Exhibit 10.3

 

EXECUTION VERSION

 

 

COLLATERAL AGREEMENT

 

DATED AS OF AUGUST 31, 2016

 

AMONG

 

EGALET CORPORATION,
as Issuer,

 

EGALET US INC.,

 

EGALET LIMITED,

 

THE SUBSIDIARY PARTIES FROM TIME TO TIME PARTY HERETO

 

U.S. BANK NATIONAL ASSOCIATION,
 as Trustee,

 

and

 

U.S. BANK NATIONAL ASSOCIATION,
as Collateral Agent

 

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I DEFINITIONS

2

Section 1.1

Terms Defined in the Indenture

2

Section 1.2

Terms Defined in UCC

2

Section 1.3

Definitions of Certain Terms Used Herein

2

Section 1.4

Construction; Certain Defined Terms

8

 

 

 

ARTICLE II GRANT OF SECURITY INTEREST

8

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES

10

Section 3.1

Validity and Priority of Security Interest

10

Section 3.2

Location of Collateral

11

Section 3.3

Exact Names

11

Section 3.4

Accounts and Chattel Paper

11

Section 3.5

Documents, Instruments, and Chattel Paper

11

Section 3.6

Proprietary Rights

11

Section 3.7

Investment Property

12

Section 3.8

Commercial Tort Claims

12

Section 3.9

Bank Accounts and Related Items

12

Section 3.10

Perfection Certificate

12

Section 3.11

Leases

12

Section 3.12

Trade Names

13

Section 3.13

No Financing Statements, Security Agreements

13

Section 3.14

Location for Purposes of the UCC

13

 

 

 

ARTICLE IV COVENANTS

13

Section 4.1

General

13

Section 4.2

Perfection and Protection of Security Interest

15

Section 4.3

Electronic Chattel Paper

16

Section 4.4

Maintenance of Property

17

Section 4.5

Investment Property

17

Section 4.6

Proprietary Rights

19

Section 4.7

Inventory

19

Section 4.8

Commercial Tort Claims

19

Section 4.9

No Interference

19

Section 4.10

Insurance

19

Section 4.11

Condemnation

20

Section 4.12

Further Assurances

20

Section 4.13

Negative Pledge

21

Section 4.14

Certain Post-Closing Obligations

21

 

 

 

ARTICLE V REMEDIES

21

Section 5.1

Remedies

21

Section 5.2

Grant of Intellectual Property License

24

 

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Section 5.3

Application of Proceeds

24

 

 

 

ARTICLE VI CONCERNING THE COLLATERAL AGENT

25

Section 6.1

Reliance by Collateral Agent; Indemnity Against Liabilities, etc.

25

Section 6.2

Exercise of Remedies

25

Section 6.3

Authorized Investments

25

Section 6.4

Bankruptcy Proceedings

26

 

 

 

ARTICLE VII COLLATERAL AGENT AND TRUSTEE RIGHTS, DUTIES AND LIABILITIES;
ATTORNEY IN FACT; PROXY

26

Section 7.1

The Collateral Agent’s and the Trustee’s Rights, Duties, and Liabilities

26

Section 7.2

Right to Cure

27

Section 7.3

Confidentiality

27

Section 7.4

Power of Attorney

28

Section 7.5

NATURE OF APPOINTMENT; LIMITATION OF DUTY

29

Section 7.6

Additional Matters Relating to the Collateral Agent

29

Section 7.7

Appointment of Co-Collateral Agent

32

Section 7.8

Instructions under Account Control Agreement

32

 

 

 

ARTICLE VIII GENERAL PROVISIONS

33

Section 8.1

Notice

33

Section 8.2

Waiver of Notices

34

Section 8.3

Limitation on Collateral Agent’s and Secured Party’s Duty with Respect to the
Collateral

34

Section 8.4

Compromises and Collection of Collateral

35

Section 8.5

Specific Performance of Certain Covenants

35

Section 8.6

Cumulative Remedies; No Prior Recourse to Collateral

35

Section 8.7

Limitation by Law; Severability of Provisions

35

Section 8.8

Reinstatement

36

Section 8.9

Binding Effect

36

Section 8.10

Survival of Representations

36

Section 8.11

Guaranties; Third Party Joinder

36

Section 8.12

Captions

37

Section 8.13

Termination and Release

37

Section 8.14

Entire Agreement

37

Section 8.15

Governing Law; Jurisdiction; Consent to Service of Process

37

Section 8.16

Waiver of Jury Trial

37

Section 8.17

Indemnity

37

Section 8.18

Limitation of Liability

38

Section 8.19

Counterparts

39

Section 8.20

Amendments

39

Section 8.21

Conflicts with Other Agreements

39

Section 8.22

Incorporation by Reference

39

Section 8.23

English Language

39

 

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EXHIBIT A

Grantors’ Information and Collateral Locations

 

EXHIBIT B

Proprietary Rights

 

EXHIBIT C

Commercial Tort Claims

 

EXHIBIT D

List of Investment Property

 

EXHIBIT E

Filing Offices

 

EXHIBIT F

Form of Amendment

 

EXHIBIT G

Form of Perfection Certificate

 

EXHIBIT H

Form of Supplement

 

EXHIBIT I

Leased Property

 

EXHIBIT J

Bank Accounts and Related Items

 

EXHIBIT K

Trade Names

 

 

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COLLATERAL AGREEMENT

 

THIS COLLATERAL AGREEMENT (as amended, extended, renewed, restated,
supplemented, waived or otherwise modified from time to time, this “Agreement”)
is entered into as of August 31, 2016, by and among EGALET CORPORATION, a
Delaware corporation with an address at 600 Lee Road, Suite 100, Wayne,
Pennsylvania 19087 (the “Issuer”), EGALET US INC., a Delaware corporation
(“Egalet US”), EGALET LIMITED, a private limited company formed under the law of
England and Wales (“Egalet UK”), the other SUBSIDIARY PARTIES (as defined below)
from time to time party hereto, U.S. BANK NATIONAL ASSOCIATION, in its capacity
as Trustee (and its successors under the Indenture (as defined below), in such
capacity, the “Trustee”), and U.S. BANK NATIONAL ASSOCIATION, in its capacity as
collateral agent for the Secured Parties (as defined below) (and its successors
under the Indenture, in such capacity, the “Collateral Agent”).

 

PRELIMINARY STATEMENT

 

WHEREAS pursuant to the terms, conditions and provisions of (a) the Indenture
dated as of the date hereof (as amended, extended, renewed, restated,
supplemented, waived or otherwise modified from time to time, the “Indenture”),
among the Issuer, the Guarantors (as defined therein) from time to time party
thereto and the Trustee, (b) each Purchase Agreement dated August 31, 2016
(collectively, the “Purchase Agreement”), among the Issuer, the Subsidiary
Guarantors (as defined therein) party thereto and each purchaser party thereto
(collectively, the “Purchasers”), the Issuer is issuing the Securities (as
defined below), which may be guaranteed on a senior secured basis by each of the
Subsidiary Parties;

 

WHEREAS the initial aggregate principal amount of the Securities will be
$40,000,000;

 

WHEREAS additional Securities in an aggregate principal amount not to exceed
$40,000,000 may be issued pursuant to the terms of the Indenture and subject to
the conditions in the Purchase Agreement;

 

WHEREAS the Indenture permits the Issuer and the Subsidiary Parties to grant a
lien and security interest in the Intercreditor Collateral (as defined below) to
one or more ABL Collateral Agents (as defined below) and holders of First
Priority Lien Obligations (as defined below);

 

WHEREAS the Issuer, the Subsidiary Parties, the Collateral Agent, the
Co-Collateral Agent (if applicable), the Trustee and the other parties party
thereto may enter into one or more Intercreditor Agreements (as defined below),
which will govern the liens upon and security interests in the Collateral
granted by this Agreement and the First Priority Lien Obligations;

 

WHEREAS each Grantor (as defined below) is executing and delivering this
Agreement pursuant to the terms of the Indenture to induce the Trustee to enter
into the Indenture and, pursuant to the terms of the Purchase Agreement, to
induce the Purchasers to purchase the Securities; and

 

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WHEREAS each Grantor has duly authorized the execution, delivery and performance
by it of this Agreement.

 

NOW, THEREFORE, for and in consideration of the premises, and of the mutual
covenants herein contained, and in order to induce the Trustee to enter into the
Indenture and the Purchasers to purchase the Securities, the Issuer, Egalet US,
Egalet UK, each other Subsidiary Party that becomes bound hereby and the
Collateral Agent, on behalf of itself and each Secured Party (and each of their
respective successors or assigns), hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.1                                    Terms Defined in the Indenture. 
All capitalized terms used and not otherwise defined herein have the meanings
assigned to such terms in the Indenture.

 

Section 1.2                                    Terms Defined in UCC.  Terms
defined in the UCC that are not otherwise defined in this Agreement are used
herein as defined in the UCC.

 

Section 1.3                                    Definitions of Certain Terms Used
Herein.  As used in this Agreement, in addition to the terms defined in the
preamble and Preliminary Statement above, the following terms have the following
meanings:

 

“ABL Agreement” means any revolving credit, line of credit or similar agreement,
debt facility, commercial paper facility, debt securities, indenture or other
form of debt financing (including convertible or exchangeable debt instruments
or bank guarantees or bankers’ acceptances) or other instruments or agreements
evidencing Secured Bank Indebtedness (as such term is defined in the Indenture),
in each case, with the same or different borrowers, lenders, noteholders or
other creditors or agents, as amended, extended, renewed, restated,
supplemented, waived, replaced (whether or not upon termination), restructured,
repaid, refunded, refinanced or otherwise modified from time to time.

 

“ABL Collateral Agent” means, with respect to ABL Obligations under any ABL
Document, one of the following:  (a) the applicable collateral agent (or similar
agent party) in its capacity as collateral agent (or similar agent) under such
ABL Document, (b) the ABL Lender if acting as sole lender thereunder, or (c) any
Person or Persons acting in an administrative agent capacity thereunder, and in
each case its or their successors and assigns in such capacity.

 

“ABL Documents” means, with respect to any ABL Obligations, any ABL Agreement,
any ABL Security Documents and any “Loan Documents” (or similar term) as such
term is defined in the ABL Agreement and each of the other agreements, documents
and instruments providing for or evidencing such ABL Obligations, and any other
document or instrument executed or delivered at any time in connection with such
ABL Obligations, including any intercreditor or joinder agreement among holders
of such ABL Obligations, in each case, as amended, extended, renewed, restated,
supplemented, waived, replaced (whether or not upon termination), restructured,
repaid, refunded, refinanced or otherwise modified from time to time.

 

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“ABL Lenders” means, with respect to ABL Obligations under any ABL Document, the
lenders or noteholders (or similar creditors) under such ABL Document.

 

“ABL Liens” means, with respect to ABL Obligations under any ABL Document, Liens
on the ABL Collateral created under the related ABL Security Document to secure
such ABL Obligations.

 

“ABL Obligations” means all “Secured Obligations” as such term is defined in any
applicable ABL Document (or, if “Secured Obligations” is not defined therein,
then all the liabilities and obligations under all ABL Documents secured, in
whole or in part, pursuant to the related ABL Security Documents), including,
without limitation, any hedging obligations and cash management obligations and
whether for principal, interest (including interest which, but for the filing of
a petition in any Bankruptcy Proceeding with respect to any Grantor, would have
accrued on any ABL Obligation, whether or not a claim is allowed against such
Grantor for such interest in such proceeding), premium, fees, expenses,
indemnification, performance or otherwise.

 

“ABL Secured Parties” means, with respect to ABL Obligations under any ABL
Document, at any time, the applicable ABL Collateral Agent, the applicable
Administrative Agent, each applicable ABL Lender and each other holder of, or
obligee in respect of, any such ABL Obligations outstanding at such time, in
each case, including the successors and assigns of each of the foregoing.

 

“ABL Security Documents” means, with respect to ABL Obligations under any ABL
Document, any related ABL Document (insofar as the same grants a Lien on any
assets or properties of any Grantor or any of its Subsidiaries to secure any
such ABL Obligations) and any other documents now existing or entered into after
the date hereof that grant a Lien on any assets or properties of any Grantor or
any of its Subsidiaries to secure any such ABL Obligations, as amended,
extended, renewed, restated, supplemented, waived, replaced (whether or not upon
termination), restructured, repaid, refunded, refinanced or otherwise modified
from time to time.

 

“Account” means, with respect to a Person, any of such Person’s now owned and
hereafter acquired or arising “accounts”, as defined in the UCC, including any
rights to payment for the sale or lease of goods or rendition of services,
whether or not they have been earned by performance, and “Accounts” means, with
respect to any such Person, all of the foregoing.

 

“Account Control Agreement” means each of (i) the Danish Account Pledge;
(ii) (x) the Egalet Corp DACA, (y) the Egalet Corp SACA and (z) the Egalet US
DACA (in each case of (x), (y) and (z) upon entry into such account control
agreement by the parties thereto); and (iii) any other account control
agreement, account pledge, charge over accounts or similar agreement, which is
in form and substance reasonably satisfactory to the Collateral Agent (it being
agreed that any agreement that shall require the Collateral Agent to indemnify
any institution in its individual capacity shall not be reasonably acceptable to
the Collateral Agent) and to counsel to the Purchasers.

 

“Account Debtor” means each Person obligated on an Account, Chattel Paper or
General Intangible.

 

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“Administrative Agent” means, with respect to ABL Obligations under any ABL
Document, one of the following:  (a) the applicable administrative agent (or
similar agent party) in its capacity as administrative agent (or similar agent)
under such ABL Documents, (b) the ABL Lender if acting as sole lender
thereunder, or (c) any Person or Persons acting in an administrative agent
capacity thereunder, and, in each case, its or their successors and assigns in
such capacity.

 

“Bankruptcy Proceeding” means, with respect to any Person, a general assignment
by such Person for the benefit of its creditors, or the institution by or
against such Person of any proceeding seeking relief as debtor, or seeking to
adjudicate such Person as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of such Person or its debts, under any
law or regulation relating to bankruptcy, insolvency, reorganization or relief
of debtors, or seeking appointment of a receiver, trustee, custodian or other
similar official for such Person or for any substantial part of its property.

 

“Chattel Paper” means any “chattel paper”, as such term is defined in the UCC,
now owned or hereafter acquired by any Person and, in any event, shall include,
all Electronic Chattel Paper and Tangible Chattel Paper.

 

“Co-Collateral Agent” means a financial institution appointed by the Collateral
Agent in accordance with Sections 7.6(a) and 7.7 hereto to act as co-collateral
agent for the Secured Parties.

 

“Collateral” has the meaning specified in Article II.

 

“Collateral Agent’s Liens” means the Liens in the Collateral granted to the
Collateral Agent (or any Co-Collateral Agent), for the benefit of the Secured
Parties, pursuant to this Agreement and the other Indenture Documents.

 

“Commercial Tort Claims” means, with respect to a Person, all of such Person’s
now owned or hereafter acquired “commercial tort claims”, as defined by the UCC,
identified on Exhibit C and as specifically identified hereafter, and in any
event, shall include, any claim now owned or hereafter acquired by any Person,
arising in tort with respect to which:  (a) the claimant is an organization; or
(b) the claimant is an individual and the claim (i) arose in the course of the
claimant’s business or profession and (ii) does not include damages arising out
of personal injury to or the death of an individual.

 

“Control” has the meaning assigned to such term in Article 8 of the UCC or, if
applicable, in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the UCC.

 

“Copyright, Patent, and Trademark Agreements” means each copyright security
agreement, patent collateral agreement, and trademark collateral agreement
executed (and if necessary, notarized and legalized) and delivered by a Grantor
to the Collateral Agent to evidence and perfect the Collateral Agent’s security
interest in such Grantor’s present and future copyrights, patents, trademarks,
and related licenses and rights for the benefit of the Secured Parties.

 

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“Danish Account Pledge” means the Pledge of Bank Accounts, dated on or about the
date hereof, between the Issuer and the Collateral Agent on behalf of the
Secured Parties (as defined therein) with respect to the Accounts at Danske Bank
A/S (CVR 61126228).

 

“Dollars” means United States dollars.

 

“Effective Date” means the date of this Agreement.

 

“Egalet Corp DACA” means the deposit account control agreement to be entered
into among the Issuer, the Collateral Agent and Silicon Valley Bank which is in
form and substance reasonably satisfactory to the Collateral Agent and to
counsel to the Purchasers.

 

“Egalet Corp SACA” means the securities account control agreement to be entered
into among the Issuer, the Collateral Agent, U.S. Bank, N.A., as account bank,
and SVB Asset Management which is in form and substance reasonably satisfactory
to the Collateral Agent and to counsel to the Purchasers.

 

“Egalet US DACA” means the deposit account control agreement to be entered into
among Egalet US, the Collateral Agent and Silicon Valley Bank which is in form
and substance reasonably satisfactory to the Collateral Agent and to counsel to
the Purchasers.

 

“Electronic Chattel Paper” means any “electronic chattel paper”, as such term is
defined in the UCC, now owned or hereafter acquired by any Person.

 

“Equipment” means, with respect to a Person, all of such Person’s now owned and
hereafter acquired machinery, “equipment”, as defined by the UCC, furniture,
furnishings, fixtures, and other tangible personal property (except Inventory),
including rolling stock with respect to which a certificate of title has been
issued, aircraft, dies, tools, jigs, and office equipment, as well as all of
such types of property leased by such Person and all of such Person’s rights and
interests with respect thereto under such leases (including, options to
purchase); together with all present and future additions and accessions
thereto, replacements therefor, component and auxiliary parts and supplies used
or to be used in connection therewith, and all substitutes for any of the
foregoing, and all manuals, drawings, instructions, warranties, and rights with
respect thereto, wherever any of the foregoing is located.

 

“Filing Office” means, with respect to each Grantor, the office specified on
Exhibit E and, if applicable, any other appropriate office of the state where
such Grantor is “located” (as such term is used in Article 9-307 of the UCC).

 

“Financial Assets” means any “financial asset”, as such term is defined in the
UCC, now owned or hereafter acquired by any Person.

 

“General Intangibles” means, with respect to a Person, all of such Person’s now
owned or hereafter acquired “general intangibles”, as defined in the UCC,
including payment intangibles, choses in action and causes of action and all
other intangible personal property of such Person of every kind and nature
(other than Accounts), including, all contract rights, Proprietary Rights,
corporate or other business records, inventions, designs, blueprints, plans,
specifications, patents, patent applications, trademarks, service marks, trade
names, trade secrets,

 

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goodwill, copyrights, computer software, customer lists, registrations,
licenses, franchises, tax refund claims, any funds which may become due to such
Person in connection with the termination of any employee benefit plan or any
rights thereto and any other amounts payable to such Person from any employee
benefit plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof, property,
casualty or any similar type of insurance and any proceeds thereof, proceeds of
insurance covering the lives of key employees on which such Person is
beneficiary, rights to receive dividends, distributions, cash, Instruments and
other property in respect of or in exchange for pledged equity interests or
Investment Property, and any letter of credit, guarantee, claim, security
interest, or other security held by or granted to such Person.

 

“Grantors” means the Issuer and the Subsidiary Parties.

 

“Indenture Documents” means (a) the Indenture and the Securities, (b) each
Intercreditor Agreement, (c) each other Security Document, including this
Agreement and (d) any other related documents or instruments executed and
delivered pursuant to or in connection with the Indenture or any other Indenture
Document, in each case, as such agreements may be amended, extended, renewed,
restated, supplemented, waived or otherwise modified from time to time.

 

“Intercompany Obligations” means, collectively, all indebtedness, obligations
and other amounts at any time owing to any Grantor from any of such Grantor’s
Subsidiaries or Affiliates and all interest, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness, obligations or
other amounts.

 

“Intercreditor Agreement” means any Lien Subordination and Intercreditor
Agreement substantially in the form attached as Exhibit D to the Indenture
entered into by one or more Grantors, the Collateral Agent and the ABL
Collateral Agent (as such agreement may be amended, extended, renewed, restated,
supplemented, waived or otherwise modified from time to time).

 

“Intercreditor Collateral” means ABL Collateral in which the Secured Parties
have a Lien.

 

“Inventory” means, with respect to a Person, all of such Person’s now owned and
hereafter acquired “inventory”, as defined in the UCC, goods, and merchandise,
wherever located, in each case to be furnished under any contract of service or
held for sale or lease, all returned goods, raw materials, work-in-process,
finished goods (including embedded software), other materials, and supplies of
any kind, nature, or description which are used or consumed in such Person’s
business or used in connection with the packing, shipping, advertising, selling,
or finishing of such goods, merchandise, and other property, and all documents
of title or other documents representing them.

 

“Investment Property” means, with respect to a Person, all of such Person’s
right, title, and interest in and to any and all “investment property”, as
defined in the UCC, including, all (a) securities, whether certificated or
uncertificated, (b) securities entitlements, (c) securities

 

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accounts, (d) commodity contracts, (e) commodity accounts and (f) Equity
Interests; together with all other units, shares, partnership interests,
membership interests, membership rights, equity interests, rights, or other
equivalent evidences of ownership (howsoever designated) issued by any Person.

 

“Investment Property Collateral” means Investment Property other than Excluded
Assets of the type described in clauses (v), (vi), (vii) and (viii) of the
definition of Excluded Assets.

 

“Investment Property Issuer” means the issuer of any Investment Property
Collateral.

 

“Majority Holders” means, at any time, the holders of at least a majority of the
aggregate principal amount of the Securities then outstanding.

 

“Noteholder First Lien Collateral” means the Collateral unless and until an
Intercreditor Agreement is effective and thereafter has the meaning assigned to
such term in the applicable Intercreditor Agreement.

 

“Obligations” means all obligations of every nature of each Grantor under the
Indenture Documents from time to time owed to the Trustee, any Holder of
Securities, the Collateral Agent and any other Secured Party, whether for
principal, interest (including interest which, but for the filing of a petition
in any Bankruptcy Proceeding with respect to such Grantor, would have accrued on
any Obligation, whether or not a claim is allowed or allowable against such
Grantor for such interest in such proceeding), premium, fees, expenses,
indemnification, performance or otherwise.

 

“Perfection Certificate” means a certificate substantially in the form of
Exhibit G, completed and supplemented with the schedules and attachments
contemplated thereby.

 

“Proprietary Rights” means, with respect to a Person, all of such Person’s now
owned and hereafter arising or acquired new drug applications or abbreviated new
drug applications (or equivalent foreign application), including those new drug
applications or abbreviated new drug applications (and equivalent foreign
applications) that are owned as of the date hereof set forth on Exhibit B, and
any licenses, franchises, permits, patents, patent rights, copyrights, works
which are the subject matter of copyrights, trademarks, service marks, trade
names, trade styles, patent, trademark and service mark applications, and all
licenses and rights related to any of the foregoing, including those patents and
trademarks set forth on Exhibit B, and all other rights under any of the
foregoing, all extensions, renewals, reissues, divisions, continuations, and
continuations in part of any of the foregoing, and all rights to sue for past,
present, and future infringement of any of the foregoing.

 

“Related Person” means, with respect to any specified Person, such Person’s
Affiliates, and the respective officers, directors, employees, agents, advisors
and attorneys-in-fact of such Person and its Affiliates.

 

“Requirement of Law” means, as to any Person, any law (statutory or common),
treaty, rule, or regulation or determination of an arbitrator or of a
Governmental Authority, in

 

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each case applicable to or binding upon the Person or any of its property or to
which the Person or any of its property is subject.

 

“Secured Parties” means (a) the Collateral Agent (including any Co-Collateral
Agents), (b) each Holder of Securities, (c) the Trustee and (d) the successors
and permitted assigns of each of the foregoing.

 

“Subsequent Closing Date” has the meaning given to such term in Section 4.13.

 

“Subsidiary Parties” means Egalet US, Egalet UK and each Subsidiary that becomes
a party to this Agreement as a Subsidiary Party after the Effective Date.

 

“Tangible Chattel Paper” means any “tangible chattel paper”, as such term is
defined in the UCC, now owned or hereafter acquired by any Person.

 

“UCC” means the Uniform Commercial Code (or any successor statute), as in effect
from time to time, of the State of New York or of any other state the laws of
which are required as a result thereof to be applied in connection with the
issue or perfection of security interests.

 

“UK Share Charge” means the charge over, inter alia, all of the Capital Stock of
Egalet UK granted by the Issuer in favor of the Collateral Agent, dated on or
about the date of this Agreement.

 

Section 1.4                                    Construction; Certain Defined
Terms.  The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined.  Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms. 
The words “include”, “includes” and “including” shall be deemed to be followed
by the phrase “without limitation”.  The word “will” shall be construed to have
the same meaning and effect as the word “shall”.  Unless the context requires
otherwise, (i) any definition of or reference to any agreement, instrument,
other document, statute or regulation herein shall be construed as referring to
such agreement, instrument, other document, statute or regulation as from time
to time amended, supplemented or otherwise modified, (ii) any reference herein
to any Person shall be construed to include such Person’s successors and
assigns, but shall not be deemed to include the Subsidiaries of such person
unless express reference is made to such Subsidiaries, (iii) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (iv) all references herein to Articles, Sections and Exhibits shall be
construed to refer to Articles, Sections and Exhibits of this Agreement, (v) the
words “asset” and “property” shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights and
(vi) the term “or” is not exclusive.

 

ARTICLE II
GRANT OF SECURITY INTEREST

 

As security for the Obligations, each Grantor hereby grants to the Collateral
Agent, for the benefit of the Secured Parties, a continuing security interest in
and lien on, such

 

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Grantor’s right, title and interest in and to all of the following property and
assets of such Grantor, whether now owned or existing or hereafter acquired or
arising, regardless of where located:

 

(i)                                     all Accounts (including any credit
enhancement therefor) and Intercompany Obligations;

 

(ii)                                  all Chattel Paper;

 

(iii)                               all Commercial Tort Claims;

 

(iv)                              all contract rights, leases, letters of
credit, letter-of-credit rights, instruments, promissory notes, documents, and
documents of title;

 

(v)                                 all Financial Assets;

 

(vi)                              all Equipment;

 

(vii)                           all General Intangibles;

 

(viii)                        all Investment Property;

 

(ix)                              all Inventory;

 

(x)                                 all money, cash, cash equivalents,
securities, and other property of any kind of such Grantor;

 

(xi)                              all of such Grantor’s deposit accounts,
securities accounts, commodities accounts, credits, and balances with, and other
claims against, any financial institution with which such Grantor maintains
deposits;

 

(xii)                           all of such Grantor’s books, records, and other
property related to or referring to any of the foregoing, including books,
records, account ledgers, data processing records, computer software and other
property, and General Intangibles at any time evidencing or relating to any of
the foregoing;

 

(xiii)                        all supporting obligations in respect of any
Collateral;

 

(xiv)                       all other items, kinds and types of personal
property, tangible or intangible, of whatever nature, and regardless of whether
the creation or perfection or effect of perfection or non-perfection of a
security interest therein is governed by the UCC of any particular jurisdiction
or by another applicable treaty, convention, statute, law or regulation of any
applicable jurisdiction; and

 

(xv)                          all accessions to, substitutions for, and
replacements, products, and proceeds of any of the foregoing, including, but not
limited to, After-Acquired Property, proceeds of any insurance policies, claims
against third parties, and condemnation or requisition payments with respect to
all or any of the foregoing.

 

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All of the foregoing, and all other property of the Grantors’ in which a Secured
Party may at any time be granted a Lien to secure the Obligations, are herein
collectively referred to as the “Collateral”; provided, however, that
notwithstanding the foregoing, the Collateral shall not include, and the
security interest shall not attach to, any and all Excluded Assets; provided,
further, however, that if any Grantor grants a security interest in or Lien on
any OXAYDO® Excluded Asset to any third-party financing source, such OXAYDO®
Excluded Asset shall, for the purposes of this Agreement, no longer be included
within the definition of Excluded Assets and shall thenceforth be included
within the definition of Collateral in accordance with the Indenture Documents.

 

For purposes of registering this Agreement with the Registrar of Companies under
the law of England and Wales, the Lien on the Collateral granted hereunder shall
constitute a “floating charge” and, with respect to the Collateral comprising
the Proprietary Rights identified on Exhibit B, a “fixed charge”.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES

 

The Grantors, jointly and severally, represent and warrant to the Collateral
Agent, for the benefit of the Secured Parties, that as of the Effective Date:

 

Section 3.1                                    Validity and Priority of Security
Interest.

 

(a)                                 This Agreement and the applicable Security
Documents are effective to create in favor of the Collateral Agent, for the
ratable benefit of the Secured Parties, a legal, valid and enforceable security
interest in the Collateral and the proceeds thereof and (i) when the Investment
Property Collateral that consists of Equity Interests is delivered to the
Collateral Agent (subject to the terms of any Intercreditor Agreement (if any)),
the Lien created under this Agreement and the applicable Security Documents
shall constitute a fully perfected Lien on, and security interest in, all right,
title and interest of the Grantors in such Investment Property Collateral
(subject to Permitted Liens), in each case prior and superior in right to any
other Person, (ii) upon the execution and delivery of each Account Control
Agreement by each party thereto, each Account Control Agreement shall be
effective to perfect the security interest in the accounts specified therein,
and such security interest shall be perfected, and (iii) when financing
statements in appropriate form are filed in the Filing Offices, the Lien created
under this Agreement and the applicable Security Documents will constitute a
fully perfected Lien on, and security interest in, all right, title and interest
of the Grantors in such Collateral in which a security interest can be perfected
by filing a financing statement (subject to Permitted Liens), in each case prior
and superior in right to any other Person with respect to such perfection
(subject only to a prior ranking lien in respect of (A) the Intercreditor
Collateral that secures any First Priority Lien Obligations and (B) the
Permitted Liens set forth in clauses (6)(B), (8), (9) and (16) and (as it
relates to such clauses) clauses (20) and (30) of the definition thereof).

 

(b)                                 Upon the recordation of this Agreement or
the Copyright, Patent, and Trademark Agreements with the United States Patent
and Trademark Office or the United States Copyright Office, as applicable,
together with the financing statements in appropriate form filed in the Filing
Offices and (as to Proprietary Rights related to the SPRIX® Product, the ARYMO

 

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ER™ Product and, to the extent required to be pledged as Collateral, the OXAYDO®
Product) in the European Patent Office, the Lien created shall constitute a
fully perfected Lien on, and security interest in, all right, title and interest
of the Grantors in the respective Proprietary Rights in which a security
interest may be perfected by filing in the United States and its territories and
possessions, or in Europe, respectively, in each case prior and superior in
right to any other Person with respect to such perfection (other than Permitted
Liens of the type described in clauses (8), (9) and (19) and (as it relates to
such clauses) clauses (20) and (30) of the definition thereof of the definition
thereof).

 

Section 3.2                                    Location of Collateral. 
(a) Exhibit A is a correct and complete list of each Grantor’s jurisdiction of
organization, the location of its books and records, the locations of the
Collateral (other than Inventory that is in transit, consignments of Inventory
not in excess of $1,000,000, rolling stock, and Collateral in the Collateral
Agent’s possession or equipment in transit between the locations set forth on
Exhibit A and equipment at other locations for purposes of maintenance or
repair), and the locations of all of its other places of business; and
(b) Exhibit A correctly identifies any of such facilities and locations that are
not owned by such Grantor and sets forth the names of the owners and lessors or
sublessors of such facilities and locations.

 

Section 3.3                                    Exact Names.  The name in which
each Grantor has executed this Agreement is the exact name as it appears in such
Grantor’s organizational documents, as amended, as filed with such Grantor’s
jurisdiction of organization.  Except as set forth on Exhibit A or as permitted
by the Indenture or this Agreement, since the date of its organization or
acquisition as a Subsidiary of the Issuer, no Grantor has been known by or used
any other corporate or fictitious name, or been a party to any merger or
consolidation, or acquired all or substantially all of the assets of any Person.

 

Section 3.4                                    Accounts and Chattel Paper.  The
names of the obligors, amounts owing, due dates and other information with
respect to each Grantor’s Accounts and Chattel Paper that are Collateral are and
will be correctly stated, in all material respects, at the time furnished, in
all records of such Grantor relating thereto.

 

Section 3.5                                    Documents, Instruments, and
Chattel Paper.  (a) All documents, instruments, and Chattel Paper of each
Grantor describing, evidencing, or constituting Collateral, and all signatures
and endorsements thereon, are and will be complete, valid, and genuine in all
material respects, and (b) all goods evidenced by such documents, instruments,
and Chattel Paper are and will be owned by such Grantor free and clear of all
Liens (subject to Permitted Liens).  If any Grantor retains possession of any
Chattel Paper or other instruments, at the Collateral Agent’s request upon an
Event of Default, such Chattel Paper or instruments shall be marked with the
following legend:  “This writing and the obligations evidenced or served hereby
are subject to the security interest of U.S. Bank National Association, as
Collateral Agent, for the benefit of Collateral Agent and certain Secured
Parties.”

 

Section 3.6                                    Proprietary Rights.  Exhibit B
sets forth a correct and complete list of all of each Grantor’s registered or
applied for patents, copyrights and trademarks material to its business, in each
case owned by such Grantor in its own name as of August 31, 2016.

 

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Section 3.7                                    Investment Property.

 

(a)                                 Exhibit D sets forth a correct and complete
list of all of the Investment Property Collateral owned by each Grantor.  Each
Grantor is the legal and beneficial owner of such Investment Property
Collateral, as so reflected, free and clear of any Lien (other than Permitted
Liens), and has not sold, granted any option with respect to, assigned or
transferred, or otherwise disposed of any of its rights or interest therein. 
Each Grantor further represents and warrants that (i) to such Grantor’s
knowledge, all Investment Property constituting an Equity Interest has been (to
the extent such concepts are relevant with respect to such Investment Property)
duly authorized and validly issued by the Investment Property Issuer thereof and
are fully paid and non-assessable, (ii) with respect to any certificates
delivered to the Collateral Agent representing an Equity Interest, either such
certificates are Securities as defined in Article 8 of the UCC as a result of
actions by the Investment Property Issuer thereof or otherwise, or, if such
certificates are not Securities as defined in Article 8 of the UCC, such Grantor
has filed financing statements in appropriate form to perfect the security
interest of the Collateral Agent for the benefit of the Secured Parties therein
as a General Intangible, and (iii) to Grantor’s knowledge, all Investment
Property that represents Indebtedness owed to any Grantor has been duly
authorized, authenticated or issued and delivered by the Investment Property
Issuer of such Indebtedness and is the legal, valid and binding obligation of
such Investment Property Issuer.

 

(b)                                 Each Grantor further represents and warrants
that, to the knowledge of such Grantor, none of the Investment Property
Collateral is or will be subject to any option, right of first refusal,
shareholders agreement, charter or by-law provisions or contractual restriction
of any nature that might prohibit, impair, delay or otherwise affect the pledge
of such Investment Property Collateral hereunder, the sale or disposition
thereof pursuant hereto or the exercise by the Collateral Agent of rights and
remedies hereunder.

 

Section 3.8                                    Commercial Tort Claims.  No
Grantor holds any Commercial Tort Claims the recovery from which could
reasonably be expected to exceed $500,000, for which such Grantor has filed a
complaint in a court of competent jurisdiction, except as indicated on Exhibit C
hereto.

 

Section 3.9                                    Bank Accounts and Related Items. 
Exhibit J contains a complete and accurate list of all bank accounts, including
deposit accounts, securities accounts and commodity accounts, other than any
Excluded Assets, maintained by each Grantor with any bank or other financial
institution, broker, securities intermediary, commodity intermediary or other
Person.

 

Section 3.10                             Perfection Certificate.  The Perfection
Certificates delivered by the Grantors have been duly prepared, completed and
executed and the information set forth therein is correct and complete, in all
material respects.

 

Section 3.11                             Leases.  Exhibit I sets forth a correct
and complete list of all leases and subleases of personal property by each
Grantor as lessee or sublessee (other than any Excluded Assets, and other than
any leases of personal property as to which it is lessee or sublessee for which
the value of such personal property is less than $500,000), and all leases and
subleases of personal property by each Grantor as lessor or sublessor.

 

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Section 3.12                             Trade Names.  All trade names, business
names or corporate names under which any Grantor sells Inventory or creates
Accounts, or to which instruments in payment of Accounts are made payable, are
listed on Exhibit K.

 

Section 3.13                             No Financing Statements, Security
Agreements.  No financing statement or security agreement describing all or any
portion of the Collateral that has not lapsed or been terminated naming a
Grantor as debtor has been filed or is of record in any jurisdiction except
(a) for financing statements or security agreements naming the Collateral Agent
on behalf of the Secured Parties as the secured party and (b) for financing
statements in connection with Permitted Liens.

 

Section 3.14                             Location for Purposes of the UCC.  The
Issuer is “located” (as such term is used in Article 9-307 of the UCC) in the
State of Delaware.

 

ARTICLE IV
COVENANTS

 

From the date hereof, and thereafter until this Agreement is terminated, each
Grantor agrees that:

 

Section 4.1                                    General.

 

(a)                                 Collateral Records.  Each Grantor shall
maintain at all times reasonably detailed, accurate (in all material respects)
and updated books and records pertaining to the Collateral and promptly furnish
to the Collateral Agent such information relating to the Collateral as the
Collateral Agent shall from time to time reasonably request.

 

(b)                                 Authorization to File Financing Statements;
Ratification.  The Collateral Agent may, and the Grantors hereby authorize the
Collateral Agent to, at any time and from time to time, file financing
statements, continuation statements, and amendments thereto that describe the
Collateral as “all assets” or words of similar import and which contain any
other information required pursuant to Article 9 of the UCC for the sufficiency
of filing office acceptance of any financing statement, continuation statement,
or amendment, and each Grantor agrees to furnish any such information to the
Collateral Agent promptly upon request.  The Collateral Agent shall inform the
applicable Grantor of any such filing either prior to, or reasonably promptly
after, such filing.  Each Grantor acknowledges that it is not authorized to file
any financing statement covering the Collateral or amendment or termination
statement with respect to any financing statement covering the Collateral
without the prior written consent of the Collateral Agent and agrees that it
will not do so without such consent, subject to (i) the Grantors’ rights under
Section 9-509(d)(2) of Article 9 of the UCC and (ii) financing statements that
may be filed, in accordance with the Indenture or each Intercreditor Agreement
(if any), to perfect or release any ABL Liens or Permitted Liens.

 

(c)                                  Other Perfection, etc.  Each Grantor shall,
at any time and from time to time (i) notify, in form reasonably satisfactory to
the Collateral Agent, any warehouseman, bailee, or any of such Grantor’s agents
or processors having possession of any Collateral consisting of Inventory or
Equipment with a Fair Market Value in excess of $1,000,000 (calculated based on
the Grantor’s estimate of the Fair Market Value of the Inventory or

 

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Equipment to be possessed by such warehouseman, bailee, agent or processor over
the course of any calendar year on a weighted average basis) of the security
interest of the Collateral Agent in such Collateral (with a copy of such notice
sent to the Collateral Agent), (ii) use its commercially reasonable efforts to
obtain an acknowledgment, in form and substance reasonably satisfactory to the
Collateral Agent, from such warehouseman, bailee, agent or processor (other than
with respect to any Intercreditor Collateral, unless the ABL Collateral Agent,
if any, shall also have obtained such acknowledgement from such warehouseman,
bailee, agent or processor) and not having otherwise entered into a
subordination agreement for the benefit of the Collateral Agent, stating that
the warehouseman, bailee, agent or processor holds such Collateral for the
Collateral Agent, subject to each Intercreditor Agreement (if any) and
(iii) take such steps as are necessary or as the Collateral Agent may reasonably
request (A) for the Collateral Agent to obtain “control” of any Investment
Property Collateral, deposit accounts, letter-of-credit rights, or Electronic
Chattel Paper (as such terms, to the extent they are undefined herein, are
defined by Article 9 of the UCC with corresponding provisions thereof defining
what constitutes “control” for such items of Collateral) constituting Noteholder
First Lien Collateral in excess of $500,000 (other than Investment Property
Collateral constituting Equity Interests of a Subsidiary for which no minimum
dollar amount shall apply), excluding any Excluded Assets, with any agreements
establishing control to be in form and substance reasonably satisfactory to the
Collateral Agent (provided that, for the avoidance of doubt, any such control
with respect to any Noteholder First Lien Collateral that becomes Intercreditor
Collateral shall be subordinated to the ABL Liens in accordance with the terms
of the Intercreditor Agreement at the request of the ABL Collateral Agent during
such time as an Intercreditor Agreement is effective) and (B) to otherwise
ensure the continued perfection and priority of the Collateral Agent’s security
interest in any of the Collateral (to the extent required hereunder) and of the
preservation of its rights therein.  The $500,000 threshold described in clause
(iii)(A) of the preceding sentence as it relates to any deposit account shall be
measured by reference to the closing balance of such deposit account as of each
Business Day.

 

(d)                                 Change of Name, Etc.  Each Grantor agrees to
furnish to the Collateral Agent prompt written notice of any change in: 
(i) such Grantor’s name; (ii) such Grantor’s state of organization or form of
organization, in each case at least fifteen (15) days prior thereto; (iii) such
Grantor’s Federal Taxpayer Identification Number or organizational
identification number assigned to it by its jurisdiction of incorporation or
formation; or (iv) the acquisition by such Grantor of any material property for
which additional filings or recordings are necessary to perfect and maintain the
Collateral Agent’s security interest therein (to the extent perfection of the
security interest in such property is required hereby or by the terms of the
Indenture).  Each Grantor agrees not to effect or permit any change referred to
in the preceding sentence unless all filings are promptly made under the Uniform
Commercial Code or other applicable law that are required in order for the
Collateral Agent to continue at all times following such change to have a valid,
legal and perfected, security interest (subject to the terms of each
Intercreditor Agreement (if any) and subject to Permitted Liens) in the
Collateral for its benefit and the benefit of the other Secured Parties.

 

(e)                                  Change in Location of Collateral.  No
Grantor shall (i) maintain any Collateral with a Fair Market Value in excess of
$1,000,000 (other than Inventory in transit, consignments of Inventory not in
excess of $1,000,000), rolling stock, equipment in transit between locations set
forth in Exhibit A, equipment at other locations for purposes of

 

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maintenance or repair and Collateral in the Collateral Agent’s possession or the
possession of any ABL Collateral Agent) at any location other than those
locations listed on Exhibit A, (ii) otherwise change or add to any of such
locations, or (iii) change the location of its jurisdiction of organization from
the location identified in Exhibit A, unless in each case it gives the
Collateral Agent prompt written notice thereof but in any event described in
clause (iii) not later than 30 days prior thereto, and executes or authorizes
the filing of any and all financing statements and other documents that are
necessary or that the Collateral Agent reasonably requests in connection
therewith.  In the event any Grantor changes or adds any location of Collateral,
such Grantor shall prepare and promptly deliver to the Collateral Agent a
revised Exhibit A, which shall automatically be adopted as Exhibit A for all
purposes.  Each Grantor agrees not to effect or permit any change referred to in
the preceding sentences unless all filings are promptly made under the Uniform
Commercial Code or other applicable law that are required in order for the
Collateral Agent to continue at all times following such change to have a valid,
legal and perfected security interest (subject to the terms of each
Intercreditor Agreement (if any) and subject to Permitted Liens) in the
Collateral for its benefit and the benefit of the other Secured Parties.

 

Section 4.2                                    Perfection and Protection of
Security Interest.

 

(a)                                 Perfection and Protection.  Each Grantor
shall, at its expense, perform all steps necessary or otherwise reasonably
requested by the Collateral Agent (at the direction of the Majority Holders) at
any time to perfect, maintain, protect, and enforce the Collateral Agent’s
Liens, subject to the terms of each Intercreditor Agreement (if any), including:
(i) filing and recording of the Copyright, Patent, and Trademark Agreements, and
amendments thereof in the United States Patent and Trademark Office, the United
States Copyright Office and the European Patent Office and filing financing
statements or continuation statements in the respective Filing Office; (ii) to
the extent constituting Noteholder First Lien Collateral, delivering to the
Collateral Agent the originals of all instruments, documents, and Chattel Paper
(in each case in excess of $250,000), and all other Collateral of which the
Collateral Agent is required to have or reasonably requests to have physical
possession of in order to perfect and protect the Collateral Agent’s security
interest therein, duly pledged, endorsed, or assigned to the Collateral Agent as
provided herein; (iii)  deliver to the Collateral Agent a duly executed
amendment to this Agreement, in the form of Exhibit F hereto (each, an
“Amendment”), pursuant to which such Grantor will pledge any additional
Collateral that constitutes Commercial Tort Claims; (iv) upon the occurrence and
during the continuation of an Event of Default, delivering to the Collateral
Agent (A) warehouse receipts covering any portion of the Noteholder First Lien
Collateral located in warehouses and for which warehouse receipts are issued,
(B)  warehouse receipts covering any portion of the Intercreditor Collateral (so
long as no ABL Liens are outstanding on such Collateral) located in warehouses
and for which warehouse receipts are issued and (C) if requested by the
Collateral Agent, certificates of title reflecting the Collateral Agent’s Liens
covering any portion of the Collateral for which certificates of title have been
issued; (v) when an Event of Default exists, transferring Inventory to
warehouses or other locations designated by the Collateral Agent; (vi) upon the
occurrence and during the continuance of an Event of Default, delivering to the
Collateral Agent all letters of credit constituting Collateral on which such
Grantor is named beneficiary; and (vii) taking such other steps as are
reasonably deemed necessary or desirable by the Collateral Agent (acting at the
direction of the Majority Holders) to maintain, protect and enforce the
Collateral Agent’s Liens.  To the extent permitted by any

 

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Requirement of Law and each Intercreditor Agreement (if any), the Collateral
Agent may file, without any Grantor’s signature, one or more financing
statements disclosing the Collateral Agent’s Liens.  Each Grantor hereby
authorizes the Collateral Agent to attach each Amendment to this Agreement and
agrees that all additional collateral set forth in such Amendments shall be
considered to be part of the Collateral.

 

(b)                                 Collateral in Other’s Possession.  If at any
time any Collateral with a Fair Market Value in excess of $1,000,000 (other than
Intercreditor Collateral, unless (i) no ABL Liens on such Collateral are
outstanding or (ii) the applicable ABL Collateral Agent shall also have obtained
such waiver or subordination from such landlord) is located at any operating
facility of a Grantor which is not owned by such Grantor, such Grantor shall,
upon request, use commercially reasonable efforts to obtain written landlord
lien waivers or subordinations, in form and substance reasonably satisfactory to
the Collateral Agent, of all present and future Liens to which the owner or
lessor of such premises may be entitled to assert against such Collateral.

 

(c)                                  Confirmatory Instruments.  From time to
time, subject to each Intercreditor Agreement (if any), each Grantor shall, upon
the Collateral Agent’s request, execute and deliver confirmatory written
instruments pledging to the Collateral Agent, for the benefit of the Secured
Parties, the Collateral with respect to such Grantor, but the failure to do so
shall not affect or limit any security interest or any other rights of the
Secured Parties in and to the Collateral with respect to such Grantor.

 

(d)                                 OXAYDO® Excluded Assets.  In the event that
any OXAYDO® Excluded Asset is included in the Collateral, the Issuer will take
(or cause the applicable Grantor to take) all steps necessary to perfect the
Lien granted to the Collateral Agent in such Collateral, including by making a
filing with the United States Patent and Trademark Office, the United States
Copyright Office and the European Patent Office, as applicable, and by filing
financing statements or continuation statements in the applicable Filing Office.

 

Section 4.3                                    Electronic Chattel
Paper.          If any Grantor at any time holds or acquires an interest in any
Electronic Chattel Paper or any “transferable record”, as that term is defined
in Section 201 of the Federal Electronic Signatures in Global and National
Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in
effect in any relevant jurisdiction, such Grantor shall promptly notify the
Collateral Agent thereof and (other than if such Electronic Chattel Paper
constitutes Intercreditor Collateral for which ABL Liens are outstanding) shall
take such action as is necessary to vest in the Collateral Agent Control under
UCC Section 9-105 of such Electronic Chattel Paper or control (to the extent the
meaning of “control” has not been clearly established under such provisions,
“control” in this paragraph (d) to have such meaning as the Collateral Agent
shall reasonably specify in writing after consultation with the Issuer) under
Section 201 of the Federal Electronic Signatures in Global and National Commerce
Act or, as the case may be, Section 16 of the Uniform Electronic Transactions
Act, as so in effect in such jurisdiction, of such transferable record.  The
Collateral Agent agrees with such Grantor that the Collateral Agent will
arrange, pursuant to procedures reasonably satisfactory to the Collateral Agent
and so long as such procedures will not result in the Collateral Agent’s loss of
Control or control, as applicable, which may be established to the satisfaction
of the Collateral Agent pursuant to the delivery to it by the Grantor of an
Officers’

 

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Certificate or an Opinion of Counsel, for the Grantor to make alterations to the
Electronic Chattel Paper or transferable record permitted under UCC
Section 9-105 or, as the case may be, Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or Section 16 of the Uniform
Electronic Transactions Act for a party in Control to allow without loss of
Control or control, as applicable, unless an Event of Default has occurred and
is continuing or would occur after taking into account any action by such
Grantor with respect to such Electronic Chattel Paper or transferable record.

 

Section 4.4                                    Maintenance of Property.  Except
as otherwise permitted hereunder or pursuant to the Indenture Documents, each
Grantor shall maintain all of its property necessary and useful in the conduct
of its business, in reasonable operating condition and repair, ordinary wear and
tear, casualty, condemnation and obsolescence excepted.

 

Section 4.5                                    Investment Property.

 

(a)                                 Registration in Nominee Name;
Denominations.  The Collateral Agent, on behalf of the Secured Parties, shall
hold certificated Investment Property Collateral in the name of the applicable
Grantor, endorsed or assigned in blank or in favor of the Collateral Agent, but
following the occurrence and during the continuance of an Event of Default shall
have the right (in its sole and absolute discretion) to hold such Investment
Property Collateral in its own name as pledgee, or in the name of its nominee
(as pledgee or as sub-agent).  Each Grantor will promptly give to the Collateral
Agent copies of any material notices or other material communications received
by it with respect to any Investment Property Collateral registered in the name
of such Grantor.  Following the occurrence and during the continuance of an
Event of Default, the Collateral Agent shall at all times have the right to
exchange the certificates representing Investment Property Collateral for
certificates of smaller or larger denominations for any purpose consistent with
this Agreement.

 

(b)                                 Voting Rights, Distributions, Etc. in
Respect of Investment Property Collateral.

 

(i)                                     Unless an Event of Default exists and
subject to each Intercreditor Agreement (if any), (A) each Grantor shall be
entitled to exercise any and all voting and other consensual rights (including,
the right to give consents, waivers, and notifications in respect of any
securities) pertaining to its Investment Property Collateral or any part
thereof; provided, however, that without the prior written consent of the
Collateral Agent and the Trustee obtained in accordance with the Indenture, no
vote shall be cast or consent, waiver, or ratification given or action taken
which would amend, modify, or waive any term, provision, or condition of the
certificate of incorporation, bylaws, certificate of formation, or other charter
document or other agreement relating to, evidencing or providing for the
issuance of any such Investment Property Collateral, in any manner that would
materially impair such Investment Property Collateral, the transferability
thereof, or the Collateral Agent’s Liens therein, and (B) each Grantor shall be
entitled to receive and retain any and all dividends, interest paid and other
cash distributions in respect of any of such Investment Property Collateral
(unless otherwise required by the Indenture).

 

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(ii)                                  During the existence of an Event of
Default, subject to each Intercreditor Agreement (if any) and the rights of any
applicable ABL Collateral Agent and any ABL Secured Parties thereunder, after
delivery of notice to the applicable Grantor, (A) the Collateral Agent may
exercise all voting and corporate rights at any meeting of any corporation,
partnership, or other business entity issuing any of the Investment Property
Collateral and the proceeds thereof (in cash or otherwise) held by the
Collateral Agent hereunder, and any and all rights of conversion, exchange,
subscription, or any other rights, privileges, or options pertaining to any of
the Investment Property Collateral as if it were the absolute owner thereof,
including, the right to exchange at its discretion any and all of the Investment
Property Collateral upon the merger, consolidation, reorganization,
recapitalization, or other readjustment of any Investment Property Issuer or
upon the exercise by any such issuer or the Collateral Agent of any right,
privilege, or option pertaining to any of the Investment Property Collateral,
and in connection therewith, to deposit and deliver any and all of the
Investment Property Collateral with any committee, depositary, transfer agent,
registrar, or other designated agency upon such terms and conditions as it may
determine, all without liability except to account for property actually
received by it, but the Collateral Agent shall have no duty to exercise any of
the aforesaid rights, privileges, or options, and the Collateral Agent shall not
be responsible for any failure to do so or delay in so doing, (B) all rights of
any Grantor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 4.5(b)(i) and to receive
the dividends, interest, and other distributions which it would otherwise be
authorized to receive and retain thereunder shall be suspended until such Event
of Default shall no longer exist or as the Collateral Agent shall otherwise
specify, and all such rights shall, until such Event of Default shall no longer
exist or as the Collateral Agent shall otherwise specify, thereupon become
vested in the Collateral Agent which shall thereupon have the sole right, but no
duty, to exercise such voting and other consensual rights and to receive and
hold as Investment Property Collateral such dividends, interest, and other
distributions, (C) all dividends, interest, and other distributions which are
received by any Grantor contrary to the provisions of this
Section 4.5(b)(ii) shall be received in trust for the benefit of the Collateral
Agent, shall be segregated from other funds of such Grantor and shall be
forthwith paid over to the Collateral Agent as Collateral in the same form as so
received (with any necessary endorsement), and (D) each Grantor shall execute
and deliver (or cause to be executed and delivered) to the Collateral Agent all
such proxies and other instruments as the Collateral Agent may reasonably
request for the purpose of enabling the Collateral Agent to exercise the voting
and other rights which it is entitled to exercise pursuant to this
Section 4.5(b)(ii) and to receive the dividends, interest, and other
distributions which it is entitled to receive and retain pursuant to this
Section 4.5(b)(ii).  The foregoing shall not in any way limit the Collateral
Agent’s power and authority granted pursuant to Section 7.4.  After all Events
of Default have been cured or waived and the applicable Grantor shall have
delivered to the Collateral Agent certificates to that effect, the Collateral
Agent shall promptly repay to each Grantor (without interest) all dividends or
other distributions that such Grantor would otherwise be permitted to retain
pursuant to the terms of Section 4.5(b)(i) above and that remain in such
account.

 

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(c)                                  The Grantors will cause or permit the
Collateral Agent from time to time to cause the appropriate Investment Property
Issuers (and, if held with a securities intermediary, such securities
intermediary) of uncertificated securities or other types of Investment Property
Collateral not represented by certificates to mark their books and records with
the numbers and face amounts of all such uncertificated securities or other
types of Investment Property Collateral not represented by certificates and all
rollovers and replacements therefor to reflect the Lien of the Collateral Agent
granted pursuant to this Agreement.  The Grantors will take any actions
reasonably necessary to cause (a) the Investment Property Issuers of
uncertificated securities which are Investment Property Collateral, and (b) any
securities intermediary which is the holder of any Investment Property
Collateral, to cause the Collateral Agent to have and retain Control over such
Investment Property Collateral.

 

Section 4.6                                    Proprietary Rights.

 

(a)                                 The Issuer, either directly or through any
agent, employee, licensee or designee, shall inform the Collateral Agent on an
annual basis of each application for the registration of any material
Proprietary Right owned or licensed by the Issuer or any of its Affiliates with
the United States Patent and Trademark Office, the United States Copyright
Office, the European Patent Office or any similar office or agency filed during
the preceding year.

 

Section 4.7                                    Inventory.  Each Grantor shall
keep its Inventory (other than returned or obsolete Inventory) in good and
marketable condition, except for damaged or defective goods arising in the
ordinary course of such Grantor’s business.

 

Section 4.8                                    Commercial Tort Claims.  If any
Grantor shall at any time, acquire a Commercial Tort Claim, the recovery from
which could reasonably be expected to exceed $500,000, such Grantor shall
promptly notify the Collateral Agent thereof in a writing, therein providing a
reasonable description and summary thereof, and upon delivery thereof to the
Collateral Agent, together with an Amendment as contemplated by
Section 4.2(a)(iii), such Grantor shall be deemed thereby to grant to the
Collateral Agent a security interest in such Commercial Tort Claim (subject to
each Intercreditor Agreement (if any)).

 

Section 4.9                                    No Interference.  Each Grantor
agrees that it will not interfere with any right, power and remedy of the
Collateral Agent provided for in this Agreement or now or hereafter existing at
law or in equity or by statute or otherwise, or the exercise or beginning of the
exercise by the Collateral Agent of any one or more of such rights, powers or
remedies.

 

Section 4.10                             Insurance.

 

(a)                                 The Grantors shall maintain with financially
sound and reputable insurers insurance that is reasonably consistent with
prudent industry practice.

 

(b)                                 For each of the insurance policies issued as
required by this Section 4.10 with respect to Collateral, each Grantor shall
cause the Collateral Agent, for the benefit of the Secured Parties, to be named
as an additional insured with respect to insurance policies for general
liability for bodily injury and a lenders loss payee for insurance policies for
property damage.  Certificates of insurance of the policies shall be delivered
to the Collateral Agent.

 

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(c)                                  The Issuer shall promptly provide written
notice to the Collateral Agent of any loss, damage, or destruction to the
Collateral in excess of (A) $2,500,000 if covered by insurance or (B) $1,000,000
if not covered by insurance.  During the existence of an Event of Default,
subject to each Intercreditor Agreement (if any) and the rights of any
applicable ABL Collateral Agent and any ABL Secured Parties thereunder, the
Collateral Agent is hereby authorized to directly collect all insurance proceeds
in respect of Collateral and to apply such proceeds in accordance with
Section 5.3.

 

(d)                                 Unless the Grantors provide the Collateral
Agent with evidence of the insurance coverage on the Collateral required by this
Section 4.10, subject to each Intercreditor Agreement (if any), the Collateral
Agent may, upon sixty (60) days’ prior notice, purchase insurance at the
applicable Grantor’s expense to protect the Collateral Agent’s Lien on such
Collateral owned by the applicable Grantor.  This insurance may, but need not,
protect the interests of the Grantors.  The coverage that the Collateral Agent
purchases may (but shall not be required to) pay any claim that the Grantors
make or any claim that is made against the Grantors in connection with said
Collateral.  The Grantors may later cancel any insurance purchased by the
Collateral Agent but only after providing the Collateral Agent with evidence
that the Grantors have obtained insurance as required by this Agreement.  If the
Collateral Agent purchases such insurance, the applicable Grantor will be
responsible for the costs of that insurance, including interest and any other
reasonable charges the Collateral Agent may impose in connection with the
placement of insurance, until the effective date of the cancellation or
expiration of the insurance.  The costs of the insurance shall be added to the
Obligations.  The costs of the insurance may be more than the cost of insurance
that the Grantors may be able to obtain on their own.

 

Section 4.11                             Condemnation.  Subject to each
Intercreditor Agreement (if any) and the rights of any applicable ABL Collateral
Agent and any ABL Secured Parties thereunder, each Grantor shall, promptly upon
learning of the institution of any proceeding for the condemnation or other
taking of any of its property with a Fair Market Value in excess of $1,000,000,
notify the Collateral Agent of the pendency of such proceeding.

 

Section 4.12                             Further Assurances.  The Grantors
shall, at their own cost and expense, execute and deliver, or cause to be
executed and delivered, to the Collateral Agent and/or the Trustee such
documents and agreements, and shall take or cause to be taken such actions, as
are necessary or that the Collateral Agent and/or the Trustee may, from time to
time, reasonably request to carry out the terms and conditions of this Agreement
and the other Indenture Documents.  Upon the acquisition by any Grantor of any
After-Acquired Property (but subject to the limitations, if applicable, set
forth herein, in the Indenture or in each Intercreditor Agreement (if any)),
such Grantor shall execute and deliver such security instruments, financing
statements and certificates and Opinions of Counsel as shall be reasonably
necessary to vest in the Collateral Agent a perfected security interest or other
Lien in such After-Acquired Property and to have such After-Acquired Property
added to the Collateral and shall promptly deliver such Officers’ Certificates
and Opinions of Counsel as are customary in secured financing transactions in
the relevant jurisdiction(s) or as are reasonably requested by the Trustee or
the Collateral Agent (subject to customary assumptions, exceptions and
qualifications), and thereupon all provisions of this Agreement relating to the
Collateral, shall be deemed to relate to such After-Acquired Property to the
same extent and with the same force and effect.  If any

 

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property or assets of the Issuer or any Grantor originally deemed to be an
Excluded Asset at any point ceases to be an Excluded Asset pursuant to such
defined term, all or the applicable portion of such property and assets shall be
deemed to be After-Acquired Property and shall be added to the Notes Collateral
in accordance with the Indenture and this Agreement and each Intercreditor
Agreement (if any).  Subject to each Intercreditor Agreement (if any), such
security interests and Liens will be created under security agreements and other
instruments and documents in form reasonably satisfactory to the Collateral
Agent, and the Grantors shall deliver or cause to be delivered to the Collateral
Agent and the Trustee all such instruments and documents (including legal
opinions, Officers’ Certificates, title insurance policies and lien searches) as
are necessary or that the Collateral Agent shall reasonably request to evidence
compliance with this Section 4.12.  The Grantors shall furnish to the Collateral
Agent each year at the time of delivery of the annual report required to be
delivered by the Issuer pursuant to Section 4.02(a) of the Indenture, an
Officer’s Certificate setting forth the information required pursuant to the
Perfection Certificate or confirming that there has been no change in such
information since the Effective Date or the date of the most recent certificate
delivered pursuant to this Section 4.12.

 

Section 4.13                             Negative Pledge.  In accordance with
Section 4.11 of the Indenture, the Grantors shall not, directly or indirectly,
create, Incur or suffer to exist (a) any Lien (except Permitted Liens) on any
asset or property of such Grantor securing Indebtedness or (b) any Lien on ABL
Collateral securing any First Priority Lien Obligation of such Grantor without
effectively providing that the Securities or the applicable Guarantee, as the
case may be, shall be granted a junior security interest (subject to Permitted
Liens) upon the assets or property constituting the ABL Collateral for such
First Priority Lien Obligations; provided, however, that no such junior security
interest upon any Lockbox Account constituting ABL Collateral shall be required.

 

Section 4.14                             Certain Post-Closing Obligations.  As
promptly as practical, and in any event no later than 45 days after the
Effective Date, (a) the Issuer shall deliver to the Collateral Agent executed
copies of the Egalet Corp DACA and Egalet Corp SACA, and (b) Egalet US shall
deliver to the Collateral Agent an executed copy of the Egalet US DACA.

 

ARTICLE V
REMEDIES

 

Section 5.1                                    Remedies.

 

(a)                                 If an Event of Default has occurred and is
continuing:

 

(i)                                     the Collateral Agent shall have, for the
benefit of the Secured Parties, in addition to all other rights of the
Collateral Agent and the Trustee, the rights and remedies of a secured party
under the UCC (whether or not the UCC applies to the affected Collateral) or
under any other applicable law when a debtor is in default under a security
agreement;

 

(ii)                                  the Collateral Agent may, at any time,
take possession of the Collateral and keep it on any Grantor’s premises, at no
cost to the Collateral Agent, the Trustee or any other Secured Party or remove
any part of it to such other place or places

 

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as the Collateral Agent may desire, or any Grantor shall, upon the Collateral
Agent’s demand, at such Grantor’s cost, assemble the Collateral and make it
available to the Collateral Agent at a place reasonably convenient to the
Collateral Agent;

 

(iii)                               the Collateral Agent may sell and deliver
any Collateral at public or private sales, for cash, upon credit, or otherwise,
at such prices and upon such terms as the Collateral Agent deems advisable, in
its sole discretion, and may, if the Collateral Agent deems it reasonable,
postpone or adjourn any sale of the Collateral by an announcement at the time
and place of sale or of such postponed or adjourned sale without giving a new
notice of sale; provided that in connection with any such sale of Collateral,
the Collateral Agent shall use its reasonable commercial efforts to maintain the
confidentiality of any proprietary information of the Grantors (consistent with
the confidentiality obligations of the Holders of the Securities as required by
the Indenture Documents).

 

(iv)                              the Collateral Agent may give notice of sole
control or any other instruction under any Account Control Agreement and take
any action provided therein with respect to the applicable Collateral;

 

(v)                                 the Collateral Agent may, concurrently with
or following written notice to the Grantors, transfer and register in its name
or in the name of its nominee the whole or any part of the Investment Property
Collateral, exchange certificates or instruments representing or evidencing
Investment Property Collateral for certificates or instruments of smaller or
larger denominations, exercise the voting and all other rights as a holder with
respect thereto, collect and receive all cash dividends, interest, principal and
other distributions made thereon and otherwise act with respect to the
Investment Property Collateral as though the Collateral Agent was the outright
owner thereof.

 

(b)                                 Without in any way requiring notice to be
given in the following manner, each Grantor agrees that any notice by the
Collateral Agent of sale, disposition, or other intended action hereunder or in
connection herewith, whether required by the UCC or otherwise, shall constitute
reasonable notice to the Grantors if such notice is mailed by registered or
certified mail, return receipt requested, postage prepaid, or is delivered
personally against receipt, at least ten (10) Business Days prior to such action
to the Grantors’ address specified in or pursuant to Section 8.1.

 

(c)                                  If any Collateral is sold on terms other
than payment in full at the time of sale, no credit shall be given against the
Obligations until the Collateral Agent receives payment, and if the buyer
defaults in payment, the Collateral Agent may resell the Collateral without
further notice to any Grantor.

 

(d)                                 In the event the Collateral Agent seeks to
take possession of all or any portion of the Collateral by judicial process,
each Grantor irrevocably waives:  (i) the posting of any bond, surety, or
security with respect thereto which might otherwise be required; (ii) any demand
for possession prior to the commencement of any suit or action to recover the
Collateral; and (iii) any requirement that the Collateral Agent retain
possession and not dispose of any Collateral until after trial or final
judgment.

 

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(e)                                  If an Event of Default occurs and is
continuing, each Grantor hereby waives all rights to a hearing prior to the
exercise by the Collateral Agent of the Collateral Agent’s rights to repossess
the Collateral without judicial process or to replevy, attach, or levy upon the
Collateral.

 

(f)                                   Each Grantor acknowledges and agrees that
the Collateral Agent has no obligation to preserve rights to the Collateral or
marshal any Collateral for the benefit of any Person.

 

(g)                                  Each Grantor acknowledges and agrees that
the compliance by the Collateral Agent, on behalf of the Secured Parties, with
any applicable state or federal law requirements may be required in connection
with a disposition of the Collateral and such compliance will not be considered
to adversely affect the commercial reasonableness of any sale of the Collateral.

 

(h)                                 The Collateral Agent shall have the right
upon any public sale or sales and, to the extent permitted by law, upon any
private sale or sales, to purchase for the benefit of the Collateral Agent and
the other Secured Parties, the whole or any part of the Collateral so sold, free
of any right of equity redemption, which equity redemption each Grantor hereby
expressly releases.

 

(i)                                     Until the Collateral Agent is able to
effect a sale, lease, transfer or other disposition of Collateral, the
Collateral Agent shall have the right, but no duty or obligation, to hold or use
Collateral, or any part thereof, to the extent that it deems appropriate for the
purpose of preserving Collateral or the value of the Collateral, or for any
other purpose deemed appropriate by the Collateral Agent.  The Collateral Agent
may, if it so elects, but shall have no obligation to, seek the appointment of a
receiver or keeper to take possession of Collateral and to enforce any of the
Collateral Agent’s remedies (for the benefit of the Collateral Agent and Secured
Parties), with respect to such appointment without prior notice or hearing as to
such appointment.

 

(j)                                    Each Grantor recognizes that the
Collateral Agent may be unable to effect a public sale of any or all of the
Collateral consisting of securities to be sold by reason of certain prohibitions
contained in the laws of any jurisdiction outside the United States or in
applicable federal or state securities laws but may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers who will
be obliged to agree, among other things, to acquire such Collateral or other
property to be sold for their own account for investment and not with a view to
the distribution or resale thereof.  Each Grantor acknowledges and agrees that
any such private sale may result in prices and other terms less favorable to the
seller than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall not, by virtue thereof,
be deemed to have been made in a commercially unreasonable manner.  Unless
required by a Requirement of Law, the Collateral Agent shall not be under any
obligation to delay a sale of any of the Collateral or other property to be sold
for the period of time necessary to permit the issuer of such securities to
register such securities under the laws of any jurisdiction outside the United
States or under any applicable federal or state securities laws, even if such
issuer would agree to do so.  Each Grantor further agrees to do or cause to be
done, at its own cost and expense, to the extent that such Grantor may do so
under Requirements of

 

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Law, all such other acts and things as may be necessary to make such sales or
resales of any portion or all of the Collateral or other property to be sold
valid and binding and in compliance with any and all Requirements of Law at the
Grantors’ expense.

 

(k)                                 Any remedy or enforcement action to be taken
hereunder by the Collateral Agent with respect to the Collateral shall be at the
written direction of the Trustee (acting pursuant to the direction of the
Majority Holders pursuant to the Indenture).

 

(l)                                     Notwithstanding the foregoing, any
rights and remedies provided in this Section 5.1 shall be subject to each
Intercreditor Agreement (if any).

 

Section 5.2                                    Grant of Intellectual Property
License.  Effective only upon the occurrence and during the continuance of an
Event of Default, for the purpose of enabling the Collateral Agent to exercise
the rights and remedies under this Article V at such time as the Collateral
Agent shall be lawfully entitled to exercise such rights and remedies, subject
to the terms of each Intercreditor Agreement (if any), each Grantor hereby
grants to the Collateral Agent a non-exclusive license or other right to use,
without charge, each Grantor’s labels, patents, copyrights, name, trade secrets,
trade names, trademarks, and advertising matter, or any similar property, to the
extent constituting Collateral in completing production of, advertising or
selling any Collateral, and, subject to the rights of any licensor or franchisor
under such agreements and to the extent not in violation of such agreements,
each Grantor’s rights under all licenses and all franchise agreements shall
inure to the Collateral Agent’s benefit for such purpose.

 

Section 5.3                                    Application of Proceeds.  Subject
to each Intercreditor Agreement (if any), the Collateral Agent shall apply the
proceeds of any collection, sale, foreclosure or other realization upon any
Collateral, as well as any Collateral consisting of cash, as follows:

 

FIRST, to the payment of all reasonable costs and expenses incurred by the
Collateral Agent (in its capacity as such hereunder or under the Indenture or
any other Indenture Document) and the Trustee in connection with such
collection, sale, foreclosure or realization or reasonable costs, expenses,
claims or liabilities of the Collateral Agent or the Trustee otherwise relating
to or arising in connection with this Agreement, the Indenture or any other
Indenture Document or any of the Obligations, including all court costs and the
reasonable fees and expenses of its agents and legal counsel, the repayment of
all advances made by the Collateral Agent or the Trustee hereunder or under the
Indenture or any other Indenture Document on behalf of any Grantor, any other
reasonable costs or expenses incurred by the Collateral Agent or the Trustee in
connection with the exercise of any remedy hereunder or under the Indenture or
any other Indenture Document, and any indemnification of the Collateral Agent
and the Trustee required by the terms hereunder, under the Indenture or any
other Indenture Document;

 

SECOND, to the Trustee for distribution in accordance with the priorities set
forth in Section 6.10 of the Indenture.

 

Except as otherwise provided herein, the Collateral Agent shall have absolute
discretion as to the time of application of any such proceeds, moneys or
balances in accordance

 

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with this Agreement and each Intercreditor Agreement (if any).  Upon any sale of
Collateral by the Collateral Agent (including pursuant to a power of sale
granted by statute or under a judicial proceeding), the receipt of the
Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Collateral Agent or such officer or
be answerable in any way for the misapplication thereof.

 

ARTICLE VI
CONCERNING THE COLLATERAL AGENT

 

Section 6.1                                    Reliance by Collateral Agent;
Indemnity Against Liabilities, etc.

 

(a)                                 Whenever in the performance of its duties
under this Agreement or any other Indenture Document, the Collateral Agent shall
deem it necessary or desirable that a matter be proved or established with
respect to the Grantors or any other Person in connection with the taking,
suffering or omitting of any action hereunder by the Collateral Agent, such
matter may be conclusively deemed to be proved or established by a certificate
executed by an Officer of such Person, including an Officers’ Certificate or an
Opinion of Counsel, and the Collateral Agent shall have no liability with
respect to any action taken, suffered or omitted in reliance thereon.  The
Collateral Agent may at any time solicit written confirmatory instructions,
including a direction of the Trustee, any Grantor or an order of a court of
competent jurisdiction as to any action that it may be requested or required to
take or that it may propose to take in the performance of any of its obligations
under this Agreement or any other Indenture Document and shall be fully
justified in failing or refusing to act hereunder or under any Indenture
Document until it shall have received such requisite instruction.

 

(b)                                 The Collateral Agent shall be fully
protected in relying upon any note, writing, affidavit, electronic
communication, fax, resolution, statement, certificate, instrument, opinion,
report, notice (including any notice of an Event of Default or of the cure or
waiver thereof), request, consent, order or other paper or document or oral
conversation (including, telephone conversations) which it in good faith
believes to be genuine and correct and to have been signed, presented or made by
the proper party.  The Collateral Agent may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein, upon
any notice, certificate or opinion furnished to the Collateral Agent in
connection with this Agreement or any other Indenture Document and upon advice
and statements of legal counsel (including counsel to the Issuer or any Grantor,
independent accountants and other agents consulted by the Collateral Agent).

 

Section 6.2                                    Exercise of Remedies.  The
remedies of the Collateral Agent hereunder and under the other Security
Documents shall include, but not be limited to, the disposition of the
Collateral by foreclosure or other sale and the exercising of all remedies of a
secured lender under the UCC, bankruptcy laws or similar laws of any applicable
jurisdiction.

 

Section 6.3                                    Authorized Investments.  Any and
all funds held by the Collateral Agent in its capacity as Collateral Agent,
whether pursuant to any provision hereof or of any other Security Document or
otherwise, shall, to the extent reasonably practicable following

 

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receipt by the Collateral Agent from the Issuer of specific written instructions
in form and substance reasonably satisfactory to the Collateral Agent delivered
to the Collateral Agent at least three (3) Business Days prior to the proposed
investment, be invested by the Collateral Agent within a reasonable time in the
Cash Equivalents identified in such written instructions.  Any interest earned
on such funds shall be disbursed (i) during an Event of Default, in accordance
with Section 5.3 and (ii) at all other times, as the Issuer shall direct. To the
extent that the interest rate payable with respect to any such account varies
over time, the Collateral Agent may use an average interest rate in making the
interest allocations among the respective Secured Parties.  In the absence of
gross negligence or willful misconduct as determined by a final non-appealable
order of a court of competent jurisdiction, the Collateral Agent shall not be
responsible for any investment losses in respect of any funds invested in
accordance with this Section 6.3.  The Collateral Agent shall have no duty or
obligation regarding the reinvestment of any such funds in the absence of
updated written instructions from the Issuer in form and substance reasonably
satisfactory to the Collateral Agent.

 

Section 6.4                                    Bankruptcy Proceedings.  The
following provisions shall apply during any Bankruptcy Proceeding of any
Grantor:

 

(a)                                 The Collateral Agent shall represent all
Secured Parties in connection with all matters directly relating to the
Collateral, including, any use, sale or lease of Collateral, use of cash
collateral, request for relief from the automatic stay and request for adequate
protection.

 

(b)                                 Each Secured Party shall be free to act
independently on any issue not affecting the Collateral.  Each Secured Party
shall give prior notice to the Collateral Agent of any such action that could
materially affect the rights or interests of the Collateral Agent or the other
Secured Parties to the extent that such notice is reasonably practicable.  If
such prior notice is not given, such Secured Party shall give prompt notice
following any action taken hereunder.

 

(c)                                  Any proceeds of the Collateral received by
any Secured Party as a result of, or during, any Bankruptcy Proceeding will be
delivered promptly to the Collateral Agent for distribution in accordance with
Section 5.3.

 

ARTICLE VII
COLLATERAL AGENT AND TRUSTEE RIGHTS, DUTIES AND
LIABILITIES; ATTORNEY IN FACT; PROXY

 

Section 7.1                                    The Collateral Agent’s and the
Trustee’s Rights, Duties, and Liabilities.

 

(a)                                 The Grantors assume all responsibility and
liability arising from or relating to the use, maintenance, storage, sale,
collection, foreclosure, realization on, conveyance or other disposition of or
involving the Collateral.  The Obligations shall not be affected by any failure
of any Grantor, the Collateral Agent or the Trustee to take any steps to perfect
the Collateral Agent’s Liens or to collect or realize upon the Collateral, nor
shall loss of or damage to the Collateral release any Grantor from any of the
Obligations.  Following the occurrence and during the continuation of an Event
of Default, the Collateral Agent may (but shall not be required to), and at the
direction of the Trustee (acting in accordance with the instructions of the

 

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Majority Holders pursuant to the Indenture) shall, subject to each Intercreditor
Agreement (if any) and the terms of the Indenture, without notice to or consent
from any Grantor sue upon or otherwise collect, extend the time for payment of,
modify or amend the terms of, compromise or settle for cash, credit, or
otherwise upon any terms, grant other indulgences, extensions, renewals,
compositions, or releases, and take or omit to take any other action with
respect to the Collateral, any security therefor, any agreement relating
thereto, any insurance applicable thereto, or any Person liable directly or
indirectly in connection with any of the foregoing, without discharging or
otherwise affecting the liability of any Grantor for the Obligations or under
the Indenture, any other Indenture Document or any other agreement now or
hereafter existing between any Secured Party and any Grantor.

 

(b)                                 It is expressly agreed by the Grantors that,
anything herein to the contrary notwithstanding, each of the Grantors shall
remain liable under each of its contracts and each of its licenses to observe
and perform all the conditions and obligations to be observed and performed by
it thereunder.  The Collateral Agent and the Trustee shall not have any
obligation or liability under any contract or license by reason of or arising
out of this Agreement or the granting herein of a Lien thereon or the receipt by
the Collateral Agent or the Trustee of any payment relating to any contract or
license pursuant hereto that is applied as required herein.  The Collateral
Agent and the Trustee shall not be required or obligated in any manner to
perform or fulfill any of the obligations of any Grantor under or pursuant to
any contract or license, or to make any payment, or to make any inquiry as to
the nature or the sufficiency of any payment received by it or the sufficiency
of any performance by any party under any contract or license, or to present or
file any claims, or to take any action to collect or enforce any performance or
the payment of any amounts which may have been assigned to it or to which it may
be entitled at any time or times.

 

Section 7.2                                    Right to Cure.  The Collateral
Agent may, (but shall not be required to) in its reasonable discretion, subject
to each Intercreditor Agreement (if any), pay any reasonable amount or do any
reasonable act required of any Grantor hereunder or under any other Indenture
Document in order to preserve, protect, maintain, or enforce the Obligations,
the Collateral or the Collateral Agent’s Liens therein, and which any Grantor
fails to timely pay or do, including payment of any judgment against any
Grantor, any insurance premium, any warehouse charge, any finishing or
processing charge, any landlord’s or bailee’s claim, and any other Lien upon or
with respect to the Collateral.  All payments that the Collateral Agent makes
under this Section 7.2 and all reasonable out-of-pocket costs and expenses that
the Collateral Agent pays or incurs in connection with any action taken by it
hereunder shall be promptly reimbursed by such Grantor.  Any payment made or
other action taken by the Collateral Agent under this Section 7.2 shall be
without prejudice to any right to assert an Event of Default hereunder and to
proceed thereafter as herein provided.

 

Section 7.3                                    Confidentiality.

 

(a)                                 The Collateral Agent, in its individual
capacity and as Collateral Agent, and the Trustee, in its individual capacity
and as Trustee, agree and acknowledge that all information provided to the
Collateral Agent or the Trustee by any Grantor may be considered to be
proprietary and confidential information (“Confidential Information”).  The
Trustee and the Collateral Agent each agrees to take all reasonable precautions
necessary to keep such

 

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information confidential, which precautions shall be no less stringent than
those that the Collateral Agent and the Trustee, as applicable, employs to
protect its own confidential information.  Each of the Collateral Agent and the
Trustee shall not disclose to any third party other than as set forth herein,
and shall not use for any purpose other than the exercise of the Collateral
Agent’s and the Trustee’s rights and the performance of its respective
obligations under this Agreement, any such information without the prior written
consent of such Grantor, as applicable.  Each of the Collateral Agent and the
Trustee shall limit access to such information received hereunder to (a) its
directors, officers, managers and employees and (b) its legal advisors, to each
of whom disclosure of such information is necessary for the purposes described
above; provided, however, that in each case such party has expressly agreed to
maintain such information in confidence under terms and conditions substantially
identical to the terms of this Section 7.3(a).

 

(b)                                 Each of the Collateral Agent and the Trustee
agree that, unless otherwise provided hereunder or under the Indenture, each
Grantor does not have any responsibility whatsoever for any reliance on
Confidential Information by the Collateral Agent or the Trustee or by any Person
to whom such information is disclosed in connection with this Agreement, whether
related to the purposes described above or otherwise.  Without limiting the
generality of the foregoing, each of the Collateral Agent and the Trustee agrees
that the Grantor makes no representation or warranty whatsoever to it with
respect to Confidential Information or its suitability for such purposes.  Each
of the Collateral Agent and the Trustee further agrees that it shall not acquire
any rights against the Grantor or any employee, officer, director, manager,
representative or agent of the Grantor (together with the Issuer and any
employee, officer, director, manager, representative or agent of the Issuer,
“Confidential Parties”) as a result of the disclosure of Confidential
Information to the Trustee and that no Confidential Party has any duty,
responsibility, liability or obligation to any Person as a result of any such
disclosure.

 

(c)                                  In the event the Collateral Agent or the
Trustee is required to disclose any Confidential Information received hereunder
in order to comply with any laws, regulations or court orders, it may disclose
Confidential Information only to the extent necessary for such compliance;
provided, however, that it shall give the Grantor, reasonable advance written
notice of any such court proceeding in which such disclosure may be required
pursuant to a court order so as to afford the Grantor full and fair opportunity
to oppose the issuance of such order and to appeal therefrom and shall cooperate
reasonably with the Grantor, as applicable, in opposing such order and in
securing confidential treatment of any Confidential Information to be disclosed
and/or obtaining a protective order narrowing the scope of such disclosure.

 

Section 7.4                                    Power of Attorney.  Each Grantor,
as to itself, hereby appoints the Collateral Agent and the Collateral Agent’s
designee as such Grantor’s attorney, with power upon the occurrence and during
the continuance of an Event of Default: (a) to endorse such Grantor’s name on
any checks, notes, acceptances, money orders, or other forms of payment or
security that come into the Collateral Agent’s or any Secured Parties’
possession; (b) to sign such Grantor’s name on any invoice, bill of lading,
warehouse receipt, or other document of title relating to any Collateral, on
drafts against customers, on assignments of Accounts, on notices of assignment,
financing statements, and other public records and to file any such financing
statements by electronic means with or without a signature as authorized or
required by applicable law or filing procedure; (c) to notify the post office
authorities to change the address

 

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for delivery of such Grantor’s mail to an address designated by the Collateral
Agent and to receive, open, and dispose of all mail addressed to such Grantor;
(d) to send requests for verification of Accounts to customers or Account
Debtors (but if any such Accounts constitute Intercreditor Collateral, only so
long as no ABL Liens are outstanding on such Collateral); (e) to clear Inventory
through customs in such Grantor’s name, the Collateral Agent’s name, or the name
of the Collateral Agent’s designee, and to sign and deliver to customs officials
powers of attorney in such Grantor’s name for such purpose; and (f) to do all
things the Collateral Agent reasonably determines are necessary to carry out the
security interest provisions of the Indenture and the provisions of this
Agreement.  Each Grantor ratifies and approves all acts of such attorney. 
Notwithstanding anything in this Agreement or any Indenture Document to the
contrary, none of the Trustee, the Collateral Agent, nor their attorneys,
employees or Affiliates will be liable for any acts or omissions or for any
error of judgment or mistake of fact or law other than any such liability
arising from any such Person’s gross negligence or willful misconduct, as
finally determined by a court of competent jurisdiction.  Notwithstanding the
foregoing, any rights and remedies provided in this Section 7.4 shall be subject
to each Intercreditor Agreement (if any).

 

Section 7.5                                    NATURE OF APPOINTMENT; LIMITATION
OF DUTY.  THE APPOINTMENT OF THE COLLATERAL AGENT AS ATTORNEY-IN-FACT IN THIS
ARTICLE VII IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THE DATE
ON WHICH THIS AGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 8.13.
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT OR IN ANY INDENTURE
DOCUMENT, NEITHER THE COLLATERAL AGENT, NOR ANY SECURED PARTY, NOR ANY OF THEIR
RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES
SHALL HAVE ANY DUTY TO EXERCISE ANY RIGHT OR POWER GRANTED HEREUNDER OR
OTHERWISE OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO
SO OR FOR ANY DELAY IN DOING SO, EXCEPT  TO THE EXTENT SUCH DAMAGES ARE
ATTRIBUTABLE TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY
DETERMINED BY A COURT OF COMPETENT JURISDICTION; PROVIDED THAT, IN NO EVENT
SHALL THEY BE LIABLE FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL
DAMAGES.

 

Section 7.6                                    Additional Matters Relating to
the Collateral Agent.

 

(a)                                 The Collateral Agent.  U.S. Bank National
Association shall initially act as Collateral Agent for the Secured Parties and
shall be authorized to appoint co-collateral agents as necessary in its sole
discretion.  U.S. Bank National Association, as Collateral Agent, is authorized
and directed to (i) enter into the Indenture Documents, (ii) enter into
Intercreditor Agreements, (iii) bind the Secured Parties on the terms as set
forth in the Indenture Documents and any Intercreditor Agreement and
(iv) perform and observe its obligations under the Indenture Documents and each
Intercreditor Agreement (if any).

 

(b)                                 Role of the Collateral Agent.  The rights,
duties, liabilities and immunities of the Collateral Agent and its appointment,
resignation and replacement hereunder and under the Indenture and the other
Indenture Documents shall be governed by this Agreement, Article 11 of the
Indenture and the relevant provisions contained in the other Indenture
Documents.

 

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Without limiting the foregoing, the rights, privileges, protections and benefits
given to the Collateral Agent under the Indenture are extended to, and shall be
enforceable by, the Collateral Agent in connection with the execution, delivery
and administration of this Agreement and the other Indenture Documents and any
action taken or omitted to be taken by the Collateral Agent in connection with
its appointment and performance under this Agreement and the other Indenture
Documents to which it is a party.

 

(c)                                  Absence of Fiduciary Relation.  The
Collateral Agent undertakes to perform or to observe only such of its agreements
and obligations as are specifically set forth in this Agreement, the Indenture
and the other Indenture Documents, and no implied agreements, covenants or
obligations with respect to any Grantor or any Affiliate of any Grantor, any
Secured Party or any other party shall be read into this Agreement against the
Collateral Agent.  The Collateral Agent in its capacity as such is not a
fiduciary of and shall not owe or be deemed to owe any fiduciary duty to any
Grantor or any Related Person of any Grantor.

 

(d)                                 Exculpatory Provisions.

 

(i)                                     None of the Collateral Agent, the
Trustee or any of their respective officers, directors, employees, agents,
attorneys-in-fact or Related Persons shall be responsible or liable in any
manner (A) to any Grantor or any of their respective Related Persons for any
action taken or omitted to be taken by it under or in connection with this
Agreement in compliance herewith, (B) to any Secured Party or any other Person
for any recitals, statements, representations, warranties, covenants or
agreements contained in this Agreement or in any Indenture Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Collateral Agent under or in connection with, this Agreement
or any Indenture Document, (C) to any Secured Party or any other Person for the
validity, effectiveness, adequacy, genuineness or enforceability of this
Agreement or any Indenture Document, or any Lien purported to be created
hereunder or under any Indenture Document, (D) to any Secured Party or any other
Person for the validity or sufficiency of the Collateral or the validity of the
title of any Grantor to the Collateral, for insuring the Collateral or for the
payment of taxes, charges, assessments or Liens upon the Collateral or otherwise
as to the maintenance of the Collateral or (E) to any Secured Party or other
Person for any failure of any Grantor to perform its obligations hereunder or of
the Issuer to perform any of the Obligations.

 

(ii)                                  Notwithstanding anything to the contrary
contained in this Agreement, (A) in no event shall the Trustee or the Collateral
Agent be responsible for or have any obligation, duty or liability with respect
to the creation, perfection, priority, maintenance, protection or enforcement of
any Lien on, security interest in, pledge or other encumbrance involving or
relating to the Collateral or any other assets, properties or rights of the
Grantors, provided, however that the Collateral Agent acknowledges that with
respect to the enforcement of any Liens, its actions will be subject to each
Intercreditor Agreement (if any), (B) none of the Trustee or the Collateral
Agent shall be responsible for filing any financing or continuation statements
or recording any documents or instruments in any public office at any time or
times or otherwise perfecting or maintaining the perfection of any Liens in the
Collateral and (C) none of the Trustee or the Collateral Agent shall be under
any obligation to any Person to ascertain or

 

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to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or to inspect the properties or
records of any Grantor.  The permissive rights of the Collateral Agent to do
things enumerated in this Agreement shall not be construed as a duty or
obligation.  The Collateral Agent may rely conclusively on any Opinions of
Counsel rendered to the Collateral Agent under Section 11.02 of the Indenture
and otherwise under the Indenture in determining any necessary or desirable
actions under this Agreement. Notwithstanding anything to the contrary herein,
the Collateral Agent’s sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under the UCC or
otherwise, shall be to deal with it in the same manner as the Collateral Agent
deals with similar property for its own account and the Collateral Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which comparable secured parties accord comparable
collateral.  None of the Collateral Agent or the Trustee shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of any Grantor or any other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof.

 

(iii)                               Notwithstanding anything to the contrary
contained herein, none of the Collateral Agent, the Trustee or any of their
respective officers, directors, employees, agents, attorneys-in-fact, or Related
Persons shall be exonerated from any liability arising from its or their own
gross negligence or willful misconduct, as finally determined by a court of
competent jurisdiction.

 

(e)                                  Fees and Expenses.  The Grantors agree that
they shall, jointly and severally, upon demand pay to the Collateral Agent and
any Secured Party the amount of any and all reasonable and documented
out-of-pocket fees, costs and expenses (including the reasonable and documented
out-of-pocket fees and expenses of their respective counsel, any special
consultants reasonably engaged (and, unless an Event of Default exists, engaged
only with the consent of the Issuer), and any local counsel who might reasonably
be retained by the Collateral Agent or any Secured Party, as the case may be, in
connection with the transactions contemplated hereby) that the Collateral Agent
or any Secured Party, as the case may be, may incur in connection with (i) any
Event of Default, including the sale, lease, license or other disposition of,
collection from, or other realization upon, any of the Collateral pursuant to
the exercise or enforcement of any of their respective rights hereunder,
(ii) the exercise of their respective rights under this Agreement or under any
Indenture Document, including the custody, preservation, use or operation of, or
the sale of,  any of the Collateral, (iii) performance by the Collateral Agent
of any obligations of any Grantor that any Grantor has failed or refused to
perform with respect to the Collateral, (iv) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings and defending
or asserting rights and claims of the Collateral Agent in respect thereof, by
litigation or otherwise, including expenses of insurance, or (v) the execution
and delivery and administration of this Agreement, each Intercreditor Agreement
and the other Indenture Documents and, any agreement supplemental hereto or
thereto, and any instruments of amendment, waiver, further assurance, release or
termination, including with respect to the termination and/or release of any or
all of the Liens  in the

 

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Collateral provided for in this Agreement and the other Security Documents.  Any
amounts payable by any Grantor pursuant to this Section 7.6 shall be payable on
demand.

 

(f)                                   Filing Fees, Taxes, etc.  The Grantors,
jointly and severally, shall pay all filing, registration and recording fees or
re-filing, re-registration, and re-recording fees, and all federal, state,
county, and municipal stamp taxes and other similar taxes, duties, imposts,
assessments, and charges arising out of or in connection with the execution and
delivery of this Agreement, the Indenture, each Intercreditor Agreement, the
other Indenture Documents, and any agreement supplemental hereto or thereto and
any instruments of further assurance or termination.

 

(g)                                  Security Against Costs.  Except for action
expressly provided for herein and in the other Indenture Documents, the
Collateral Agent shall be under no obligation to exercise any of the rights or
powers vested in it by this Agreement or any other Indenture Document at the
request, order or direction of any Secured Party pursuant to the provisions of
the Indenture or any Indenture Document, unless such Secured Party shall have
offered to the Collateral Agent security or indemnity satisfactory to the
Collateral Agent against the costs, expenses and liabilities which may be
incurred by it in compliance with such request, order or direction.

 

(h)                                 No Responsibility for Investments.  In no
event shall the Collateral Agent or any Secured Party be liable or responsible
for any funds or investments of funds held by any Grantor or any Affiliates
thereof.

 

Section 7.7                                    Appointment of Co-Collateral
Agent.  In the event that the Collateral Agent appoints a Co-Collateral Agent,
or Co-Collateral Agents, in accordance with the provisions of Section 7.6(a) of
this Agreement, such Co-Collateral Agent(s) shall enter into a Co-Collateral
Agent Appointment Agreement in a form satisfactory to the Collateral Agent and
such Co-Collateral Agent, and upon acceptance of the appointment, such
Co-Collateral Agent shall be entitled to all of the rights, privileges,
limitations on liability and immunities afforded to and subject to all the
duties of the Collateral Agent hereunder, and shall be deemed to be a party to
this Agreement for all purposes provided in this Section 7.7, in each case,
subject to the specific rights and duties vested in the Co-Collateral Agent
pursuant to the Co-Collateral Agent Appointment Agreement and related Security
Documents.  It is accepted and acknowledged by the parties hereto that any
Co-Collateral Agent appointed in accordance with Section 7.6(a) and this
Section 7.7 shall be entitled to the payment of its fees and expenses as agreed
to by the Issuer, and without limitation of any of the other provisions of this
Agreement, shall be deemed to be an indemnified party under Section 8.17 of this
Agreement with respect to any liability arising under this Agreement or the
other Indenture Documents without need for further act by the Issuer or the
Subsidiary Parties.

 

Section 7.8                                    Instructions under Account
Control Agreement.  Each of the Trustee and the Collateral Agent, whichsoever is
a party to any Account Control Agreement, agrees not to issue a notice of
exclusive control or any other instruction under such Account Control Agreement
unless an Event of Default has occurred and is continuing.

 

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ARTICLE VIII
GENERAL PROVISIONS

 

Section 8.1                                    Notice.  All notices and other
communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or
sent by fax, as follows:

 

(a)                                 if to the Collateral Agent, to it at

 

U.S. Bank National Association

Corporate Trust Services

One Federal Street, 3rd Floor

Boston, Massachusetts 02110

Attention: Alison Nadeau (Egalet Corporation 2016 Indenture)

Facsimile:  (617) 603-6683

 

(b)                                 if to the Trustee, to it at

 

U.S. Bank National Association

Corporate Trust Services

One Federal Street, 3rd Floor

Boston, Massachusetts 02110

Attention: Alison Nadeau (Egalet Corporation 2016 Indenture)

Facsimile:  (617) 603-6683

 

(c)                                  if to Grantors, at

 

Egalet Corporation

600 Lee Road, Suite 100

Wayne, Pennsylvania 19807

Attention:  Chief Financial Officer

General Counsel

Facsimile:  (484) 580-6230

 

Any party hereto may change its address or facsimile number for notices and
other communications hereunder by notice to the other parties hereto (and for
this purpose a notice to the Issuer shall be deemed to be a notice to each
Grantor).  All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt if delivered by hand or overnight courier service
or sent by facsimile or on the date five (5) Business Days after dispatch by
certified or registered mail if mailed, in each case delivered, sent or mailed
(properly addressed) to such party as provided in this Section 8.1 or in
accordance with the latest unrevoked direction from such party given in
accordance with this Section 8.1.  Notwithstanding the foregoing, notices to the
Collateral Agent shall only be effective upon actual receipt.

 

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Section 8.2                                    Waiver of Notices.  Unless
otherwise expressly provided herein, each Grantor hereby waives presentment,
demand, protest or any notice (to the maximum extent permitted by applicable
law) of any kind in connection with this Agreement or any Collateral.

 

Section 8.3                                    Limitation on Collateral Agent’s
and Secured Party’s Duty with Respect to the Collateral.  The Collateral Agent
shall have no obligation to clean-up or otherwise prepare the Collateral for
sale. The Collateral Agent and each Secured Party shall use reasonable care with
respect to the Collateral in its possession or under its control.  Neither the
Collateral Agent nor any Secured Party shall have any other duty as to any
Collateral in its possession or control or in the possession or control of any
agent or nominee of the Collateral Agent or such Secured Party, or any income
thereon (other than to account for proceeds therefrom) or as to the preservation
of rights against prior parties or any other rights pertaining thereto. To the
extent that applicable law imposes duties on the Collateral Agent to exercise
remedies in a commercially reasonable manner, and to the extent permitted by
applicable law, each Grantor acknowledges and agrees that it would be
commercially reasonable for the Collateral Agent (i) to fail to incur expenses
deemed significant by the Collateral Agent to prepare Collateral for disposition
or otherwise to transform raw material or work in process into finished goods or
other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain governmental or third party consents
for the collection or disposition of Collateral to be collected or disposed of,
(iii) to fail to exercise collection remedies against Account Debtors or other
Persons obligated on Collateral or to remove Liens on or any adverse claims
against Collateral, (iv) to exercise collection remedies against Account Debtors
and other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) to contact other
Persons, whether or not in the same business as the Grantor, for expressions of
interest in acquiring all or any portion of such Collateral, (vii) to hire one
or more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capacity of
doing so, or that match buyers and sellers of assets, (ix) to dispose of assets
in wholesale rather than retail markets, (x) to disclaim disposition warranties,
such as title, possession or quiet enjoyment, (xi) to purchase insurance or
credit enhancements to insure the Collateral Agent against risks of loss,
collection or disposition of Collateral or to provide to the Collateral Agent a
guaranteed return from the collection or disposition of Collateral, or (xii) to
the extent deemed appropriate by the Collateral Agent, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
the Collateral Agent in the collection or disposition of any of the Collateral. 
Each Grantor acknowledges that the purpose of this Section 8.3 is to provide
non-exhaustive indications of what actions or omissions by the Collateral Agent
would be commercially reasonable in the Collateral Agent’s exercise of remedies
against the Collateral and that other actions or omissions by the Collateral
Agent shall not be deemed commercially unreasonable solely on account of not
being indicated in this Section 8.3.  Without limitation upon the foregoing,
nothing contained in this Section 8.3 shall be construed to grant any rights to
any Grantor or to impose any duties on the Collateral Agent that would not have
been granted or imposed by this Agreement or by applicable law in the absence of
this Section 8.3.

 

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Section 8.4                                    Compromises and Collection of
Collateral.  Each Grantor and the Collateral Agent recognize that setoffs,
counterclaims, defenses and other claims may be asserted by obligors with
respect to certain of the Accounts, that certain of the Accounts may be or
become uncollectible in whole or in part and that the expense and probability of
success in litigating a disputed Account may exceed the amount that reasonably
may be expected to be recovered with respect to an Account.  In view of the
foregoing, each Grantor agrees that the Collateral Agent may at any time and
from time to time if an Event of Default has occurred and is continuing,
(provided that if such Account constitutes Intercreditor Collateral only so long
as no ABL Liens are outstanding in on such Collateral), compromise with the
obligor on any Account, accept in full payment of any Account such amount as the
Collateral Agent in its sole discretion shall determine or abandon any Account,
and any such action by the Collateral Agent shall be commercially reasonable so
long as the Collateral Agent acts in good faith based on information known to it
at the time it takes any such action.

 

Section 8.5                                    Specific Performance of Certain
Covenants.  Each Grantor acknowledges and agrees that a breach of any of the
covenants contained in Sections 4.2(a), 4.5, 4.6, 4.7, 4.8, 4.10, 4.12, 5.1(j),
7.6, 8.11, 8.17 and 8.18, will cause irreparable injury to the Collateral Agent
and the other Secured Parties, that the Collateral Agent and the other Secured
Parties have no adequate remedy at law in respect of such breaches and therefore
agrees, without limiting the right of the Collateral Agent or the other Secured
Parties to seek and obtain specific performance of other obligations of any
Grantor contained in this Agreement, that the covenants of such Grantor
contained in the Sections referred to in this Section 8.5 shall be specifically
enforceable against such Grantor.

 

Section 8.6                                    Cumulative Remedies; No Prior
Recourse to Collateral.  The enumeration herein of the Collateral Agent’s and
the Trustee’s rights and remedies is not intended to be exclusive, and such
rights and remedies are in addition to and not by way of limitation of any other
rights or remedies that the Collateral Agent and the Trustee may have under the
UCC, other applicable law or the Indenture Documents.  The Collateral Agent and
the Trustee shall have the right, in their sole discretion, to determine which
rights and remedies are to be exercised and in which order.  The exercise of one
right or remedy shall not preclude the exercise of any others, all of which
shall be cumulative.  The Collateral Agent and the Trustee may, without
limitation, proceed directly against any Person liable therefor to collect the
Obligations without any prior recourse to the Collateral.  No failure to
exercise and no delay in exercising, on the part of the Collateral Agent or the
Trustee, 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 thereof or
the exercise of any other right, remedy, power, or privilege.

 

Section 8.7                                    Limitation by Law; Severability
of Provisions.  All rights, remedies and powers provided in this Agreement may
be exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Agreement are
intended to be subject to all applicable mandatory provisions of law that may be
controlling and to be limited to the extent necessary so that they shall not
render this Agreement invalid, unenforceable or not entitled to be recorded or
registered, in whole or in part.  The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement

 

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required hereunder shall not in any way affect or impair the legality or
enforceability of the remaining provisions of this Agreement or any instrument
or agreement required hereunder.

 

Section 8.8                                    Reinstatement.  This Agreement
shall remain in full force and effect and continue to be effective should any
petition be filed by or against any Grantor for liquidation or reorganization,
should any Grantor become insolvent or make an assignment for the benefit of any
creditor or creditors or should a receiver or trustee be appointed for all or
any significant part of such Grantor’s assets.  This Agreement shall continue to
be effective or be reinstated, as the case may be, if at any time when there is
or has been more than one Grantor payment and performance of the Obligations, or
any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the
Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or
otherwise, all as though such payment or performance had not been made.  In the
event that any such payment, or any part thereof, is rescinded, reduced,
restored or returned, the Obligations shall be reinstated and deemed reduced
only by such amount paid and not so rescinded, reduced, restored or returned.

 

Section 8.9                                    Binding Effect.  The provisions
of this Agreement shall be binding upon and inure to the benefit of the
respective representatives, successors, and permitted assigns of the parties
hereto; provided, however, no Grantor shall assign or delegate any of its rights
or duties hereunder without the prior written consent of the Collateral Agent
and the Trustee (other than pursuant to a transaction permitted under the
Indenture), and any attempted assignment without such consent shall be null and
void.  The rights and benefits of the Collateral Agent and the Trustee hereunder
shall, if such Persons so agree, inure to any party acquiring any interest in
the Obligations or any part thereof in accordance with the terms hereof or of
the Indenture.

 

Section 8.10                             Survival of Representations.  All
representations and warranties made by the Grantors in the Indenture Documents
and in the certificates or other instruments prepared or delivered in connection
with or pursuant to this Agreement or any other Indenture Document shall be
considered to have been relied upon by the Secured Parties and shall survive the
execution and delivery of the Indenture Documents and the purchase of the
Securities by the Purchasers, regardless of any investigation made by any
Secured Party or on its behalf and notwithstanding that the Collateral Agent,
the Trustee or any other Secured Party may have had notice or knowledge of any
Default or incorrect representation or warranty.  Notwithstanding anything to
the contrary set forth herein, the provisions of Section 8.17 and 8.18 shall
survive and remain in full force and effect regardless of the consummation of
the transactions contemplated hereby, the repayment of the Securities or the
termination of this Agreement or any other Indenture Document.

 

Section 8.11                             Guaranties; Third Party Joinder. 
Promptly upon creation or acquisition of any Subsidiary of a Grantor, such
Grantor shall, to the extent required pursuant to the terms of the Indenture,
cause such new Subsidiary to become a Grantor by executing and delivering to the
Collateral Agent such an instrument in the form of Exhibit H hereto and other
instruments, certificates, and agreements as the Collateral Agent may reasonably
request.  Upon execution and delivery of such instruments, certificates, and
agreements, such newly created or acquired Subsidiary shall automatically become
a Grantor and thereupon shall have all of the rights, benefits, duties, and
obligations of a Grantor under the Indenture Documents.

 

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Section 8.12                             Captions.  The captions contained in
this Agreement are for convenience of reference only, are without substantive
meaning and should not be construed to modify, enlarge, or restrict any
provision.

 

Section 8.13                             Termination and Release.  This
Agreement and the security interests granted hereby shall terminate in
accordance with the Indenture and each Intercreditor Agreement (if any).

 

Section 8.14                             Entire Agreement.  This Agreement,
together with the other Indenture Documents embodies the entire agreement and
understanding between each Grantor and the Collateral Agent relating to the
Collateral and supersedes all prior agreements and understandings between any
Grantor and the Collateral Agent relating to the Collateral.

 

Section 8.15                             Governing Law; Jurisdiction; Consent to
Service of Process.

 

(a)                                 THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE
NEW YORK GENERAL OBLIGATIONS LAW), EXCEPT TO THE EXTENT THAT LOCAL LAW GOVERNS
THE CREATION, PERFECTION, PRIORITY OR ENFORCEMENT OF SECURITY INTERESTS.

 

(b)                                 EACH PARTY HERETO HEREBY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS OF COMPETENT
JURISDICTION IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN ANY SUIT OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 8.1.  NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

 

Section 8.16                             Waiver of Jury Trial.  EACH PARTY
HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT.  EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

 

Section 8.17                             Indemnity.  EACH GRANTOR AGREES,
JOINTLY AND SEVERALLY, TO DEFEND, INDEMNIFY, AND HOLD THE COLLATERAL AGENT, THE
TRUSTEE AND EACH OF THEIR RELATED PERSONS (EACH, AN “INDEMNIFIED

 

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PERSON”) HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, CHARGES, EXPENSES, AND
DISBURSEMENTS (INCLUDING REASONABLE AND DOCUMENTED OUT-OF-POCKET ATTORNEY COSTS)
OF ANY KIND OR NATURE WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING AT ANY TIME
FOLLOWING THE TERMINATION, RESIGNATION, OR REPLACEMENT OF THE COLLATERAL AGENT
OR THE TRUSTEE) BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST ANY SUCH PERSON
IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE INDENTURE OR ANY
OTHER INDENTURE DOCUMENT OR ANY DOCUMENT CONTEMPLATED BY OR REFERRED TO HEREIN
OR THEREIN, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR ANY ACTION
TAKEN OR OMITTED BY ANY SUCH PERSON UNDER OR IN CONNECTION WITH ANY OF THE
FOREGOING, INCLUDING WITH RESPECT TO ANY INVESTIGATION, LITIGATION, OR
PROCEEDING (INCLUDING ANY INSOLVENCY PROCEEDING OR APPELLATE PROCEEDING) RELATED
TO OR ARISING OUT OF THIS AGREEMENT, THE INDENTURE, ANY OTHER INDENTURE
DOCUMENT, OR THE SECURITIES OR THE USE OF THE PROCEEDS THEREOF, WHETHER OR NOT
ANY INDEMNIFIED PERSON IS A PARTY THERETO INCLUDING ANY SUCH LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
CHARGES, EXPENSES AND REIMBURSEMENTS RESULTING FROM THE NEGLIGENCE OF SUCH
INDEMNIFIED PERSON (ALL THE FOREGOING, COLLECTIVELY, THE “INDEMNIFIED
LIABILITIES”); PROVIDED THAT THE GRANTORS SHALL HAVE NO OBLIGATION HEREUNDER TO
ANY INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES TO THE EXTENT
SUCH INDEMNIFIED LIABILITIES RESULT PRIMARILY FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PERSON OR ITS RESPECTIVE AFFILIATES, AS
FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION.  THE AGREEMENTS IN THIS
SECTION 8.17 SHALL SURVIVE PAYMENT OF ALL OTHER OBLIGATIONS AND ANY TERMINATION
OR EXPIRATION OF THIS AGREEMENT OR ANY OTHER INDENTURE DOCUMENT.

 

Section 8.18                             Limitation of Liability.  NO CLAIM
MAY BE MADE BY ANY GRANTOR OR OTHER PERSON AGAINST THE COLLATERAL AGENT, THE
TRUSTEE, OR THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, OR AGENTS OR THEIR
RESPECTIVE RELATED PERSONS OF ANY OF THEM FOR ANY SPECIAL, INDIRECT,
CONSEQUENTIAL, OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF
CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE INDENTURE OR ANY OTHER
INDENTURE DOCUMENT, OR ANY ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION
THEREWITH, AND EACH GRANTOR HEREBY IRREVOCABLY WAIVES, RELEASES, AND AGREES NOT
TO SUE UPON OR BRING IN ANY JUDICIAL, ARBITRAL OR ADMINISTRATIVE FORUM ANY CLAIM
FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED
TO EXIST IN ITS FAVOR. THE AGREEMENTS IN THIS SECTION 8.18 SHALL SURVIVE PAYMENT
OF ALL OTHER OBLIGATIONS AND ANY TERMINATION OR EXPIRATION OF THIS AGREEMENT OR
ANY OTHER INDENTURE DOCUMENT.

 

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Section 8.19                             Counterparts.  This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and all such counterparts shall together constitute one and the same
Agreement.  Any counterpart may be executed by facsimile or other electronic
transmission, and such facsimile or other electronic transmission shall be
deemed an original.

 

Section 8.20                             Amendments.  Other than as permitted
pursuant to each Intercreditor Agreement (if any) or the Indenture, neither this
Agreement nor any provision hereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Collateral
Agent, the Trustee and the Grantor or Grantors with respect to which such
waiver, amendment or modification is to apply, subject to any consent that may
be required in accordance with Section 9.02 of the Indenture.

 

Section 8.21                             Conflicts with Other Agreements.  (a) 
Notwithstanding any other provision contained herein, this Agreement, the Liens
created hereby and the rights, remedies, duties and obligations provided for
herein are subject in all respects to the provisions of each Intercreditor
Agreement (if any) and, to the extent provided therein, the applicable ABL
Security Documents (as defined in each applicable Intercreditor Agreement).  In
the event of any conflict or inconsistency between the provisions of this
Agreement and any Intercreditor Agreement, the provisions of the applicable
Intercreditor Agreement shall control.

 

(b)                                 Notwithstanding anything to the contrary
herein, in any Indenture Document or any ABL Document (as such term is defined
in each Intercreditor Agreement (if any)), the Grantors shall not be required to
act or refrain from acting (a) pursuant to any Indenture Document solely with
respect to any Intercreditor Collateral in any manner that would cause a default
under any ABL Document, or (b) pursuant to any ABL Document solely with respect
to any Noteholder First Lien Collateral in any manner that would cause a default
under any Indenture Document.  For avoidance of doubt and for the purposes of
this paragraph only, the terms Indenture Document and ABL Document do not
include any Intercreditor Agreement.

 

(c)                                  In the event of any conflict or
inconsistency between the provisions of this Agreement and the UK Share Charge
with respect to the Collateral intended to be pledged under the UK Share Charge,
the provisions of the UK Share Charge shall control.

 

(d)                                 In the event of any conflict or
inconsistency between the provisions of this Agreement and the Danish Account
Pledge with respect to the Collateral intended to be pledged under the Danish
Account Pledge, the provisions of the Danish Account Pledge shall control.

 

Section 8.22                             Incorporation by Reference.  It is
expressly understood and agreed that U.S. Bank National Association is entering
into this Agreement solely in its capacity as Collateral Agent and as Trustee as
appointed pursuant to the Indenture, and shall be entitled to all of the rights,
privileges, immunities and protections under the Indenture as if such rights,
privileges, immunities and protections were set forth herein.

 

Section 8.23                             English Language.  This Agreement and
each other Indenture Document has been negotiated and executed in English. All
certificates, reports, notices and other documents and communications given or
delivered by any party hereto pursuant to this

 

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Agreement or any other Indenture Document shall be in English or, if not in
English, accompanied by a certified English translation thereof. The English
version of any such document shall control the meaning of the matters set forth
herein.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

 

 

 

EGALET CORPORATION

 

 

 

 

 

By:

/s/ Robert S. Radie

 

 

Name:

Robert S. Radie

 

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

 

 

EGALET US INC.

 

 

 

 

 

By:

/s/ Robert S. Radie

 

 

Name:

Robert S. Radie

 

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

 

 

EGALET LIMITED

 

 

 

 

 

By:

/s/ Robert S. Radie

 

 

Name:

Robert S. Radie

 

 

Title:

Chief Executive Officer

 

Signature page to Collateral Agreement

 

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U.S. BANK NATIONAL ASSOCIATION,

 

as Collateral Agent

 

 

 

 

 

By:

/s/ Alison D.B. Nadeau

 

 

Name: Alison D.B. Nadeau

 

 

Title: Vice President

 

 

 

 

 

U.S. BANK NATIONAL ASSOCIATION,

 

as Trustee

 

 

 

 

 

By:

/s/ Alison D.B. Nadeau

 

 

Name: Alison D.B. Nadeau

 

 

Title: Vice President

 

Signature page to Collateral Agreement

 

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