being expressly
agreed and understood that the Obligations, will be satisfied solely out of the
Pledged Collateral and any other collateral available to the Lender for the
Obligations under any other Loan Document.

Section 5.06Appointment of Lender as Pledgor’s Lawful Attorney.  Pledgor
irrevocably designates, makes, constitutes and appoints Lender (and all Persons
designated by Lender) as its true and lawful proxy and attorney-in-fact (coupled
with an interest) upon the occurrence and during the continuance of an Event of
Default to take the following actions:

(a)To Endorse Pledgor’s Name.  At such time or times hereafter as Lender or its
agent in its sole discretion may determine, in Pledgor’s or Lender’s name, to
endorse Pledgor’s name on any checks, notes, drafts, instruments, documents or
any other payment relating to the Pledged Collateral and/or Proceeds which come
into the possession of Lender or come under Lender’s control;

(b)To Sign Pledgor’s Name to Perfection Documents.  To the extent permitted by
law, to sign Pledgor’s name on any documents (including authorizing the filing
of financing statements and continuations thereof) necessary or desirable for
the purpose of maintaining or achieving the perfection of a security interest in
the Pledged Collateral; and

(c)To Sign Pledgor’s Name on Other Documents.  To the extent permitted by law,
to sign Pledgor’s name to any document necessary or appropriate in order to
permit Lender to fully exercise its rights under Section 5.01.

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Section 5.07Reimbursement.  All reasonable and documented sums expended by
Lender in connection with the exercise of any right or remedy provided for
herein shall be and shall remain the obligation of Pledgor.  At the option of
Lender, all such reasonable sums may be paid from the Pledged Collateral or may
be advanced by Lender, in which event they shall be deemed to have been advanced
to Pledgor and shall be reimbursed by Pledgor pursuant to Section 4.06 of the
Loan Agreement.

Section 5.08Lender’s Powers for Lender’s Sole Benefit.  The powers conferred on
Lender hereunder are solely for Lender’s benefit, and do not impose any duty on
Lender to exercise any such powers.  Pledgor waives, to the fullest extent
permitted by law, all rights whatsoever against Lender for any loss, expense,
liability or damage suffered by Pledgor as a result of actions taken pursuant to
this Agreement, including those arising under any “mortgagee in possession”
doctrine or the like, except to the extent such losses, expenses, liabilities or
damages result from the gross negligence or willful misconduct of Lender, or to
the extent otherwise expressly provided herein.

Section 5.09Waiver of Redemption and Deficiency Rights.  Pledgor hereby waives,
to the fullest extent permitted by law, every statute of limitation, any right
of redemption, any moratorium or redemption period, and any right which Pledgor
may have to direct the order in which any of the Pledged Collateral shall be
disposed of in the event of any disposition thereof pursuant hereto, except as
otherwise expressly provided herein.

ARTICLE VI

MISCELLANEOUS

Section 6.01Security Agreement.  This Agreement is intended to be a security
agreement pursuant to the UCC for any and all of the Pledged Collateral
purported to be covered by this Agreement, and, prior to the occurrence of and
continuation of an Event of Default hereunder, any assignment of the Pledged
Collateral by the Pledgor pursuant to this Agreement is an assignment for
security purposes only.

Section 6.02Remedies Cumulative.  The rights, remedies and benefits of Lender
herein expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which Lender may have under this Agreement or any other
Loan Document, at law, in equity, by statute or otherwise.  Without limiting the
generality of the foregoing, Lender shall have all rights and remedies of a
secured party under Article 9 of the UCC in each applicable jurisdiction.

Section 6.03Security Interest Absolute.  All rights of Lender hereunder, the
grant of a security interest in the Pledged Collateral and all obligations of
Pledgor hereunder, shall be absolute and unconditional irrespective of (a) any
lack of validity or enforceability of the Organizational Documents or Loan
Documents, (b) any change in time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any release, amendment or
waiver of or any consent to any departure from the Loan Agreement or any other
of the Loan Documents, (c) any exchange, release or nonperfection of any other
collateral, or any release, amendment or waiver of or consent to or departure
from any guarantee, for all or any of the Obligations, or (d) any other similar
circumstance which might otherwise constitute a defense available to, or a
discharge of, Pledgor in respect of this Agreement.

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Section 6.04No Delay; Waivers.  No delay on the part of Lender in exercising any
power or right hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any power or right hereunder preclude other or further
exercise thereof or the exercise of any other power or right.  Lender shall not
be deemed to have waived any rights hereunder unless such waiver shall be in
writing and signed by Lender.

Section 6.05Further Assurances.  Each party to this Agreement shall execute such
assignments, endorsements and other instruments and documents and shall give
such further assurances as shall be necessary to perform its obligations
hereunder.

Section 6.06Waivers and Amendments.  This Agreement may be amended, superseded
or canceled; and the terms hereof may be waived, only by a written instrument
signed by authorized representatives of the parties hereto or, in the case of a
waiver, by an authorized representative of the party waiving compliance.  No
such written instrument shall be effective unless it recites that it is intended
to amend, supersede or cancel this Agreement or to waive compliance with one or
more of the terms hereof, as the case may be.

Section 6.07Notices.  All notices, consents, approvals and requests required or
permitted hereunder shall be given in writing and shall be delivered in
accordance with the procedures set forth in Section 12.03 of the Loan Agreement.

Section 6.08Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING GENERAL OBLIGATIONS
LAW SECTIONS 5-1401 AND 5-1402 BUT OTHERWISE WITHOUT GIVING EFFECT TO LAWS
CONCERNING CONFLICT OF LAWS OR CHOICE OF FORUM THAT WOULD REQUIRE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION.

 

Each party hereto irrevocably submits to the jurisdiction of the courts of the
State of New York and of the United States sitting in the State of New York, and
of the courts of its own corporate domicile with respect to any and all
Proceedings.  Each of the parties irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any such Proceeding and any claim that any such Proceeding has been
brought in an inconvenient forum.  Any process or summons for purposes of any
proceeding may be served on Pledgor by mailing a copy thereof by registered
mail, or a form of mail substantially equivalent thereto, addressed to it at its
address as provided for notices hereunder.

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Section 6.09Waiver of Jury Trial.  Each Party hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any action, proceeding, claim or counterclaim arising out of or relating to
THIS AGREEMENT or the transactions contemplated under THIS AGREEMENT (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY
HERETO WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 6.09.

Section 6.10Binding Agreement; Assignments.  This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.  Pledgor shall not assign this Agreement or
any interest herein or in the Pledged Collateral, or any part thereof, or any
cash or property held by Lender as Pledged Collateral under this Agreement,
except with the prior written consent of Lender.  Any purported assignment in
violation of this Section shall be null and void.

Section 6.11Additional Covenants of Pledgor.  

(a)Application of Distributions.  No amounts received by or distributed to
Pledgor shall be permitted if same would violate the requirements of the Loan
Agreement or the Organizational Documents.

(b)Further Assurances.  Pledgor shall at no cost or expense to Lender, promptly
and duly execute and deliver such further instruments and documents and take
such further actions as Lender may reasonably request to carry out and obtain
and preserve the full benefits of this Agreement and of the rights and powers
granted herein.

Section 6.12Restoration or Set Aside.  If, for any reason, any portion of any
payment hereunder to Lender is set aside or restored, whether voluntarily or
involuntarily, after the making thereof, then the obligation intended to be
satisfied thereby shall be revived and shall continue in full force and effect
as if said payment or payments had not been made (and Pledgor’s obligations and
liabilities to Lender under this Agreement shall be reinstated to such extent
and this Agreement and any Pledged Collateral shall remain in full force and
effect (or shall be reinstated) to such extent), and the full amount Lender is
required to repay, plus any and all reasonable and documented costs and expenses
(including reasonable and documented attorneys’ fees and expenses) paid by
Lender in connection therewith, shall constitute additional Obligations.

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Section 6.13Severability.  Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof in that jurisdiction or affecting the validity or
enforceability of such provision in any other jurisdiction.  To the extent
permitted by Applicable Law, Grantor hereby waives any provision of Applicable
Law that renders any provision of this Security Agreement prohibited or
unenforceable in any respect.

Section 6.14Section Headings.  Section headings used herein are for convenience
of reference only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.

Section 6.15Counterparts; Delivery.  This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.  Delivery of an executed
counterpart of a signature page of this Agreement in Portable Document Format
(PDF) or by facsimile transmission shall be effective as delivery of a manually
executed original counterpart of this Agreement.

Section 6.16No Third Party Beneficiaries.  This Agreement is entered into for
the benefit of the parties hereto, and no third parties shall have any direct
rights hereunder.

Section 6.17Entire Agreement.  This Agreement, taken together with the other
Loan Documents, supersedes all prior written agreements and understandings
between the parties hereto with respect to the subject matter hereof, whether
express or implied, written or oral.

Section 6.18Additional Consents.  Pledgor agrees to cause Borrower to
(i) consent to (A) the pledge by Pledgor to Lender of the Pledged Interests, (B)
upon the occurrence and during the continuance of an Event of Default and the
exercise of remedies by Lender in accordance with the terms hereof and
applicable Law, (i) the transfer of the Pledged Interests and (ii) the right to
exercise all voting and management rights appurtenant or relating to that
Pledged Interest in each case, by or in lieu of, foreclosure of the pledge (it
being agreed that Lender may, in its sole discretion foreclose solely on the
voting or management rights) and (C) upon the occurrence and during the
continuance of an Event of Default  and the aforesaid transfer of the Pledged
Interests, the change in control of Borrower and (ii) acknowledge and agree that
the foreclosure of the Pledged Interests by Lender or other transfer of the
Pledged Interests in lieu of foreclosure, shall not constitute an unpermitted
transfer under any of the Organizational Documents.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Pledge and Security
Agreement to be duly executed as of the date first above written.

 

 

PLEDGOR:

 

 

 

PARATEK PHARMACEUTICALS, INC., a

 

Delaware corporation

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

Title:

 

 

LENDER:

 

 

 

HEALTHCARE ROYALTY PARTNERS III, L.P.

 

 

 

By:

 

HealthCare Royalty GP III, LLC,
its general partner

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

Title: Founding Managing Director

 

 

 

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ACKNOWLEDGMENT

The undersigned hereby acknowledges receipt of a copy of the foregoing Pledge
and Security Agreement, to the extent required by Applicable Law agrees promptly
to note on its books the security interests granted under such Pledge and
Security Agreement, agrees that it will comply with instructions originated by
the Lender without further consent by Pledgor, confirms the consents,
acknowledgments and agreements in Section 6.18 and waives any rights or
requirement at any time hereafter to receive a copy of such Pledge and Security
Agreement in connection with the registration of any Pledged Collateral in the
name of the Lender or its nominee or the exercise of voting rights by the Lender
or its nominee.

 

 

PARATEK ROYALTY CORPORATION

 

 

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

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EXHIBIT A

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

 

Ex. A-2

--------------------------------------------------------------------------------

CWT DRAFT 12/22/2018

EXHIBIT B

CONTROL ACKNOWLEDGMENT

 

PLEDGED SUBSIDIARY:

EQUITY INTEREST OWNER:

 

 

PARATEK ROYALTY CORPORATION

PARATEK PHARMACEUTICALS, INC.

Reference is hereby made to that certain Pledge and Security Agreement, dated as
of [________], 2019 (the “Pledge Agreement”), between PARATEK PHARMACEUTICALS,
INC., a Delaware corporation ( the “Pledgor”), the sole shareholder of PARATEK
ROYALTY CORPORATION, a Delaware corporation (the “Pledged Subsidiary”) and
HEALTHCARE ROYALTY PARTNERS III, L.P., a Delaware limited partnership (the
“Lender”).  Capitalized terms used but not otherwise defined herein shall have
the meanings ascribed thereto in the Pledge and Security Agreement.

Pledged Subsidiary is hereby instructed by Pledgor that all of Pledgor’s right,
title and interest in and to all of Pledgor’s rights in connection with any
equity interests in Pledged Subsidiary now and hereafter owned by Pledgor are
subject to a pledge and security interest in favor of Lender.  Pledgor hereby
instructs the Pledged Subsidiary to act upon any instruction delivered to it by
the Lender with respect to the Pledged Collateral without further consent from
Pledgor, and, by its execution hereof, the Pledged Subsidiary agrees to do so.

Pledged Subsidiary, by its written acknowledgement and acceptance hereof, hereby
acknowledges receipt of a copy of the aforementioned Pledge and Security
Agreement and agrees promptly to note on its books the security interest granted
under such Pledge and Security Agreement.  Pledged Subsidiary also waives any
rights or requirements at any time hereafter to receive a copy of such Pledge
and Security Agreement in connection with the registration of any Pledged
Collateral in the name of the Lender or its nominee or the exercise of voting
rights by the Lender or its nominee.

[The remainder of this page is intentionally blank.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Control Acknowledgment
to be duly executed as of the date first above written.

 

 

PLEDGOR:

 

 

 

PARATEK PHARMACEUTICALS, INC., a

 

Delaware corporation

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

Title:

 

 

PLEDGED SUBSIDIARY:

 

 

 

PARATEK PHARMACEUTICALS, INC., a

 

Delaware corporation

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

Title:

 

 

LENDER:

 

 

 

HEALTHCARE ROYALTY PARTNERS III,

 

L.P., a Delaware limited partnership

 

 

 

By:

 

HealthCare Royalty GP III, LLC, its general partner

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

Title: Founding Managing Director

 

 

 

Ex. B-2

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EXHIBIT I-1

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Loan Agreement dated as of February 26, 2019 (as
amended, supplemented or otherwise modified from time to time, the “Loan
Agreement”), among HealthCare Royalty Partners III, L.P., as lender (“Lender”),
and Paratek Royalty Corporation, a Delaware corporation, as borrower
(“Borrower”).  

Pursuant to the provisions of Section 5.01 of the Loan Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of
which it is providing this certificate, (ii) it is not a bank within the meaning
of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder
of Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it
is not a controlled foreign corporation related to Borrower as described in
Section 881(c)(3)(C) of the Code.

The undersigned has furnished Borrower with a certificate of its non-U.S. Person
status on IRS Form W-8BEN or IRS Form W-8BEN-E.  By executing this certificate,
the undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform Borrower, and (2) the
undersigned shall have at all times furnished Borrower with a properly completed
and currently effective certificate in either the calendar year in which each
payment is to be made to the undersigned, or in either of the two calendar years
preceding such payments.

Unless otherwise defined herein, terms defined in the Loan Agreement and used
herein shall have the meanings given to them in the Loan Agreement.

 

By:

 

 

 

 

Name:

 

 

Title:

Date: ________ __, 20[  ]

 

 

 

 

-I-1-

--------------------------------------------------------------------------------

 

EXHIBIT I-2

Form Of U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Loan Agreement dated as of February 26, 2019 (as
amended, supplemented or otherwise modified from time to time, the “Loan
Agreement”), among HealthCare Royalty Partners III, L.P., as lender (“Lender”),
and Paratek Royalty Corporation, a Delaware corporation, as borrower
(“Borrower”).  

Pursuant to the provisions of Section 5.1 of the Loan Agreement, the undersigned
hereby certifies that (i) it is the sole record and beneficial owner of the
participation in respect of which it is providing this certificate, (ii) it is
not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is
not a ten percent shareholder of Borrower within the meaning of Section
871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation
related to Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with a certificate of its
non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E.  By executing
this certificate, the undersigned agrees that (1) if the information provided on
this certificate changes, the undersigned shall promptly so inform such Lender
in writing, and (2) the undersigned shall have at all times furnished such
Lender with a properly completed and currently effective certificate in either
the calendar year in which each payment is to be made to the undersigned, or in
either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Loan Agreement and used
herein shall have the meanings given to them in the Loan Agreement.

 

By:

 

 

 

 

Name:

 

 

Title:

Date: ________ __, 20[  ]

 

 

-I-2-

--------------------------------------------------------------------------------

 

EXHIBIT I-3

Form Of U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Loan Agreement dated as of February 26, 2019 (as
amended, supplemented or otherwise modified from time to time, the “Loan
Agreement”), among HealthCare Royalty Partners III, L.P., as lender (“Lender”),
and Paratek Royalty Corporation, a Delaware corporation, as borrower
(“Borrower”).  

Pursuant to the provisions of Section 5.1 of the Loan Agreement, the undersigned
hereby certifies that (i) it is the sole record owner of the participation in
respect of which it is providing this certificate, (ii) its direct or indirect
partners/members are the sole beneficial owners of such participation, (iii)
with respect such participation, neither the undersigned nor any of its direct
or indirect partners/members is a bank extending credit pursuant to a loan
agreement entered into in the ordinary course of its trade or business within
the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or
indirect partners/members is a ten percent shareholder of Borrower within the
meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or
indirect partners/members is a controlled foreign corporation related to
Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with IRS Form W-8IMY
accompanied by one of the following forms from each of its partners/members that
is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form
W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS
Form W-8BEN-E from each of such partner’s/member’s beneficial owners that is
claiming the portfolio interest exemption.  By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Lender and (2) the
undersigned shall have at all times furnished such Lender with a properly
completed and currently effective certificate in either the calendar year in
which each payment is to be made to the undersigned, or in either of the two
calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Loan Agreement and used
herein shall have the meanings given to them in the Loan Agreement.

 

By:

 

 

 

 

Name:

 

 

Title:

Date: ________ __, 20[  ]

 

-I-3-

--------------------------------------------------------------------------------

 

EXHIBIT I-4

Form of U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Loan Agreement dated as of February 26, 2019 (as
amended, supplemented or otherwise modified from time to time, the “Loan
Agreement”), among HealthCare Royalty Partners III, L.P., as lender (“Lender”),
and Paratek Royalty Corporation, a Delaware corporation, as borrower
(“Borrower”).  

Pursuant to the provisions of Section 5.1 of the Loan Agreement, the undersigned
hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as
any Note(s) evidencing such Loan(s)) in respect of which it is providing this
certificate, (ii) its direct or indirect partners/members are the sole
beneficial owners of such Loan(s) (as well as any Note(s) evidencing such
Loan(s)), (iii) with respect to the extension of credit pursuant to this Loan
Agreement or any other Loan Document, neither the undersigned nor any of its
direct or indirect partners/members is a bank extending credit pursuant to a
loan agreement entered into in the ordinary course of its trade or business
within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct
or indirect partners/members is a ten percent shareholder of Borrower within the
meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or
indirect partners/members is a controlled foreign corporation related to
Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished Borrower with IRS Form W-8IMY accompanied by one
of the following forms from each of its partners/members that is claiming the
portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY
accompanied by an IRS Form W-8BEN from each of such partner’s/member’s
beneficial owners that is claiming the portfolio interest exemption.  By
executing this certificate, the undersigned agrees that (1) if the information
provided on this certificate changes, the undersigned shall promptly so inform
Borrower, and (2) the undersigned shall have at all times furnished Borrower
with a properly completed and currently effective certificate in either the
calendar year in which each payment is to be made to the undersigned, or in
either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Loan Agreement and used
herein shall have the meanings given to them in the Loan Agreement.

 

By:

 

 

 

 

Name:

 

 

Title:

Date: ________ __, 20[  ]

 

 

 

 

-I-4-

--------------------------------------------------------------------------------

 

 

EXHIBIT J

 

 

FORM OF

 

OFFICER’S CERTIFICATE

 

 

 

J-1

--------------------------------------------------------------------------------

EXHIBIT J

Closing Date Certificate

 

Paratek Royalty Corporation

[____________  ___], 2019

The undersigned, being a duly elected and qualified Senior Officer Paratek
Royalty Corporation, a Delaware corporation (the “Borrower”), does hereby
certify, in his capacity as such and not in any individual capacity, pursuant to
Section 6.01(b)(i) of that certain Loan Agreement, dated as of February 21, 2019
(the “Loan Agreement”; capitalized terms used but not otherwise defined herein
shall have the meanings ascribed thereto in the Loan Agreement), between
Borrower and Healthcare Royalty Partners III, L.P., a Delaware limited
partnership (“Lender”), as of the date hereof (the “Closing Date”), that:

(A)

no event has occurred and is continuing that (i) constitutes a Default or an
Event of Default or a Prepayment Trigger or (ii) could reasonably be expected to
constitute a Material Adverse Effect (without giving effect to the cure period
applicable to a Prepayment Trigger based thereon), in each case both at the time
of, and immediately after giving effect to, the making of the Loan on the
Closing Date;

(B)

the representations and warranties made by Borrower in Article VII of the Loan
Agreement and in the other Loan Documents are true and correct in all material
respects as of the Closing Date, except to the extent that such representations
and warranties specifically refer to an earlier date, in which case they are
true and correct in all material respects as of such earlier date, before and
after giving effect to the Loan (except that any representation or warranty that
is qualified as to “materiality” or “Material Adverse Effect” is true and
correct in all respects);

(C)

all necessary governmental and third-party approvals, consents and filings,
including in connection with the Loan, the Security Agreement, the Contribution
Agreement and the other Loan Documents have been obtained or made and remain in
full force and effect;

(D)

the License Agreement is attached hereto as Annex A (including all amendments,
supplements or other modifications attached thereto) and is as assigned,
transferred and contributed to Borrower pursuant to the Contribution Agreement;
and

(E)

each of the other conditions precedent set forth in Section 6.01 of the Loan
Agreement to the obligation of Lender to make the Loan has been satisfied.

[Remainder of Page Intentionally Left Blank]

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this certificate as of the
Closing Date.

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

[Signature Page – Closing Date Certificate – Borrower]

--------------------------------------------------------------------------------

 

ANNEX A

 

LICENSE AGREEMENT

 

[Attached Hereto]

 

199525818 v4

--------------------------------------------------------------------------------

 

Closing Date Certificate

 

Paratek Pharmaceuticals, Inc.

[____________  ___], 2019

The undersigned, being a duly elected and qualified Senior Officer Paratek
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), does hereby
certify, in his capacity as such and not in any individual capacity, pursuant to
Section 6.01(b)(i) of that certain Loan Agreement, dated as of February 21, 2019
(the “Loan Agreement”; capitalized terms used but not otherwise defined herein
shall have the meanings ascribed thereto in the Loan Agreement), between Paratek
Royalty Corporation, a Delaware corporation and subsidiary of Company
(“Borrower”), and Healthcare Royalty Partners III, L.P., a Delaware limited
partnership (“Lender”), as of the date hereof (the “Closing Date”), that:

(A)

no event has occurred and is continuing that (i) constitutes a Default or an
Event of Default or a Prepayment Trigger or (ii) could reasonably be expected to
constitute a Material Adverse Effect (without giving effect to the cure period
applicable to a Prepayment Trigger based thereon), in each case both at the time
of, and immediately after giving effect to, the making of the Loan on the
Closing Date;

(B)

the representations and warranties of Company in Article VII of the Loan
Agreement and in the other Loan Documents are true and correct in all material
respects as of the Closing Date, except to the extent that such representations
and warranties specifically refer to an earlier date, in which case they are
true and correct in all material respects as of such earlier date, before and
after giving effect to the Loan (except that any representation or warranty that
is qualified as to “materiality” or “Material Adverse Effect” is true and
correct in all respects);

(C)

all necessary governmental and third-party approvals, consents and filings,
including in connection with the Loan, the Security Agreement, the Contribution
Agreement and the other Loan Documents have been obtained or made and remain in
full force and effect;

(D)

the License Agreement is attached hereto as Annex A (including all amendments,
supplements or other modifications attached thereto) and is as assigned,
transferred and contributed to Borrower pursuant to the Contribution Agreement;
and

(E)each of the other conditions precedent set forth in Section 6.01 of the Loan
Agreement to the obligation of Lender to make the Loan has been satisfied

 

[Remainder of Page Intentionally Left Blank]

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this certificate as of the
Closing Date.

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

[Signature Page – Closing Date Certificate – Company]

--------------------------------------------------------------------------------

 

ANNEX A

 

LICENSE AGREEMENT

 

[Attached Hereto]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

SCHEDULE 7.01

 

PATENTS

 

Omitted pursuant to Regulation S-K, Item 601(a)(5)

 

 

-Sch.-1-

--------------------------------------------------------------------------------

 

SCHEDULE 7.01(k)

 

COMMISSIONS OR BROKERS FEES

 

Pursuant to the Engagement Letter dated July 26, 2017, as amended between
Perella Weinberg Partners LP (“PWP”) and the Company (the “Engagement Letter”)
the Company engaged PWP to provide financial advisory services to the
Company.  Pursuant to the terms of the Engagement Letter, PWP will be entitled
to a fee upon the closing and funding of the Loan.

 

-Sch.-3-

--------------------------------------------------------------------------------

 

SCHEDULE 7.01(m)

 

RELEVANT NON-UNITED STATES JURISDICTIONS

 

The United Kingdom, France, Germany, Spain, Italy and Japan.

 

 

 

 

-Sch.-4-

 

--------------------------------------------------------------------------------

 

SCHEDULE 7.02(j)

 

COMMISSIONS OR BROKER’S FEES - COMPANY

 

Pursuant to the Engagement Letter dated July 26, 2017, as amended between
Perella Weinberg Partners LP (“PWP”) and the Company (the “Engagement Letter”)
the Company engaged PWP to provide financial advisory services to the
Company.  Pursuant to the terms of the Engagement Letter, PWP will be entitled
to a fee upon the closing and funding of the Loan.

-Sch.-5-

 

--------------------------------------------------------------------------------

 

 

SCHEDULE 7.02(m)

 

MATERIAL CONTRACTS – COMPANY OR SUBSIDIARIES

 

 

1.  The Transaction Documents

2.  The License Agreement

 

-Sch.-6-

 

--------------------------------------------------------------------------------

 

SCHEDULE 7.02(z)

 

Scheduled Indebtedness and Liabilities

 

Company and its Subsidiaries have no Indebtedness (or other liabilities) other
than (i) reflected in the Financial Statements, (ii) incurred by Company or its
Subsidiaries in the ordinary course of business since December 31, 2017 (other
than any indebtedness for borrowed money) and (iii) the further amendments to
the Hercules Loan Agreement described in the Form 10-Q filed by the Company on
August 2, 2018.

 

-Sch.-7-