Exhibit 10.2

 

Execution Version

 

 

 

 

COLLATERAL AGREEMENT

 

DATED AS OF MARCH 20, 2019

 

AMONG

 

EGALET CORPORATION,
as Borrower,

 

THE SUBSIDIARY PARTIES FROM TIME TO TIME PARTY HERETO

 

and

 

CANTOR FITZGERALD SECURITIES,
as Administrative Agent and Collateral Agent

 

 

 

 

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TABLE OF CONTENTS

 

 

 

Page

ARTICLE I DEFINITIONS

1

 

Section 1.1

Terms Defined in the Credit Agreement

1

 

Section 1.2

Terms Defined in UCC

1

 

Section 1.3

Definitions of Certain Terms Used Herein

2

 

Section 1.4

Construction; Certain Defined Terms

6

 

 

ARTICLE II GRANT OF SECURITY INTEREST

6

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES

8

 

Section 3.1

Validity and Priority of Security Interest

8

 

Section 3.2

Location of Collateral

9

 

Section 3.3

Exact Names

9

 

Section 3.4

Accounts and Chattel Paper

9

 

Section 3.5

Documents, Instruments, and Chattel Paper

9

 

Section 3.6

Proprietary Rights

9

 

Section 3.7

Investment Property

9

 

Section 3.8

Commercial Tort Claims

10

 

Section 3.9

Bank Accounts and Related Items

10

 

Section 3.10

Perfection Certificate

10

 

Section 3.11

Leases

10

 

Section 3.12

Trade Names

10

 

Section 3.13

No Financing Statements, Security Agreements

10

 

Section 3.14

Location for Purposes of the UCC

11

 

 

ARTICLE IV COVENANTS

11

 

Section 4.1

General

11

 

Section 4.2

Perfection and Protection of Security Interest

13

 

Section 4.3

Electronic Chattel Paper

14

 

Section 4.4

Maintenance of Property

15

 

Section 4.5

Investment Property

15

 

Section 4.6

Proprietary Rights

17

 

Section 4.7

Inventory

17

 

Section 4.8

Commercial Tort Claims

17

 

Section 4.9

No Interference

17

 

Section 4.10

Insurance

17

 

Section 4.11

Condemnation

18

 

Section 4.12

Further Assurances

18

 

Section 4.13

Negative Pledge

19

 

Section 4.14

Certain Post-Closing Obligations

19

 

 

ARTICLE V REMEDIES

19

 

Section 5.1

Remedies

19

 

Section 5.2

Grant of Intellectual Property License

21

 

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Section 5.3

Application of Proceeds

22

 

 

ARTICLE VI CONCERNING THE COLLATERAL AGENT

22

 

Section 6.1

Reliance by Collateral Agent; Indemnity Against Liabilities, etc.

22

 

Section 6.2

Exercise of Remedies

23

 

Section 6.3

Authorized Investments

23

 

Section 6.4

Bankruptcy Proceedings

23

 

 

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

24

 

Section 7.1

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

24

 

Section 7.2

Right to Cure

25

 

Section 7.3

Confidentiality

25

 

Section 7.4

Power of Attorney

26

 

Section 7.5

NATURE OF APPOINTMENT; LIMITATION OF DUTY

26

 

Section 7.6

Additional Matters Relating to the Collateral Agent

27

 

Section 7.7

[Reserved]

29

 

Section 7.8

Instructions under Account Control Agreement

29

 

 

ARTICLE VIII GENERAL PROVISIONS

30

 

Section 8.1

Notice

30

 

Section 8.2

Waiver of Notices

31

 

Section 8.3

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

31

 

Section 8.4

Compromises and Collection of Collateral

32

 

Section 8.5

Specific Performance of Certain Covenants

32

 

Section 8.6

Cumulative Remedies; No Prior Recourse to Collateral

32

 

Section 8.7

Limitation by Law; Severability of Provisions

32

 

Section 8.8

Reinstatement

33

 

Section 8.9

Binding Effect

33

 

Section 8.10

Survival of Representations

33

 

Section 8.11

Guaranties; Third Party Joinder

33

 

Section 8.12

Captions

34

 

Section 8.13

Termination and Release

34

 

Section 8.14

Entire Agreement

34

 

Section 8.15

Governing Law; Jurisdiction; Consent to Service of Process

34

 

Section 8.16

Waiver of Jury Trial

34

 

Section 8.17

Indemnity

35

 

Section 8.18

Limitation of Liability

35

 

Section 8.19

Counterparts

36

 

Section 8.20

Amendments

36

 

Section 8.21

Conflicts with Other Agreements

36

 

Section 8.22

Incorporation by Reference

36

 

Section 8.23

English Language

36

 

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EXHIBIT A

Grantors’ Information and Collateral Locations

EXHIBIT B

Proprietary Rights

EXHIBIT C

Commercial Tort Claims

EXHIBIT D

List of Investment Property

EXHIBIT E

Filing Offices

EXHIBIT F

Form of Amendment

EXHIBIT G

Form of Perfection Certificate

EXHIBIT H

Form of Supplement

EXHIBIT I

Leased Property

EXHIBIT J

Bank Accounts and Related Items

EXHIBIT K

Trade Names

 

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COLLATERAL AGREEMENT

 

THIS COLLATERAL AGREEMENT (as amended, extended, renewed, restated,
supplemented, waived or otherwise modified from time to time, this “Agreement”)
is entered into as of March 20, 2019, by and among EGALET CORPORATION, a
Delaware corporation with an address at 600 Lee Road, Suite 100, Wayne,
Pennsylvania 19087 (the “Borrower”), the SUBSIDIARY PARTIES (as defined below)
from time to time party hereto, CANTOR FITZGERALD SECURITIES, in its capacity as
administrative agent for the Lenders (in such capacity, the “Agent”) and in its
capacity as collateral agent for the Secured Parties (as defined below) (in such
capacity, the “Collateral Agent”).

 

PRELIMINARY STATEMENT

 

WHEREAS pursuant to the terms, conditions and provisions of the Credit Agreement
dated as of the date hereof (as amended, extended, renewed, restated,
supplemented, waived or otherwise modified from time to time, the “Credit
Agreement”), among the Borrower, Lenders from time to time party thereto and
Agent, the Borrower is incurring the Obligations, which may be guaranteed on a
senior secured basis by each of the Subsidiary Parties;

 

WHEREAS the Borrower, the Subsidiary Parties, the Collateral Agent and the other
parties party thereto have entered into the Closing Date Intercreditor Agreement
(as defined in the Credit Agreement), which will govern the liens upon and
security interests in the Collateral granted by this Agreement;

 

WHEREAS each Grantor (as defined below) is executing and delivering this
Agreement pursuant to the terms of the Credit Agreement to induce the Agent to
enter into the Credit Agreement and for the benefit of the Secured Parties; and

 

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

 

NOW, THEREFORE, for and in consideration of the premises, and of the mutual
covenants herein contained, and in order to induce the Agent to enter into the
Credit Agreement and for the benefit of the Secured Parties, the Borrower, each
Subsidiary Party party hereto or that becomes bound hereby and the Collateral
Agent, on behalf of itself and each Secured Party (and each of their respective
successors or assigns), hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.1                                    Terms Defined in the Credit
Agreement.

 

All capitalized terms used and not otherwise defined herein have the meanings
assigned to such terms in the Credit Agreement.

 

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

 

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

 

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

 

“Account Control Agreement”(1) means each of (i) (x) the Egalet Corp DACA,
(y) the Egalet Corp SACA and (z) the Egalet US DACA (in each case of (x),
(y) and (z) of this clause (i), upon entry into such account control agreement
by the parties thereto); and (ii) any other account control agreement, account
pledge, charge over accounts or similar agreement, which is in form and
substance reasonably satisfactory to the Collateral Agent (it being agreed that
any agreement that shall require the Collateral Agent to indemnify any
institution in its individual capacity shall not be reasonably acceptable to the
Collateral Agent) and to counsel to the Lenders.

 

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

 

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

 

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

 

“Closing Date Intercreditor Agreement” has the meaning assigned to such term in
the Credit Agreement.

 

“Collateral” has the meaning specified in Article II.

 

“Collateral Agent’s Liens” means the Liens in the Collateral granted to the
Collateral Agent, for the benefit of the Secured Parties, pursuant to this
Agreement and the other Loan Documents.

 

“Commercial Tort Claims” means, with respect to a Person, all of such Person’s
now owned or hereafter acquired “commercial tort claims”, as defined by the UCC,
identified on

 

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(1)  Note to Draft: To be updated (along with corresponding definitions and
Section 4.14) at Closing based on review of exhibits and schedules with any
additional required account control agreements in accordance with the terms
hereof.

 

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

 

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

 

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

 

“Dollars” means United States dollars.

 

“Effective Date” means the date of this Agreement.

 

“Egalet Corp DACA” means the deposit account control agreement to be entered
into among the Borrower, the Collateral Agent and Wells Fargo Bank, N.A. which
is in form and substance reasonably satisfactory to the Collateral Agent and to
counsel to the Lenders.

 

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

 

“Egalet UK” means Egalet Limited, a private limited company organized under the
laws of England and Wales.

 

“Egalet US” means Egalet US Inc., a Delaware corporation.

 

“Egalet US DACA” means the deposit account control agreement to be entered into
among Egalet US, the Collateral Agent and Wells Fargo Bank, N.A. which is in
form and substance reasonably satisfactory to the Collateral Agent and to
counsel to the Lenders.

 

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

 

“Equipment” means, with respect to a Person, all of such Person’s now owned and
hereafter acquired machinery, “equipment”, as defined by the UCC, furniture,
furnishings, fixtures, and other tangible personal property (except Inventory),
including rolling stock with respect to which a certificate of title has been
issued, aircraft, dies, tools, jigs, and office equipment, as well as all of
such types of property leased by such Person and all of such Person’s rights and
interests with respect thereto under such leases (including, options to
purchase); together with all present and future additions and accessions
thereto, replacements therefor,

 

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component and auxiliary parts and supplies used or to be used in connection
therewith, and all substitutes for any of the foregoing, and all manuals,
drawings, instructions, warranties, and rights with respect thereto, wherever
any of the foregoing is located.

 

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

 

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

 

“General Intangibles” means, with respect to a Person, all of such Person’s now
owned or hereafter acquired “general intangibles”, as defined in the UCC,
including payment intangibles, choses in action and causes of action and all
other intangible personal property of such Person of every kind and nature
(other than Accounts), including, all contract rights, Proprietary Rights,
corporate or other business records, inventions, designs, blueprints, plans,
specifications, patents, patent applications, trademarks, service marks, trade
names, trade secrets, goodwill, copyrights, computer software, customer lists,
registrations, licenses, franchises, tax refund claims, any funds which may
become due to such Person in connection with the termination of any employee
benefit plan or any rights thereto and any other amounts payable to such Person
from any employee benefit plan, rights and claims against carriers and shippers,
rights to indemnification, business interruption insurance and proceeds thereof,
property, casualty or any similar type of insurance and any proceeds thereof,
proceeds of insurance covering the lives of key employees on which such Person
is beneficiary, rights to receive dividends, distributions, cash, Instruments
and other property in respect of or in exchange for pledged equity interests or
Investment Property, and any letter of credit, guarantee, claim, security
interest, or other security held by or granted to such Person.

 

“Grantors” means the Borrower and the Subsidiary Parties.

 

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

 

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

 

“Investment Property” means, with respect to a Person, all of such Person’s
right, title, and interest in and to any and all “investment property”, as
defined in the UCC, including,

 

4

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Requirement of Law” means, as to any Person, any law (statutory or common),
treaty, rule, or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.

 

“Secured Parties” means (a) the Collateral Agent, (b) each Lender, (c) the Agent
and (d) the successors and permitted assigns of each of the foregoing.

 

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

 

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

 

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

 

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

 

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

 

ARTICLE II
GRANT OF SECURITY INTEREST

 

As security for the Obligations, each Grantor hereby grants to the Collateral
Agent, for the benefit of the Secured Parties, a continuing security interest in
and lien on, such Grantor’s right, title and interest in and to all of the
following property and assets of such Grantor, whether now owned or existing or
hereafter acquired or arising, regardless of where located:

 

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

 

(ii)                                  all Chattel Paper;

 

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(iii)                               all Commercial Tort Claims;

 

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

 

(v)                                 all Financial Assets;

 

(vi)                              all Equipment;

 

(vii)                           all General Intangibles;

 

(viii)                        all Investment Property;

 

(ix)                              all Inventory;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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and shall thenceforth be included within the definition of Collateral in
accordance with the Loan Documents.

 

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

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES

 

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

 

Section 3.1                                    Validity and Priority of Security
Interest.

 

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

 

(b)                                 Upon the recordation of this Agreement or
the Copyright, Patent, and Trademark Agreements with the United States Patent
and Trademark Office or the United States Copyright Office, as applicable,
together with the financing statements in appropriate form filed in the Filing
Offices and (as to Proprietary Rights related to the SPRIX® Product, the ARYMO
ER™ Product, the Egalet-002 Product, the INDOCIN Product, the TIVORBEX Product,
the VIVLODEX Product, the ZORVOLEZ Product and, to the extent required to be
pledged as Collateral, the OXAYDO® Product) in the European Patent Office, the
Lien created shall constitute a fully perfected Lien on, and security interest
in, all right, title and interest of the Grantors in the respective Proprietary
Rights in which a security interest may be perfected by filing in the United
States and its territories and possessions, or in Europe, respectively, in each
case prior and superior in right to any other Person with respect to such
perfection (other than Permitted Liens of the type described in clauses (8),
(9) and (19) and (as it relates to such clauses) clauses (20) and (30) of the
definition thereof of the definition thereof).

 

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

 

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

 

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

 

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

 

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

 

Section 3.7                                    Investment Property.

 

(a)                                 Exhibit D sets forth a correct and complete
list of all of the Investment Property Collateral owned by each Grantor.  Each
Grantor is the legal and beneficial owner of such Investment Property
Collateral, as so reflected, free and clear of any Lien (other than Permitted
Liens), and has not sold, granted any option with respect to, assigned or
transferred, or otherwise disposed of any of its rights or interest therein. 
Each Grantor further represents and warrants that (i) to such Grantor’s
knowledge, all Investment Property constituting an Equity Interest has been (to
the extent such concepts are relevant with respect to such Investment Property)
duly authorized and validly issued by the Investment Property Issuer thereof and
are fully paid and non-assessable, (ii) with respect to any certificates

 

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delivered to the Collateral Agent representing an Equity Interest, either such
certificates are Securities as defined in Article 8 of the UCC as a result of
actions by the Investment Property Issuer thereof or otherwise, or, if such
certificates are not Securities as defined in Article 8 of the UCC, such Grantor
has filed financing statements in appropriate form to perfect the security
interest of the Collateral Agent for the benefit of the Secured Parties therein
as a General Intangible, and (iii) to Grantor’s knowledge, all Investment
Property that represents Indebtedness owed to any Grantor has been duly
authorized, authenticated or issued and delivered by the Investment Property
Issuer of such Indebtedness and is the legal, valid and binding obligation of
such Investment Property Issuer.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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Permitted Liens (including, for the avoidance of doubt, in connection with the
Senior Secured Notes).

 

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

 

ARTICLE IV
COVENANTS

 

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

 

Section 4.1                                    General.; Collateral Records. 
Each Grantor shall maintain at all times reasonably detailed, accurate (in all
material respects) and updated books and records pertaining to the Collateral
and promptly furnish to the Collateral Agent such information relating to the
Collateral as the Collateral Agent shall from time to time reasonably request.

 

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

 

(b)                                 Other Perfection, etc.  Each Grantor shall,
at any time and from time to time (i) notify, in form reasonably satisfactory to
the Collateral Agent, any warehouseman, bailee, or any of such Grantor’s agents
or processors having possession of any Collateral consisting of Inventory or
Equipment with a Fair Market Value in excess of $1,000,000 (calculated based on
the Grantor’s estimate of the Fair Market Value of the Inventory or Equipment to
be possessed by such warehouseman, bailee, agent or processor over the course of
any calendar year on a weighted average basis) of the security interest of the
Collateral Agent in such Collateral (with a copy of such notice sent to the
Collateral Agent), (ii) use its commercially reasonable efforts to obtain an
acknowledgment, in form and substance reasonably satisfactory to the Collateral
Agent, from such warehouseman, bailee, agent or processor (other than with
respect to any Intercreditor Collateral, unless the agent thereunder, if any,
shall also have obtained acknowledgement from such warehousemen, bailee, agent
or processor) and not having otherwise entered into a subordination agreement
for the benefit of the Collateral Agent, stating

 

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that the warehouseman, bailee, agent or processor holds such Collateral for the
Collateral Agent, subject to the Closing Date Intercreditor Agreement and
(iii) take such steps as are necessary or as the Collateral Agent may reasonably
request (A) for the Collateral Agent to obtain “control” of any Investment
Property Collateral, deposit accounts, letter-of-credit rights, or Electronic
Chattel Paper (as such terms, to the extent they are undefined herein, are
defined by Article 9 of the UCC with corresponding provisions thereof defining
what constitutes “control” for such items of Collateral) constituting Collateral
in excess of $500,000 (other than (i) Investment Property Collateral
constituting Equity Interests of a Subsidiary for which no minimum dollar amount
shall apply and (ii) the deposit account at Danske Bank A/S (CVR 61126228) so
long as the aggregate amount of cash and Cash Equivalents held in such account
do not exceed $1,000,000 at any time outstanding; provided that to the extent
the Grantors directly or indirectly, create, incur or suffer to exist any Lien
over such account to secure the Senior Secured Notes or any other Indebtedness,
the Obligations are also secured by a first priority Lien on such account until
such time as such Indebtedness is no longer secured by such Lien), excluding any
Excluded Assets, with any agreements establishing control to be in form and
substance reasonably satisfactory to the Collateral Agent and (B) to otherwise
ensure the continued perfection and priority of the Collateral Agent’s security
interest in any of the Collateral (to the extent required hereunder) and of the
preservation of its rights therein.  The $500,000 threshold described in clause
(iii)(A) of the preceding sentence as it relates to any deposit account shall be
measured by reference to the closing balance of such deposit account as of each
Business Day.

 

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

 

(d)                                 Change in Location of Collateral.  No
Grantor shall (i) maintain any Collateral with a Fair Market Value in excess of
$1,000,000 (other than Inventory in transit, consignments of Inventory not in
excess of $1,000,000), rolling stock, equipment in transit between locations set
forth in Exhibit A, equipment at other locations for purposes of maintenance or
repair and Collateral in the Collateral Agent’s possession or the possession of
any applicable agent or other Person acting in an administrative capacity for
other indebtedness subject to an intercreditor agreement at any location other
than those locations listed on Exhibit A, (ii) otherwise change or add to any of
such locations, or (iii) change the location of its jurisdiction of organization
from the location identified in Exhibit A, unless in each case it gives the
Collateral Agent prompt written notice thereof but in any event described in
clause (iii) not later than 30 days prior thereto, and executes or authorizes
the filing of any and all financing

 

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statements and other documents that are necessary or that the Collateral Agent
reasonably requests in connection therewith.  In the event any Grantor changes
or adds any location of Collateral, such Grantor shall prepare and promptly
deliver to the Collateral Agent a revised Exhibit A, which shall automatically
be adopted as Exhibit A for all purposes.  Each Grantor agrees not to effect or
permit any change referred to in the preceding sentences unless all filings are
promptly made under the Uniform Commercial Code or other applicable law that are
required in order for the Collateral Agent to continue at all times following
such change to have a valid, legal and perfected security interest (subject to
the terms of the Closing Date Intercreditor Agreement and subject to Permitted
Liens) in the Collateral for its benefit and the benefit of the other Secured
Parties.

 

Section 4.2                                    Perfection and Protection of
Security Interest.

 

(a)           Perfection and Protection.  Each Grantor shall, at its expense,
perform all steps necessary or otherwise reasonably requested by the Collateral
Agent (at the direction of the Required Lenders) at any time to perfect,
maintain, protect, and enforce the Collateral Agent’s Liens, subject to the
terms of the Closing Date Intercreditor Agreement, including: (i) filing and
recording of the Copyright, Patent, and Trademark Agreements, and amendments
thereof in the United States Patent and Trademark Office, the United States
Copyright Office and the European Patent Office and filing financing statements
or continuation statements in the respective Filing Office; (ii) subject to the
terms of the Closing Date Intercreditor Agreement, delivering to the Collateral
Agent the originals of all instruments, documents, and Chattel Paper (in each
case in excess of $250,000), and all other Collateral of which the Collateral
Agent is required to have or reasonably requests to have physical possession of
in order to perfect and protect the Collateral Agent’s security interest
therein, duly pledged, endorsed, or assigned to the Collateral Agent as provided
herein; (iii) delivering to the Collateral Agent a duly executed amendment to
this Agreement, in the form of Exhibit F hereto (each, an “Amendment”), pursuant
to which such Grantor will pledge any additional Collateral that constitutes
Commercial Tort Claims the recovery from which could reasonably be expected to
exceed $500,000; (iv) subject to the terms of the Closing Date Intercreditor
Agreement, upon the occurrence and during the continuation of an Event of
Default, delivering to the Collateral Agent (A) warehouse receipts covering any
portion of the Collateral located in warehouses and for which warehouse receipts
are issued, (B)  warehouse receipts covering any portion of the Collateral
located in warehouses and for which warehouse receipts are issued and (C) if
requested by the Collateral Agent, certificates of title reflecting the
Collateral Agent’s Liens covering any portion of the Collateral for which
certificates of title have been issued; (v) when an Event of Default exists,
transferring Inventory to warehouses or other locations designated by the
Collateral Agent; (vi) upon the occurrence and during the continuance of an
Event of Default, delivering to the Collateral Agent all letters of credit
constituting Collateral on which such Grantor is named beneficiary; and
(vii) taking such other steps as are reasonably deemed necessary or desirable by
the Collateral Agent (acting at the direction of the Required Lenders) to
maintain, protect and enforce the Collateral Agent’s Liens.  To the extent
permitted by any Requirement of Law and the Closing Date Intercreditor
Agreement, the Collateral Agent may file, without any Grantor’s signature, one
or more financing statements disclosing the Collateral Agent’s Liens.  Each
Grantor hereby authorizes the Collateral Agent to attach each Amendment to this
Agreement and agrees that all additional collateral set forth in such Amendments
shall be considered to be part of the Collateral.

 

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(b)                                 Collateral in Other’s Possession.  Subject
to the terms of the Closing Date Intercreditor Agreement, if at any time any
Collateral with a Fair Market Value in excess of $1,000,000 is located at any
operating facility of a Grantor which is not owned by such Grantor, such Grantor
shall, upon request, use commercially reasonable efforts to obtain written
landlord lien waivers or subordinations, in form and substance reasonably
satisfactory to the Collateral Agent, of all present and future Liens to which
the owner or lessor of such premises may be entitled to assert against such
Collateral.

 

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

 

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

 

Section 4.3                                    Electronic Chattel Paper.If any
Grantor at any time holds or acquires an interest in any Electronic Chattel
Paper or any “transferable record”, as that term is defined in Section 201 of
the Federal Electronic Signatures in Global and National Commerce Act, or in
Section 16 of the Uniform Electronic Transactions Act as in effect in any
relevant jurisdiction, such Grantor shall promptly notify the Collateral Agent
thereof and (subject to the terms of the Closing Date Intercreditor Agreement)
shall take such action as is necessary to vest in the Collateral Agent Control
under UCC Section 9-105 of such Electronic Chattel Paper or control (to the
extent the meaning of “control” has not been clearly established under such
provisions, “control” in this paragraph (d) to have such meaning as the
Collateral Agent shall reasonably specify in writing after consultation with the
Borrower) under Section 201 of the Federal Electronic Signatures in Global and
National Commerce Act or, as the case may be, Section 16 of the Uniform
Electronic Transactions Act, as so in effect in such jurisdiction, of such
transferable record.  The Collateral Agent agrees with such Grantor that the
Collateral Agent will arrange, pursuant to procedures reasonably satisfactory to
the Collateral Agent and so long as such procedures will not result in the
Collateral Agent’s loss of Control or control, as applicable, which may be
established to the satisfaction of the Collateral Agent pursuant to the delivery
to it by the Grantor of an Officers’ Certificate or an Opinion of Counsel, for
the Grantor to make alterations to the Electronic Chattel Paper or transferable
record permitted under UCC Section 9-105 or, as the case may be, Section 201 of
the Federal Electronic Signatures in Global and National Commerce Act or
Section 16 of the Uniform Electronic Transactions Act for a party in Control to
allow without loss of Control or control, as applicable, unless an Event of
Default has occurred and is continuing or would occur after taking into account
any action by such Grantor with respect to such Electronic Chattel Paper or
transferable record.

 

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

 

Section 4.5                                    Investment Property.

 

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

 

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

 

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

 

(ii)                                  During the existence of an Event of
Default, subject to the Closing Date Intercreditor Agreement, after delivery of
notice to the applicable Grantor, (A) the Collateral Agent may exercise all
voting and corporate rights at any meeting of any corporation, partnership, or
other business entity issuing any of the Investment Property Collateral and the
proceeds thereof (in cash or otherwise) held by the Collateral Agent hereunder,
and any and all rights of conversion, exchange, subscription, or any other
rights, privileges, or options pertaining to any of the Investment Property
Collateral as if it were the absolute owner thereof, including, the right to
exchange at its discretion any and all of the Investment Property Collateral
upon the merger, consolidation,

 

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

 

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

 

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Section 4.6                                    Proprietary Rights. (a) The
Borrower, either directly or through any agent, employee, licensee or designee,
shall inform the Collateral Agent on an annual basis of each application for the
registration of any material Proprietary Right owned or licensed by the Borrower
or any of its Affiliates with the United States Patent and Trademark Office, the
United States Copyright Office, the European Patent Office or any similar office
or agency filed during the preceding year.

 

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

 

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

 

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

 

Section 4.10                             Insurance. 

 

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

 

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

 

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

 

(d)                                 Unless the Grantors provide the Collateral
Agent with evidence of the insurance coverage on the Collateral required by this
Section 4.10, subject to the Closing Date Intercreditor Agreement, the
Collateral Agent may, upon sixty (60) days’ prior notice, purchase insurance at
the applicable Grantor’s expense to protect the Collateral Agent’s Lien on such
Collateral owned by the applicable Grantor.  This insurance may, but need not,
protect the interests of the Grantors.  The coverage that the Collateral Agent
purchases may (but shall not be required to) pay any claim that the Grantors
make or any claim that is made against the Grantors

 

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in connection with said Collateral.  The Grantors may later cancel any insurance
purchased by the Collateral Agent but only after providing the Collateral Agent
with evidence that the Grantors have obtained insurance as required by this
Agreement.  If the Collateral Agent purchases such insurance, the applicable
Grantor will be responsible for the reasonable costs of that insurance,
including interest and any other reasonable charges the Collateral Agent may
impose in connection with the placement of insurance, until the effective date
of the cancellation or expiration of the insurance.  The reasonable costs of the
insurance shall be added to the Obligations.  The costs of the insurance may be
reasonable even if it is more than the cost of insurance that the Grantors may
be able to obtain on their own.

 

Section 4.11                             Condemnation.Subject to the Closing
Date Intercreditor Agreement, each Grantor shall, promptly upon learning of the
institution of any proceeding for the condemnation or other taking of any of its
property with a Fair Market Value in excess of $1,000,000, notify the Collateral
Agent of the pendency of such proceeding.

 

Section 4.12                             Further Assurances.Subject to the
Closing Date Intercreditor Agreement, the Grantors shall, at their own cost and
expense, execute and deliver, or cause to be executed and delivered, to the
Collateral Agent and/or the Agent such documents and agreements, and shall take
or cause to be taken such actions, as are necessary or that the Collateral Agent
and/or the Agent may, from time to time, reasonably request to carry out the
terms and conditions of this Agreement and the other Loan Documents.  Upon the
acquisition by any Grantor of any After-Acquired Property (but subject to the
limitations, if applicable, set forth herein, in the Credit Agreement or in the
Closing Date Intercreditor Agreement), such Grantor shall execute and deliver
such security instruments, financing statements and certificates and Opinions of
Counsel as shall be reasonably necessary to vest in the Collateral Agent a
perfected security interest or other Lien in such After-Acquired Property and to
have such After-Acquired Property added to the Collateral and shall promptly
deliver such Officers’ Certificates and Opinions of Counsel as are customary in
secured financing transactions in the relevant jurisdiction(s) or as are
reasonably requested by the Agent or the Collateral Agent (subject to customary
assumptions, exceptions and qualifications), and thereupon all provisions of
this Agreement relating to the Collateral, shall be deemed to relate to such
After-Acquired Property to the same extent and with the same force and effect. 
If any property or assets of the Borrower or any Grantor originally deemed to be
an Excluded Asset at any point ceases to be an Excluded Asset pursuant to such
defined term, all or the applicable portion of such property and assets shall be
deemed to be After-Acquired Property and shall be added to the Notes Collateral
in accordance with the Credit Agreement and this Agreement and the Closing Date
Intercreditor Agreement.  Subject to the Closing Date Intercreditor Agreement,
such security interests and Liens will be created under security agreements and
other instruments and documents in form reasonably satisfactory to the
Collateral Agent, and the Grantors shall deliver or cause to be delivered to the
Collateral Agent and the Agent all such instruments and documents (including
legal opinions, Officers’ Certificates, title insurance policies and lien
searches) as are necessary or that the Collateral Agent shall reasonably request
to evidence compliance with this Section 4.12.  The Grantors shall furnish to
the Collateral Agent each year at the time of delivery of the annual report
required to be delivered by the Borrower pursuant to Section 5.1(a) of the
Credit Agreement, an Officer’s Certificate setting forth the information
required pursuant to the Perfection Certificate or confirming that there has
been no change in such information since the Effective Date or the date of the
most recent certificate delivered pursuant to this Section 4.12.

 

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Section 4.13                             Negative Pledge.In accordance with
Section 6.2 of the Credit Agreement, the Grantors shall not, directly or
indirectly, create, Incur or suffer to exist any Lien (except Permitted Liens or
otherwise in accordance with Section 6.2 of the Credit Agreement) on any asset
or property of the Grantors.

 

Section 4.14                             Certain Post-Closing
Obligations.Subject to the Closing Date Intercreditor Agreement, as promptly as
practical, and in any event no later than 60 days after the Effective Date (or
such later date as reasonably agreed by the Collateral Agent), (a) the Borrower
shall deliver to the Collateral Agent executed copies of the Egalet Corp DACA
and Egalet Corp SACA, and (b) Egalet US shall deliver to the Collateral Agent an
executed copy of the Egalet US DACA; provided that, no such Account Control
Agreement shall be required to the extent the value of the Collateral in such
account is less than or equal to $500,000 as contemplated by Section 4.1(b).

 

ARTICLE V
REMEDIES

 

Section 5.1                                    Remedies.

 

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

 

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

 

(ii)                                  the Collateral Agent may, at any time,
take possession of the Collateral and keep it on any Grantor’s premises, at no
cost to the Collateral Agent, the Agent or any other Secured Party or remove any
part of it to such other place or places as the Collateral Agent may desire, or
any Grantor shall, upon the Collateral Agent’s demand, at such Grantor’s cost,
assemble the Collateral and make it available to the Collateral Agent at a place
reasonably convenient to the Collateral Agent;

 

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

 

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

 

(v)                                 the Collateral Agent may, concurrently with
or following written notice to the Grantors, transfer and register in its name
or in the name of its nominee the whole or any part of the Investment Property
Collateral, exchange certificates or

 

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instruments representing or evidencing Investment Property Collateral for
certificates or instruments of smaller or larger denominations, exercise the
voting and all other rights as a holder with respect thereto, collect and
receive all cash dividends, interest, principal and other distributions made
thereon and otherwise act with respect to the Investment Property Collateral as
though the Collateral Agent was the outright owner thereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(k)           Any remedy or enforcement action to be taken hereunder by the
Collateral Agent with respect to the Collateral shall be at the written
direction of the Agent (acting pursuant to the direction of the Required Lenders
pursuant to the Credit Agreement).

 

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

 

Section 5.2            Grant of Intellectual Property License.For the purpose of
enabling the Collateral Agent to exercise the rights and remedies under this
Article V at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, subject to the terms of the Closing Date
Intercreditor Agreement, each Grantor hereby grants to the Collateral Agent a
non-exclusive license or other right to use, without charge, each Grantor’s
labels, patents, copyrights, name, trade secrets, trade names, trademarks, and
advertising matter, or any similar property, to the extent constituting
Collateral in completing production of, advertising or selling any Collateral,
and, subject to the rights of any licensor or franchisor under such agreements
and to the extent not in violation of such agreements, each Grantor’s rights
under all

 

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licenses and all franchise agreements shall inure to the Collateral Agent’s
benefit for such purpose.

 

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

 

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

 

SECOND, to the Agent for distribution in accordance with the priorities set
forth in Section 2.4(b)(ii) of the Credit Agreement (whether or not an
Application Event has occurred and is continuing).

 

Except as otherwise provided herein, the Collateral Agent shall have absolute
discretion as to the time of application of any such proceeds, moneys or
balances in accordance with this Agreement and the Closing Date Intercreditor
Agreement.  Upon any sale of Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.

 

ARTICLE VI
CONCERNING THE COLLATERAL AGENT

 

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

 

(a)           Whenever in the performance of its duties under this Agreement or
any other Loan Document, the Collateral Agent shall deem it necessary or
desirable that a matter be proved or established with respect to the Grantors or
any other Person in connection with the taking, suffering or omitting of any
action hereunder by the Collateral Agent, such matter may be conclusively deemed
to be proved or established by a certificate executed by an Officer of such
Person, including an Officers’ Certificate or an Opinion of Counsel, and the
Collateral Agent shall have no liability with respect to any action taken,
suffered or omitted in reliance thereon.  The Collateral Agent may at any time
solicit written confirmatory instructions, including a

 

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direction of the Agent, any Grantor or an order of a court of competent
jurisdiction as to any action that it may be requested or required to take or
that it may propose to take in the performance of any of its obligations under
this Agreement or any other Loan Document and shall be fully justified in
failing or refusing to act hereunder or under any Loan Document until it shall
have received such requisite instruction.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)           The Grantors assume all responsibility and liability arising from
or relating to the use, maintenance, storage, sale, collection, foreclosure,
realization on, conveyance or other disposition of or involving the Collateral. 
The Obligations shall not be affected by any failure of any Grantor, the
Collateral Agent or the Agent to take any steps to perfect the Collateral
Agent’s Liens or to collect or realize upon the Collateral, nor shall loss of or
damage to the Collateral release any Grantor from any of the Obligations. 
Following the occurrence and during the continuation of an Event of Default, the
Collateral Agent may (but shall not be required to), and at the direction of the
Agent (acting in accordance with the instructions of the Required Lenders
pursuant to the Credit Agreement) shall, subject to the Closing Date
Intercreditor Agreement and the terms of the Credit Agreement, without notice to
or consent from any Grantor sue upon or otherwise collect, extend the time for
payment of, modify or amend the terms of, compromise or settle for cash, credit,
or otherwise upon any terms, grant other indulgences, extensions, renewals,
compositions, or releases, and take or omit to take any other action with
respect to the Collateral, any security therefor, any agreement relating
thereto, any insurance applicable thereto, or any Person liable directly or
indirectly in connection with any of the foregoing, without discharging or
otherwise affecting the liability of any Grantor for the Obligations or under
the Credit Agreement, any other Loan Document or any other agreement now or
hereafter existing between any Secured Party and any Grantor.

 

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

 

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payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.

 

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

 

Section 7.3            Confidentiality.

 

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

 

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

 

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the disclosure of Confidential Information to the Agent and that no Confidential
Party has any duty, responsibility, liability or obligation to any Person as a
result of any such disclosure.

 

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

 

Section 7.4            Power of Attorney.  Each Grantor, as to itself, hereby
appoints the Collateral Agent and the Collateral Agent’s designee as such
Grantor’s attorney, with power upon the occurrence and during the continuance of
an Event of Default: (a) to endorse such Grantor’s name on any checks, notes,
acceptances, money orders, or other forms of payment or security that come into
the Collateral Agent’s or any Secured Parties’ possession; (b) to sign such
Grantor’s name on any invoice, bill of lading, warehouse receipt, or other
document of title relating to any Collateral, on drafts against customers, on
assignments of Accounts, on notices of assignment, financing statements, and
other public records and to file any such financing statements by electronic
means with or without a signature as authorized or required by applicable law or
filing procedure; (c) to notify the post office authorities to change the
address for delivery of such Grantor’s mail to an address designated by the
Collateral Agent and to receive, open, and dispose of all mail addressed to such
Grantor; (d) to send requests for verification of Accounts to customers or
Account Debtors (subject to the terms of the Closing Date Intercreditor
Agreement); (e) to clear Inventory through customs in such Grantor’s name, the
Collateral Agent’s name, or the name of the Collateral Agent’s designee, and to
sign and deliver to customs officials powers of attorney in such Grantor’s name
for such purpose; and (f) to do all things the Collateral Agent reasonably
determines are necessary to carry out the security interest provisions of the
Credit Agreement and the provisions of this Agreement.  Each Grantor ratifies
and approves all acts of such attorney.  Notwithstanding anything in this
Agreement or any Loan Document to the contrary, none of the Agent, the
Collateral Agent, nor their attorneys, employees or Affiliates will be liable
for any acts or omissions or for any error of judgment or mistake of fact or law
other than any such liability arising from any such Person’s gross negligence or
willful misconduct, as finally determined by a court of competent jurisdiction. 
Notwithstanding the foregoing, any rights and remedies provided in this
Section 7.4 shall be subject to the Closing Date Intercreditor Agreement.

 

Section 7.5            NATURE OF APPOINTMENT; LIMITATION OF DUTY.  THE
APPOINTMENT OF THE COLLATERAL AGENT AS ATTORNEY-IN-FACT IN THIS ARTICLE VII IS
COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THE DATE ON WHICH THIS
AGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 8.13. NOTWITHSTANDING
ANYTHING CONTAINED IN THIS AGREEMENT OR IN ANY LOAN DOCUMENT, NEITHER THE
COLLATERAL AGENT, NOR ANY SECURED PARTY, NOR ANY OF THEIR RESPECTIVE AFFILIATES,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL

 

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HAVE ANY DUTY TO EXERCISE ANY RIGHT OR POWER GRANTED HEREUNDER OR OTHERWISE OR
TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO SO OR FOR ANY
DELAY IN DOING SO, EXCEPT  TO THE EXTENT SUCH DAMAGES ARE ATTRIBUTABLE TO THEIR
OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF
COMPETENT JURISDICTION; PROVIDED THAT, IN NO EVENT SHALL THEY BE LIABLE FOR ANY
PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

 

Section 7.6            Additional Matters Relating to the Collateral Agent.

 

(a)           The Collateral Agent.  Cantor Fitzgerald Securities shall
initially act as Collateral Agent for the Secured Parties.  Cantor Fitzgerald
Securities, as Collateral Agent, is authorized and directed to (i) enter into
the Loan Documents, (ii) enter into the Closing Date Intercreditor Agreements,
(iii) bind the Secured Parties on the terms as set forth in the Loan Documents
and the Closing Date Intercreditor Agreement and (iv) perform and observe its
obligations under the Loan Documents and the Closing Date Intercreditor
Agreement.

 

(b)           Role of the Collateral Agent.  The rights, duties, liabilities and
immunities of the Collateral Agent and its appointment, resignation and
replacement hereunder and under the Credit Agreement and the other Loan
Documents shall be governed by this Agreement, Section 15.11 of the Credit
Agreement and the relevant provisions contained in the other Loan Documents. 
Without limiting the foregoing, the rights, privileges, protections and benefits
given to the Collateral Agent under the Credit Agreement are extended to, and
shall be enforceable by, the Collateral Agent in connection with the execution,
delivery and administration of this Agreement and the other Loan Documents and
any action taken or omitted to be taken by the Collateral Agent in connection
with its appointment and performance under this Agreement and the other Loan
Documents to which it is a party.

 

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

 

(d)           Exculpatory Provisions.

 

(i)            None of the Collateral Agent, the Agent or any of their
respective officers, directors, employees, agents, attorneys-in-fact or Related
Persons shall be responsible or liable in any manner (A) to any Grantor or any
of their respective Related Persons for any action taken or omitted to be taken
by it under or in connection with this Agreement in compliance herewith, (B) to
any Secured Party or any other Person for any recitals, statements,
representations, warranties, covenants or agreements contained in this Agreement
or in any Loan Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the Collateral Agent
under or in connection with, this Agreement or any Loan Document, (C) to any
Secured Party or any other Person for the validity, effectiveness, adequacy,
genuineness or enforceability of

 

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this Agreement or any Loan Document, or any Lien purported to be created
hereunder or under any Loan Document, (D) to any Secured Party or any other
Person for the validity or sufficiency of the Collateral or the validity of the
title of any Grantor to the Collateral, for insuring the Collateral or for the
payment of taxes, charges, assessments or Liens upon the Collateral or otherwise
as to the maintenance of the Collateral or (E) to any Secured Party or other
Person for any failure of any Grantor to perform its obligations hereunder or of
the Borrower to perform any of the Obligations.

 

(ii)           Notwithstanding anything to the contrary contained in this
Agreement, (A) in no event shall the Agent or the Collateral Agent be
responsible for or have any obligation, duty or liability with respect to the
creation, perfection, priority, maintenance, protection or enforcement of any
Lien on, security interest in, pledge or other encumbrance involving or relating
to the Collateral or any other assets, properties or rights of the Grantors,
provided, however that the Collateral Agent acknowledges that with respect to
the enforcement of any Liens, its actions will be subject to the Closing Date
Intercreditor Agreement, (B) none of the Agent or the Collateral Agent shall be
responsible for filing any financing or continuation statements or recording any
documents or instruments in any public office at any time or times or otherwise
perfecting or maintaining the perfection of any Liens in the Collateral and
(C) none of the Agent or the Collateral Agent shall be under any obligation to
any Person to ascertain or to inquire as to the observance or performance of any
of the agreements contained in, or conditions of, this Agreement or to inspect
the properties or records of any Grantor.  The permissive rights of the
Collateral Agent to do things enumerated in this Agreement shall not be
construed as a duty or obligation.  The Collateral Agent may rely conclusively
on any Opinions of Counsel rendered to the Collateral Agent under Section 3.1 of
the Credit Agreement and otherwise under the Credit Agreement in determining any
necessary or desirable actions under this Agreement. Notwithstanding anything to
the contrary herein, the Collateral Agent’s sole duty with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under the UCC or otherwise, shall be to deal with it in the same
manner as the Collateral Agent deals with similar property for its own account
and the Collateral Agent shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which comparable
secured parties accord comparable collateral.  None of the Collateral Agent or
the Agent shall be liable for failure to demand, collect or realize upon any of
the Collateral or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of any Grantor or
any other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof.

 

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

 

(e)           Fees and Expenses.  The Grantors agree that they shall, jointly
and severally, upon demand pay to the Collateral Agent and any Secured Party the
amount of any

 

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and all reasonable and documented out-of-pocket fees, costs and expenses
(including the reasonable and documented out-of-pocket fees and expenses of
their respective counsel, any special consultants reasonably engaged (and,
unless an Event of Default exists, engaged only with the consent of the
Borrower), and any local counsel who might reasonably be retained by the
Collateral Agent or any Secured Party, as the case may be, in connection with
the transactions contemplated hereby) that the Collateral Agent or any Secured
Party, as the case may be, may incur in connection with (i) any Event of
Default, including the sale, lease, license or other disposition of, collection
from, or other realization upon, any of the Collateral pursuant to the exercise
or enforcement of any of their respective rights hereunder, (ii) the exercise of
their respective rights under this Agreement or under any Loan Document,
including the custody, preservation, use or operation of, or the sale of,  any
of the Collateral, (iii) performance by the Collateral Agent of any obligations
of any Grantor that any Grantor has failed or refused to perform with respect to
the Collateral, (iv) bankruptcy, insolvency, receivership, foreclosure, winding
up or liquidation proceedings and defending or asserting rights and claims of
the Collateral Agent in respect thereof, by litigation or otherwise, including
expenses of insurance, or (v) the execution and delivery and administration of
this Agreement, the Closing Date Intercreditor Agreement and the other Loan
Documents and, any agreement supplemental hereto or thereto, and any instruments
of amendment, waiver, further assurance, release or termination, including with
respect to the termination and/or release of any or all of the Liens  in the
Collateral provided for in this Agreement and the other Security Documents.  Any
amounts payable by any Grantor pursuant to this Section 7.6 shall be payable on
demand.

 

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

 

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

 

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

 

Section 7.7            [Reserved].

 

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

 

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ARTICLE VIII
GENERAL PROVISIONS

 

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

 

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

 

Cantor Fitzgerald Securities

900 West Trade Street

Suite 725

Charlotte, NC 28202

Attention: Bobbie Young

 

(b)           if to the Agent, to it at

 

Cantor Fitzgerald Securities

900 West Trade Street

Suite 725

Charlotte, NC 28202

Attention: Bobbie Young

 

(c)           if to Grantors, at

 

Egalet Corporation

600 Lee Road, Suite 100

Wayne, Pennsylvania 19807

Attention:  General Counsel

Facsimile:  (484) 580-6230

 

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

 

Dechert LLP

Cira Centre

2929 Arch Street

Philadelphia, Pennsylvania  19104

Attn:  Sarah B. Gelb

Email: sarah.gelb@dechert.com

 

Any party hereto may change its address or facsimile number for notices and
other communications hereunder by notice to the other parties hereto (and for
this purpose a notice to the Borrower shall be deemed to be a notice to each
Grantor).  All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt if delivered by hand or overnight

 

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courier service or sent by facsimile or on the date five (5) Business Days after
dispatch by certified or registered mail if mailed, in each case delivered, sent
or mailed (properly addressed) to such party as provided in this Section 8.1 or
in accordance with the latest unrevoked direction from such party given in
accordance with this Section 8.1.  Notwithstanding the foregoing, notices to the
Collateral Agent shall only be effective upon actual receipt.

 

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

 

Section 8.3                                    Limitation on Collateral Agent’s
and Secured Party’s Duty with Respect to the Collateral.  The Collateral Agent
shall have no obligation to clean-up or otherwise prepare the Collateral for
sale. The Collateral Agent and each Secured Party shall use reasonable care with
respect to the Collateral in its possession or under its control.  Neither the
Collateral Agent nor any Secured Party shall have any other duty as to any
Collateral in its possession or control or in the possession or control of any
agent or nominee of the Collateral Agent or such Secured Party, or any income
thereon (other than to account for proceeds therefrom) or as to the preservation
of rights against prior parties or any other rights pertaining thereto. To the
extent that applicable law imposes duties on the Collateral Agent to exercise
remedies in a commercially reasonable manner, and to the extent permitted by
applicable law, each Grantor acknowledges and agrees that it would be
commercially reasonable for the Collateral Agent (i) to fail to incur expenses
deemed significant by the Collateral Agent to prepare Collateral for disposition
or otherwise to transform raw material or work in process into finished goods or
other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain governmental or third party consents
for the collection or disposition of Collateral to be collected or disposed of,
(iii) to fail to exercise collection remedies against Account Debtors or other
Persons obligated on Collateral or to remove Liens on or any adverse claims
against Collateral, (iv) to exercise collection remedies against Account Debtors
and other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) to contact other
Persons, whether or not in the same business as the Grantor, for expressions of
interest in acquiring all or any portion of such Collateral, (vii) to hire one
or more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capacity of
doing so, or that match buyers and sellers of assets, (ix) to dispose of assets
in wholesale rather than retail markets, (x) to disclaim disposition warranties,
such as title, possession or quiet enjoyment, (xi) to purchase insurance or
credit enhancements to insure the Collateral Agent against risks of loss,
collection or disposition of Collateral or to provide to the Collateral Agent a
guaranteed return from the collection or disposition of Collateral, or (xii) to
the extent deemed appropriate by the Collateral Agent, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
the Collateral Agent in the collection or disposition of any of the Collateral. 
Each Grantor acknowledges that the purpose of this Section 8.3 is to provide
non-exhaustive indications of what actions or omissions by the Collateral Agent
would be commercially reasonable in the Collateral Agent’s exercise of remedies
against the Collateral and that other actions or omissions

 

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by the Collateral Agent shall not be deemed commercially unreasonable solely on
account of not being indicated in this Section 8.3.  Without limitation upon the
foregoing, nothing contained in this Section 8.3 shall be construed to grant any
rights to any Grantor or to impose any duties on the Collateral Agent that would
not have been granted or imposed by this Agreement or by applicable law in the
absence of this Section 8.3.

 

Section 8.4                                    Compromises and Collection of
Collateral.  Each Grantor and the Collateral Agent recognize that setoffs,
counterclaims, defenses and other claims may be asserted by obligors with
respect to certain of the Accounts, that certain of the Accounts may be or
become uncollectible in whole or in part and that the expense and probability of
success in litigating a disputed Account may exceed the amount that reasonably
may be expected to be recovered with respect to an Account.  In view of the
foregoing, each Grantor agrees that the Collateral Agent may at any time and
from time to time, if an Event of Default has occurred and is continuing
(subject to the terms of the Closing Date Intercreditor Agreement), compromise
with the obligor on any Account, accept in full payment of any Account such
amount as the Collateral Agent in its sole discretion shall determine or abandon
any Account, and any such action by the Collateral Agent shall be commercially
reasonable so long as the Collateral Agent acts in good faith based on
information known to it at the time it takes any such action.

 

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

 

Section 8.6                                    Cumulative Remedies; No Prior
Recourse to Collateral.  The enumeration herein of the Collateral Agent’s and
the Agent’s rights and remedies is not intended to be exclusive, and such rights
and remedies are in addition to and not by way of limitation of any other rights
or remedies that the Collateral Agent and the Agent may have under the UCC,
other applicable law or the Loan Documents.  The Collateral Agent and the Agent
shall have the right, in their sole discretion, to determine which rights and
remedies are to be exercised and in which order.  The exercise of one right or
remedy shall not preclude the exercise of any others, all of which shall be
cumulative.  The Collateral Agent and the Agent may, without limitation, proceed
directly against any Person liable therefor to collect the Obligations without
any prior recourse to the Collateral.  No failure to exercise and no delay in
exercising, on the part of the Collateral Agent or the Agent, any right, remedy,
power, or privilege hereunder, shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power, or privilege.

 

Section 8.7                                    Limitation by Law; Severability
of Provisions.  All rights, remedies and powers provided in this Agreement may
be exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this

 

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Agreement are intended to be subject to all applicable mandatory provisions of
law that may be controlling and to be limited to the extent necessary so that
they shall not render this Agreement invalid, unenforceable or not entitled to
be recorded or registered, in whole or in part.  The illegality or
unenforceability of any provision of this Agreement or any instrument or
agreement required hereunder shall not in any way affect or impair the legality
or enforceability of the remaining provisions of this Agreement or any
instrument or agreement required hereunder.

 

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

 

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

 

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

 

Section 8.11                             Guaranties; Third Party Joinder. 
Promptly upon creation or acquisition of any Subsidiary of a Grantor, such
Grantor shall, to the extent required pursuant to the terms of the Credit
Agreement, cause such new Subsidiary to become a Grantor by executing and
delivering to the Collateral Agent such an instrument in the form of Exhibit H
hereto and

 

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other instruments, certificates, and agreements as the Collateral Agent may
reasonably request.  Upon execution and delivery of such instruments,
certificates, and agreements, such newly created or acquired Subsidiary shall
automatically become a Grantor and thereupon shall have all of the rights,
benefits, duties, and obligations of a Grantor under the Loan Documents.

 

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

 

Section 8.13                             Termination and Release.  This
Agreement and the security interests granted hereby shall terminate in
accordance with the Credit Agreement and the Closing Date Intercreditor
Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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TERMINATION OR EXPIRATION OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.

 

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

 

Section 8.20                             Amendments.  Other than as permitted
pursuant to the Closing Date Intercreditor Agreement or the Credit Agreement,
neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Collateral Agent, the Agent and the Grantor or Grantors with respect to
which such waiver, amendment or modification is to apply, subject to any consent
that may be required in accordance with Section 14.1 of the Credit Agreement.

 

Section 8.21                             Conflicts with Other Agreements.

 

(a)                                 Notwithstanding any other provision
contained herein, this Agreement, the Liens created hereby and the rights,
remedies, duties and obligations provided for herein are subject in all respects
to the provisions of the Closing Date Intercreditor Agreement.  In the event of
any conflict or inconsistency between the provisions of this Agreement and the
Closing Date Intercreditor Agreement, the provisions of the Closing Date
Intercreditor Agreement shall control.

 

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

 

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

 

Section 8.23                             English Language.  This Agreement and
each other Loan Document has been negotiated and executed in English. All
certificates, reports, notices and other documents and communications given or
delivered by any party hereto pursuant to this Agreement or any other Loan
Document shall be in English or, if not in English, accompanied by a certified
English translation thereof. The English version of any such document shall
control the meaning of the matters set forth herein.

 

[Signature page follows]

 

36

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

 

 

 

EGALET CORPORATION

 

 

 

 

 

 

 

 

By:

/s/ Robert S. Radie

 

 

 

Name:

Robert S. Radie

 

 

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

 

EGALET US INC.

 

 

 

 

 

 

 

 

By:

/s/ Robert S. Radie

 

 

 

Name:

Robert S. Radie

 

 

 

Title:

Authorized Officer

 

 

 

 

 

 

 

 

EGALET LIMITED

 

 

 

 

 

 

 

 

By:

/s/ Robert S. Radie

 

 

 

Name:

Robert S. Radie

 

 

 

Title:

Director

 

Signature page to Collateral Agreement

 

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CANTOR FITZGERALD SECURITIES,

 

 

as Agent and Collateral Agent

 

 

 

 

 

 

 

 

 

By:

/s/ James Buccola

 

 

 

Name:

James Buccola

 

 

 

Title:

Head of Fixed Income

 

Signature page to Collateral Agreement

 

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