Exhibit 10.1

 

PURCHASE AGREEMENT

 

dated August 31, 2016

 

among

 

EGALET CORPORATION,

 

THE SUBSIDIARY GUARANTORS NAMED HEREIN

 

and

 

THE PURCHASER NAMED HEREIN

 

$80,000,000 13% SENIOR SECURED NOTES

 

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Table of Contents

 

 

 

Page

 

ARTICLE I

INTRODUCTORY

 

Section 1.1

Introductory

1

 

 

 

ARTICLE II

RULES OF CONSTRUCTION AND DEFINED TERMS

 

Section 2.1

Rules of Construction and Defined Terms

1

 

 

 

ARTICLE III

SALE AND PURCHASE OF NOTES; CLOSINGS; ALLOCATION OF PURCHASE PRICE

 

Section 3.1

Sale and Purchase of Notes; Closings

1

Section 3.2

Allocation of Purchase Price

2

 

 

 

ARTICLE IV

REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PURCHASER

 

Section 4.1

Purchase for Investment and Restrictions on Resales

3

Section 4.2

Purchaser Status

4

Section 4.3

Source of Funds; ERISA Matters

4

Section 4.4

Due Diligence

6

Section 4.5

Enforceability of this Purchase Agreement

7

Section 4.6

Confidentiality Agreement

7

Section 4.7

Tax Matters

7

Section 4.8

Reliance for Opinions

7

 

 

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS

 

Section 5.1

Securities Laws

8

Section 5.2

Investment Company Act Matters

8

Section 5.3

Use of Proceeds; Margin Regulations

9

Section 5.4

Exchange Act Documents

9

Section 5.5

Financial Statements

9

Section 5.6

Organization; Power; Authorization; Enforceability

9

Section 5.7

Equity Interests; Ownership Structure

10

Section 5.8

Governmental and Third Party Authorizations

10

Section 5.9

No Conflicts

10

Section 5.10

No Violation or Default

11

Section 5.11

No Material Adverse Change

11

Section 5.12

Compliance with ERISA

11

Section 5.13

Tax Matters

12

 

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Section 5.14

Legal Proceedings

12

Section 5.15

Solvency

12

Section 5.16

Existing Indebtedness

12

Section 5.17

Material Contracts

12

Section 5.18

Properties

13

Section 5.19

Intellectual Property

13

Section 5.20

Environmental Matters

14

Section 5.21

Labor Matters

14

Section 5.22

Insurance

14

Section 5.23

No Unlawful Payments

14

Section 5.24

Compliance with Anti-Money Laundering Laws

15

Section 5.25

Compliance with Sanctions

15

Section 5.26

Disclosure Controls

15

Section 5.27

Accounting Controls

15

Section 5.28

Licenses and Permits

16

Section 5.29

Regulatory Filings

16

Section 5.30

Clinical Trials

17

Section 5.31

Sarbanes-Oxley Act

17

Section 5.32

Security Documents

17

 

 

 

ARTICLE VI

CONDITIONS TO CLOSING

 

Section 6.1

Transactional Opinions

18

Section 6.2

Purchasers’ Counsel Opinions

18

Section 6.3

Certification as to Purchase Agreement

18

Section 6.4

Authorizations

18

Section 6.5

Offering of Notes and Royalty Rights

19

Section 6.6

CUSIP Numbers

19

Section 6.7

Further Information

19

Section 6.8

Consummation of Transactions

19

Section 6.9

No Actions

20

Section 6.10

Consents

20

Section 6.11

Notes Collateral Requirements

20

Section 6.12

Insurance

20

Section 6.13

Use of Proceeds

20

Section 6.14

Royalty Rights

21

 

 

 

ARTICLE VII

ADDITIONAL COVENANTS

 

Section 7.1

DTC

21

Section 7.2

Expenses

21

Section 7.3

Confidentiality; Public Announcement

21

 

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ARTICLE VIII

SURVIVAL OF CERTAIN PROVISIONS

 

Section 8.1

Survival of Certain Provisions

22

 

 

 

ARTICLE IX

NOTICES

 

Section 9.1

Notices

23

 

 

 

ARTICLE X

SUCCESSORS AND ASSIGNS

 

Section 10.1

Successors and Assigns

23

 

 

 

ARTICLE XI

SEVERABILITY

 

Section 11.1

Severability

23

 

 

 

ARTICLE XII

WAIVER OF JURY TRIAL

 

Section 12.1

WAIVER OF JURY TRIAL

23

 

 

 

ARTICLE XIII

GOVERNING LAW; CONSENT TO JURISDICTION

 

Section 13.1

Governing Law; Consent to Jurisdiction

23

 

 

 

ARTICLE XIV

COUNTERPARTS

 

Section 14.1

Counterparts

24

 

 

 

ARTICLE XV

TABLE OF CONTENTS AND HEADINGS

 

Section 15.1

Table of Contents and Headings

24

 

 

 

Annex A

Rules of Construction and Defined Terms

 

 

 

 

Exhibit A

Form of Royalty Right Agreement

 

 

 

 

Schedule 1

Purchaser

 

Schedule 2

Confidentiality Agreement

 

Schedule 5.7

Equity Interests; Ownership Structure

 

Schedule 5.8

Governmental and Third Party Authorizations

 

Schedule 5.14

Legal Proceedings

 

 

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Schedule 5.16

Existing Indebtedness

 

Schedule 5.19

Intellectual Property

 

 

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PURCHASE AGREEMENT

 

August 31, 2016

 

To the Purchaser named in Schedule 1

 

Ladies and Gentlemen:

 

Egalet Corporation, a Delaware corporation (the “Issuer”), and the Subsidiaries
of the Issuer named on the signature pages hereto (the “Subsidiary Guarantors”),
hereby covenant and agree with you as follows:

 

ARTICLE I
INTRODUCTORY

 

Section 1.1                                    Introductory. The Issuer
proposes, subject to the terms and conditions stated herein, to issue and sell
to the purchaser named in Schedule 1 (the “Purchaser”) and to the Other
Purchasers up to $80,000,000 in aggregate principal amount of the Issuer’s 13%
Senior Secured Notes. The principal amounts of Notes to be purchased by the
Purchaser pursuant to this Purchase Agreement are set forth opposite the
Purchaser’s name in Schedule 1. The Notes to be sold to the Purchaser and the
Other Purchasers are to be issued on the applicable Closing Date pursuant to,
and subject to the terms and conditions of, the Indenture.

 

The Notes and the Guarantees will be offered and sold to the Purchaser and the
Other Purchasers (collectively, the “Purchasers”), and the Royalty Rights will
be offered and sold to the Purchasers or Affiliates of the Purchasers, in
transactions exempt from the registration requirements of the Securities Act.

 

ARTICLE II
RULES OF CONSTRUCTION AND DEFINED TERMS

 

Section 2.1                                    Rules of Construction and Defined
Terms. The rules of construction set forth in Annex A shall apply to this
Purchase Agreement and are hereby incorporated by reference into this Purchase
Agreement as if set forth fully in this Purchase Agreement. Capitalized terms
used but not otherwise defined in this Purchase Agreement shall have the
respective meanings given to such terms in Annex A, which is hereby incorporated
by reference into this Purchase Agreement as if set forth fully in this Purchase
Agreement.

 

ARTICLE III
SALE AND PURCHASE OF NOTES; CLOSINGS; ALLOCATION OF PURCHASE PRICE

 

Section 3.1                                    Sale and Purchase of Notes;
Closings. On the basis of the representations and warranties contained in, and
subject to the terms and conditions of, this Purchase Agreement and the
Indenture, the Issuer will issue and sell to the Purchaser, and the Purchaser
will purchase, (a) on the Issue Date, the principal amount of Original Notes set
forth opposite the Purchaser’s name in Schedule 1, and (b) on a date selected by
the Issuer that is within 10 Business Days from the occurrence of the Additional
Securities Triggering Event (but not during the period between

 

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the day immediately after the relevant Record Date immediately preceding the
next related Payment Date and such Payment Date, unless the entire such 10
Business Day period following the Additional Securities Triggering Event is
within such period, in which case, on the Business Day immediately following
such Payment Date), and only upon no less than five Business Days’ written
notice by the Issuer to the Trustee and the Purchaser (the “Subsequent Closing
Date”), the principal amount of Additional Notes set forth opposite the
Purchaser’s name in Schedule I. It is acknowledged and agreed that Additional
Notes shall not be issued, and the Subsequent Closing Date shall not occur, if
the Additional Securities Triggering Event has not occurred. The Purchaser will
purchase the applicable principal amount of Notes set forth in Schedule 1 on the
applicable Closing Date at a purchase price equal to 100% of the principal
amount thereof (the “Price”). Contemporaneously with entering into this Purchase
Agreement, the Obligors are entering into separate purchase agreements (the
“Other Agreements”) substantially identical to this Purchase Agreement with
other purchasers (the “Other Purchasers”), providing for the sale on the
applicable Closing Date to each of the Other Purchasers of the applicable Notes
in the applicable principal amounts specified opposite its name in Schedule 1 to
such Other Agreement, at a purchase price equal to 100% of the principal amounts
thereof (together with the Price, the “Purchase Price”). The Issuer shall not be
obligated to deliver, and no Purchaser shall be required to purchase, any of the
Original Notes except upon delivery of and payment for all the Original Notes to
be purchased by the Purchasers under the Purchase Agreements on the Issue Date
and subject to the satisfaction or waiver of the respective terms and conditions
hereunder and thereunder.

 

On the applicable Closing Date, the Issuer will deliver one or more Global
Securities for the account of DTC, as well as any Definitive Securities to the
relevant Purchasers, evidencing the aggregate principal amount of Notes to be
acquired by all Purchasers pursuant to the Purchase Agreements on such Closing
Date. On the applicable Closing Date, the Issuer will deliver the Global
Securities to DTC, as well as any Definitive Securities to the relevant
Purchasers, against payment by each such Purchaser of its respective portion of
the applicable aggregate Purchase Price for its beneficial interest therein by
wire transfer of immediately available funds to the Trustee Closing Account. The
Issuer shall cause U.S. Bank National Association, as trustee under the
Indenture (the “Trustee”), to hold all such funds in trust for the Purchasers
pending completion of the applicable closing of the transactions contemplated by
the Purchase Agreements. Upon receipt by the Trustee of the applicable Purchase
Price and the satisfaction of the applicable conditions to closing set forth in
Article VI in respect of the related Closing Date, the Issuer shall cause the
Trustee to disburse the applicable Purchase Price in accordance with written
instructions provided by the Issuer to the Trustee. If the applicable aggregate
Purchase Price shall not have been received by the Trustee by 3:30 p.m. (New
York City time) on the Issue Date, or if the closing of the transactions
contemplated by the Purchase Agreements shall not otherwise be capable of being
consummated by 3:30 p.m. (New York City time) on the Issue Date, then the
Trustee shall return, and the Issuer shall cause the Trustee to return, such
portion of the applicable Purchase Price to such Purchaser prior to the close of
business on the Issue Date or as soon thereafter as reasonably practicable, in
which case such Purchaser shall, at its election, be relieved of all obligations
(other than confidentiality obligations) under the applicable Purchase
Agreement.

 

Section 3.2                                    Allocation of Purchase Price. The
Issuer and the Purchaser hereby acknowledge and agree that the Notes issued to
the Purchaser and the Royalty Right sold by the

 

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Issuer to the Purchaser (or its Affiliates) on the Issue Date constitute an
“investment unit” for purposes of Section 1273(c)(2) of the Code. In accordance
with Section 1273(b)(2) of the Code and Section 1273(c)(2)(A) of the Code, the
issue price of the investment unit is 100% of the principal amount of such
Notes. Allocating that issue price between such Notes and such Royalty Right
based on their relative fair market values, as required by
Section 1273(c)(2)(B) of the Code and U.S. Treasury Regulations
Section 1.1273-2(h)(1), results in (a) such Notes having an issue price of
92.75% of the principal amount of such Notes and (b) such Royalty Right having a
purchase price of 7.25% of the principal amount of such Notes. The Issuer and
the Purchaser agree to prepare their respective U.S. federal income tax returns,
statements and reports, as the case may be, in a manner consistent with the
foregoing agreement.

 

The Issuer and the Purchaser hereby acknowledge and agree that the Notes to be
issued to the Purchaser and the Royalty Right to be sold by the Issuer to the
Purchaser (or its Affiliates) on the Subsequent Closing Date will constitute an
“investment unit” for purposes of Section 1273(c)(2) of the Code. In accordance
with Section 1273(b)(2) of the Code and Section 1273(c)(2)(A) of the Code, the
issue price of the investment unit will be 100% of the principal amount of such
Notes. The allocation of that issue price between such Notes and such Royalty
Right will be based on their relative fair market values on the Subsequent
Closing Date, as required by Section 1273(c)(2)(B) of the Code and U.S. Treasury
Regulations Section 1.1273-2(h)(1). Such allocation shall be set forth in the
Royalty Right Agreement entered into on the Subsequent Closing Date. The Issuer
and the Purchaser agree to prepare their respective U.S. federal income tax
returns, statements and reports, as the case may be, in a manner consistent with
the foregoing agreement.

 

ARTICLE IV
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PURCHASER

 

The Purchaser agrees and acknowledges that (a) the Obligors and counsel to the
Obligors may rely upon the accuracy of and performance of obligations under the
representations, warranties and agreements of the Purchaser contained in this
Article IV and (b) the Placement Agent may rely upon the accuracy of and
performance of obligations under the representations, warranties and agreements
of the Purchaser contained in Sections 4.1, 4.2 and 4.4.

 

Section 4.1                                    Purchase for Investment and
Restrictions on Resales. The Purchaser (on behalf of itself or any Affiliate
thereof purchasing the Royalty Rights):

 

(a)                acknowledges that (i) none of the Notes, the Royalty Rights
or the Guarantees have been or will be registered under the Securities Act or
the Laws of any U.S. state or other jurisdiction relating to securities matters
and (ii) neither the Notes nor the Royalty Rights may be offered, sold, pledged
or otherwise transferred except as set forth in the Transaction Documents and
the legend regarding transfers on the Notes;

 

(b)                agrees that, if it should resell or otherwise transfer the
Notes, in whole or in part, it will do so only pursuant to an exemption from, or
in a transaction not subject to, registration under the Securities Act, the Laws
of any applicable state or other jurisdiction relating to securities matters and
in accordance with the restrictions and requirements of the provisions of the
Transaction Documents, the Confidentiality Agreement to which it is a party

 

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and the legend regarding transfers on the Notes and only to a Person whom it
reasonably believes, at the time any buy order for such Notes is originated, is
(i) the Issuer or a Subsidiary of the Issuer, (ii) for so long as such Notes are
eligible for resale pursuant to Rule 144A, a QIB that purchases for its own
account or for the account of a QIB, to whom notice is given that the transfer
is being made in reliance on Rule 144A, (iii) a Person outside the United States
in an offshore transaction in compliance with Rule 903 or 904 of Regulation S
(if available) or (iv) an Accredited Investor that is purchasing such Notes for
its own account or for the account of such an Accredited Investor for investment
purposes and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act, in each case unless consented
to by the Issuer in writing;

 

(c)                 agrees not to make available or disclose any Information (as
defined in the Confidentiality Agreement attached to Schedule 2) to any Person
to whom the Purchaser intends to transfer (or any prospective purchaser of) the
Notes or the Royalty Rights until such intended transferee executes and delivers
a Confidentiality Agreement (and the parties hereto acknowledge and agree that
the Purchaser and its Affiliates shall not be liable in respect of the actions
or omissions to act of any Person to whom the Purchaser intends to transfer (or
any prospective purchaser of) the Notes or the Royalty Rights that is provided
after such Person executes and delivers such Confidentiality Agreement);

 

(d)                acknowledges and agrees that, as a condition to the transfer
of any Notes or Royalty Rights, each transferee of Notes or Royalty Rights shall
be deemed to have given, and may be required expressly to give, the assurances
set forth in Section 4.3 as to itself;

 

(e)                 acknowledges the restrictions and requirements contained in
the Transaction Documents applicable to transfers of the Notes and the legend
regarding transfers on the Notes and agrees that it will only offer or sell the
Notes in accordance with such restrictions and requirements; and

 

(f)                  represents that it is purchasing the Notes for investment
purposes and not with a view to resale or distribution thereof in contravention
of the requirements of the Securities Act; however, the Purchaser reserves the
right to sell the Notes at any time in accordance with applicable Laws, the
restrictions and requirements contained in the Transaction Documents applicable
to transfer of the Notes, the legend regarding transfer of the Notes and its
investment objectives.

 

Section 4.2                                    Purchaser Status. The Purchaser
(on behalf of itself or any Affiliate thereof purchasing the Royalty Rights)
represents and warrants that, as of the date hereof, it is (a) a QIB and is
purchasing the Notes and the Royalty Rights for its own account or for the
account of a QIB, (b) a Person outside the United States purchasing the Notes
and the Royalty Rights in an offshore transaction in compliance with Regulation
S or (c) an Accredited Investor.

 

Section 4.3                                    Source of Funds; ERISA Matters.

 

(a)                The Purchaser (on behalf of itself or any Affiliate thereof
purchasing the Royalty Rights) represents, warrants and covenants that at least
one of the following statements is an accurate representation as to each source
of funds (a “Source”) to be used by such

 

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Purchaser (or such Affiliate) to pay the purchase price of any Note or Royalty
Right to be purchased by such Purchaser (or such Affiliate) under the
Transaction Documents and with respect to its holding of such Note or such
Royalty Right:

 

(i)                                     the Source either (A) does not and will
not include Plan Assets of any employee benefit plan, other than a plan exempt
from the coverage of ERISA, or (B) includes and will include only assets that
are not considered Plan Assets by reason of being held in a separate account of
an insurance company that is maintained solely in connection with fixed
contractual obligations of the insurance company under which the amounts
payable, or credited, to the plan and to any participant or beneficiary of the
plan (including an annuitant) are not affected in any manner by the investment
performance of the separate account;

 

(ii)                                  the Source is a governmental plan; or

 

(iii)                               the Source does include Plan Assets of an
employee benefit plan subject to ERISA, but the use of such Plan Assets to
purchase and hold one or more Notes or Royalty Rights will not constitute a
non-exempt prohibited transaction within the meaning of Section 406 or 407 of
ERISA or Section 4975 of the Code, and one of the following applies:

 

(w)                               (A) the Source is an “insurance company
general account” within the meaning of United States Department of Labor
Prohibited Transaction Exemption (“PTE”) 95-60 (issued July 12, 1995, as
subsequently amended), (B) there is no employee benefit plan, treating as a
single plan all plans maintained by the same employer or employee organization,
with respect to which the amount of the general account reserves and liabilities
for all contracts held by or on behalf of such plan exceeds ten percent (10%) of
the total reserves and liabilities of such general account (exclusive of
separate account liabilities) plus surplus, as set forth in the NAIC Annual
Statement filed with the Purchaser’s state of domicile and (C) the purchase and
holding of Notes or Royalty Rights is exempt under the provisions of PTE 95-60;

 

(x)                                 the Source is either (A) an insurance
company pooled separate account, within the meaning of PTE 90-1 (issued
January 29, 1990), or (B) a bank collective investment fund, within the meaning
of PTE 91-38 (issued July 12, 1991, as subsequently amended), no employee
benefit plan or group of plans maintained by the same employer or employee
organization beneficially owns more than ten percent (10%) of all assets
allocated to such pooled separate account or collective investment fund, and the
purchase and holding of Notes or Royalty Rights is covered by either PTE 90-1 or
91-38, as applicable;

 

(y)                                 the Source constitutes assets of an
“investment fund” (within the meaning of Part VI of the QPAM Exemption) managed
by a “qualified professional asset manager” or “QPAM” (within the meaning of

 

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Part VI of the QPAM Exemption), and the conditions of Part I of the QPAM
Exemption are satisfied; or

 

(z)                                  the Source constitutes assets of a
“plan(s)” (within the meaning of Part IV of PTE 96-23 (the “INHAM Exemption”))
managed by an “in-house asset manager” or “INHAM” (within the meaning of Part IV
of the INHAM Exemption), and the conditions of Part I of the INHAM Exemption are
satisfied.

 

As used in this Section 4.3(a), the terms “employee benefit plan”, “governmental
plan” and “separate account” shall have the respective meanings assigned to such
terms in Section 3 of ERISA.

 

(b)                The Purchaser (on behalf of itself or any Affiliate thereof
purchasing the Royalty Rights) represents, warrants and covenants that, if any
Source to be used by the Purchaser to pay the purchase price of any Note or
Royalty Right under the Transaction Documents consists of assets of a benefit
plan that is not subject to ERISA, (i) such benefit plan is not subject to Law
that is substantially similar to Section 406 or 407 of ERISA or Section 4975 of
the Code (“Similar Law”) or (ii) its purchase and holding of Notes and Royalty
Rights do not and will not constitute a violation of Similar Law.

 

Section 4.4                                    Due Diligence. The Purchaser (on
behalf of itself or any Affiliate thereof purchasing the Royalty Rights)
acknowledges that (a) it has made, either alone or together with its advisors,
such separate and independent investigation of the Obligors and their respective
businesses, financial condition, prospects and managements as the Purchaser
deems to be, or such advisors have advised to be, necessary or advisable in
connection with the purchase of the Notes and the Royalty Rights pursuant to the
transactions contemplated by this Purchase Agreement, (b) it and its advisors
have received all information and data that it and such advisors believe to be
necessary in order to reach an informed decision as to the advisability of the
purchase of the Notes and the Royalty Rights pursuant to the transactions
contemplated by this Purchase Agreement, (c) it understands the nature of the
potential risks and potential rewards of the purchase of the Notes and the
Royalty Rights, (d) it is a sophisticated investor with investment experience
and has the ability to bear complete loss of its investment, whether as a result
of an Event of Default on the Notes or any insolvency, liquidation or winding up
of any Obligor or otherwise and (e) it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of purchasing the Notes and the Royalty Rights and can bear the economic
risks of investing in the Notes and the Royalty Rights for an indefinite period
of time, including the complete loss of its investment. The Purchaser
acknowledges that it has obtained its own attorneys, business advisors and tax
advisors as to legal, business and tax advice (or has decided not to obtain such
advice) and has not relied in any respect on any Obligor or the Placement Agent
for such advice. The Purchaser has had a reasonable time prior to the Issue Date
to ask questions and receive answers concerning the Obligors and their business
and the terms and conditions of the offering of the Notes and the Royalty Rights
and the transactions contemplated hereby and to obtain any additional
information that the Obligors possess or could acquire without unreasonable
effort or expense, and has generally such knowledge and experience in business
and financial matters and with respect to investments in securities as to enable
such Purchaser to understand and evaluate the

 

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risks of such investment and form an investment decision with respect thereto.
Except for (i) the representations, warranties and covenants made by the
Obligors in the Transaction Documents and (ii) the legal opinions provided to
the Purchasers in connection with the transactions contemplated by the
Transaction Documents, the Purchaser is relying on its own investigation and
analysis in entering into the transactions contemplated hereby.

 

Section 4.5                                    Enforceability of this Purchase
Agreement. This Purchase Agreement has been duly authorized, executed and
delivered by the Purchaser and constitutes the valid, legally binding and
enforceable obligation of the Purchaser, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting creditors’ rights generally and by general principles of equity.

 

Section 4.6                                    Confidentiality Agreement. The
Purchaser acknowledges and agrees that it is bound by the terms and conditions
of the Confidentiality Agreement attached to Schedule 2 (including, if the
Purchaser is not a party thereto, as if it were a party thereto), agrees to
execute any documents reasonably requested by the Issuer to evidence such
obligation and acknowledges and agrees that such Confidentiality Agreement
remains in effect and will survive the execution and delivery of this Purchase
Agreement and the closing or closings of the purchases of the Notes and the
Royalty Rights pursuant to their respective terms.

 

Section 4.7                                    Tax Matters.

 

(a)                Except as otherwise required by Law, the Purchaser agrees to
treat, and shall treat, the Notes as indebtedness of the Issuer for U.S. federal
income tax purposes.

 

(b)                The Purchaser understands and acknowledges that, (i) if
Definitive Securities are issued, the Purchaser must provide the Trustee or any
Paying Agent with the applicable U.S. federal income tax certifications
(generally, on IRS Form W-9 (or successor applicable form) in the case of a
Person that is a United States person (for purposes of this
Section 4.7(b) within the meaning of Section 7701(a)(30) of the Code) or on an
appropriate IRS Form W-8 (or successor applicable form) in the case of a Person
that is not a United States person) and (ii) none of the Issuer or any other
Obligor shall not be obligated to pay any additional amounts to the Purchaser as
a result of any withholding or deduction for, or on account of, any present or
future taxes of whatever nature (including income taxes, franchise taxes,
withholding taxes, branch profits taxes, taxes on withholdable payments under
Sections 1471-1474 of the Code, transfer or recording taxes and fees, stamp and
documentary taxes, and excise taxes) imposed on payments in respect of the Notes
or the Royalty Rights.

 

(c)                 The Purchaser (on behalf of itself or any Affiliate thereof
purchasing the Royalty Rights) represents and warrants that (i) it has not
relied upon any Obligor or the Placement Agent for any tax advice or disclosure
of tax consequences arising from the purchase and holding of the Notes and the
Royalty Rights and (ii) it has relied upon its own tax counsel or advisors with
respect to its tax consequences arising from the purchase and holding of the
Notes and the Royalty Rights.

 

Section 4.8                                    Reliance for Opinions. The
Purchaser acknowledges and agrees that the Obligors and, for purposes of the
opinions to be delivered to the Purchaser pursuant to Sections

 

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6.1 and 6.2 (to the extent such opinions relate to exemptions from registration
and prospectus requirements under Law), counsel for the Obligors and counsel for
the Purchasers, respectively, may rely, without any independent verification
thereof, upon the accuracy of the representations and warranties of the
Purchaser, and compliance by the Purchaser with its agreements, contained in
Sections 4.1, 4.2 and 4.3, and the Purchaser hereby consents to such reliance.

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS

 

Each Obligor, jointly and severally, represents and warrants to the Purchaser as
of the date hereof as follows:

 

Section 5.1                                    Securities Laws.

 

(a)                No securities of the same class (within the meaning of
Rule 144A(d)(3)(i) under the Securities Act) as the Notes, the Guarantees or the
Royalty Rights have been issued and sold by any Obligor within the six-month
period immediately prior to the date hereof.

 

(b)                Assuming the accuracy of the representations and warranties
of the Purchasers in each of the Purchase Agreements and assuming the accuracy
of the statements in the certificate to be delivered by the Placement Agent
pursuant to Section 6.5, neither such Obligor nor any affiliate (as defined in
Rule 144 under the Securities Act) of such Obligor has directly, or through any
agent, (i) sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of any security (as defined in the Securities Act) that is
or will be integrated with the sale of the Notes, the Guarantees or the Royalty
Rights in a manner that would require the registration under the Securities Act
of the Notes, the Guarantees or the Royalty Rights, (ii) engaged in any form of
general solicitation or general advertising in connection with the offering of
the Notes, the Guarantees or the Royalty Rights (as those terms are used in
Regulation D under the Securities Act), or in any manner involving a public
offering within the meaning of Section 4(a)(2) of the Securities Act, including
publication or release of articles, notices or other communications published in
any newspaper, magazine or similar medium or broadcast over television, radio or
internet, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising, or (iii) engaged in any directed
selling efforts within the meaning of Rule 902(c) of Regulation S.

 

(c)                 Assuming the accuracy of the representations and warranties
of the Purchasers in each of the Purchase Agreements and assuming the accuracy
of the statements in the certificate to be delivered by the Placement Agent
pursuant to Section 6.5, (i) neither the Indenture nor any Guarantee is required
to be qualified under the U.S. Trust Indenture Act of 1939, as amended, and
(ii) no registration under the Securities Act of the Notes, the Guarantees or
the Royalty Rights is required in connection with the sale thereof to the
Purchasers (or, in the case of the Royalty Rights, any of their Affiliates) as
contemplated by the Transaction Documents.

 

Section 5.2                                    Investment Company Act Matters.
After giving effect to the offering and sale of the Notes and the Royalty
Rights, none of the Obligors will be an “investment company”

 

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or “controlled” by an “investment company” within the meaning of the Investment
Company Act.

 

Section 5.3                                    Use of Proceeds; Margin
Regulations. No part of the proceeds from the sale of the Notes or the Royalty
Rights under the Transaction Documents will be used, directly or indirectly, for
the purpose of purchasing or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System (12 CFR
221), or for the purpose of purchasing or carrying or trading in any securities
under such circumstances as to involve such Obligor in a violation of Regulation
X of said Board (12 CFR 224) or to involve any broker or dealer in a violation
of Regulation T of said Board (12 CFR 220). Such Obligor is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 221). As used in this Section 5.3, the terms
“margin stock” and “purpose of purchasing or carrying” shall have the meanings
ascribed to them in said Regulation U.

 

Section 5.4                                    Exchange Act Documents. The
documents filed by the Issuer with the Commission pursuant to the Exchange Act
since January 1, 2016 (the “Exchange Act Documents”), when they were filed with
the Commission (or, in the case of documents that have been amended by
amendments filed with the Commission, when so amended), conformed as to form in
all material respects with the requirements of the Exchange Act and the
rules and regulations of the Commission thereunder, and when filed with the
Commission (or, in the case of documents that have been amended by amendments
filed with the Commission, upon the filing of such amendment) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

 

Section 5.5                                    Financial Statements. The
financial statements and the related notes thereto included in the Exchange Act
Documents present fairly in all material respects the consolidated financial
position of the Obligors as of the dates indicated and the consolidated results
of their operations and the consolidated changes in their cash flows for the
periods specified. Such financial statements have been prepared in conformity
with GAAP applied on a consistent basis throughout the periods covered thereby,
except as may be expressly stated in the related notes thereto and in the case
of unaudited financial statements, subject to normal and recurring year-end
adjustments that if presented, would not differ materially from that included in
the audited financial statements. The other financial information included in
the Exchange Act Documents has been derived from the accounting records of the
Obligors and presents fairly in all material respects the information shown
thereby.

 

Section 5.6                                    Organization; Power;
Authorization; Enforceability. Each of the Obligors has been duly organized, is
legally existing and is in good standing (or equivalent status) under the Laws
of its jurisdiction of organization. Each of the Obligors is duly qualified as a
foreign corporation (or other equivalent entity) in all jurisdictions in which
the nature of its business or location of its properties require such
qualifications except where the failure to be so qualified would not reasonably
be expected to have a Material Adverse Effect. Each of the Obligors has the
requisite corporate (or other equivalent organizational) power and authority to
own, lease or operate the properties and assets it purports to own, lease or
operate, to carry on its business as presently conducted and to execute, deliver
and perform its obligations under each Transaction

 

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Document to which it is a party except where the failure to have such power and
authority to own, lease or operate such properties and assets and carry on such
business would not reasonably be expected to have a Material Adverse Effect.
Each Transaction Document entered into as of the Issue Date to which any Obligor
is a party has been duly authorized, executed and delivered by such Obligor and
constitutes the valid, legally binding and, assuming due authorization,
execution and delivery by all other parties thereto (subject to general
equitable principles, insolvency, liquidation, reorganization and other Laws of
general application relating to creditors’ rights), enforceable obligation of
such Obligor, as the case may be. Each Transaction Document to be entered into
after the Issue Date to which any Obligor will be a party will be duly
authorized, executed and delivered by such Obligor and will constitute the
valid, legally binding and, assuming due authorization, execution and delivery
by all other parties thereto (subject to general equitable principles,
insolvency, liquidation, reorganization and other Laws of general application
relating to creditors’ rights), enforceable obligation of such Obligor, as the
case may be.

 

Section 5.7                                    Equity Interests; Ownership
Structure. Schedule 5.7 sets forth a complete and accurate list of each Obligor
showing, as of the Issue Date (as to each), the jurisdiction of its
organization, the address of its principal place of business and its U.S.
taxpayer identification number. All of the outstanding Equity Interests in the
Obligors have been duly authorized and validly issued and are fully paid and
non-assessable, and, in the case of any Subsidiary of the Issuer, the Equity
Interests of such Subsidiary that are owned by the Issuer or any other Obligor
are owned by the Issuer or such other Obligor free and clear of all Liens except
Permitted Liens and those Liens created under the Security Documents.

 

Section 5.8                                    Governmental and Third Party
Authorizations. No consent, approval, authorization, order, registration or
qualification of or with any Governmental Authority or any other Person is
required for (a) the execution and delivery by any Obligor of, and performance
of obligations by any Obligor under, any Transaction Document to which it is a
party, (b) the issuance and sale of the Notes and the Royalty Rights and
compliance by each of the Obligors with the terms thereof, (c) the consummation
of the transactions contemplated by the Transaction Documents, (d) the grant by
the Obligors of the Liens granted or purported to be granted by it pursuant to
the Security Documents or (e) the perfection of the Liens created under the
Security Documents, except for (i) such consents, approvals, authorizations,
orders, registrations and qualifications as shall have been taken, given, made
or obtained and are in full force and effect as of the Issue Date, in each case,
as set forth in Schedule 5.8, (ii) such consents, approvals, authorizations,
orders, registrations and qualifications as may be required under applicable
state securities Laws in connection with the offering of the Notes and the
Royalty Rights, (iii) the filing of financing statements under the UCC,
recordings with the PTO and any other recordings (including in any applicable
non-U.S. jurisdiction) required to perfect a security interest in the Notes
Collateral and (iv) the failure to obtain or file such consents, approvals,
authorizations, orders, registrations or qualifications, as the case may be,
that would not reasonably be expected to have a Material Adverse Effect.

 

Section 5.9                                    No Conflicts. The execution and
delivery by each Obligor of, and performance of obligations by each Obligor
under, each Transaction Document by each Obligor to which it is a party, the
issuance and sale of the Notes and the Royalty Rights and compliance by each
Obligor with the terms thereof and the consummation of the transactions
contemplated

 

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by the Transaction Documents will not (a) conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any Lien upon any property or assets
of such Obligor pursuant to, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which such Obligor is a party, by
which any Obligor is bound or to which any of the property or assets of such
Obligor is subject, (b) result in any violation of the provisions of the
respective certificate or articles of incorporation or bylaws (or other
organization documents) of such Obligor or (c) result in the violation of any
Law of any Governmental Authority, except, in the case of clauses (a) and
(c) above, for any such conflict, breach, violation or default that would not,
individually or in the aggregate, have a Material Adverse Effect.

 

Section 5.10                             No Violation or Default. No Obligor is
(a) in violation of its certificate or articles of incorporation or bylaws (or
other organization documents), (b) in violation of any Law applicable to such
Obligor, (c) in violation of any decree of any Governmental Authority having
jurisdiction over such Obligor or (d) in default in the performance of any
obligation, agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or in any agreement, indenture, lease or other
instrument to which such Obligor is a party or by which any Obligor or any of
its respective properties may be bound, except, in the case of clauses (b),
(c) and (d), where any such violation or default, individually or in the
aggregate, would not have a Material Adverse Effect.

 

Section 5.11                             No Material Adverse Change. Except as
described in the Exchange Act Documents, since the date of the most recent
consolidated financial statements of the Issuer included in the Exchange Act
Documents, (a) there has not been any material change in the capital stock or
long-term debt of any Obligor, any dividend or distribution of any kind
declared, set aside for payment, paid or made by any Obligor on any class of
capital stock other than ordinary and customary dividends and distributions or
any material adverse change, or any development involving a prospective material
adverse change, in or affecting the business, properties, management, financial
position or results of operations of the Obligors taken as a whole, (b) none of
the Obligors has entered into any transaction or agreement that is material to
the Obligors taken as a whole or incurred any liability or obligation, direct or
contingent, that is material to the Obligors taken as a whole and (c) none of
the Obligors has sustained any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor disturbance or dispute or any action, order or
decree of any Governmental Authority.

 

Section 5.12                             Compliance with ERISA. Each employee
benefit plan, including any plan within the meaning of Section 3(3) of ERISA and
any plan governed by Laws of jurisdictions outside of the United States, that is
maintained, administered or contributed to by any Obligor for current or former
employees of any Obligor or their respective Affiliates has been maintained in
compliance with its terms and the requirements of any applicable Laws, including
ERISA, the Code and all applicable non-U.S. Laws, except to the extent that
failure to so comply, individually or in the aggregate, would not have a
Material Adverse Effect. No prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code has occurred with respect to
any such plan, excluding transactions effected pursuant to a statutory or
administrative exemption.

 

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Section 5.13                             Tax Matters. Each Obligor is a
corporation for U.S. federal income tax purposes. All income and other material
tax returns of the Obligors required by Law to be filed through the date hereof
have been filed and all income and other material taxes that are due and payable
by any Obligor have been paid, except such as are being contested in good faith
by appropriate proceedings and as to which adequate reserves in accordance with
GAAP have been provided.

 

Section 5.14                             Legal Proceedings. Except as described
on Schedule 5.14, there are no legal or governmental proceedings pending to
which any Obligor is a party or of which any property of any Obligor is the
subject that, if determined adversely to the Obligors, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect. To
the knowledge of the Obligors, no such proceedings are threatened by any
Governmental Authority or other Person.

 

Section 5.15                             Solvency. No step has been taken or is
currently intended by any Obligor or, to the knowledge of the Obligors, any
other Person for the winding-up, liquidation, dissolution or administration or
for the appointment of a receiver or administrator of any Obligor for all or any
of the Obligors’ properties or assets. Immediately after the issuance and sale
of the Notes and the Royalty Rights and the consummation of the other
transactions contemplated by the Transaction Documents on the applicable Closing
Date, the Obligors taken as a whole will not be rendered insolvent within the
meaning of 11 U.S.C. 101(32) or any other applicable insolvency Laws or, taken
as a whole, be unable to pay their debts as they mature.

 

Section 5.16                             Existing Indebtedness. Schedule 5.16
sets forth a complete list of the following types of indebtedness of each
Obligor outstanding as of the Issue Date: (a) indebtedness in respect of
borrowed money; (b) any other obligation of such Obligor to be liable for, or to
pay, as obligor, guarantor or otherwise, on the indebtedness for borrowed money
of another Person (other than by endorsement of negotiable instruments for
collection in the ordinary course of business); and (c) to the extent not
otherwise included, indebtedness for borrowed money of another Person secured by
a Lien on any asset owned by such Person (whether or not such indebtedness for
borrowed money is assumed by such Person).

 

Section 5.17                             Material Contracts. All Material
Contracts are in full force and effect and constitute the valid, legally binding
and (subject to general equitable principles, insolvency, liquidation,
reorganization and other Laws of general application relating to creditors’
rights) enforceable obligation of the Obligors party thereto and, to the
knowledge of the Obligors, all other parties thereto, except in each case as
would not reasonably be expected to have a Material Adverse Effect. There are no
oral waivers or modifications (or pending requests therefor) in respect of such
Material Contracts, except as would not reasonably be expected to have a
Material Adverse Effect. No Obligor is in breach or default under or with
respect to any Material Contract binding on it except where such breaches or
defaults would not reasonably be expected to have a Material Adverse Effect. To
the knowledge of the Obligors, no other Person party to any such Material
Contract is in default thereunder except where such default would not reasonably
be expected to have a Material Adverse Effect. To the knowledge of the Obligors,
no party to any such Material Contract has given any notice of termination or
breach of any such Material Contract.

 

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Section 5.18                             Properties. Each of the Obligors has
good and valid title to, or valid leasehold interests in or rights to use, all
of its tangible properties and assets material to its business as presently
conducted, free and clear of all Liens other than Permitted Liens. None of the
Obligors owns any real property. To the knowledge of the Obligors, any real
property held by any Obligor under lease constitutes the valid, legally binding
and (subject to general equitable principles, insolvency, liquidation,
reorganization and other Laws of general application relating to creditors’
rights) enforceable obligation of all parties thereto except as would not
reasonably be expected to have a Material Adverse Effect.

 

Section 5.19                             Intellectual Property.

 

(a)                To the knowledge of the Obligors, the Obligors own, or
possess the right or license to use, all of the Intellectual Property that is
reasonably necessary for the operation of their respective businesses as
presently conducted, without conflicting with the valid and enforceable rights
of any other Person, except for the failure to own or license, or conflict with
such rights of any other Person, that would not reasonably be expected to result
in a Material Adverse Effect. To the knowledge of the Obligors, no slogan or
other advertising device, product, process, method, substance, part or other
material presently employed by any Obligor infringes upon any valid and
enforceable rights held by any other Person except where such infringement would
not reasonably be expected to have a Material Adverse Effect. No claim or
litigation regarding any of the foregoing is pending against any Obligor or, to
the knowledge of the Obligors, threatened (in writing).

 

(b)                Schedule 5.19 contains a complete list of all registered
trademarks, copyrights and Patents that are owned by any Obligor, in each case
that are reasonably necessary for the operation of the business of the Obligors
as presently conducted (the “Relevant Intellectual Property”), and all Patent
licenses granting rights to any Obligor to any licensed Patents. The Obligors
hold all requisite right, title and/or interest in and to the Relevant
Intellectual Property, free and clear of any Lien (except for Permitted Liens),
and have requisite power and authority, and all necessary third party consents
or approvals, including from any Governmental Authority, to grant a security
interest in such Relevant Intellectual Property owned by any Obligor as
contemplated in the Transaction Documents. The Obligors have made all necessary
recordings of assignments to the Obligors with the U.S. Copyright Office and the
PTO and equivalent non-U.S. intellectual property offices in respect of such
Relevant Intellectual Property owned by the Obligors to protect and maintain
ownership of such Relevant Intellectual Property. To the knowledge of the
Obligors, there is no third party infringing any Intellectual Property or
proprietary right in relation to the Relevant Intellectual Property except where
such infringement would not reasonably be expected to have a Material Adverse
Effect. To the knowledge of the Obligors, at least one claim of each of such
Patents that are reasonably necessary for the operation of the business of the
Obligors as presently conducted (“Relevant Patents”) that has issued is valid
and enforceable. There are no litigation, interference or opposition proceedings
pending or, to the knowledge of the Obligors, threatened (in writing) relating
to the Relevant Patents that would reasonably be expected to result in a
Material Adverse Effect. All patent applications owned by the Obligors that are
reasonably necessary for the operation of their respective businesses as
currently conducted are being diligently prosecuted by the Obligors, and each
Obligor duly maintains those Relevant Patents that have issued and are owned by
it. None of the Obligors have been notified in writing of any actions by

 

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any Governmental Authority challenging the validity or enforceability of any of
the issued Relevant Patents.

 

(c)                 Each Obligor is the owner or holder of each new drug
application or abbreviated new drug application set forth opposite its name in
Schedule 5.19. No Obligor has granted or assigned to any other Person, directly
or indirectly, any rights to any other Person under any such new drug
application or abbreviated new drug application; provided, however, that such
Obligor may have assigned or granted to a Person the right to manufacture
product under such new drug application or abbreviated new drug application
and/or the right to a share of profit from such Obligor’s sales of product under
such new drug application or abbreviated new drug application. Schedule 5.19
sets forth the product that pertains to each such new drug application and
abbreviated new drug application.

 

Section 5.20                             Environmental Matters. No Obligor is in
violation of any Law relating to the use, production, disposal or release of
hazardous or toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, “Environmental Laws”), owns or operates any real property
contaminated with any substance that is subject to any Environmental Laws, is
liable for any off-site disposal or contamination pursuant to any Environmental
Laws, or is subject to any claim relating to any Environmental Laws, which
violation, contamination, liability or claim, individually or in the aggregate,
would have a Material Adverse Effect; and no Obligor is aware of any pending
investigation which might lead to such a claim.

 

Section 5.21                             Labor Matters. No material labor
dispute with the employees of any Obligor exists or, to the knowledge of the
Obligors, is imminent. No Obligor is aware of any existing or imminent labor
disturbance by the employees of any Obligor’s principal suppliers,
manufacturers, customers or contractors that, individually or in the aggregate,
would reasonably be expected to result in a Material Adverse Effect.

 

Section 5.22                             Insurance. The Obligors are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts the Obligors deem adequate for their respective businesses
as currently conducted. No Obligor has been refused any material insurance
coverage sought or applied for since January 1, 2011. No Obligor has any reason
to believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that, in the
aggregate, would not have a Material Adverse Effect.

 

Section 5.23                             No Unlawful Payments. None of the
Obligors, any director or officer thereof or, to the knowledge of the Obligors,
any employee, agent, Affiliate, representative of or other Person associated
with or acting on behalf of any Obligor has (a) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense relating to
political activity, (b) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds,
(c) violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended, or (d) made any bribe, unlawful rebate,
payoff, influence payment, kickback or other unlawful payment.

 

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Section 5.24                             Compliance with Anti-Money Laundering
Laws. The operations of the Obligors are and have been conducted at all times in
compliance with applicable financial recordkeeping and reporting requirements,
including those of the Bank Secrecy Act, as amended by Title III of the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism (USA PATRIOT) Act of 2001, and the money laundering and
any related or similar Laws of all jurisdictions in which the Obligors conduct
business (collectively, the “Anti-Money Laundering Laws”), and no action, suit
or proceeding by or before any Governmental Authority involving any Obligor with
respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the
Obligors, threatened.

 

Section 5.25                             Compliance with Sanctions.

 

(a)                None of the Obligors, any director, officer or employee
thereof or, to the knowledge of the Obligors, any agent, Affiliate or
representative of any Obligor is an individual or entity that is, or is owned or
controlled by an individual or entity that is: (i) the subject of any sanctions
administered or enforced by the U.S. Department of Treasury’s Office of Foreign
Assets Control, the United Nations Security Council, the European Union, Her
Majesty’s Treasury or other relevant sanctions authority (collectively,
“Sanctions”); or (ii) located, organized or resident in a country or territory
that is the subject of Sanctions (including Cuba, Iran, North Korea, Sudan and
Syria).

 

(b)                The Issuer will not directly or indirectly use the proceeds
of the offering of the Notes and Royalty Rights hereunder, or lend, contribute
or otherwise make available such proceeds to any Subsidiary, joint venture
partner or other Person: (i) to fund or facilitate any activities or business of
or with any Person or in any country or territory that, at the time of such
funding or facilitation, is the subject of Sanctions; or (ii) in any other
manner that will result in a violation of Sanctions by any Person (including any
Person participating in the transaction, whether as underwriter, advisor,
investor or otherwise).

 

(c)                 For the past five years, the Obligors have not knowingly
engaged in, are not now knowingly engaged in, and will not engage in, any
dealings or transactions with any Person, or in any country or territory, that
at the time of the dealing or transaction is or was the subject of Sanctions.

 

Section 5.26                             Disclosure Controls. The Issuer
maintains disclosure controls and procedures (as such term is defined in
Rule 13a-15(e) under the Exchange Act) that are designed to ensure that
information required to be disclosed under the Exchange Act is reported within
the time periods specified in the applicable rules promulgated under the
Exchange Act. The Issuer has carried out evaluations of the effectiveness of its
disclosure controls and procedures as required by Rule 13a-15 under the Exchange
Act, and such disclosure controls and procedures are effective as of June 30,
2016 to perform the functions for which they were established.

 

Section 5.27                             Accounting Controls. The Issuer
maintains systems of “internal control over financial reporting” (as defined in
Rule 13a-15(f) under the Exchange Act) that comply in all material respects with
the requirements of the Exchange Act and that are sufficient to provide
reasonable assurance that (a) transactions are executed in accordance with
management’s general or specific authorizations, (b) transactions are recorded
as necessary to permit preparation of

 

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financial statements in conformity with GAAP and to maintain asset
accountability, (c) access to assets is permitted only in accordance with
management’s general or specific authorization and (d) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
Except as disclosed in the Exchange Act Documents, there were no material
weaknesses in the Issuer’s internal controls over financial reporting as of
December 31, 2015 and no significant changes in the Issuer’s internal control
over financial reporting in connection with the evaluation that occurred during
the three and six months ended June 30, 2016. The Issuer’s auditors and the
Audit Committee of the Board of Directors of the Issuer have been advised of
(i) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting that are reasonably
likely to adversely affect any Obligor’s ability to record, process, summarize
and report financial information and (ii) any fraud, whether or not material,
that involves management or other employees who have a significant role in any
Obligor’s internal control over financial reporting.

 

Section 5.28                             Licenses and Permits. The Obligors
possess all permits, licenses, approvals, consents and other authorizations
(collectively, “Permits”) issued by the appropriate Governmental Authorities
necessary to conduct the businesses now operated by them, except where the
failure to so possess would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Obligors are in compliance with
the terms and conditions of all such Permits and all of the Permits are valid
and in full force and effect, except, in each case, where the failure so to
comply or where the invalidity of such Permits or the failure of such Permits to
be in full force and effect, individually or in the aggregate, would not have a
Material Adverse Effect. None of the Obligors has received any notice of
proceedings relating to the revocation or material modification of any such
Permits. Except as described in the Exchange Act Documents, and except as would
not, individually or in the aggregate, have or may reasonably be expected to
have a Material Adverse Effect, no Obligor has received any notice of adverse
filing, warning letter, untitled letter or other correspondence or written
notice from the FDA or other relevant regulatory authorities, or any other
Governmental Authority, alleging or asserting noncompliance with the U.S.
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.) (the “FFDCA”) or
similar U.S. federal, state or non-U.S. Law.

 

Section 5.29                             Regulatory Filings. Except as described
in the Exchange Act Documents, and except as would not, individually or in the
aggregate, have or reasonably be expected to have a Material Adverse Effect,
(a) the Obligors are and have been in compliance with applicable health care
Laws, including the FFDCA and the U.S. Anti-Kickback Statute (42 U.S.C.
1320a-7b(b)) (collectively, “Health Care Laws”), (b) each Obligor possesses all
licenses, certificates, approvals, clearances, authorizations, permits and
supplements or amendments thereto required by any such Health Care Laws and/or
to carry on its businesses as now or proposed to be conducted (“Health Care
Authorizations”), such Health Care Authorizations are valid and in full force
and effect and none of the Obligors is in violation of any term of any such
Health Care Authorizations, (c) none of the Obligors has received written notice
of any ongoing claim, action, suit, proceeding, hearing, enforcement,
investigation, arbitration or other action from any Governmental Authority
alleging that any product, operation or activity is in violation of any Health
Care Laws or Health Care Authorizations or has any knowledge that any such
Governmental Authority or third party is considering any such claim, action,
suit, proceeding, hearing, enforcement, investigation, arbitration or other
action, (d) none of the Obligors has

 

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received written notice that any Governmental Authority has taken, is taking or
intends to take action to limit, suspend, modify or revoke any Health Care
Authorizations or has any knowledge that any such Governmental Authority is
considering such action and (e) the Obligors have filed, maintained or submitted
all reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments as required by any Health Care Laws or
Health Care Authorizations, and all such reports, documents, forms, notices,
applications, records, claims, submissions and supplements or amendments were
complete, correct and not misleading on the date filed (or were corrected or
supplemented by a subsequent submission).

 

Section 5.30                             Clinical Trials. To the knowledge of
the Obligors, the pre-clinical and clinical studies and trials conducted by or
on behalf of the Obligors have been and, if still pending, are being conducted
with reasonable care and in accordance with the protocols submitted to the FDA
or comparable Governmental Authorities and all Health Care Laws and Health Care
Authorizations. The descriptions of the results of such pre-clinical and
clinical studies and trials contained in the Exchange Act Documents are accurate
and complete in all material respects and fairly present the data derived from
such pre-clinical and clinical studies and trials. Except to the extent
disclosed in the Exchange Act Documents, no Obligor is aware of any pre-clinical
or clinical studies or trials, the results of which the Obligors believe
reasonably call into question the pre-clinical or clinical studies or trials
described or referred to in the Exchange Act Documents when viewed in the
context in which such results are described. None of the Obligors has received
any written notices or correspondence from any Governmental Authority requiring
the termination, suspension or material modification of any pre-clinical or
clinical study or trial conducted by or on behalf of any Obligor.

 

Section 5.31                             Sarbanes-Oxley Act. There is and has
been no material failure on the part of the Obligors or any of their directors
or officers, in their capacities as such, to comply with any provision of the
Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in
connection therewith, including Section 402 thereof related to loans and
Section 302 and 906 thereof related to certifications.

 

Section 5.32                             Security Documents. The representations
and warranties of the Obligors in Article III of the Collateral Agreement are
true and correct, except to the extent that any such untrue or incorrect
statement, individually or in the aggregate, would not have a material adverse
effect on the Notes Collateral.

 

ARTICLE VI
CONDITIONS TO CLOSING

 

The obligations of the Purchaser hereunder on each Closing Date are subject to
the accuracy in all material respects (except for such representations qualified
by materiality or Material Adverse Effect, which shall be accurate in all
respects) of the representations and warranties of the Obligors contained herein
as of such Closing Date (subject in the case of the Subsequent Closing Date to
exceptions or updates to such representations and warranties contemplated by
Section 6.3), to the accuracy of the statements of the Obligors and their
respective officers made in any certificates delivered pursuant hereto on such
Closing Date, to the performance by the Obligors of their respective obligations
hereunder as of such Closing

 

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Date and to the satisfaction or waiver by the Purchaser of each of the following
additional terms and conditions applicable on such Closing Date:

 

Section 6.1                                    Transactional Opinions.

 

(a)                Dechert LLP, special counsel to the Obligors, shall have
furnished to the Purchasers their opinion, addressed to the Purchasers (and any
Affiliate thereof purchasing the Royalty Rights on the applicable Closing Date)
and dated the applicable Closing Date, in form and substance reasonably
satisfactory to the Purchasers.

 

(b)                Gorrissen Federspiel, Danish counsel to the Obligors, shall
have furnished to the Purchasers their opinion, addressed to the Purchasers (and
any Affiliate thereof purchasing the Royalty Rights on the applicable Closing
Date) and dated the applicable Closing Date, in form and substance reasonably
satisfactory to the Purchasers.

 

(c)                 Dechert LLP, England and Wales counsel to the Obligors,
shall have furnished to the Purchasers their opinion, addressed to the
Purchasers (and any Affiliate thereof purchasing the Royalty Rights on the
applicable Closing Date) and dated the applicable Closing Date, in form and
substance reasonably satisfactory to the Purchasers.

 

Section 6.2                                    Purchasers’ Counsel Opinions.
Pillsbury Winthrop Shaw Pittman LLP, special counsel to the Purchasers (and any
Affiliate thereof purchasing the Royalty Rights on the applicable Closing Date),
shall have furnished to the Purchasers (a) their reasoned opinions, each
addressed to the Purchasers and dated the applicable Closing Date, as to certain
product clearance and validity matters, and (b) their opinions, addressed to the
Purchasers (and any Affiliate thereof purchasing the Royalty Rights on the
applicable Closing Date) and dated the applicable Closing Date, in form and
substance reasonably satisfactory to the Purchasers.

 

Section 6.3                                    Certification as to Purchase
Agreement. Each Obligor shall have furnished to the Purchasers a certificate,
dated the applicable Closing Date, of its respective Responsible Officer,
stating that, as of the applicable Closing Date, the representations and
warranties of such Obligor in this Purchase Agreement and the Collateral
Agreement are true and correct in all material respects (except for such
representations qualified by materiality or Material Adverse Effect, which are
true and correct in all respects) and such Obligor has complied in all material
respects with all of the agreements and satisfied all of the conditions on its
part to be performed or satisfied hereunder or under the Collateral Agreement on
or before the applicable Closing Date; provided, however, that any such
certificate as of the Subsequent Closing Date may provide exceptions to any
representation and warranty made in Sections 5.11 through 5.31 or in Article III
of the Collateral Agreement or update any Schedule provided pursuant to
Article V or any exhibit provided pursuant to Article III of the Collateral
Agreement.

 

Section 6.4                                    Authorizations. Each Obligor
shall have furnished to the Purchasers (a) a copy of the resolutions, consents
or other documents, certified by a Responsible Officer of such Obligor, as of
the applicable Closing Date, duly authorizing the execution and delivery of, and
performance of obligations under, the Transaction Documents to which it is a
party and any other documents to be executed on or prior to the applicable
Closing Date by or on behalf of it in connection with the transactions
contemplated thereby and, in the case of the Issuer, the issuance

 

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and sale of the applicable Notes and Royalty Rights, and a certification that
such resolutions, consents or other documents have not been modified, rescinded
or amended and are in full force and effect, (b) certified copies of its
respective organizational documents, (c) a certification by a Responsible
Officer of such Obligor, as of the applicable Closing Date, as to the incumbency
and specimen signatures of each officer executing any Transaction Document or
any other document delivered in connection herewith on behalf of such Obligor
(together with a certification of another Responsible Officer of such Obligor as
to incumbency and specimen signature of the first-mentioned Responsible Officer)
and (d) a certificate of good standing (or equivalent) of such Obligor as of a
recent date from the Secretary of State (or other applicable Governmental
Authority) of its jurisdiction of organization.

 

Section 6.5                                    Offering of Notes and Royalty
Rights. The Placement Agent shall have delivered to the Issuer a certificate,
dated on or about the Issue Date, as to the manner of the offering of the Notes,
the Guarantees and the Royalty Rights and the number and character of the
offerees contacted, which certificate shall state that the Placement Agent
(a) did not solicit offers for, or offer, the Notes, the Guarantees or the
Royalty Rights by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of
Section 4(a)(2) of the Securities Act, including publication or release of
articles, notices or other communications published in any newspaper, magazine
or similar medium or broadcast over television, radio or internet, or any
seminar or meeting whose attendees have been invited by any general solicitation
or general advertising, and (b) solicited offers for the Notes and the Royalty
Rights only from, and offered the Notes only to, (i) Persons who it reasonably
believed were QIBs or, if any such Person was buying for one or more
institutional accounts for which such Person was acting as fiduciary or agent,
only when such Person reasonably believed that each such account was a QIB,
(ii) in the case of offers outside the United States, to Persons that are not
U.S. persons (as defined in Regulation S) in accordance with Rule 903 of
Regulation S, and (iii) Accredited Investors, and shall further state that
counsel to the Obligors and to the Purchasers may rely thereon in rendering
their respective opinions to be delivered hereunder.

 

Section 6.6                                    CUSIP Numbers. Standard & Poor’s
CUSIP Service Bureau, as agent for the National Association of Insurance
Commissioners, shall have issued CUSIP numbers and ISIN numbers for the Notes.

 

Section 6.7                                    Further Information. On or prior
to the applicable Closing Date, the Obligors shall have furnished to the
Purchaser such further information, certificates and documents as such Purchaser
may reasonably request in connection with this Purchase Agreement and the other
Transaction Documents and the transactions contemplated hereby and thereby
(including written evidence that all outstanding obligations under the Issuer’s
Loan and Security Agreement with Hercules, dated as of January 7, 2015, will be
repaid in full on or prior to the Closing Date of the Original Notes and that on
or prior to the Closing Date of the Original Notes, all Liens securing such
obligations will be released).

 

Section 6.8                                    Consummation of Transactions. All
of the transactions contemplated by the Transaction Documents to be completed on
or before the applicable Closing Date shall have been consummated or shall be
consummated concurrently with the transactions contemplated

 

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hereby, and the Purchaser shall have received executed copies of the Transaction
Documents (which shall be in full force and effect).

 

Section 6.9                                    No Actions. No action shall have
been taken and no Law shall have been enacted, adopted or issued by any
Governmental Authority that would, as of the applicable Closing Date, prevent
the issuance or sale of the applicable Notes or Royalty Rights, and no
injunction, restraining order or order of any other nature by any court of
competent jurisdiction shall have been issued as of the applicable Closing Date
that would prevent the issuance or sale of the applicable Notes or Royalty
Rights.

 

Section 6.10                             Consents. The Purchasers shall have
received copies of all consents, approvals, authorizations, orders,
registrations and qualifications set forth in Schedule 5.8.

 

Section 6.11                             Notes Collateral Requirements. The
Collateral Agent shall have received with respect to the Notes Collateral, on or
prior to the Issue Date:

 

(a)                all certificates, agreements or instruments representing or
evidencing the Equity Interests of the Subsidiary Guarantors referred to in the
Security Documents accompanied by instruments of transfer and stock powers
undated and endorsed in blank;

 

(b)                all other certificates, agreements or instruments necessary
to perfect the Collateral Agent’s security interest in all chattel paper, all
instruments, all deposit accounts and all investment property of each Obligor
(to the extent required by any Transaction Document);

 

(c)                 evidence of the filing of financing statements under the
UCC, recordings with the PTO and other recordings (including in any applicable
non-U.S. jurisdiction) required, necessary, appropriate or reasonably requested
to be made to perfect a security interest in the Notes Collateral, including
those specified in the Security Documents; and

 

(d)                certified copies of UCC, PTO, United States Copyright Office,
tax, judgment lien, bankruptcy and pending lawsuit searches or equivalent
reports or searches, each as of a recent date and listing all effective
financing statements, lien notices or comparable documents that name any Obligor
as debtor and that are filed in the jurisdiction in which such Obligor is
organized or maintains its principal place of business and such other searches
deemed necessary or appropriate, none of which encumber the Notes Collateral
covered or intended to be covered in the Security Documents.

 

Section 6.12                             Insurance. The Collateral Agent shall
have received on or prior to the Issue Date evidence that all insurance required
to be maintained pursuant to the Transaction Documents by the Obligors has been
obtained and is in effect together with the certificates of insurance, naming
the Collateral Agent, on behalf of all Persons in whose name the Notes are
registered from time to time in the register with respect to the Notes, as an
additional insured or loss payee, as the case may be, under all insurance
policies maintained with respect to the properties and assets that constitute
Notes Collateral.

 

Section 6.13                             Use of Proceeds. The Issuer will apply
the proceeds of the sale of the Notes and the Royalty Rights to repay all
outstanding obligations under the Issuer’s Loan and Security Agreement with
Hercules, dated as of January 7, 2015, to seek FDA approval for and

 

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commercialize its product candidates ARYMO ER™ and Egalet-002, to pay fees,
costs and expenses arising in connection with the issuance of the Notes and the
Royalty Rights and for general corporate purposes.

 

Section 6.14                             Royalty Rights. On each Closing Date,
(a) the applicable Royalty Right shall have been issued to the Purchaser (or any
Affiliate thereof) pursuant to the applicable Royalty Right Agreement and
(b) the Issuer and the Purchaser shall execute and deliver such Royalty Right
Agreement in the form of Exhibit A.

 

ARTICLE VII
ADDITIONAL COVENANTS

 

Section 7.1                                    DTC. The Issuer will use
reasonable best efforts to comply with the agreements set forth in the
representation letter of the Issuer to DTC relating to the approval of the Notes
by DTC for “book-entry” transfer.

 

Section 7.2                                    Expenses. The Issuer agrees to
pay or cause to be paid from the proceeds of the issuance of the Notes and the
Royalty Rights all reasonable, documented fees and expenses of Pillsbury
Winthrop Shaw Pittman LLP, acting as special counsel to the Purchasers  and
Kromann Reumert, acting as special Danish counsel to the Purchasers (the amount
of any such payment of the reasonable, documented fees and expenses of Pillsbury
Winthrop Shaw Pittman LLP and Kromann Reumert not to exceed in the aggregate the
amount set forth in paragraph 2 of the letter agreement dated April 25, 2016
between the Issuer and the Placement Agent (unless otherwise agreed to in
writing by the Issuer)), it being understood that the Issuer will not reimburse
any other expenses of any Purchasers (including expenses of any other counsel).

 

Section 7.3                                    Confidentiality; Public
Announcement.

 

(a)                Except as otherwise required by Law or judicial or
administrative proceedings (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigation demand or similar
process) or the rules and regulations of any securities exchange or trading
system or any Governmental Authority or pursuant to requests from regulatory
agencies having oversight over any of the Obligors and except as otherwise set
forth in this Section 7.3, each Obligor will, and will cause each of its
Affiliates, directors, officers, employees, agents, representatives and
similarly situated persons who receive such information to, treat and hold as
confidential and not disclose to any Person any and all Confidential Information
furnished to it by the Purchaser, as well as the information on Schedule 1 to
this Purchase Agreement, and to use any such Confidential Information and other
information only in connection with this Purchase Agreement and any other
Transaction Document and the transactions contemplated hereby and thereby.
Notwithstanding the foregoing, the Obligors may disclose such information solely
on a need-to-know basis and solely to their members, directors, employees,
managers, officers, agents, brokers, advisors, lawyers, bankers, trustees,
representatives, investors, co-investors, insurers, insurance brokers,
underwriters and financing parties; provided, however, that such Persons shall
be informed of the confidential nature of such information and shall be
obligated to keep such Confidential Information and other information
confidential pursuant to obligations of confidentiality no less onerous than
those set forth herein.

 

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(b)                The Purchaser acknowledges that it will not, after the
execution of this Purchase Agreement, make a public announcement or filing with
respect to the transactions contemplated by the Transaction Documents or
reference or describe such transactions in a public announcement or filing,
without the Issuer’s prior written consent (such consent not to be unreasonably
withheld, delayed or conditioned). Except as required by applicable Law or
judicial or administrative proceedings (by oral questions, interrogatories,
requests for information or documents, subpoena, civil investigation demand or
similar process) or the rules and regulations of any securities exchange or
trading system or any Governmental Authority or pursuant to requests from
regulatory agencies having oversight over any of the Obligors, in no event shall
the Purchaser’s name (in any variation) be used in any public announcement or
filing, or in any type of mail or electronic distribution intended for an
audience that is not solely limited to the Affiliates of the Issuer, without the
Purchaser’s written consent.

 

(c)                 Except as required by applicable Law or judicial or
administrative proceedings (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigation demand or similar
process) or the rules and regulations of any securities exchange or trading
system or any Governmental Authority or pursuant to requests from regulatory
agencies having oversight over any of the Obligors, none of the Obligors or any
of their Affiliates shall disclose to any Person, or use or include in any
public announcement or any public filing, the identity of any shareholders,
members, directors or Affiliates of the Purchaser, without the prior written
consent of such shareholder, member, director or Affiliate.

 

ARTICLE VIII
SURVIVAL OF CERTAIN PROVISIONS

 

Section 8.1                                    Survival of Certain Provisions.
The representations, warranties, covenants and agreements contained in this
Purchase Agreement shall survive (a) the execution and delivery of this Purchase
Agreement, the Notes, the Guarantees and the Royalty Rights and (b) the purchase
or transfer by any Purchaser of any Note or Royalty Right or portion thereof or
interest therein. All such provisions are binding upon and may be relied upon by
any subsequent holder or beneficial owner of a Note or Royalty Right, regardless
of any investigation made at any time by or on behalf of any Purchaser or any
other holder or beneficial owner of a Note or Royalty Right. All statements
contained in any certificate or other instrument delivered by or on behalf of
any party hereto pursuant to this Purchase Agreement shall be deemed to have
been relied upon by each other party hereto and shall survive the consummation
of the transactions contemplated hereby regardless of any investigation made by
or on behalf of any such party. The Transaction Documents embody the entire
agreement and understanding among the parties hereto and supersede all prior
agreements and understandings relating to the subject matter hereof, other than
the separate Confidentiality Agreements entered into between each Purchaser and
the Issuer relating to the transactions contemplated hereby. Notwithstanding
anything to the contrary elsewhere in this Purchase Agreement, no party shall,
in any event, be liable to any other Person for any consequential, incidental,
indirect, special or punitive damages of such other Person, including loss of
revenue, income or profits, diminution of value or loss of business reputation
or opportunity relating to the breach or alleged breach hereof (provided that
such limitation with respect to lost profits or otherwise shall not limit the
Issuer’s right to recover contract damages in connection with the Purchaser’s
failure to close in violation of this Purchase

 

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Agreement, including damages that are a reasonably foreseeable consequence of
such failure to close).

 

ARTICLE IX
NOTICES

 

Section 9.1                                    Notices. All statements,
requests, notices and agreements hereunder shall be in writing and delivered by
hand, mail, overnight courier or telefax as follows:

 

(a)                if to the Purchaser, in accordance with Schedule 1; and

 

(b)                if to any Obligor, in accordance with Section 12.01 of the
Indenture.

 

ARTICLE X
SUCCESSORS AND ASSIGNS

 

Section 10.1                             Successors and Assigns. This Purchase
Agreement will inure to the benefit of and be binding upon the parties hereto
and their respective successors, permitted assignees and permitted transferees.
So long as any of the Notes or Royalty Rights are outstanding, (i) no Obligor
may assign any of its rights or obligations hereunder or any interest herein
without the prior written consent of the Purchaser except as permitted in
accordance with the Indenture and (ii) no Purchaser shall transfer any of the
Notes except in accordance with the provisions of the Indenture.

 

ARTICLE XI
SEVERABILITY

 

Section 11.1                             Severability. Any provision of this
Purchase Agreement that is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall (to the full
extent permitted by Law) not invalidate or render unenforceable such provision
in any other jurisdiction.

 

ARTICLE XII
WAIVER OF JURY TRIAL

 

Section 12.1                             WAIVER OF JURY TRIAL. THE PURCHASER AND
EACH OBLIGOR HEREBY WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT
TO THIS PURCHASE AGREEMENT.

 

ARTICLE XIII
GOVERNING LAW; CONSENT TO JURISDICTION

 

Section 13.1                             Governing Law; Consent to Jurisdiction.
THIS PURCHASE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE
RULES THEREOF RELATING TO CONFLICTS OF LAW OTHER THAN SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF

 

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NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. The parties hereto hereby
submit to the non-exclusive jurisdiction of the U.S. 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 Purchase Agreement or
the transactions contemplated hereby.

 

ARTICLE XIV
COUNTERPARTS

 

Section 14.1                             Counterparts. This Purchase Agreement
may be executed in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same Purchase Agreement. Any counterpart may be executed by facsimile or other
electronic transmission, and such facsimile or other electronic transmission
shall be deemed an original.

 

ARTICLE XV
TABLE OF CONTENTS AND HEADINGS

 

Section 15.1                             Table of Contents and Headings. The
Table of Contents and headings of the Articles and Sections of this Purchase
Agreement have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
or provisions hereof.

 

{SIGNATURE PAGE FOLLOWS}

 

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If the foregoing is in accordance with your understanding of this Purchase
Agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement among us and you in accordance with
its terms.

 

 

Very truly yours,

 

 

 

 

 

 

 

EGALET CORPORATION

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

EGALET LIMITED

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

EGALET US INC.

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

{Signature Page to the Purchase Agreement}

 

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[PURCHASER SIGNATURE PAGE]

 

{Signature Page to the Purchase Agreement}

 

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ANNEX A
RULES OF CONSTRUCTION AND DEFINED TERMS

 

Unless the context otherwise requires, in this Annex A and each Transaction
Document (or other document) to which this Annex A is attached:

 

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

 

(b)                                 Where any payment is to be made, any funds
are to be applied or any calculation is to be made under any Transaction
Document (or other document) on a day that is not a Business Day, unless any
Transaction Document (or other document) otherwise provides, such payment shall
be made, such funds shall be applied and such calculation shall be made on the
succeeding Business Day, and payments shall be adjusted accordingly, including
interest unless otherwise specified.

 

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

 

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

 

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

 

(f)                                   Unless otherwise specified, references to
an agreement or other document include references to such agreement or document
as from time to time amended, restated, reformed, supplemented or otherwise
modified in accordance with the terms thereof (subject to any restrictions on
such amendments, restatements, reformations, supplements or modifications set
forth in this Annex A or any Transaction Document (or other document)) and
include any Annexes, Exhibits and Schedules attached thereto.

 

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

 

(h)                                 References to any Person shall be construed
to include such Person’s successors and permitted assigns (subject to any
restrictions on assignment, transfer or delegation set forth in this Annex A or
any Transaction Document (or other document)), and any reference to a Person in
a particular capacity excludes such Person in other capacities.

 

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

 

(j)                                    The words “hereof”, “herein”, “hereunder”
and similar terms when used in this Annex A or any Transaction Document (or
other document) shall refer to this Annex A or such Transaction Document (or
other document) as a whole and not to any particular provision hereof or
thereof, and Article, Section, Annex, Schedule and Exhibit references herein

 

A-1

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and therein are references to Articles and Sections of, and Annexes, Schedules
and Exhibits to, the relevant Transaction Document (or other document) unless
otherwise specified.

 

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

 

(l)                                     References to any action, remedy or
method of judicial proceeding for the enforcement of the rights of creditors or
of security shall be deemed to include, in respect of any jurisdiction other
than the State of New York, references to such action, remedy or method of
judicial proceeding for the enforcement of the rights of creditors or of
security available or appropriate in such jurisdiction as shall most nearly
approximate such action, remedy or method of judicial proceeding described or
referred to in the relevant Transaction Document (or other document).

 

A-2

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“$” means lawful money of the United States.

 

“Accredited Investor” means an “accredited investor” as defined in
Rule 501(a)(1), (a)(2), (a)(3) or (a)(7) under the Securities Act that is not
(i) a QIB or (ii) a Person other than a U.S. person (as defined in Regulation S)
that acquires Notes in reliance on Regulation S.

 

“Additional Notes” means the 13% Senior Secured Notes of the Issuer in the
initial Outstanding Principal Balance of $40,000,000 that may be issued on the
Subsequent Closing Date pursuant to Section 2.01(c) of the Indenture and
Section 3.1 of the Purchase Agreements.

 

“Additional Securities Triggering Event” means the FDA has approved ARYMO ER™ on
or before June 30, 2017.

 

“Affiliate” means, with respect to any specified Person, another Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the specified Person. For purposes
of this definition, “control” means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of Voting Stock, by contract or otherwise,
and “controlled” has a meaning correlative thereto.

 

“Anti-Money Laundering Laws” has the meaning set forth in Section 5.24 of the
Purchase Agreements.

 

“ARYMO ER™” means the product candidate referred to as ARYMO ER™ (whether
marketed under such name or any other name).

 

“Business Day” means any day other than a Saturday, a Sunday or any other day on
which banking institutions are authorized or required by Law to close in New
York City or the city in which the Trustee’s corporate trust office is located.

 

“Capital Stock” means (a) in the case of a corporation, corporate stock or
shares, (b) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (c) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and membership rights, and (d) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person, in each case to the extent
treated as equity in accordance with GAAP.

 

“Closing Date” means each of the Issue Date and the Subsequent Closing Date (if
any).

 

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

 

“Collateral Agent” means U.S. Bank National Association in its capacity as
“Collateral Agent” under the Indenture and under the Security Documents and any
successor thereto in such capacity.

 

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“Collateral Agreement” means that certain collateral agreement, dated as of the
Issue Date, among the Obligors, the other subsidiary parties from time to time
party thereto, the Trustee and the Collateral Agent.

 

“Commission” means the U.S. Securities and Exchange Commission or any successor
thereto.

 

“Confidential Information” means, as it relates to the Purchaser (or its
Affiliates), all information (whether written or oral, or in electronic or other
form) furnished to the Issuer or its Affiliates at any time concerning the
Purchaser or its Affiliates (including any of its equityholders), including any
and all information regarding any aspect of the Purchaser’s business, including
its owners, funds, strategy, market views, structure, investors or potential
investors. Such Confidential Information includes any IRS Form W-9 or W-8BEN (or
any similar type of form) provided by the Purchaser to the Issuer or its
Affiliates. Notwithstanding the foregoing definition, “Confidential Information”
shall not include information that is (v) independently developed or discovered
by any Obligor without use of or access to any information described in the
second preceding sentence, as demonstrated by documentary evidence, (w) already
in the public domain at the time the information is disclosed or has become part
of the public domain after such disclosure through no breach of the Purchase
Agreement, (x) lawfully obtainable from other sources, (y) required to be
disclosed in any document to be filed with any Governmental Authority or
otherwise required to be disclosed under applicable Law or judicial or
administrative proceedings (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigation demand or similar
process) or pursuant to requests from regulatory agencies having oversight over
any of the Obligors or (z) required to be disclosed by court or administrative
order or under securities Laws applicable to any party to the Purchase Agreement
or pursuant to the rules and regulations of any stock exchange or stock market
on which securities of any Obligor or its Affiliates or the Purchaser or its
Affiliates may be listed for trading.

 

“Confidentiality Agreement” means a confidentiality agreement substantially in
the form of Exhibit E to the Indenture or substantially in the form of any
confidentiality agreement attached to Schedule 2 to an applicable Purchase
Agreement.

 

“Default” means any event that is, or after notice or passage of time or both
would be, an Event of Default.

 

“Definitive Security” has the meaning set forth in Appendix A to the Indenture
as of the Issue Date.

 

“DTC” means The Depository Trust Company (including its nominees).

 

“Egalet-002” means the product candidate referred to as Egalet-002 (whether
marketed under such name or any other name).

 

“Environmental Laws” has the meaning set forth in Section 5.20 of the Purchase
Agreements.

 

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“Equity Interests” means, with respect to any Person, all of the shares of
Capital Stock of (or other ownership, distribution or profit interests or
participations in) such Person, all of the warrants, options or other rights for
the purchase or acquisition from such Person of shares of Capital Stock of (or
other ownership, distribution or profit interests or participations in) such
Person and all of the other ownership, distribution or profit interests or
participations in such Person (including partnership, membership or trust
interests therein), whether voting or non-voting, and whether or not such
shares, warrants, options, rights or other interests or participations are
outstanding on any date of determination.

 

“ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as
amended.

 

“Event of Default” has the meaning set forth in the Indenture as of the Issue
Date.

 

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

 

“Exchange Act Documents” has the meaning set forth in Section 5.4 of the
Purchase Agreements.

 

“FDA” means the U.S. Food and Drug Administration or any successor thereto.

 

“FFDCA” has the meaning set forth in Section 5.28 of the Purchase Agreements.

 

“GAAP” means generally accepted accounting principles in effect in the United
States from time to time.

 

“Global Security” has the meaning set forth in Appendix A to the Indenture as of
the Issue Date.

 

“Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, arbitrator, central
bank or other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government
(including any supra-national bodies such as the European Union or the European
Central Bank).

 

“Guarantee” means any guarantee of the obligations of the Issuer under the
Indenture and the Notes by any Person in accordance with the provisions of the
Indenture.

 

“Health Care Authorizations” has the meaning set forth in Section 5.29 of the
Purchase Agreements.

 

“Health Care Laws” has the meaning set forth in Section 5.29 of the Purchase
Agreements.

 

“Hercules” means Hercules Capital, Inc. (f/k/a Hercules Technology Growth
Capital, Inc.).

 

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“Indenture” means that certain indenture for the Notes, dated as of the Issue
Date, among the Obligors, the Trustee and the Collateral Agent.

 

“INHAM Exemption” has the meaning set forth in Section 4.3(a)(iii)(z) of the
Purchase Agreement.

 

“Intellectual Property” means, with respect to any Person, all intellectual
property and proprietary rights in any jurisdiction throughout the world, and
all corresponding rights, presently or hereafter existing, including: (a) all
inventions (whether or not patentable or reduced to practice), all improvements
thereto, and all patents, patent applications, industrial designs, industrial
design applications, and patent disclosures, together with all reissues,
continuations, continuations-in-part, revisions, divisionals, extensions, and
reexaminations in connection therewith; (b) all trademarks, trademark
applications, tradenames, servicemarks, servicemark applications, trade dress,
logos and designs, business names, company names, Internet domain names, and all
other indicia of origin, all applications, registrations, and renewals in
connection therewith, and all goodwill associated with any of the foregoing;
(c) all copyrights and other works of authorship, mask works, database rights
and moral rights, and all applications, registrations, and renewals in
connection therewith; (d) all trade secrets and proprietary know-how and
confidential information (including technical data, customer and supplier lists,
manufacturing processes, pricing and cost information, and business and
marketing plans and proposals); (e) all software (including source code,
executable code, data, databases, and related documentation); and (f) all rights
of privacy and publicity, including rights to the use of names, likenesses,
images, voices, signatures and biographical information of real persons.

 

“Investment Company Act” means the U.S. Investment Company Act of 1940, as
amended.

 

“IRS” means the U.S. Internal Revenue Service.

 

“Issue Date” means the date hereof.

 

“Issuer” has the meaning set forth in the preamble to the Purchase Agreements.

 

“Laws” means, collectively, all international, foreign, federal, state and local
laws, statutes, treaties, rules, guidelines, regulations, ordinances, judgments,
orders, writs, injunctions, decrees, codes and administrative or judicial
precedents or authorities, including the interpretation or administration
thereof by any Governmental Authority charged with the enforcement,
interpretation or administration thereof, and all applicable administrative
orders, directed duties, requests, licenses, authorizations and permits of, and
agreements with, any Governmental Authority, in each case whether or not having
the force of law.

 

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable Law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the UCC (or
equivalent statutes) of any jurisdiction); provided, that in no event shall an
operating lease be deemed to constitute a Lien.

 

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“Material Adverse Effect” means a material adverse effect on (a) the business,
properties, financial position, results of operations or business prospects of
the Obligors taken as a whole, (b) the ability of the Obligors to perform their
obligations under the Transaction Documents or (c) the validity or
enforceability of the Transaction Documents.

 

“Material Contract” means a contract or other agreement to which any Obligor is
a party, by which any Obligor is bound or to which any of the property or assets
of any Obligor is subject that is material in relation to the business,
operations, affairs, financial condition, assets or properties of the Obligors
taken as a whole.

 

“Notes” means the 13% Senior Secured Notes of the Issuer, substantially in the
form of Exhibit A to the Indenture, and shall include, for the avoidance of
doubt, the Original Notes and the Additional Notes, as and to the extent issued
pursuant to the terms and conditions of the Indenture and the Purchase
Agreements.

 

“Notes Collateral” means all property subject, or purported to be subject from
time to time, to a Lien under any Security Documents.

 

“Obligors” means, collectively, the Issuer and the Subsidiary Guarantors.

 

“Original Notes” means the 13% Senior Secured Notes of the Issuer in the initial
Outstanding Principal Balance of $40,000,000 that are issued on the Issue Date
pursuant to Section 2.01(b) of the Indenture and Section 3.1 of the Purchase
Agreements.

 

“Other Agreements” has the meaning set forth in Section 3.1 of the Purchase
Agreements.

 

“Other Purchasers” has the meaning set forth in Section 3.1 of the Purchase
Agreements.

 

“Outstanding Principal Balance” means, with respect to any Note or other
evidence of indebtedness outstanding, the total principal amount of such Note or
other evidence of indebtedness unpaid and outstanding at any time.

 

“Patents” means (i) an issued patent or a patent application, (ii) all
registrations and recordings thereof, (iii) all continuations and
continuations-in-part to an issued patent or patent application, (iv) all
divisions, patents of addition, reissues, renewals and extensions of any patent,
patent application, continuation or continuation-in-part and (v) all
counterparts of any of the above in any jurisdiction.

 

“Paying Agent” means an office or agency where Notes may be presented for
payment maintained by the Issuer in accordance with Section 2.04(a) of the
Indenture.

 

“Payment Date” means each March 20 and September 20.

 

“Permits” has the meaning set forth in Section 5.28 of the Purchase Agreements.

 

“Permitted Lien” in respect of a Person means: (i) pledges or deposits by such
Person under workmen’s compensation Laws, unemployment insurance Laws or similar
legislation, or

 

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good faith deposits in connection with bids, tenders, contracts (other than for
the payment of indebtedness) or leases to which such Person is a party, or
deposits to secure public or statutory obligations of such Person or deposits of
cash or U.S. government bonds to secure surety or appeal bonds to which such
Person is a party, or deposits as security for contested taxes or import duties
or for the payment of rent, in each case incurred in the ordinary course of
business; (ii) Liens imposed by Law, such as carriers’, warehousemen’s and
mechanics’ Liens, in each case for sums not yet due or being contested in good
faith by appropriate proceedings or other Liens arising out of judgments or
awards against such Person with respect to which such Person shall then be
proceeding with an appeal or other proceedings for review; (iii) Liens for
taxes, assessments or other governmental charges not yet due or payable or
subject to penalties for nonpayment or that are being contested in good faith by
appropriate proceedings; (iv) Liens in favor of issuers of performance and
surety bonds or bid bonds or with respect to other regulatory requirements or
letters of credit issued pursuant to the request of and for the account of such
Person in the ordinary course of its business; (v) minor survey exceptions,
minor encumbrances, easements or reservations of, or rights of others for,
licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines
and other similar purposes, or zoning or other restrictions as to the use of
real properties or Liens incidental to the conduct of the business of such
Person or to the ownership of its properties that were not incurred in
connection with indebtedness and that do not in the aggregate materially
adversely affect the value of said properties or materially impair their use in
the operation of the business of such Person; (vi) Liens on specific items of
inventory or other goods and proceeds of any Person securing such Person’s
obligations in respect of bankers’ acceptances issued or created for the account
of such Person to facilitate the purchase, shipment or storage of such inventory
or other goods; (vii) deposits made in the ordinary course of business to secure
liability to insurance carriers; (viii) grants of software and other technology
licenses in the ordinary course of business; (ix) Liens arising out of
conditional sale, title retention, consignment or similar arrangements for the
sale of goods entered into in the ordinary course of business; (x) Liens arising
by virtue of any statutory or common law provisions relating to banker’s Liens,
rights of set-off or similar rights and remedies as to deposit accounts or other
funds maintained with a depository or financial institution; and (xi) Liens
created in favor of the Trustee or the Collateral Agent.

 

“Person” means an individual, corporation, partnership, association, limited
liability company, unincorporated organization, trust, joint stock company or
joint venture, a Governmental Authority or any other entity.

 

“Placement Agent” means Morgan Stanley & Co. LLC.

 

“Plan Assets” has the meaning given to such term by Section 3(42) of ERISA and
regulations issued by the U.S. Department of Labor.

 

“Price” has the meaning set forth in Section 3.1 of the Purchase Agreements.

 

“PTE” has the meaning set forth in Section 4.3(a)(iii)(w) of the Purchase
Agreements.

 

“PTO” means the U.S. Patent and Trademark Office.

 

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“Purchase Agreement” means that certain purchase agreement dated the Issue Date
among the Obligors and the Purchaser party thereto.

 

“Purchase Agreements” means, collectively, each Purchase Agreement and the Other
Agreements.

 

“Purchase Price” has the meaning set forth in Section 3.1 of the Purchase
Agreements.

 

“Purchaser” has the meaning set forth in Section 1.1 of the Purchase Agreements.

 

“Purchasers” has the meaning set forth in Section 1.1 of the Purchase
Agreements.

 

“QIB” means a qualified institutional buyer within the meaning of Rule 144A.

 

“QPAM Exemption” means PTE 84-14 (issued December 21, 1982, as subsequently
amended).

 

“Record Date” means each March 5 and September 5.

 

“Regulation S” means Regulation S under the Securities Act.

 

“Relevant Intellectual Property” has the meaning set forth in Section 5.19(b) of
the Purchase Agreements.

 

“Relevant Patents” has the meaning set forth in Section 5.19(b) of the Purchase
Agreements.

 

“Responsible Officer” means, with respect to any Obligor, any manager, director
or officer of such Obligor.

 

“Royalty Right Agreements” means the separate royalty right agreements between
the Issuer and each Purchaser (or an Affiliate thereof).

 

“Royalty Rights” means the royalty rights sold by the Issuer to the Purchasers
(or Affiliates thereof) pursuant to and subject to the terms and conditions of
the Royalty Right Agreements.

 

“Rule 144A” means Rule 144A under the Securities Act.

 

“Sanctions” has the meaning set forth in Section 5.25(a) of the Purchase
Agreements.

 

“Securities Act” means the U.S. Securities Act of 1933, as amended.

 

“Security Documents” means the security agreements, pledge agreements,
mortgages, collateral assignments and related agreements, as amended,
supplemented, restated, renewed, refunded, replaced, restructured, repaid,
refinanced or otherwise modified from time to time, creating, perfecting or
otherwise evidencing the security interests in the Notes Collateral as
contemplated by the Indenture.

 

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“Similar Law” has the meaning set forth in Section 4.3(b) of the Purchase
Agreements.

 

“Source” has the meaning set forth in Section 4.3(a) of the Purchase Agreements.

 

“Subsequent Closing Date” has the meaning set forth in Section 3.1 of the
Purchase Agreements.

 

“Subsidiary” means, with respect to any Person, (a) any corporation, association
or other business entity (other than a partnership, joint venture or limited
liability company) of which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
of determination owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
and (b) any partnership, joint venture or limited liability company of which
(x) more than 50% of the capital accounts, distribution rights, total equity and
voting interests or general and limited partnership interests, as applicable,
are owned or controlled, directly or indirectly, by such Person or one or more
of the other Subsidiaries of that Person or a combination thereof, whether in
the form of membership, general, special or limited partnership interests or
otherwise, and (y) such Person or any Subsidiary of such Person is a controlling
general partner or otherwise controls such entity. For purposes of clarity, a
Subsidiary of a Person shall not include any Person that is under common control
with the first Person solely by virtue of having directors, managers or trustees
in common and shall not include any Person that is solely under common control
with the first Person (i.e., a sister company with a common parent).

 

“Subsidiary Guarantors” has the meaning set forth in the preamble to the
Purchase Agreements.

 

“Transaction Documents” means the Indenture, the Notes, the Royalty Right
Agreements, the Guarantees, the Security Documents, the Purchase Agreements and
any intercreditor agreement in the form of Exhibit D to the Indenture.

 

“Trustee” has the meaning set forth in Section 3.1 of the Purchase Agreements.

 

“Trustee Closing Account” means the account maintained with the Trustee at U.S.
Bank National Association, ABA No. 091000022, Account No. 1731 0332 1092, Ref.
Egalet Corporation Senior Notes, Attention: Alison D.B. Nadeau.

 

“UCC” means the Uniform Commercial Code as in effect in the State of New York;
provided, that, if perfection, the effect of perfection or non-perfection or the
priority of any security interest in any Notes Collateral is governed by the
Uniform Commercial Code (or equivalent Law) as in effect in a jurisdiction other
than the State of New York, then “UCC” means the Uniform Commercial Code (or
equivalent Law) as in effect from time to time in such other jurisdiction for
purposes of the provisions relating to such perfection, effect of perfection or
non-perfection or priority.

 

“U.S.” or “United States” means the United States of America, its 50 states,
each territory thereof and the District of Columbia.

 

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“Voting Stock” of any Person as of any date means the Equity Interests of such
Person that are at the time outstanding and entitled to vote generally (without
regard to the occurrence of any contingency) in the election of the board of
directors or similar governing body of such Person or any duly authorized
committee thereof

 

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