Exhibit 10.1

 

 

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LOAN AGREEMENT

 

Dated as of September 6, 2013

 

SWK HOLDINGS CORPORATION

 

and

 

SWK FUNDING LLC,

 

as Borrowers,

 

SWK ADVISORS LLC

 

and

 

SWK HP HOLDINGS GP LLC,

 

as Guarantors,

 

and

 

DOUBLE BLACK DIAMOND, L.P.,

 

as Lender

 

 

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TABLE OF CONTENTS

 

ARTICLE I - DEFINITIONS AND REFERENCES 

1  

Section 1.1

 

Terms Defined Above

1

 

Section 1.2

 

Defined Terms

1

 

Section 1.3

 

Exhibits and Schedules; Additional Definitions

18

 

Section 1.4

 

Amendment of Defined Instruments

18

 

Section 1.5

 

References and Titles

18

 

Section 1.6

 

Calculations and Determinations

19

 

Section 1.7

 

Joint Preparation; Construction of Indemnities and Releases

19

 

ARTICLE II - LOANS

19  

Section 2.1

 

Commitment

19

 

Section 2.2

 

Loans; Borrowing Procedures and Limitations

19

 

Section 2.3

 

Use of Proceeds

19

 

Section 2.4

 

Interest Rates and Fees; Payment Dates

20

 

Section 2.5

 

Mandatory Prepayments

20

 

Section 2.6

 

Optional Prepayments

21

 

Section 2.7

 

Increase in Commitment

21

 

ARTICLE III - PAYMENTS TO THE LENDER

22

 

Section 3.1

 

General Procedures

22

 

Section 3.2

 

Reimbursable Taxes

22

 

Section 3.3

 

Status of Lender; FATCA

23

 

ARTICLE IV - CONDITIONS PRECEDENT

24

 

Section 4.1

 

Closing Date Conditions

24

 

Section 4.2

 

Funding Date Conditions

26

 

ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES

26

 

Section 5.1

 

Organization and Good Standing

26

 

Section 5.2

 

Authorization

27

 

Section 5.3

 

No Conflicts or Consents

27

 

Section 5.4

 

Enforceable Obligations

27

 

Section 5.5

 

Initial Financial Statements

27

 

Section 5.6

 

Other Obligations and Restrictions

27

 

Section 5.7

 

Full Disclosure

28

 

Section 5.8

 

Litigation

28

 

Section 5.9

 

ERISA Plans and Liabilities

28

 

Section 5.10

 

Insurance

28

 

Section 5.11

 

Names and Places of Business

29

 

Section 5.12

 

Capital Structure and Subsidiaries

29

 

Section 5.13

 

Government Regulation

30

 

Section 5.14

 

Solvency

30

 

Section 5.15

 

Title to Properties; Licenses

30

 

Section 5.16

 

Regulation T, U or X

30

 

Section 5.17

 

Taxes

30

 

Section 5.18

 

Foreign Corrupt Practices

31

 

Section 5.19

 

OFAC

31

 

Section 5.20

 

Investment Policy

31

 

Section 5.21

 

Warrants

31

 

Section 5.22

 

Eligible Assets

31

 

 

 
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ARTICLE VI - AFFIRMATIVE COVENANTS

32

 

Section 6.1

 

Payment and Performance

32

 

Section 6.2

 

Books, Financial Statements and Reports

32

 

Section 6.3

 

Inspections

33

 

Section 6.4

 

Notice of Material Events and Change of Address

33

 

Section 6.5

 

Maintenance and Administration of Properties

34

 

Section 6.6

 

Maintenance of Existence and Qualifications

35

 

Section 6.7

 

Payment of Trade Liabilities, Taxes, etc

35

 

Section 6.8

 

Insurance

35

 

Section 6.9

 

Performance on a Credit Party’s Behalf

36

 

Section 6.10

 

Interest

36

 

Section 6.11

 

Compliance with Agreements and Law

36

 

Section 6.12

 

Guaranties of Subsidiaries

36

 

Section 6.13

 

Agreement to Deliver Security Documents

36

 

Section 6.14

 

Investment Policy

37

 

ARTICLE VII - NEGATIVE COVENANTS

37

 

Section 7.1

 

Indebtedness

37

 

Section 7.2

 

Limitation on Liens

38

 

Section 7.3

 

Limitation on Mergers, Issuances of Securities

38

 

Section 7.4

 

Limitation on Dispositions of Property

38

 

Section 7.5

 

Limitation on Dividends and Redemptions

38

 

Section 7.6

 

Limitation on Investments and New Businesses

39

 

Section 7.7

 

Transactions with Affiliates

39

 

Section 7.8

 

Prohibited Contracts

39

 

Section 7.9

 

Amendments to Organizational Documents; Other Material Agreements

40

 

Section 7.10

 

Investment Policy

40

 

Section 7.11

 

Underlying Agreements

40

 

ARTICLE VIII - FINANCIAL COVENANTS

40

 

Section 8.1

 

Minimum Asset Coverage Ratio

40

 

Section 8.2

 

Minimum Interest Coverage Ratio

40

 

ARTICLE IX - EVENTS OF DEFAULT AND REMEDIES

41

 

Section 9.1

 

Events of Default

41

 

Section 9.2

 

Remedies

43

 

ARTICLE X - GUARANTY

43

 

Section 10.1

 

Guaranty

43

 

Section 10.2

 

Guaranty of Payment

43

 

Section 10.3

 

No Discharge or Diminishment of Guaranty

43

 

Section 10.4

 

Defenses Waived

44

 

Section 10.5

 

Rights of Subrogation

45

 

Section 10.6

 

Reinstatement; Stay of Acceleration

45

 

Section 10.7

 

Information

45

 

Section 10.8

 

Maximum Liability

45

 

Section 10.9

 

Liability Cumulative

45

 

 

 
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ARTICLE XI - MISCELLANEOUS

46

 

Section 11.1

 

Waivers and Amendments; Acknowledgments

46

 

Section 11.2

 

Survival of Agreements; Cumulative Nature

47

 

Section 11.3

 

Notices

47

 

Section 11.4

 

Payment of Expenses; Indemnity

48

 

Section 11.5

 

Successors and Assigns

50

 

Section 11.6

 

Assignment of Loans and Note; Replacement of Note

50

 

Section 11.7

 

Confidentiality

50

 

Section 11.8

 

Governing Law; Submission to Process

51

 

Section 11.9

 

Limitation on Interest

52

 

Section 11.10

 

Severability

52

 

Section 11.11

 

Counterparts; Fax

52

 

Section 11.12

 

Waiver of Jury Trial, Punitive Damages, etc

52

 

Schedules and Exhibits:

 

Schedule 1

-

Disclosure Schedule

Schedule 2

-

Security Schedule

Schedule 3

-

Insurance Schedule

Schedule 4

-

Asset Schedule

     

Exhibit A

-

Promissory Note

Exhibit B

-

Prepayment Notice

Exhibit C

-

Certificate Accompanying Financial Statements

Exhibit D

-

Registration Rights Agreement

Exhibit E

-

Voting Agreement

Exhibit F

-

Warrant

Exhibit G

-

Investment Policy

 

 

 
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LOAN AGREEMENT

 

THIS LOAN AGREEMENT is made as of September 6, 2013 (the “Closing Date”), by and
among SWK Holdings Corporation, a Delaware corporation (“SWK Holdings”), and SWK
Funding LLC, a Delaware limited liability company (“SWK Funding”), as borrowers
(SWK Holdings and SWK Funding are referred to herein collectively as the
“Borrowers” and each individually, a “Borrower”), SWK HP HOLDINGS GP LLC, a
Delaware limited liability company (“HP Holdings”), and SWK ADVISORS, LLC, a
Delaware limited liability company (“SWK Advisors”), as Guarantors (as
hereinafter defined), and Double Black Diamond, L.P., a Delaware limited
partnership (together with its successors and assigns, the “Lender”).

 

W I T N E S S E T H:

 

In consideration of the mutual covenants and agreements contained herein, the
Loans to be made by the Lender, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

 

ARTICLE I - Definitions and References

 

Section 1.1     Terms Defined Above. As used in this Agreement, each term
defined above has the meaning indicated above.

 

Section 1.2     Defined Terms. As used in this Agreement, each of the following
terms has the meaning given to such term in this Section 1.2 or in the sections
and subsections referred to below:

 

“2012 Annual Report” means the Annual Report of SWK Holdings on SEC Form 10-K
for the Fiscal Year ended December 31, 2013, filed with the SEC on March 27,
2013.

 

“Adjusted Asset Value” means, as of any date, the Asset Value as of such date
minus any portion of such Asset Value attributable to the value of any
individual Eligible Asset’s contribution to Asset Value (other than Pledged
Cash) in excess of the Concentration Limit as of such date for such Eligible
Asset.

 

“Affiliate” means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be “controlled by” any other Person if such other Person possesses,
directly or indirectly, power:

 

(a)     to vote 50% or more of the securities or other equity interests (on a
fully diluted basis) having ordinary voting power for the election of directors,
the managing general partner or partners or the managing member or members; or

 

(b)     to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise;  

 

 
 

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 provided, that, for purposes of this Agreement and the other Loan Documents,
the Borrowers and their Subsidiaries shall not be deemed Affiliates of the
Lender or vice versa.

 

“Agreement” means this Loan Agreement.

 

“Anticipated Cash Flow” means, as of the end of any Fiscal Quarter, the sum of
(a) 90% of all mandatory fixed minimum cash payments, including scheduled
interest payments and mandatory amortization payments, in respect of Eligible
Assets or other Permitted Investments of the Credit Parties falling due for
payment irrespective of the occurrence of any event or the achievement or any
threshold, and (b) 60% of all other cash payments in respect of Eligible Assets
(including variable royalty payments, revenue sharing and revenue based
amortization), in each case reasonably expected by the Borrowers to be received
by the Credit Parties during the next four succeeding Fiscal Quarters.

 

“Approved Fund” means any Person (other than a natural Person) that is engaged
in making, purchasing, holding or investing in loans and similar extensions of
credit and that is administered or managed by (a) the Lender, (b) an Affiliate
of the Lender or (c) an entity or an Affiliate of an entity that administers or
manages the Lender.

 

“Asset Coverage Ratio” means, as of any date, the ratio of Adjusted Asset Value
to Total Funded Debt.

 

“Asset File” means, with respect to each Permitted Investment all files, books,
records, reports, data and other information, including each Underlying
Agreement and any notices and other correspondence, received or generated by the
Credit Parties in connection with, and which are material to, the administration
and management of Permitted Investments.

 

“Asset Value” means, as of any date, the sum of the following:

 

(a)     an amount equal to 100% of any Pledged Cash or Permitted Investment
Securities; plus

 

(b)     an amount equal to 90% of the outstanding principal balance of each
Eligible Performing Loan as of the date of determination; plus

 

(c)     an amount equal to 60% of the Net Present Value of each Eligible
Non-Loan Asset; plus

 

(d)     an amount to be agreed, from time to time, between the Borrowers and the
Lender, with respect to any other Property of the Borrowers, which shall be
subject to eligibility criteria and valuation procedures acceptable to the
Lender in its sole discretion.

 

provided, however, that for purposes of calculating Asset Value, any Loan Asset
that is a Non-Performing Loan or any Non-Loan Asset that is not an Eligible
Non-Loan Asset shall not be assigned any value unless otherwise agreed between
the Borrowers and the Lender.

 

“Available Amount” means, at any time, the difference of (a) the Commitment,
minus (b) the aggregate amount of all Loans made pursuant to this Agreement
prior to such time.

 

 
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“Bankruptcy Code” means the United States Bankruptcy Reform Act of 1978 (11
U.S.C. § 101, et seq.).

 

“Borrower Confidential Information” has the meaning given to such term in
Section 11.7(a).

 

 

“Business Day” means a day, other than a Saturday or Sunday, on which commercial
banks are open for business with the public in Dallas, Texas.

 

“Capital Lease” means a lease with respect to which the lessee is required
concurrently to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP.

 

“Capital Lease Obligation” means, with respect to any Person and a Capital
Lease, the amount of the obligation of such Person as the lessee under such
Capital Lease which should, in accordance with GAAP, appear as a liability on
the balance sheet of such Person.

 

“Carlson” means Carlson Capital L.P., a Delaware limited partnership, and its
Affiliates.

 

“Cash Equivalents” means Investments in:

 

(a)     marketable obligations, maturing within twelve months after acquisition
thereof, issued or unconditionally guaranteed by the United States of America or
an instrumentality or agency thereof and entitled to the full faith and credit
of the United States of America;

 

(b)     demand deposits, and time deposits (including certificates of deposit)
maturing within twelve months from the date of deposit thereof, with a domestic
office of any national or state bank or trust company which is organized under
the Laws of the United States of America or any state therein, which has
capital, surplus and undivided profits of at least $500,000,000, and whose long
term certificates of deposit are rated at least Aa3 by Moody’s or AA- by S & P;

 

(c)     open market commercial paper, maturing within 270 days after acquisition
thereof, which are rated at least P-1 by Moody’s or A-1 by S & P; and

 

(d)     money market or other mutual funds substantially all of whose assets
comprise securities of the types described in subsections (a) through (d) above.

 

“Change of Control” means the occurrence of any of the following events:

 

(a)     at any time after the Closing Date, the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
SEC thereunder as in effect on the date hereof), other than any such acquisition
resulting from a change in Carlson’s ownership of Equity Interests in SWK
Holdings, of Equity Interests representing more than fifty percent (50%) of the
aggregate ordinary voting power represented by the issued and outstanding Equity
Interests of SWK Holdings; or

 

 
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(b)     SWK Holdings shall cease to own and control, directly or indirectly,
100% of the voting and economic interest in the Equity Interests in each other
Credit Party other than in connection with a Disposition of such Equity
Interests permitted hereunder or to which the Lender consents.

 

“Closing Date” has the meaning set forth in the introductory paragraph of this
Agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute.

 

“Collateral” means all property of any kind which is subject to a Lien in favor
of the Lender or which, under the terms of any Security Document, is purported
to be subject to such a Lien.

 

“Commitment” means an amount initially equal to $15,000,000, as such amount may
be increased from time to time pursuant to Section 2.7.

 

“Concentration Limit” means, at any time with respect to each Eligible Asset
other than Pledged Cash, an amount equal to the lesser of (a) $10,000,000 and
(b) an amount equal to 17.5% of the aggregate Asset Value of all Eligible Assets
at such time.

 

“Consolidated” refers to the consolidation of any Person, in accordance with
GAAP, with its properly consolidated subsidiaries. References herein to a
Person’s Consolidated financial statements, financial position, financial
condition or liabilities refer to the consolidated financial statements,
financial position, financial condition or liabilities of such Person and its
properly consolidated subsidiaries.

 

“Consolidated Interest Expense” means, as of the end of any Fiscal Quarter, for
the Credit Parties on a Consolidated basis, an amount equal to, without
duplication, all interest, premium payments, debt discount, fees, charges and
related expenses of the Credit Parties in connection with borrowed money
(including capitalized interest) or in connection with the deferred purchase
price of assets, in each case to the extent treated as interest in accordance
with GAAP and reasonably expected to fall due for payment during the next four
succeeding Fiscal Quarters; provided, that, solely for the purpose of this
definition, interest on any Loans for the applicable period shall be calculated
(a) using the LIBOR Rate then in effect as of the end of such Fiscal Quarter,
and (b) assuming the outstanding principal balance of any Loans then outstanding
have been reduced by an amount equal to 90% of any unrestricted cash then
available to the Borrowers to voluntarily prepay such Loans.

 

“Control Agreement” means any deposit account, securities account or blocked
account control agreement, as applicable, to be executed and delivered by and
among the Lender, the Credit Parties required by the Lender, and the applicable
financial institution, that is approved by the Lender, for purposes of
evidencing control by the Lender in one or more deposit accounts or securities
accounts maintained by the applicable Credit Parties with any such specified
financial institution, for purposes of perfection of the Lender’s Lien in such
accounts.

 

 
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“Controlled Account” means a deposit account or a securities account of any
Credit Party that, in each case, is subject to a Control Agreement.

 

“Credit Party” and “Credit Parties” mean, individually or collectively as the
context requires, the Borrowers and the Guarantors.

 

“Default” means any Event of Default and any default, event or condition that
would, with the giving of any requisite notices, the passage of any requisite
periods of time, or both, constitute an Event of Default.

 

“Default Rate” means the rate per annum equal to 2.00% above the Floating Rate,
provided that no Default Rate charged by the Lender shall ever exceed the
Highest Lawful Rate.

 

“Disclosure Schedule” means Schedule 1 hereto.

 

“Disposition” means the sale, transfer, discounted pay-off or other disposition
(including pursuant to a merger resulting in the subject Property no longer
being owned by a Credit Party or a Subsidiary thereof) of any Property.

 

“Distribution” means (a) any dividend or other distribution made by a Credit
Party on or in respect of any Equity Interest in such Credit Party or any other
Credit Party, or (b) any payment made by a Credit Party to purchase, redeem,
acquire or retire any Equity Interest in such Credit Party or any other Credit
Party.

 

“Draw Period” means the period beginning on the Closing Date and ending on the
date that is eighteen-months after the Closing Date.

 

“Eligible Asset” means any Pledged Cash, Permitted Investment Securities,
Eligible Performing Loans, Eligible Non-Loan Assets, and any Property of a
Credit Party that is assigned a positive value for purposes of calculating Asset
Value pursuant to clause (d) of the definition thereof.

 

“Eligible Non-Loan Asset” means, as of any date, any Non-Loan Asset with respect
to which each of the following conditions is satisfied:

 

(a)     the representations and warranties contained in Section 5.22 hereof are
true in all material respects (provided that such materiality qualifier shall
not apply to the extent a specific representation or warranty contains a
materiality qualifier) as of such date (except in the case of representations
and warranties that are made solely as of a specific date, which representations
and warranties shall be true and correct in all material respects as of such
date) with respect to such Non-Loan Asset;

 

(b)     the Lender has a valid and perfected first priority Lien (subject only
to Permitted Liens) in such Non-Loan Asset;

 

(c)     such Non-Loan Asset was acquired and is maintained in accordance with
the Investment Policy;

 

 
5

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(d)     no material breach or default exists beyond any applicable grace or cure
period under any Underlying Agreement relating to such Non-Loan Asset;

 

(e)     no Obligor relating to such Non-Loan Asset has repudiated any material
obligation, including any payment obligation, with respect thereto;

 

(f)     no right of set-off, or other defense to payment, has been asserted or
exercised by an Obligor with respect thereto, other than the netting of any
fees, costs, expenses or other items by such Obligor in accordance with, and in
the normal course of administration of, the Underlying Agreements and/or such
Non-Loan Asset;

 

(g)     each material Underlying Agreement with respect to such Non-Loan Asset
constitutes the valid, binding obligation, and is enforceable against each
applicable Obligor (as such enforcement may be limited by bankruptcy, insolvency
or similar Laws of general application relating to the enforcement of creditors’
rights); and

 

(h)     to the extent the obligations of an Obligor with respect to such
Non-Loan Asset are required to be secured in favor of any of the Borrowers or
any other Credit Party pursuant to the terms of the Underlying Agreements
related to such Non-Loan Asset, such Liens have been validly granted and
perfected in accordance with the terms of the applicable Underlying Agreements
and the representations and warranties in the applicable Underlying Agreements
with respect to the collateral encumbered thereby are true and correct in all
material respects (except in the case of representations and warranties that are
made solely as of a specific date, which representations and warranties shall be
true and correct in all material respects as of such date).

 

“Eligible Performing Loan” means, as of any date, any Performing Loan with
respect to which each of the following conditions is satisfied:

 

(a)     the representations and warranties contained in Section 5.22 hereof are
true in all material respects (provided that such materiality qualifier shall
not apply to the extent a specific representation or warranty contains a
materiality qualifier) as of such date (except in the case of representations
and warranties that are made solely as of a specific date, which representations
and warranties shall be true and correct in all material respects as of such
date) with respect to such Performing Loan;

 

(b)     the Lender has a valid and perfected first priority Lien (subject only
to Permitted Liens) in such Performing Loan; and

 

(c)     such Performing Loan was made in accordance with the Investment Policy;

 

(d)     each material Underlying Agreement with respect to such Performing Loan
constitutes the valid, binding obligation, and is enforceable against each
applicable Obligor (as such enforcement may be limited by bankruptcy, insolvency
or similar Laws of general application relating to the enforcement of creditors’
rights); and

 

(e)     to the extent the obligations of an Obligor with respect to such
Performing Loan are required to be secured in favor of any of the Borrowers or
any other Credit Party pursuant to the terms of the Underlying Agreements
related to such Performing Loan, such Liens have been validly granted and
perfected in accordance with the terms of the applicable Underlying Agreements
and the representations and warranties in the applicable Underlying Agreements
with respect to the collateral encumbered thereby are true and correct in all
material respects (except in the case of representations and warranties that are
made solely as of a specific date, which representations and warranties shall be
true and correct in all material respects as of such date).

 

 
6

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“Equity Documents” means the Warrant Agreement, the Voting Agreement, the
Registration Rights Agreement, and all other agreements, certificates, documents
and instruments delivered pursuant to such documents.

 

“Equity Interest” in a Person means any share of capital stock issued by such
Person, any partnership, profits, capital, membership or other equity interest
in such Person, any option, warrant or any other right to acquire any share of
capital stock or any partnership, profits, capital, membership or other equity
interest in such Person, and any other voting security issued by such Person.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any successor statutes or statute, together with all
rules and regulations promulgated with respect thereto.

 

“ERISA Affiliate” means each Credit Party and all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated) under
common control that, together with such Credit Party, are treated as a single
employer under Section 414 of the Internal Revenue Code.

 

“ERISA Plan” means any employee pension benefit plan subject to Title IV of
ERISA maintained by any ERISA Affiliate with respect to which any Credit Party
has a fixed or contingent liability.

 

“Event of Default” has the meaning given to such term in Section 9.1.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof and any agreements entered into
pursuant to Section 1471(b)(1) of the Code.

 

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

 

“Fiscal Quarter” means a three-month period ending on March 31, June 30,
September 30 or December 31 of any year.

 

“Fiscal Year” means a twelve-month period ending on December 31 of any year.

 

“Floating Rate” means, for any date of determination, a per annum rate equal to
the sum of (a) the LIBOR Rate, plus (b) 6.50% per annum.

 

 
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“Funding Date” is any Business Day during the Draw Period on which a Loan is
requested to be made to or for the account of the Borrowers.

 

“GAAP” means those generally accepted accounting principles and practices that
are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and that, in the case of the Credit Parties, are
applied for all periods after the date hereof in a manner consistent with the
manner in which such principles and practices were applied to the Initial
Financial Statements. If any change in any accounting principle or practice is
required by the Financial Accounting Standards Board (or any such successor) in
order for such principle or practice to continue as a generally accepted
accounting principle or practice, all reports and financial statements required
hereunder with respect to any Credit Party may be prepared in accordance with
such change, but all calculations and determinations to be made hereunder may be
made in accordance with such change only after notice of such change is given to
the Lender, and only to the extent the Borrowers and the Lender agree to such
change insofar as it affects such calculations and determinations in any
material respect.

 

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

 

“Guaranteed Obligations” has the meaning given to such term in Section 10.1.

 

“Guarantor” and “Guarantors” mean, individually or collectively as the context
requires, the Borrowers, SWK Advisors, HP Holdings, and any other Subsidiary of
the Borrowers that now or hereafter executes and delivers a guaranty to the
Lender as required herein.

 

“Highest Lawful Rate” means the maximum nonusurious rate of interest that the
Lender is permitted under applicable Law to contract for, take, charge, or
receive with respect to any Obligations.

 

“HP Holdings” has the meaning given such term in the introductory paragraph of
this Agreement.

 

“Indebtedness” of any Person means Liabilities in any of the following
categories:

 

(a)     Liabilities for borrowed money;

 

(b)     Liabilities constituting an obligation to pay the deferred purchase
price of property or services;

 

(c)     Liabilities evidenced by a bond, debenture, note or similar instrument;

 

(d)     Liabilities that (i) would under GAAP be shown on such Person’s balance
sheet as a liability, and (ii) are payable more than one year from the date of
creation or incurrence thereof (other than reserves for taxes and reserves for
contingent obligations);

 

 
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(e)     Capital Lease Obligations;

 

(f)     Liabilities arising under conditional sales or other title retention
agreements;

 

(g)     Liabilities owing under direct or indirect guaranties of Liabilities of
any other Person or otherwise constituting obligations to purchase or acquire or
to otherwise protect or insure a creditor against loss in respect of Liabilities
of any other Person (such as obligations under working capital maintenance
agreements, agreements to keep-well, or agreements to purchase Liabilities,
assets, goods, securities or services), but excluding endorsements in the
ordinary course of business of negotiable instruments in the course of
collection;

 

(h)     Liabilities (for example, repurchase agreements, mandatorily redeemable
preferred stock and sale/leaseback agreements) consisting of an obligation to
purchase or redeem securities or other property, if such Liabilities arise out
of or in connection with the sale or issuance of the same or similar securities
or property;

 

(i)     Liabilities with respect to letters of credit or applications or
reimbursement agreements therefor;

 

(j)     Liabilities with respect to banker’s acceptances;

 

(k)     Liabilities under any ERISA Plan;

 

(l)     Liabilities with respect to other obligations to deliver goods or
services in consideration of advance payments therefor;

 

(m)     Unfunded commitments and/or future funding commitments of a Credit Party
with respect to (i) an Eligible Asset or (ii) any other Investment not
constituting an Eligible Asset; or

 

(n)     Liabilities consisting of Royalty Payments;

 

provided, however, that the “Indebtedness” of any Person shall not include
Liabilities that were incurred by such Person in the ordinary course of business
and on ordinary trade terms to vendors, suppliers, or other Persons providing
goods and services for use by such Person in the ordinary course of its
business, unless and until such Liabilities (i) are outstanding more than sixty
(60) days past the due date therefor or (ii) exceed $250,000 in the aggregate,
but then only to the extent of such excess.

 

“Indemnified Party” has the meaning given to such term in Section 11.4(b).

 

“Initial Financial Statements” means, with respect to SWK Holdings and its
Consolidated Subsidiaries, (a) the audited consolidated balance sheet as of
December 31, 2012 and the audited consolidated statements of income and cash
flows for the twelve-month period ended December 31, 2012, and (b) the unaudited
consolidated balance sheet as of June 30, 2013 and the unaudited consolidated
statements of income and cash flows for the six-month period ended June 30,
2012, in each case together with the related notes and schedules thereto, if
any.

 

 
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“Insolvency Event” means, with respect to any Person (a) the filing of a decree
or order for relief by a court having jurisdiction over such Person or any
substantial part of its property in an involuntary case under any applicable
Insolvency Law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, or similar official for such Person or for any
substantial part of its property, or ordering the winding up or liquidation of
such Person’s affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days, (b) the commencement by such Person
of a voluntary case under any applicable Insolvency Law now or hereafter in
effect, or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, (c) the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, or similar official for such Person or for any substantial
part of its property, or the making by such Person of any general assignment for
the benefit of creditors, or (d) the failure by such Person generally to pay its
debts as such debts become due, or the taking of action by such Person in
furtherance of any of the foregoing.

 

“Insolvency Laws” means the Bankruptcy Code and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, suspension of contractual obligations, reorganization,
or similar debtor relief laws from time to time in effect affecting the rights
of creditors generally.

 

“Insurance Schedule” means Schedule 3 attached hereto.

 

“Interest Coverage Ratio” means, as of any date of determination, the ratio of
Anticipated Cash Flow to Consolidated Interest Expense for the four succeeding
Fiscal Quarters following such date of determination.

 

“Internal Revenue Code” means the United States Internal Revenue Code of 1986,
as amended from time to time and any successor statute or statutes, together
with all rules and regulations promulgated with respect thereto.

 

“Investment” means any investment, made directly or indirectly, in any Person or
asset, whether constituting Loan Assets or Non-Loan Assets and whether made (i)
by purchase or acquisition of Equity Interests, Indebtedness or other
obligations or securities, (ii) by purchase or acquisition of payment
intangibles, contracts or contract rights, accounts payable, rights to receive
royalty, milestone or other similar payments in relation to the development,
marketing, promotion and/or sale of one or more products, (iii) by purchase or
acquisition of intellectual property and any other tangible or intangible
personal property, or (iv) by extension of credit, loan, advance, capital
contribution, purchase consideration or otherwise, in each case whether made in
cash, by the transfer of property, or by any other means.

 

“Investment Policy” means SWK Holdings’ investment objectives, policies,
restrictions, and limitations as described on Exhibit G hereto, as the same may
be amended, restated, supplemented, or otherwise modified from time to time by a
Permitted Investment Policy Amendment.

 

“Law” means any statute, law, regulation, ordinance, rule, treaty, judgment,
order, decree, permit, concession, franchise, license, agreement or other
governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof. Any reference to a Law includes any
amendment or modification to such Law, and all regulations, rulings, and other
Laws promulgated under such Law.

 

 
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“Liabilities” means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered liabilities pursuant to
GAAP.

 

“LIBOR Rate” means, for any Fiscal Quarter, a per annum rate equal to the rate
appearing on Reuters Screen LIBOR01 Page (or, if no such page exists, on any
successor or substitute page providing rate quotations comparable to those
currently provided on such page of the Reuters Service, as determined by the
Lender from time to time for purposes of providing quotations of interest rates
applicable to dollar deposits in the London interbank market) at which dollar
deposits in amounts approximately equal to the aggregate outstanding principal
amount of the Loans for a term of three months are offered in the London
interbank market at approximately 11:00 a.m., London time, 2 Business Days prior
to the first day of such Fiscal Quarter; provided that for the Fiscal Quarter
ending September 30, 2013, “LIBOR Rate” means such rate determined as of 11:00
a.m., London time, on the Closing Date.

 

“Lien” means, with respect to any property or assets, any right or interest
therein of a creditor to secure Liabilities owed to it or any other arrangement
with such creditor which provides for the payment of such Liabilities out of
such property or assets or which allows such creditor to have such Liabilities
satisfied out of such property or assets prior to the general creditors of any
owner thereof, including any lien, mortgage, security interest, pledge, deposit,
production payment, rights of a vendor under any title retention or conditional
sale agreement or lease substantially equivalent thereto, tax lien, mechanic’s
or materialman’s lien, or any other charge or encumbrance for security purposes,
whether arising by Law or agreement or otherwise, but excluding any right of
offset which arises without agreement in the ordinary course of business.

 

“Liquidity” means, with respect to the Credit Parties as of any date of
determination, an amount equal to the sum of (a) the aggregate amount of all
Pledged Cash, plus (b) the aggregate amount of all Permitted Investment
Securities, plus (c) the Available Amount.

 

“Loan” and “Loans” mean, individually or collectively as the context requires,
each loan made pursuant to Section 2.1.

 

“Loan Asset” means any loan, advance or other extension of credit (including any
commitment to provide such loan, advance or extension of credit) provided by a
Credit Party that is a debt obligation with a stated principal or notional
balance and accrues interest payable or compounded at periodic intervals.

 

“Loan Documents” means this Agreement, any Note, the Security Documents, and all
other agreements, certificates, documents and instruments at any time executed
by any Credit Party for the benefit of the Lender.

 

 
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“Material Adverse Change” means any circumstance or event that, individually or
collectively with other circumstances or events, could reasonably be expected to
result in a material and adverse change, from the state of affairs existing on
the Closing Date or from the state of affairs represented or warranted in any
Loan Document, with respect to (a) the Credit Parties’ financial condition
(taken as a whole), (b) the Credit Parties’ business, income, assets, operations
or properties (taken as a whole), (c) the Credit Parties’ ability to perform
their obligations under this Agreement or any other Transaction Document, (d)
the ability of the Lender to practically realize the benefits of any of their
rights and remedies under the Transaction Documents, or (e) the enforceability
of the material terms of any Transaction Document.

 

“Material Investment” means, as of any date, any Permitted Investment that
either (a) represents more than 5% of Asset Value as of such date or (b)
generates more than 5% of Anticipated Cash Flow over the four Fiscal Quarters
commencing as of the first date of the current Fiscal Quarter.

 

“Maturity Date” means the four year anniversary of the Closing Date.

 

“Maximum Liability” has the meaning given to such term in Section 10.8.

 

“Moody’s” means Moody’s Investors Service, Inc., or its successor.

 

“Mortgage” means each deed of trust or mortgage from time to time given by any
Credit Party to secure any of the Obligations, as each may be amended,
supplemented or otherwise modified from time to time.

 

“Net Present Value” means, as of any date of determination with respect to any
Eligible Asset that is a Non-Loan Asset, the net present value of such Eligible
Asset as reasonably determined by the Lender using a valuation methodology,
consistently applied, for assets of the type and income characteristics of such
Eligible Asset in light of prevailing market conditions and customary business
practice; provided that (a) the “Net Present Value” of any Eligible Asset shall
only be determined or re-determined, as applicable, on (i) the day on which such
Eligible Asset is initially added (or subsequently added after not constituting
an Eligible Asset for any period of time) in the calculation of Asset Value,
(ii) the last day of each Fiscal Quarter, (iii) each Funding Date, and (iv) any
date on which any material breach or default has occurred and continued beyond
any applicable grace or cure period under any Underlying Agreement related to
such Eligible Asset, and (b) any determination or re-determination of “Net
Present Value” with respect to any Eligible Asset that is a Non-Loan Asset shall
be effective upon the Lender notifying the Borrowers in writing of such
determination or re-determination, as applicable.

 

“Net Proceeds” means, with respect to any event, (a) the cash proceeds received
in respect of such event including (i) any cash received in respect of any
non-cash proceeds (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or purchase
price adjustment receivable or otherwise, but excluding any interest payments),
but only as and when received, (ii) in the case of a casualty, insurance
proceeds and (iii) in the case of a condemnation or similar event, condemnation
awards and similar payments, net of (b) the sum of (i) all reasonable fees and
out-of-pocket expenses paid to third parties (other than Affiliates) in
connection with such event, (ii) in the case of a Disposition of any Property
(including pursuant to a sale and leaseback transaction or a casualty or a
condemnation or similar proceeding), the amount of all payments required to be
made as a result of such event to repay Indebtedness (other than Loans) secured
by such asset or otherwise subject to mandatory prepayment as a result of such
event and (iii) the amount of all taxes paid (or reasonably estimated to be
payable) and the amount of any reserves established to fund contingent
liabilities reasonably estimated to be payable, in each case during the year
that such event occurred or the next succeeding year and that are directly
attributable to such event (as determined reasonably and in good faith by an
officer of the Borrowers).

 

 
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“Non-Loan Asset” means an Investment by a Credit Party (other than a Loan Asset)
that, pursuant to the terms of such Investment’s Underlying Agreements, requires
that mandatory cash payments be made from time to time to a Credit Party (a) on
a scheduled or periodic basis and/or (b) or upon the occurrence, or achievement
of, designated events or thresholds; for the avoidance of doubt, Capital Leases
shall be treated as Non-Loan Assets.

 

“Non-Performing Loan” means any Loan Asset with respect to which (a) a payment
default has occurred, (b) any event of default has occurred and has not been (i)
waived by the relevant Credit Party and (ii) approved by the Lender in its sole
discretion, (c) any restructuring or modification of such Loan Asset has
occurred resulting in materially weaker credit characteristics than such Loan
Asset immediately prior to such restructuring or modification, or (d) an
Insolvency Event has occurred with respect to any related Obligor. As of the
Closing Date the Loan Assets constituting Non-Performing Loans are set forth on
Schedule 4.

 

“Note” means a promissory note in the form of Exhibit A that is delivered to the
Lender by the Borrowers, as amended, restated, replaced, supplemented or
otherwise modified from time to time in accordance the terms of this Agreement.

 

“Obligated Party” has the meaning given to such term in Section 10.2.

 

“Obligations” means all Liabilities from time to time owing by any Credit Party
to the Lender under or pursuant to any of the Loan Documents. “Obligation” means
any portion of the Obligations.

 

“Obligor” means, with respect to any Permitted Investment, any Person or Persons
obligated to make payments pursuant to, or with respect to, such Permitted
Investment, including any guarantor thereof or Person granting any security
securing any portion thereof.

 

“OFAC” means the Office of Foreign Assets Control of the United States
Department of the Treasury.

 

“Organizational Documents” means, with respect to any entity, such entity’s
certificate or articles of incorporation, articles of organization, bylaws,
regulations, operating agreement, partnership agreement, or other organizational
documents.

 

“Performance Standard” means a standard of reasonable care, using a degree of
skill and attention customarily used by prudent institutional owners of,
sophisticated investors in, or prudent managers of investments similar to the
Permitted Investments.

 

 
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“Performing Loan” means any Loan Asset that is not a Non-Performing Loan.

 

“Permitted Investments” means:

 

(a)     Cash Equivalents;

 

(b)     Investments existing on the Closing Date as set forth in Section 1.1(a)
of the Disclosure Schedule; and

 

(c)     Investments consistent with SWK Holdings’ Investment Policy.

 

“Permitted Investment Policy Amendment” means any amendment, modification,
termination or restatement of the Investment Policy that is either (a) approved
in writing by the Lender, which approval shall not be unreasonably withheld,
conditioned or delayed, or (b) required by applicable Law or Governmental
Authority.

 

“Permitted Investment Securities” means, on any date, any Cash Equivalents to
the extent pledged as additional Collateral pursuant to the Security Documents
and on deposit in a Controlled Account.

 

“Permitted Liens” means:

 

(a)     statutory Liens for taxes, assessments or other governmental charges or
levies that are not yet delinquent or that are being diligently contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP;

 

(b)     landlords’, carriers’, warehousemen’s, repairmen’s, mechanics’,
materialmen’s, or other like Liens and contractual Liens, in each case only to
the extent arising in the ordinary course of business and only to the extent
securing obligations which are not delinquent or which are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
maintained in accordance with GAAP;

 

(c)     minor defects and irregularities in title to any property, so long as
such defects and irregularities neither secure Indebtedness nor materially
impair the value of such property or the use of such property for the purposes
for which such property is held;

 

(d)     deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of business;

 

(e)     pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations;

 

(f)     judgment liens in respect of judgments that do not constitute an Event
of Default;

 

(g)     Liens arising from UCC financing statement filings regarding operating
leases entered into by any Credit Party in the ordinary course of business
covering the property under the lease;

 

 
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(h)     Liens existing on any asset of any Person at the time such asset is
acquired or at the time such Person becomes a Subsidiary of a Borrower, or is
merged or consolidated with or into a Borrower or another Credit Party;
provided, that (i) such Liens shall not have been created in contemplation of
such event, (ii) such Liens do not at any time encumber any Property other than
such asset and (iii) such Liens only secure Indebtedness of such Person
permitted under Section 7.1(f);

 

(i)     Liens burdening only deposit accounts, securities accounts or other
funds maintained with a financial institution in favor of such depository or
securities intermediary that arise solely by virtue of any statutory or common
law provisions relating to bankers’ liens, rights of set-off or similar rights
and remedies as to such deposit accounts, securities accounts or funds or under
any deposit account agreement or securities account agreement entered into in
the ordinary course of business; provided that (i) no such deposit account or
securities account is a dedicated cash collateral account or is subject to
restrictions against access by the Credit Party, and (ii) no such deposit
account or securities account is intended by the Credit Party to provide cash
collateral to the applicable financial institution;

 

(j)     easements (including easements for pipelines, alleys, telephone lines,
power lines and railways), rights-of-way, restrictions (including zoning
restrictions), covenants, terms, conditions, exceptions, servitudes, permits,
licenses, surface leases and other similar rights in respect of encroachments,
protrusions and other similar encumbrances and minor title deficiencies on or
with respect to any real property that (i) in the aggregate, are not substantial
in amount, and (ii) do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of the Credit Parties;

 

(k)     Liens existing on the date hereof and set forth in Section 1.1(b) of the
Disclosure Schedule;

 

(l)     Liens permitted under any Underlying Agreement; and

 

(m)     Liens under the Security Documents.

 

“Person” means an individual natural person, corporation, general partnership,
limited partnership, limited liability company, association, joint stock
company, trust or trustee thereof, estate or executor thereof, Governmental
Authority, or any other legally recognizable entity.

 

“Pledged Cash” means, on any date, the aggregate amount of cash in dollars on
deposit in a Controlled Account on such date.

 

“Prepayment Premium” means, with respect to any prepayment (other than a
prepayment made with the proceeds of an offering of Equity Interests of SWK
Holdings that is consummated in accordance with the terms and conditions of the
Equity Documents), an amount equal to the product of (a) 1%, multiplied by (b)
the amount of the principal prepayment to be made to the Lender.

 

“Pro Forma Compliance” means, as of any date of determination for purposes of
calculating compliance with the covenants contained in Article VIII on a pro
forma basis, calculating (a) Asset Value and Anticipated Cash Flow as if (i) in
the case of the funding of a new Loan, the Eligible Asset to be financed with
such Loan has been made or acquired by a Credit Party, (ii) in the case of a
Disposition or discounting of an Eligible Asset, the Disposition or discount has
occurred, and (iii) the four Fiscal Quarter calculation period commenced as of
the first day of the current Fiscal Quarter in which the Loan funding,
Disposition or discounting occurs, (b) Consolidated Interest Expense and Total
Funded Debt as if (i) in the case of the funding of a new Loan or incurring
other Indebtedness permitted hereunder, the Loan or other Indebtedness has been
funded or incurred, (ii) in the case of a Disposition or discounting of an
Eligible Asset, the Loans have been repaid by the amount the Borrowers have
elected or are required to repay in connection with such Disposition or
discounting, and (iii) the four Fiscal Quarter calculation period commenced as
of first day of the current Fiscal Quarter in which the Loan funding,
Disposition or discounting occurs, and (c) Liquidity, in the case of making a
Permitted Investment, as if any unfunded commitment or future commitment to be
incurred by a Credit Party in connection with such Permitted Investment, has
been incurred and any Loan financing such Permitted Investment has been funded.

 

 
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“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, tangible or intangible.

 

“Registration Rights Agreement” means a registration rights agreement entered
between SWK Holdings and the Lender, in the form attached hereto as Exhibit E.

 

“Regulation D” means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect.

 

“Reimbursable Taxes” has the meaning given such term in Section 3.2(a).

 

“Royalty Payments” means any royalty payments, licensing, marketing or similar
fees or compensation payable in cash by a Credit Party to an Obligor or other
Person in connection with a Permitted Investment.

 

“S & P” means Standard & Poor’s Ratings Services (a division of The McGraw Hill
Companies), or its successor.

 

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

 

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

 

“Security Documents” means the instruments listed in the Security Schedule and
all other security agreements, deeds of trust, Mortgages, chattel mortgages,
pledges, guaranties, financing statements, continuation statements, extension
agreements and other agreements or instruments now, heretofore, or hereafter
delivered by any Credit Party to the Lender in connection with this Agreement or
any transaction contemplated hereby to secure or guarantee the payment of any
part of the Obligations or the performance of any Credit Party’s other duties
and obligations under the Loan Documents.

 

“Security Schedule” means Schedule 2 hereto.

 

 
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“Solvent” means, with respect to any Person, (a) the aggregate fair saleable
value of such Person’s assets exceeds such Person’s liabilities, (b) such Person
has sufficient cash flow to enable it to pay its debts as they mature, and (c)
such Person does not have unreasonably low capital to conduct its business.

 

“Subsidiary” means, with respect to any Person, any corporation, association,
partnership, limited liability company, joint venture, or other business or
corporate entity, enterprise or organization which is directly or indirectly
(through one or more intermediaries) controlled by or owned fifty percent (50%)
or more by such Person. Unless expressly provided otherwise, all references
herein and in any other Transaction Document to any “Subsidiary” or
“Subsidiaries” means a Subsidiary or Subsidiaries of the Borrowers.

 

“SWK Advisors” has the meaning given such term in the introductory paragraph of
this Agreement.

 

“SWK Funding” has the meaning given such term in the introductory paragraph of
this Agreement.

 

“SWK Holdings” has the meaning given such term in the introductory paragraph of
this Agreement.

 

“Termination Event” means (a) the occurrence with respect to any ERISA Plan of
(i) a reportable event described in Section 4043(c)(5) or (6) of ERISA or
(ii) any other reportable event described in Section 4043(c) of ERISA other than
a reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) or 4043(b)(4) of ERISA, or (b) the withdrawal of any ERISA
Affiliate from an ERISA Plan during a plan year in which it was a “substantial
employer” as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a
notice of intent to terminate any ERISA Plan or the treatment of any ERISA Plan
amendment as a termination under Section 4041(c) of ERISA, or (d) the
institution of proceedings to terminate any ERISA Plan by the Pension Benefit
Guaranty Corporation under Section 4042 of ERISA, or (e) any other event or
condition which could reasonably be expected to result in grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any ERISA Plan.

 

“Total Funded Debt” means, as of any date, all Indebtedness of the Credit
Parties on a consolidated basis described in clauses (a), (c), (e), (m)(ii) and
(n) of the definition of “Indebtedness”.

 

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

 

“UCC” means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.

 

“Underlying Agreements” means any loan agreement, credit agreement, license
agreement, royalty agreement, equity document or other agreement pursuant to
which an Investment has been issued or created and each other agreement that
governs the terms of or secures the obligations represented by such Investment.

 

 
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“Voting Agreement” means a voting agreement entered among the Lender and SWK
Holdings, in the form attached hereto as Exhibit E.

 

“Warrant” means a warrant to purchase 1,000,000 shares of common stock, par
value $0.001 per share, of SWK Holdings at a price equal to $1.3875 per share,
pursuant to the Warrant Agreement.

 

“Warrant Agreement” means a warrant agreement entered between SWK Holdings and
the Lender, in the form attached hereto as Exhibit G.

 

“Warrant Shares” means shares of common stock, par value $0.001 per share, of
SWK Holdings, issuable upon exercise of or otherwise pursuant to the Warrant.

 

Section 1.3     Exhibits and Schedules; Additional Definitions. All Exhibits and
Schedules attached to this Agreement are a part hereof for all purposes.
Reference is hereby made to the Security Schedule for the meaning of certain
terms defined therein and used but not defined herein, which definitions are
incorporated herein by reference.

 

Section 1.4     Amendment of Defined Instruments. Unless the context otherwise
requires or unless otherwise provided herein the terms defined in this Agreement
which refer to a particular agreement, instrument or document also refer to and
include all renewals, extensions, modifications, amendments and restatements of
such agreement, instrument or document, provided that nothing contained in this
section shall be construed to authorize any such renewal, extension,
modification, amendment or restatement.

 

Section 1.5     References and Titles. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections, definitions and other
subdivisions refer to the Exhibits, Schedules, articles, sections, subsections,
definitions and other subdivisions of this Agreement unless expressly provided
otherwise. Exhibits and Schedules to any Transaction Document shall be deemed
incorporated by reference in such Transaction Document. References to any
document, instrument, or agreement (a) shall include all exhibits, schedules,
and other attachments thereto, and (b) shall include all documents, instruments,
or agreements issued or executed in replacement thereof. Titles appearing at the
beginning of any subdivisions are for convenience only and do not constitute any
part of such subdivisions and shall be disregarded in construing the language
contained in such subdivisions. The words “this Agreement”, “this instrument”,
“herein”, “hereof”, “hereby”, “hereunder” and words of similar import refer to
this Agreement as a whole and not to any particular subdivision unless expressly
so limited. The phrases “this section” and “this subsection” and similar phrases
refer only to the sections or subsections hereof in which such phrases occur.
The word “or” is not exclusive, and the word “including” (in its various forms)
means “including without limitation”. References to a Person’s “discretion”
means its sole and absolute discretion. Pronouns in masculine, feminine and
neuter genders shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa, unless
the context otherwise requires. Accounting terms have the meanings assigned to
them by GAAP, as applied by the accounting entity to which they refer.
References to “days” shall mean calendar days, unless the term “Business Day” is
used. Unless otherwise specified, references herein to any particular Person
also refer to its successors and permitted assigns.

 

 
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Section 1.6     Calculations and Determinations. All calculations under the Loan
Documents of interest chargeable with respect to the Loans and of fees shall be
made on the basis of actual days elapsed (including the first day but excluding
the last) and a year of 360 days. Each determination by the Lender of amounts to
be paid under Article III or any other matters which are to be determined
hereunder by the Lender shall, in the absence of manifest error, be conclusive
and binding. Unless otherwise expressly provided herein or unless the Lender
otherwise consents, all financial statements and reports furnished to the Lender
hereunder shall be prepared and all financial computations and determinations
pursuant hereto shall be made in accordance with GAAP.

 

Section 1.7     Joint Preparation; Construction of Indemnities and Releases.
This Agreement and the other Transaction Documents have been reviewed and
negotiated by sophisticated parties with access to legal counsel and no rule of
construction shall apply hereto or thereto that would require or allow any
Transaction Document to be construed against any party because of its role in
drafting such Transaction Document. All indemnification and release provisions
of this Agreement shall be construed broadly (and not narrowly) in favor of the
Persons receiving indemnification or being released.

 

ARTICLE II - Loans

 

Section 2.1     Commitment. Subject to the terms and conditions of this
Agreement, the Lender shall make Loans to the Borrowers in an aggregate amount
not to exceed the Commitment. Amounts borrowed under this Agreement and
subsequently pre-paid or repaid in whole or part may not be re-borrowed. The
Lender’s obligation to make Loans pursuant to this Section 2.1 shall terminate
on the earlier to occur of (a) the last day of the Draw Period, and (b) the date
on which the outstanding principal amount of all Loans, the unpaid interest
thereon, and all other Obligations become due and payable.

 

Section 2.2     Loans; Borrowing Procedures and Limitations.

 

(a)     Borrowing Notice; Funding Date. Subject to the prior satisfaction of all
other applicable conditions to the making of a Loan set forth in this Agreement,
in order to obtain a Loan, the Borrowers shall notify the Lender (which notice
shall be irrevocable and shall contain the requested principal amount of such
Loan and wire instructions for the proceeds of such Loan) by electronic mail,
facsimile, or telephone by no later than 11:00 a.m. (Dallas, Texas time) 5
Business Days prior to the proposed Funding Date for such Loan, which Funding
Date shall be a Business Day that is no later than the last day of the Draw
Period. The Lender may rely on any telephone notice given by a Person whom the
Lender believes is an officer or designee of any Borrower.

 

(b)     Minimum Amount. Each Loan shall be in a minimum amount of $3,000,000,
with any increases over such minimal amount in integral multiples of $100,000.

 

Section 2.3     Use of Proceeds. The Borrowers will use the proceeds of the
Loans as follows: (a) to pay expenses, costs, and fees incurred in connection
with this Agreement and the other Transaction Documents, (b) for general working
capital purposes, (c) to make or acquire new Investments of the type described
in clause (d) of the definition of “Permitted Investments”, and (e) to pay
expenses, costs, and fees incurred in connection with the consummation of
Investments described in clause (c) of this sentence. In no event shall the
proceeds of the Loans be used directly or indirectly by any Person (y) for
personal, family, household or agricultural purposes, or (z) for the purpose,
whether immediate, incidental or ultimate, of purchasing, acquiring or carrying
any “margin stock” (as such term is defined in Regulation U promulgated by the
Board of Governors of the Federal Reserve System) or to extend credit to others
directly or indirectly for the purpose of purchasing or carrying any such margin
stock.

 

 
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Section 2.4     Interest Rates and Fees; Payment Dates.

 

(a)     Interest Rates. Subject to subsection (b) below, the outstanding
principal amount of the Loans shall bear interest on each day outstanding at the
Floating Rate, and such interest shall be payable in arrears on the first day of
each Fiscal Quarter and on the Maturity Date. Interest shall also be paid on the
date of any prepayment or repayment of the Loans.

 

(b)     Default Rate. If an Event of Default shall have occurred and be
continuing, the outstanding principal amount of the Loans shall bear interest at
the Default Rate, whether at stated maturity, upon acceleration or otherwise,
after as well as before judgment. Such interest shall be payable by the
Borrowers upon demand by the Lender.

 

Section 2.5     Mandatory Prepayments.

 

(a)     If any Change of Control occurs, then, simultaneously with the
occurrence of such Change in Control, the Borrowers shall prepay in full in cash
all outstanding principal, interest, and other Obligations with respect to the
Loans.

 

(b)     Within 3 Business Days after the date any Credit Party receives Net
Proceeds in excess of $1,000,000 from any Disposition (including casualty losses
or condemnations but excluding Dispositions that are permitted under Section
7.4) by a Credit Party of any Property not constituting a Permitted Investment,
the Borrowers shall prepay the outstanding principal amount of the Obligations
in an amount equal to 100% of such Net Proceeds (including condemnation awards
and payments in lieu thereof) received by such Credit Party in connection with
such Disposition, together with all accrued and unpaid interest thereon. Within
3 Business Days after the date any Credit Party receives Net Proceeds from any
Disposition by any Credit Party of Property constituting a Permitted Investment,
the Borrowers shall prepay the outstanding principal amount of the Obligations
in the amount necessary, if any, to cause the Borrowers to be in Pro Forma
Compliance after giving effect to such Disposition. Nothing contained in this
Section 2.5(b) shall permit the Credit Parties to sell or otherwise dispose of
any Property other than in accordance with Section 7.4.

 

(c)     Any mandatory prepayment made pursuant to this Section 2.5 or made
during the continuance of an Event of Default (as a result of acceleration of
the Obligations, foreclosure of Collateral, or otherwise) shall include, if such
prepayment occurs before the Maturity Date, the Prepayment Premium determined
for the applicable prepayment date with respect to the principal amount so
prepaid.

 

 
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Section 2.6     Optional Prepayments.

 

(a)     The Borrowers may, at their option on the last Business Day of any
Fiscal Quarter, upon notice as provided below, prepay the Loans in full or in
part, in a minimum principal amount equal to the lesser of (i) $3,000,000 and
(ii) aggregate principal amount of the Loans then outstanding, plus the
Prepayment Premium determined for the prepayment date with respect to such
principal amount (except to the extent such prepayment is made with the proceeds
of an offering of Equity Interests in SWK Holdings), plus any accrued and unpaid
interest thereon and any other Obligations owing under the Loan Documents. The
Borrowers shall give the Lender irrevocable written notice of any optional
prepayment pursuant to this Section 2.6 substantially in the form of Exhibit B
hereto not less than 10 days and not more than 30 days prior to the date fixed
for such prepayment (which date shall be a Business Day).

 

(b)     In the case of the prepayment of the Loans pursuant to this Section 2.6,
the total outstanding principal amount of the Loans to be prepaid as set forth
in the applicable notice of prepayment shall become due and payable on the date
fixed for such prepayment, together with interest on such principal amount
accrued to such date and any applicable Prepayment Premium. When the Obligations
have been fully and indefeasibly paid in full in cash and no Commitments of the
Lender that would give rise to any Obligations remain outstanding, the Note
shall be surrendered to the Borrowers and cancelled and the Lender, at the
Borrowers’ sole cost and expense, shall file all necessary UCC termination
statements, execute such termination and/or release documents and/or take any
other actions as may be reasonably requested by the Credit Parties to terminate
any security interests that the Lender may have in the Collateral.

 

Section 2.7     Increase in Commitment. At the request of the Borrowers, the
Lender shall increase the Commitment if each of the following conditions is
satisfied:

 

(a)     SWK Holdings shall have consummated an offering or series of offerings
of its Equity Interests consisting of common stock of SWK Holdings after the
Closing Date in form and substance reasonably satisfactory to the Lender
resulting in Net Proceeds of at least $10,000,000 in cash received by SWK
Holdings on or before the last day of the Draw Period;

 

(b)     such requested increase in the Commitment shall be in a minimum amount
of $3,000,000, with any increases over such minimum amount in integral multiples
of $1,000,000;

 

(c)     such requested increase in the Commitment shall not cause the aggregate
amount of the Commitment to exceed $30,000,000;

 

(d)     the Borrowers shall have delivered to the Lender a certificate of each
Credit Party signed by an authorized officer of such Credit Party (i) certifying
and attaching the resolutions adopted by each Credit Party approving or
consenting to such increase and (ii) certifying that before and after giving
effect to such increase, (A) the representations and warranties contained in
Article V and the other Loan Documents are true in all material respects
(provided that such materiality qualifier shall not apply to the extent a
specific representation or warranty contains a materiality qualifier) as of such
date (except in the case of representations and warranties that are made solely
as of a specific date, which representations and warranties shall be true and
correct in all material respects as of such date), and (B) no Default exists;

 

 
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(e)     the Borrowers shall have delivered to Lender a favorable opinion of
counsel, reasonably acceptable to the Lender, as to such matters concerning the
Credit Parties, the enforceability of the Loan Documents, and the validity of
liens and security interests under the Security Documents, in each case after
giving effect to the to the increase in the Commitment; and

 

(f)     the Borrower shall have delivered to Lender a Note made by Borrowers
payable to the Lender in the aggregate principal amount of such requested
increase.

 

ARTICLE III - Payments to the Lender

 

Section 3.1     General Procedures.

 

(a)     The Borrowers will make each payment that it owes under the Loan
Documents to the Lender, in lawful money of the United States of America,
without set-off, deduction or counterclaim, and in immediately available funds.
Should any such payment become due and payable on a day other than a Business
Day, the date for such payment shall be extended to the next succeeding Business
Day, and, in the case of a payment of principal or past due interest, interest
shall accrue and be payable thereon for the period of such extension.

 

(b)     When the Lender collects or receives money on account of the
Obligations, the Lender shall apply all such money so collected or received, as
follows:

 

(i)     first, for the payment of all fees, indemnities, expenses and other
amounts (other than principal and interest) payable to the Lender under any Loan
Document;

 

(ii)     second, for the payment of accrued and unpaid interest on the Loans;

 

(iii)     third, for the payment of principal of the Loans, together with any
Prepayment Premium then owing;

 

(iv)     fourth, for the payment of any other Obligations then owing; and

 

(v)     fifth, to the Borrowers.

 

Section 3.2     Reimbursable Taxes. The Borrowers covenant and agree that:

 

(a)     the Credit Parties will indemnify the Lender against and reimburse the
Lender for all present and future income, franchise, transfer, stamp, mortgage,
court or documentary, intangible, recording, filing, withholding and other
taxes, levies, costs and charges whatsoever imposed, assessed, levied or
collected on or in respect of this Agreement or any Transaction Document or any
payment made pursuant to any Loan Document (whether or not legally or correctly
imposed, assessed, levied or collected), excluding, however, (i) taxes imposed
on or measured by the Lender’s overall net income, and margin and franchise
taxes imposed on it (in lieu of net income taxes), in each case by the
jurisdiction (or any political subdivision thereof) under the Laws of which it
is organized or otherwise resides for tax purposes or maintains the office
through which it administers this Agreement and (ii) any U.S. federal
withholding taxes imposed under FATCA (all such non-excluded taxes, levies,
costs and charges being collectively called “Reimbursable Taxes”). Such
indemnification shall be on an after-tax basis and paid within 5 Business Days
after the Lender makes demand therefor.

 

 
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(b)     All payments on account of the principal of, and interest on, the Loans,
and all other amounts payable by or on behalf of the Borrowers to the Lender
hereunder or under any other Loan Document, shall be made in full in cash
without set-off or counterclaim and shall be made free and clear of and without
deductions or withholdings of any nature by reason of any Reimbursable Taxes. In
the event of the Borrowers being compelled by Law to make any such deduction or
withholding from any payment to the Lender, the Borrowers shall pay to the
Lender on the due date of such payment such additional amounts as are needed to
cause the amount received by the Lender after such deduction or withholding to
equal the amount that would have been received by the Lender in the absence of
such deduction or withholding. If the Borrowers should make any deduction or
withholding as aforesaid, the Borrowers shall within fifteen (15) days
thereafter forward to the Lender an official receipt or other official document
evidencing payment of such deduction or withholding.

 

Section 3.3     Status of the Lender; FATCA

 

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

 

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

 

(c)     The Lender agrees that if any form or certification it previously
delivered expires or becomes obsolete or inaccurate in any respect, it shall
update such form or certification or promptly notify the Borrowers in writing of
its legal inability to do so.

 

 
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ARTICLE IV - Conditions Precedent

 

Section 4.1     Closing Date Conditions. The effectiveness of this Agreement is
subject to the satisfaction, or waiver in accordance with Section 11.1, of the
following conditions on or before the Closing Date:

 

(a)     Due Diligence; Tax Analysis. The Lender shall have completed a due
diligence review of the Credit Parties and the Collateral satisfactory to the
Lender in its sole discretion.

 

(b)     Investment Committee and Compliance Approval. The Lender shall have
received all necessary investment committee and compliance approvals.

 

(c)     Closing Documents. The Lender shall have received all of the following,
duly executed and delivered and in form and substance satisfactory to the
Lender:

 

(i)     this Agreement;

 

(ii)     a Note made by Borrowers payable to the Lender in the aggregate
principal amount of $15,000,000;

 

(iii)     each Equity Document;

 

(iv)     each Security Document listed in the Security Schedule;

 

(v)     all material third party consents required with respect to any
Collateral;

 

(vi)     certain certificates of the Credit Parties including:

 

(A)     “Officer’s Certificates” of the Secretary and of the President (or
officers holding equivalent positions) of each of the Credit Parties, which
shall contain the names and specimen signatures of the officers or
representatives authorized to execute the Transaction Documents and which shall
certify to the truth, correctness and completeness of the following exhibits
attached thereto: (1) a copy of resolutions duly adopted by the board of
directors (or comparable governing body) of such Credit Party, and in full force
and effect at the time this Agreement is entered into, authorizing the execution
of this Agreement and the other Transaction Documents delivered or to be
delivered in connection herewith to which such Credit Party is a party and the
consummation of the transactions contemplated herein and therein, (2) a copy of
the charter documents of such Credit Party and all amendments thereto, certified
by the appropriate official of the state of organization, and (3) a copy of the
bylaws (or equivalent governing documents) of such Credit Party; and

 

(B)     a “Closing Certificate” of the President or Chief Financial Officer (or
an officer holding an equivalent position) of the Borrowers, dated as of the
date of this Agreement, in which such officer certifies that (1) all
representations and warranties made by any Credit Party in any Loan Document are
true in all material respects (provided that such materiality qualifier shall
not apply to the extent a specific representation or warranty contains a
materiality qualifier) as of such date (except in the case of representations
and warranties that are made solely as of a specific date, which representations
and warranties shall be true and correct in all material respects as of such
date), (2) no Default has occurred and is continuing, and (3) there has been no
Material Adverse Change, and no event or circumstance has occurred that could
reasonably be expected to cause a Material Adverse Change, in each case since
December 31, 2012;

 

 
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(vii)     certificates evidencing the due formation, valid existence and good
standing of each Credit Party in its state of organization, issued by the
appropriate authorities of such jurisdiction, and certificates of each Credit
Party’s good standing and due qualification to do business, issued by
appropriate officials in any other jurisdiction where the nature and extent of
its business and properties require due qualification and good standing;

 

(viii)    a favorable opinion of Holland & Knight LLP, counsel for the Credit
Parties, as to such matters concerning the Credit Parties and Collateral as the
Lender may request, including, without limitation, opinions as to the Credit
Parties’ due organization, valid existence, good standing, and authority to
enter into the Transaction Documents, the enforceability of the Transaction
Documents, and validity of liens and security interests under the Security
Documents;

 

(ix)      certificates evidencing the Credit Parties’ insurance in effect on the
Closing Date;

 

(x)       a solvency certificate of the Chief Financial Officer (or an officer
holding an equivalent position) of the Borrowers dated the Closing Date
demonstrating that before and after giving effect to the consummation of the
Loan Documents the Credit Parties are Solvent;

 

(xi)      the Initial Financial Statements;

 

(xii)     UCC, judgment, tax lien, and recording-district real property record
searches in such jurisdictions as requested by the Lender evidencing the absence
of Liens except for Liens being released on the Closing Date and Permitted
Liens; and

 

(xiii)     such other agreements, instruments, certificates, or other documents
as requested by the Lender;

 

(d)     Fees and Expenses. The Borrowers shall have paid all fees owed to the
Lender and/or its Affiliates, as applicable, under this Agreement or any fee or
reimbursement letters entered into between the Borrowers and the Lender or any
Affiliate of the Lender.

 

(e)     Representations and Warranties. All representations and warranties made
by any Credit Party in any Loan Document shall be true in all material respects
(provided that such materiality qualifier shall not apply to the extent a
specific representation or warranty contains a materiality qualifier) as of the
Closing Date (except in the case of representations and warranties that are made
solely as of a specific date, which representations and warranties shall be true
and correct in all material respects as of such date).

 

 
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(f)      No Default. No Default shall have occurred that is continuing.

 

(g)     No Material Adverse Change. There shall have been no Material Adverse
Change, and no event or circumstance shall have occurred that could reasonably
be expected to cause a Material Adverse Change, in each case since December 31,
2012.

 

Section 4.2     Funding Date Conditions. The obligation of the Lender to make
any Loan is subject to the satisfaction, or waiver in accordance with
Section 11.1, of the following conditions on or before the applicable Funding
Date:

 

(a)     Availability. The amount of the requested Loan shall not be greater than
the Available Amount on the Funding Date (before giving effect to such requested
Loan).

 

(b)     Funding Documents. The Lender shall have received all of the following,
duly executed and delivered and in form and substance satisfactory to the
Lender:

 

(i)      a “Compliance Certificate” in the form of Exhibit C showing Pro Forma
Compliance with the Asset Coverage Ratio, the Interest Coverage Ratio and the
minimum Liquidity requirement set forth in Section 8.3, in each case after
giving effect to the Loan to be advanced on the Funding Date;

 

(ii)     an Officer’s Certificate from an office of the Borrowers certifying to
the truth and accuracy of the matters set forth in clauses (b), (c) and (d) of
this Section 4.2.

 

(c)     Representations and Warranties. All representations and warranties made
by any Credit Party in any Loan Document shall be true in all material respects
(provided that such materiality qualifier shall not apply to the extent a
specific representation or warranty contains a materiality qualifier) as of such
Funding Date (except in the case of representations and warranties that are made
solely as of a specific date, which representations and warranties shall be true
and correct in all material respects as of such date);

 

(d)     No Default. No Default shall have occurred that is continuing or shall
result from the making of such Loan; and

 

(e)     No Material Adverse Change. There shall have been no Material Adverse
Change, and no event or circumstance shall have occurred that could reasonably
be expected to cause a Material Adverse Change, in each case since December 31,
2012.

 

ARTICLE V - Representations and Warranties of the Credit Parties

 

To induce the Lender to enter into this Agreement and to make the Loans, the
Borrowers and each other Credit Party represent and warrant to the Lender that:

 

Section 5.1     Organization and Good Standing. Each Credit Party is duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all requisite powers and authority required
to carry on its business and enter into and carry out the transactions
contemplated hereby. Each Credit Party is duly qualified, in good standing, and
authorized to do business in all other jurisdictions within the United States
wherein the character of the properties owned or held by it or the nature of the
business transacted by it makes such qualification necessary, except to the
extent that the failure to obtain such qualification could not reasonably be
expected to cause a Material Adverse Change. Each Credit Party has taken all
actions and procedures customarily taken in order to enter, for the purpose of
conducting business or owning property, each jurisdiction outside the United
States wherein the character of the properties owned or held by it or the nature
of the business transacted by it makes such actions and procedures desirable.

 

 
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Section 5.2     Authorization. Each Credit Party has duly taken all action
necessary to authorize the execution and delivery by it of the Transaction
Documents to which it is a party and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder. The Borrowers are duly authorized to borrow the Loans pursuant to
this Agreement.

 

Section 5.3     No Conflicts or Consents. The execution and delivery by each
Credit Party of the Transaction Documents to which it is a party, the
performance of its obligations under such Transaction Documents, and the
consummation of the transactions contemplated by the Transaction Documents, do
not and will not (a) conflict with any provision of (i) any Law applicable to
the Credit Parties, (ii) its Organizational Documents, or (iii) any material
agreement, judgment, license, order or permit applicable to or binding upon such
Credit Party or its assets, (b) result in the acceleration of any Indebtedness
owed by such Credit Party, or (c) result in or require the creation of any Lien
upon any assets or properties of such Credit Party except as expressly
contemplated or permitted in the Loan Documents. Except as expressly
contemplated in the Transaction Documents, no permit, consent, approval,
authorization or order of, and no notice to or filing with, any Governmental
Authority or third party is required in connection with the execution, delivery
or performance by any Credit Party of any Transaction Document or to consummate
any transactions contemplated by the Transaction Documents.

 

Section 5.4     Enforceable Obligations. This Agreement is, and the other
Transaction Documents when duly executed and delivered will be, legal, valid and
binding obligations of the Credit Parties that are a party hereto or thereto,
enforceable in accordance with their terms except as such enforcement may be
limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors’ rights.

 

Section 5.5     Initial Financial Statements. The Borrowers have heretofore
delivered to the Lender true, correct and complete copies of the Initial
Financial Statements. The Initial Financial Statements fairly present the
Consolidated financial position, income, and cash flows of the Persons reported
on therein, in each case at the date thereof. The Initial Financial Statements
were prepared in accordance with GAAP.

 

Section 5.6     Other Obligations and Restrictions. Except as shown in the
Initial Financial Statements or disclosed in Section 5.6 of the Disclosure
Schedule, no Credit Party has any material outstanding Liabilities of any kind
(including contingent obligations, tax assessments, and unusual forward or
long-term commitments). Except as shown in the Initial Financial Statements or
disclosed in Section 5.6 of the Disclosure Schedule, no Credit Party is subject
to or restricted by any franchise, contract, deed, charter restriction, or other
instrument or restriction which could reasonably be expected to cause a Material
Adverse Change.

 

 
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Section 5.7     Full Disclosure. No certificate, statement or other information
delivered by or on behalf of any Credit Party or its Affiliates herewith or
heretofore to the Lender in connection with the negotiation of this Agreement or
in connection with any transaction contemplated hereby contains any untrue
statement of a material fact or omits to state any material fact known to any
Credit Party or their respective Affiliates necessary to make the statements
contained herein or therein not misleading, in light of the circumstances under
which they were made or deemed made, as of the date made or deemed made;
provided that, with respect to projections, the Credit Parties represent only
that such information was prepared in good faith based on assumptions believed
to be reasonable at the time. No Material Adverse Change has occurred since
December 31, 2012. There is no fact known to any Credit Party or their
respective Affiliates that has not been disclosed to the Lender in writing which
could reasonably be expected to cause a Material Adverse Change. As of the
Closing Date, no Credit Party has any Material Investments, except for those
contracts and agreements described in Section 5.7 of the Disclosure Schedule.

 

Section 5.8     Litigation. Except as disclosed in the Initial Financial
Statements or in Section 5.8 of the Disclosure Schedule: (a) there are no
actions, suits or legal, equitable, arbitrative or administrative proceedings
pending, or to the knowledge of any Credit Party threatened, against any Credit
Party or affecting any Collateral (including any that challenge or otherwise
pertain to any Credit Party’s title to any Collateral) before any Governmental
Authority that could reasonably be expected to cause a Material Adverse Change,
and (b) there are no outstanding judgments, injunctions, writs, rulings or
orders by any such Governmental Authority against any Credit Party or, to the
knowledge of the Credit Parties, any Credit Party’s stockholders, partners,
members, directors or officers or affecting any Collateral or any of its
material assets or property that could reasonably be expected to cause a
Material Adverse Change.

 

Section 5.9     ERISA Plans and Liabilities. No ERISA Affiliate maintains or
participates in any ERISA Plans.

 

Section 5.10   Insurance. The Insurance Schedule contains a substantially
accurate and complete description of all material policies of property and
casualty, liability, workmen’s compensation and other forms of insurance owned
or held by or on behalf of any Credit Party. Such policies constitute all
policies of insurance required to be maintained under Section 6.8 hereof. All
such policies are in full force and effect, all premiums due with respect
thereto have been paid, and no notice of cancellation or termination has been
received with respect to any such policy. Such policies are sufficient for
compliance in all material respects with all requirements of Law and of all
material agreements to which any Credit Party is a party; are valid, outstanding
and enforceable policies; provide adequate insurance coverage in at least such
amounts and against at least such risks (but including in any event public
liability) as are usually insured against in the same general area by companies
engaged in the same or a similar business for the assets and operations of the
Credit Parties; will remain in full force and effect through the respective
dates set forth in the Insurance Schedule without the payment of additional
premiums; and will not in any material way be affected by, or terminate or lapse
by reason of, the transactions contemplated by this Agreement and the other
Transaction Documents.

 

 
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Section 5.11   Names and Places of Business. No Credit Party has, during the
preceding five years, had, been known by, or used any other trade or fictitious
name, except as disclosed in Section 5.11 of the Disclosure Schedule. Except as
otherwise indicated in Section 5.11 of the Disclosure Schedule, the chief
executive office and principal place of business of each Credit Party are (and
for the preceding five years have been) located at the address of the Borrowers
set out in Section 11.3. Except as indicated in Section 5.11 of the Disclosure
Schedule, no Credit Party has any other office or place of business.

 

Section 5.12    Capital Structure and Subsidiaries.

 

(a)     Section 5.12(a) of the Disclosure Schedule sets forth, as of the Closing
Date, a true, correct and complete description of SWK Holdings’ outstanding
Equity Interests, all Equity Interests reserved for issuance and Equity
Interests that have been authorized for issuance under SWK Holdings’
Organizational Documents. As of the Closing Date, (i) all such Equity Interests
have been, or upon issuance will be, duly authorized and are validly issued,
fully paid and non-assessable, and (ii) all such Equity Interests are free and
clear of any Liens and other restrictions imposed through the actions or failure
to act of SWK Holdings (including any restrictions on the right to vote, sell or
otherwise dispose of any such Equity Interest) and free and clear of any
preemptive rights, rescission rights, or other rights to subscribe for or to
purchase or repurchase any such Equity Interest.

 

(b)     Section 5.12(b) of the Disclosure Schedule sets forth, as of the Closing
Date, a true, correct and complete description of (i) the Borrowers’
Subsidiaries, (ii) each such Subsidiary’s outstanding Equity Interests, Equity
Interests reserved for issuance and Equity Interests that have been authorized
for issuance under such Subsidiary’s Organizational Documents, (iii) the
ownership of each such outstanding Equity Interest and (iv) any other Equity
Interests in any other Person that are owned by the Borrowers or their
Subsidiaries. All of the Equity Interests of Borrowers’ Subsidiaries and any
other outstanding Equity Interests set forth in Section 5.12(b) of the
Disclosure Schedule, have been duly authorized and are validly issued, fully
paid and non-assessable. Except as disclosed on Section 5.12(b) of the
Disclosure Schedule, such Equity Interests that are owned by Borrowers or their
Subsidiaries are free and clear of any Liens and other restrictions (including
any restrictions on the right to vote, sell or otherwise dispose of any such
Equity Interest) and all such Equity Interests are free and clear of any
preemptive rights, rescission rights, or other rights to subscribe for or to
purchase or repurchase any such Equity Interest.

 

(c)     Except as set forth on Section 5.12(c) of the Disclosure Schedule, as of
the Closing Date, (i) there are no outstanding options, warrants, scrips, rights
to subscribe for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for any Equity Interests of the Borrowers or any of their Subsidiaries, or
arrangements by which the Borrowers or any of their Subsidiaries is or may
become bound to issue additional Equity Interests of the Borrowers or any of
their Subsidiaries or purchase or redeem any Equity Interests of the Borrowers
or any of their Subsidiaries, (ii) there are no agreements or arrangements under
which the Borrowers or any of their Subsidiaries is obligated to register the
sale of any of its or their securities under the 1933 Act and (iii) there are no
anti-dilution or price adjustment provisions contained in any security issued by
the Borrowers (or in any agreement providing rights to security holders) that
will be triggered by the issuance of the Warrant (including the issuance of the
Warrant Shares upon exercise of the Warrant).

 

 
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(d)     The Borrowers have furnished to the Lender true and correct copies of
the Borrowers’ and their Subsidiaries Organizational Documents (as in effect as
of the Closing Date). In connection with SWK Holdings’ most recent sale of its
Equity Interests occurring prior to the Closing Date (other than pursuant to any
employee option plan), which sale took place on September 29, 2005, the
per-share sales price was $1.5227.

 

Section 5.13     Government Regulation. Neither the Borrowers nor any other
Credit Party is (a) an “investment company” or a company “controlled” by an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended, or (b) subject to regulation under any Law which regulates the
incurring by such Person of Indebtedness.

 

Section 5.14     Solvency. After giving effect to the execution of the Loan
Documents by the parties thereto and the consummation of the transactions
contemplated hereby and thereby, the Credit Parties, in the aggregate, will be
Solvent.

 

Section 5.15     Title to Properties; Licenses. Section 5.15 to the Disclosure
Schedule sets forth a list of all real property owned or leased by any Credit
Party as of the Closing Date. Each Credit Party has good and defensible title
to, or valid leasehold interests in, all of its other material properties and
assets necessary or used in the ordinary conduct of its business, free and clear
of all Liens, encumbrances, or adverse claims other than Permitted Liens and of
all impediments to the use of such properties and assets in such Credit Party’s
business other than Permitted Liens. Each Credit Party possesses all licenses,
permits, franchises, patents, copyrights, trademarks and trade names, and other
intellectual property (or otherwise possesses the right to use such intellectual
property without violation of the rights of any other Person) that are necessary
to carry out its business as presently conducted and as presently proposed to be
conducted hereafter, except where the failure to possess the same does not (a)
materially interfere with the ordinary conduct of business and (b) could not
reasonably be expected to cause a Material Adverse Change, and no Credit Party
is in violation in any material respect of the terms under which it possesses
such intellectual property or the right to use such intellectual property.

 

Section 5.16     Regulation T, U or X. No Credit Party is engaged in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock, and neither the making of the Loans hereunder nor the use of proceeds
thereof will violate the provisions of Regulation T, U or X of the Federal
Reserve Board.

 

Section 5.17     Taxes. Each Credit Party has timely filed or caused to be filed
all tax returns and reports required to have been filed and has paid or caused
to be paid all taxes required to have been paid by it, except for taxes that are
being diligently contested in good faith by appropriate proceedings and for
which such Credit Party has set aside on its books adequate reserves in
accordance with GAAP. The charges, accruals and reserves on the books of each
Credit Party in respect of taxes and other governmental charges are, in the
reasonable opinion of such Credit Party, adequate. No tax Lien has been filed
and, to the knowledge of the Credit Parties, no claim is being asserted with
respect to any such tax or other such governmental charge.

 

 
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Section 5.18     Foreign Corrupt Practices. No Credit Party, nor any director,
officer, agent, employee or Affiliate of any Credit Party are aware of or has
taken any action, directly or indirectly, that would result in a material
violation by such Persons of the FCPA, including without limitation, making use
of the mails or any means or instrumentality of interstate commerce corruptly in
furtherance of an offer, payment, promise to pay or authorization of the payment
of any money, or other property, gift, promise to give, or authorization of the
giving of anything of value to any “foreign official” (as such term is defined
in the FCPA) or any foreign political party or official thereof or any candidate
for foreign political office, in contravention of the FCPA; and, each Credit
Party and their respective Affiliates have conducted their business in material
compliance with the FCPA.

 

Section 5.19     OFAC. No Credit Party, nor any director, officer, agent,
employee or Affiliate of any Credit Party are currently subject to any material
United States sanctions administered by OFAC, and the Credit Parties will not
directly or indirectly use the proceeds from the Loans or lend, contribute or
otherwise make available such proceeds to any Subsidiary, joint venture partner
or other Person, for the purpose of financing the activities of any Person
currently subject to any United States sanctions administered by OFAC.

 

Section 5.20     Investment Policy. The Credit Parties are in compliance with
the Investment Policy.

 

Section 5.21     Warrants. So long as the Warrant Agreement remains in effect
and the Warrant is held by the Lender or Carlson:

 

(a)     Warrant Shares. The Warrant Shares are duly authorized and reserved for
issuance, and, when issued upon exercise of or otherwise pursuant to the Warrant
will be validly issued, fully paid and non-assessable, and free from all taxes,
Liens, claims and encumbrances and will not be subject to preemptive rights or
other similar rights and will not impose personal liability upon the holder
thereof.

 

(b)     Application of Takeover Protections. SWK Holdings and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under SWK Holdings’ Organization Documents (or similar
charter documents) or the laws of its state of incorporation that is or could
become applicable to the Lender as a result of the Lender and SWK Holdings
fulfilling their obligations or exercising their rights under the Transaction
Documents, including, without limitation, as a result of SWK Holdings’ issuance
of the Warrant or Warrant shares and the Lender’s ownership of the Warrant or
Warrant shares.

 

 
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Section 5.22     Eligible Assets.

 

(a)     As of the Closing Date, each Credit Party is the sole and beneficial
owner of each Eligible Asset disclosed on Schedule 4 as being owned by such
Credit Party, in each case free and clear of all Liens other than Permitted
Liens, with the full legal right and ability to pledge its rights and interests
pursuant to the Security Documents.

 

(b)     Each Loan Asset disclosed on Schedule 4 carries a right to payment of
principal as of the Closing Date in an amount not less than the outstanding
principal balance of such Loan Asset as disclosed on Schedule 4. The Underlying
Agreements that have been provided to the Lender with respect to each Eligible
Asset are the only thereunder, including the rate of interest and any variable
or revenue based payments. Copies of all material Underlying Agreements with
respect to any Eligible Asset have been provided to the Lender, which are full,
correct and complete. Except as otherwise set forth on Section 5.22(b) of the
Disclosure Schedule, no modifications, amendments, waivers or supplements to any
such material Underlying Agreement have been entered into and are effective
other than such modifications, amendments, waivers or supplements that are
permitted hereunder (or have otherwise been approved by the Lender in writing)
and have been provided to the Lender.

 

(c)     Except as set forth on Section 5.22(c) of the Disclosure Schedule, no
Eligible Asset disclosed on Schedule 4 contains any obligation of any Credit
Party to make any further advances or payment to an Obligor that remains
outstanding as of the Closing Date.

 

ARTICLE VI - Affirmative Covenants

 

To induce the Lender to enter into this Agreement and make the Loans, each
Borrower and each other Credit Party warrants, covenants and agrees that until
the Obligations have been fully and indefeasibly paid in full in cash and no
Commitments of the Lender that would give rise to any Obligations remain
outstanding:

 

Section 6.1     Payment and Performance. Each Credit Party will pay all amounts
due under the Transaction Documents to which it is a party in accordance with
the terms thereof and will observe, perform and comply with every covenant, term
and condition set forth in the Transaction Documents to which it is a party.

 

Section 6.2     Books, Financial Statements and Reports. Each Credit Party will
at all times maintain full and accurate books of account and records. The
Borrowers will maintain and will cause their Subsidiaries to maintain a standard
system of accounting, will maintain its Fiscal Year, and will furnish the
following statements and reports to the Lender at the Borrowers’ expense:

 

(a)     as soon as available, and in any event within ninety (90) days after the
end of each Fiscal Year, complete Consolidated financial statements of SWK
Holdings together with all notes thereto, prepared in reasonable detail in
accordance with GAAP, together with an unqualified opinion, based on an audit
using generally accepted auditing standards, by an independent certified public
accounting firm selected by the Borrowers and reasonably acceptable to the
Lender, stating that such Consolidated financial statements have been so
prepared. Such financial statements shall contain a Consolidated balance sheet
of SWK Holdings as of the end of such Fiscal Year and Consolidated statements of
earnings, cash flows, and stockholders’ equity of SWK Holdings for such Fiscal
Year, each setting forth in comparative form the corresponding figures for the
preceding Fiscal Year;

 

 
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(b)     as soon as available, and in any event within forty five (45) days after
the end of each Fiscal Quarter, SWK Holdings’ Consolidated balance sheet as of
the end of such Fiscal Quarter and Consolidated statements of SWK Holdings’
earnings and cash flows for the period from the beginning of the then current
Fiscal Year to the end of such Fiscal Quarter, all in reasonable detail and
prepared in accordance with GAAP, subject to changes resulting from normal
year-end adjustments. In addition, the Borrowers shall, together with each such
set of financial statements and each set of financial statements furnished under
subsection (a) of this section, furnish a certificate signed by the Chief
Financial Officer (or an officer holding an equivalent position) of SWK Holdings
in the form of Exhibit C, (i) stating that such financial statements are
accurate and complete (subject to normal year-end adjustments) and stating that,
to the knowledge of Credit Parties, no Default exists at the end of such Fiscal
Quarter or at the time of such certificate or specifying the nature and period
of existence of any such Default and (ii) demonstrating the Borrower’s
compliance with the financial covenants set forth in Article VIII,; and

 

(c)     such other information that the Lender may from time to time reasonably
request concerning the Loan Documents, any Collateral, or any matter in
connection with the Credit Parties’ businesses, properties, prospects, condition
(financial or otherwise) and operations.

 

Section 6.3     Inspections. Each Credit Party will permit representatives
appointed by the Lender (including the Lender’s officers, employees, independent
accountants, auditors, agents, attorneys, appraisers and any other Persons),
upon reasonable advance notice, to visit and inspect during normal business
hours any of such Credit Party’s property, including its books of account, the
Asset File with respect to any Permitted Investment, other books and records,
and any facilities or other business assets, and to make extra copies therefrom
and photocopies and photographs thereof, and to write down and record any
information such representatives obtain; provided that so long as an Event of
Default does not exist, the Borrowers shall not be required to reimburse the
Lender for such examinations and inspections more frequently than once during
any calendar quarter. Each Credit Party shall permit the Lender and its
representatives to investigate and verify the accuracy of the information
furnished to the Lender in connection with the Transaction Documents and to
discuss all such matters with its officers, employees and representatives. Upon
prior notice to the Borrowers, the Lender may (a) contact Obligors with respect
to one or more Eligible Assets for the sole and exclusive purpose of verifying
the existence and terms of such Eligible Assets, and/or (b) require the Credit
Parties to contact any Obligor to request reports and other information to the
extent such Credit Party is entitled to such reports and information pursuant to
the applicable Underlying Agreements. Following the occurrence and during the
continuance of an Event of Default, the Lender may contact any Obligor from time
to time to discuss the performance and status of any Permitted Investment and to
request reports and other information to the extent any Credit Party is entitled
to such reports and information pursuant to the applicable Underlying
Agreements.

 

 
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Section 6.4     Notice of Material Events and Change of Address. The Borrowers
will promptly notify the Lender in writing (stating that such notice is being
given pursuant to this Agreement) upon becoming aware of:

 

(a)     the occurrence of any Material Adverse Change;

 

(b)     the occurrence of any Default;

 

(c)     the acceleration of the maturity of any Indebtedness owed by any Credit
Party or of any breach or default by any Credit Party under any Material
Investment;

 

(d)     the occurrence of any Termination Event;

 

(e)     the filing of any suit or proceeding against any Credit Party in which
(i) any Person seeks an award of more than $100,000 of damages or other amounts
from any Credit Party or (ii) an adverse decision could reasonably be expected
to cause a Material Adverse Change;

 

(f)     the creation or acquisition of any Subsidiary by any Credit Party;

 

(g)     the occurrence of (i) an Insolvency Event with respect to any Obligor or
(ii) a payment default or material breach by an Obligor in respect of any
Material Investment;

 

(h)     the termination of a Material Investment, or the repudiation of a
material obligation under any Underlying Agreement with respect to a Material
Investment by an Obligor; and

 

(i)     the receipt by any Credit Party of a written assertion or allegation by
any Obligor or other Person that a Credit Party has breached its obligations
under any Underlying Agreement with respect to any Eligible Asset, including any
obligation to make a Royalty Payment when due.

 

The Borrowers will also notify the Lender and the Lender’s counsel in writing at
least thirty (30) Business Days prior to the date that any Credit Party changes
its name or the location of its chief executive office or its location under the
UCC.

 

Section 6.5     Maintenance and Administration of Permitted Investments and
other Properties.

 

(a)     Each Credit Party will maintain, preserve, protect, and keep all
Collateral and all other property used or useful in the conduct of its business
in good condition (normal wear and tear excepted) and in accordance with prudent
industry standards, and will from time to time make all repairs, renewals and
replacements needed to enable the business and operations carried on in
connection therewith to be conducted at all times consistent with prudent
industry practices, except, in each case, where the failure to do so could not
reasonably be expected to cause a Material Adverse Change. Each Credit Party
will maintain good and defensible title to all of its fee and leasehold
interests in real property comprising the Collateral, if any, free and clear of
all Liens, except for Permitted Liens. The Borrowers and each other Credit Party
will manage and administer the Permitted Investments in accordance with (a)
applicable Laws, (b) the terms and provisions of the Underlying Agreements, (c)
the Investment Policy, (d) the Performance Standard and (e) the express terms of
this Agreement.

 

 
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(b)     The Borrowers shall continuously maintain an Asset File with respect to
each Permitted Investment in accordance with the Performance Standard, which
shall be true, correct and complete in all material respects and remain at all
times in the possession of the Borrowers and/or their agents.

 

(c)     Without limiting Section 6.5(a), each applicable Credit Party will
maintain or cause the maintenance of the interests and rights that individually
or in the aggregate, could, if not maintained, reasonably be expected to cause a
Material Adverse Change, and maintain all material agreements, licenses,
permits, and other rights required for the foregoing in full force and effect in
accordance with their terms, timely make any payments due thereunder, and
prevent any default thereunder which could result in a termination or loss
thereof, except any such failure to pay or default that could not reasonably,
individually or in the aggregate, be expected to cause a Material Adverse
Change.

 

Section 6.6     Maintenance of Existence and Qualifications. Each Credit Party
will maintain and preserve its existence and its rights and franchises in full
force and effect and will qualify to do business in all states or jurisdictions
where required by applicable Law, except where the failure to do so could not
reasonably be expected to cause a Material Adverse Change.

 

Section 6.7     Payment of Trade Liabilities, Taxes, etc. Each Credit Party will
(a) timely file all required tax returns including any extensions; (b) timely
pay all taxes, assessments, and other governmental charges or levies imposed
upon it or upon its income, profits or property before the same become
delinquent; (c) within ninety (90) days past the original invoice billing date
therefor same becomes due pay all Liabilities owed by it on ordinary trade terms
to vendors, suppliers and other Persons providing goods and services used by it
in the ordinary course of its business; (d) pay and discharge when due all other
Liabilities now or hereafter owed by it; and (e) maintain appropriate accruals
and reserves for all of the foregoing in accordance with GAAP. Each Credit Party
may, however, delay paying or discharging any of the foregoing so long as it is
diligently and in good faith contesting the validity thereof by appropriate
proceedings, it has set aside on its books adequate reserves therefore that are
required by GAAP, and the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Change.

 

Section 6.8     Insurance. Each Credit Party will maintain insurance with
responsible and reputable insurance companies or associations (including,
without limitation, comprehensive general liability and hazard insurance) with
respect to its properties (including all real properties leased or owned by it)
and business, in such amounts and covering such risks as is required by any
Governmental Authority having jurisdiction with respect thereto or as is carried
generally in accordance with sound business practice by companies in similar
businesses similarly situated, and, in any event in such amounts, adequacy and
scope as required by the Insurance Schedule or otherwise reasonably satisfactory
to the Lender. Following the occurrence and continuance of an Event of Default,
if any Credit Party fails to maintain such insurance, the Lender may arrange for
such insurance, but at the Borrowers’ expense and without any responsibility on
the part of the Lender for obtaining the insurance, the solvency of the
insurance companies, the adequacy of the coverage, or the collection of claims.
Upon the occurrence and during the continuance of an Event of Default, the
Lender shall have the sole right, in the name of the Credit Parties, to file
claims under any insurance policies, to receive, receipt and give acquittance
for any payments that may be payable thereunder, and to execute any and all
endorsements, receipts, releases, assignments, reassignments or other documents
that may be necessary to effect the collection, compromise or settlement of any
claims under any such insurance policies.

 

 
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Section 6.9      Performance on a Credit Party’s Behalf. If any Credit Party
fails to pay when due any taxes, the Lender may pay the same. If any Credit
Party fails to pay when due any insurance premiums, expenses, attorneys’ fees or
other amounts it is required to pay under any Loan Document (other than taxes),
the Lender may pay the same after the occurrence and continuance of an Event of
Default. The Borrowers shall promptly reimburse the Lender for any such payments
and each amount paid by the Lender shall constitute an Obligation owed hereunder
which is due and payable upon written demand by the Lender.

 

Section 6.10     Interest. The Borrowers hereby promise to the Lender to pay
interest at the Default Rate on all past due Obligations (including Obligations
to pay fees or to reimburse or indemnify the Lender that the Borrowers in this
Agreement promised to pay to the Lender and which are not paid when due). Such
interest shall accrue from the date such Obligations become due until they are
paid.

 

Section 6.11     Compliance with Agreements and Law. Each Credit Party will
perform all material obligations it is required to perform under the terms of
each indenture, mortgage, deed of trust, security agreement, lease, franchise,
agreement, contract or other instrument or obligation to which it is a party or
by which it or any of its properties is bound, including each Underlying
Agreement, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Change. Each
Credit Party will conduct its business and affairs in compliance with all Laws
applicable thereto except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Change. Each Credit Party will cause all licenses and permits necessary or
appropriate for the conduct of its business and the ownership and operation of
its property used and useful in the conduct of its business to be at all times
maintained in good standing and in full force and effect except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Change.

 

Section 6.12     Guaranties of Subsidiaries. Each Subsidiary of the Borrowers
created, acquired or coming into existence after the date hereof shall execute
and deliver to the Lender an absolute and unconditional guaranty of the timely
repayment of the Obligations and the due and punctual performance of the
obligations of the Borrowers hereunder, which guaranty shall be satisfactory to
the Lender in form and substance. The Borrowers will cause each of its
Subsidiaries to deliver to the Lender, simultaneously with its delivery of such
a guaranty, written evidence satisfactory to the Lender and its counsel,
including legal opinions, that such Subsidiary has taken all company action
necessary to duly approve and authorize its execution, delivery and performance
of such guaranty and any other documents which it is required to execute.

 

Section 6.13     Agreement to Deliver Security Documents. Each Borrower agrees
to deliver and to cause each other Credit Party to deliver, to further secure
the Obligations whenever requested by the Lender in its reasonable discretion,
deeds of trust, mortgages, chattel mortgages, security agreements, financing
statements and other Security Documents in form and substance reasonably
satisfactory to the Lender for the purpose of granting, confirming, and
perfecting first and prior liens or security interests in any real or personal
property now owned or hereafter acquired by any Credit Party.

 

 
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Section 6.14     Investment Policy. The Credit Parties will at all times be in
compliance with the Investment Policy.

 

ARTICLE VII - Negative Covenants

 

To induce the Lender to enter into this Agreement and make the Loans, each
Borrower and each other Credit Party warrants, covenants and agrees that until
the Obligations have been fully and indefeasibly paid in full in cash and no
Commitments of the Lender that would give rise to any Obligations remain
outstanding:

 

Section 7.1     Indebtedness. No Credit Party will in any manner owe or be
liable for Indebtedness except:

 

(a)     the Obligations;

 

(b)     Indebtedness existing on the date hereof and set forth in Section 7.1 of
the Disclosure Schedule and extensions, renewals and replacements of any such
Indebtedness; provided that the amount of any such Indebtedness may not be
increased;

 

(c)     guarantees by any Credit Party of the Liabilities of any other Credit
Party to the extent such Liabilities are permitted to be incurred under this
Agreement;

 

(d)     Indebtedness incurred by any Credit Party (i) under worker’s
compensation laws, unemployment insurance laws or similar legislation, and (ii)
to secure public or statutory obligations of such Credit Party;

 

(e)     Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insufficient
funds in the ordinary course of business or other cash management services in
the ordinary course of business;

 

(f)     Indebtedness of any Person at the time such Person becomes a Subsidiary
of a Borrower or is merged into or consolidated with or into any Credit Party in
a transaction permitted by this Agreement; provided, that (i) such Indebtedness
exists at the time such Person becomes a Subsidiary and is not created in
contemplation of such event, (ii) neither the Borrowers nor any other Credit
Party guarantees or is otherwise liable for such Indebtedness, (iii) the
Borrowers are in Pro Forma Compliance, and (iv) the principal amount of such
Indebtedness does not exceed $1,000,000 at any time outstanding, and (v) any
such Indebtedness has a maturity date not sooner than 180 days after the
Maturity Date;

 

(g)     Indebtedness constituting Royalty Payments, the effect of which is
included in the calculation of Net Present Value of an Eligible Asset;

 

(h)     other Indebtedness constituting Royalty Payments so long as the
aggregate amount payable by the Credit Parties in respect thereof does not
exceed $500,000 during any twelve month period;

 

 
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(i)     Indebtedness constituting unfunded commitments or future funding
commitments in connection with an Eligible Asset to the extent such Indebtedness
is not incurred in violation of this Agreement; and

 

(j)     other Indebtedness constituting unfunded commitments or future funding
commitments in connection with an Investment not otherwise constituting an
Eligible Asset so long as the aggregate amount payable by the Credit Parties in
respect thereof does not exceed $1,000,000 at any time outstanding.

 

Section 7.2     Limitation on Liens. Except for Permitted Liens, no Credit Party
will create, assume or permit to exist any Lien upon any of the properties or
assets which it now owns or hereafter acquires.

 

Section 7.3     Limitation on Mergers, Issuances of Securities. No Credit Party
will merge or consolidate with or into any other Person; provided that any
Credit Party may merge or may be consolidated into any other Credit Party
(provided that in any such merger or consolidation with SWK Holdings, SWK
Holdings shall be the survivor). Neither SWK Holdings nor its Subsidiaries will
issue any Equity Interests; provided that, (i) the Subsidiaries of SWK Holdings
may issue additional Equity Interests to SWK Holdings and its wholly-owned
Subsidiaries in accordance with the Security Documents, and (ii) SWK Holdings
may issue additional Equity Interests so long as such issuance does not violate
the Equity Documents.

 

Section 7.4     Limitation on Dispositions of Property. No Credit Party will
make any Disposition of any material Property (including any Eligible Asset) or
any material interest therein, or discount, sell, pledge or assign any notes
payable to it, accounts receivable or future income, except any Credit Party
may:

 

(a)     make Dispositions with respect to:

 

(i)     office furniture, equipment or other similar property that is immaterial
in value, surplus, worn out or obsolete or that is no longer used or useful in
the business of the Borrowers, or the proceeds of which are or are to be used to
purchase office furniture, equipment or other property of comparable suitability
and value;

 

(ii)     any Permitted Investment (including any Eligible Asset); provided, that
both before and after giving effect to such Disposition (A) the Borrowers are in
Pro Forma Compliance and (B) no Default exists; and

 

(iii)     Distributions permitted pursuant to Section 7.5 hereof.

 

(b)     discount, write-off or down, or otherwise make Dispositions with respect
to Non-Performing Loans or other non-performing assets in connection with the
compromise or collection thereof; provided that both before and after giving
effect thereto, (i) no Default exists, (ii) the Borrowers are in Pro Forma
Compliance and (iii) no Material Adverse Change has occurred or will occur as a
result thereof.

 

Section 7.5     Limitation on Dividends and Redemptions. No Credit Party will
declare or make any Distribution, other than (a) Distributions payable to SWK
Holdings or another Credit Party, solely to the extent not in violation of the
restrictions set forth in Section 7.6, (b) the purchase or redemption of Equity
Interests of a Credit Party held by then present or former directors,
consultants, officers or employees in connection with such Person’s death,
disability, retirement or termination of employment or under the terms of any
agreement under which such Equity Interests were issued, (c) Distributions
pursuant to and in accordance with employment arrangements with employees of
Credit Parties in the ordinary course of business either existing on the Closing
Date and set forth on Section 7.5 of the Disclosure Schedule or otherwise
reasonably approved by the Lender in writing, (d) Distributions pursuant to and
in accordance with arrangements with officers or directors of Credit Parties in
the ordinary course of business either existing on the Closing Date and set
forth on Section 7.5 of the Disclosure Schedule or otherwise approved by the
Lender in its sole discretion in writing, and (e) subject to Section 7.3,
Distributions by a Credit Party payable only in such Credit Party’s common stock
or common equity, so long as the Borrowers’ Equity Interests in their
Subsidiaries are not thereby reduced or diluted.

 

 
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Section 7.6     Limitation on Investments and New Businesses. No Credit Party
will (a) engage directly or indirectly in any business or conduct any operations
except in connection with or incidental to its present businesses and operations
or (b) make any acquisitions of or capital contributions to or other Investments
in any Person or property, other than Permitted Investments; provided, that, the
Borrowers are in Pro Forma Compliance after making such Permitted Investment.

 

Section 7.7     Transactions with Affiliates. No Credit Party will engage in any
transaction with any of its investors or Affiliates other than (a) transactions
with the Lender pursuant to the Transaction Documents, (b) transactions set
forth on Section 7.7 of the Disclosure Schedule , (c) transactions whereby SWK
Holdings or any of its Subsidiaries manages investment capital for any of SWK
Holdings’ investors consistent with the Investment Policy and past practices,
(d) transactions with Carlson and/or its Affiliates, and (e) any other
transaction that (i) is on an arm’s-length basis, (ii) is disclosed to the
Lender in writing (which writing shall include a certification by an authorized
officer of the applicable Credit Party that such transaction is on an
arm’s-length basis), and (iii) involves payments, property, services and/or
other consideration with an aggregate value not to exceed $50,000 given by or on
behalf of a Credit Party in any 12 month period.

 

Section 7.8     Prohibited Contracts. Except as expressly provided for in the
Transaction Documents, no Credit Party will, directly or indirectly, enter into,
create, or otherwise allow to exist any contract or other consensual restriction
on the ability of any Credit Party to: (a) pay Distributions to any Borrower,
(b) redeem Equity Interests held in it by any Borrower, or (c)  repay loans and
other indebtedness owing by it to any Borrower; provided, that the foregoing
shall not apply to customary restrictions imposed on the granting, conveying,
creation or imposition of any Lien on any property or assets of any Credit Party
imposed by any contract, agreement or understanding related to the Liens
described in clause (j) of the definition of “Permitted Liens” so long as such
restriction only applies to the property or assets permitted to be encumbered by
such Liens. No ERISA Affiliate will incur any obligation to contribute to any
“multiemployer plan” as defined in Section 4001 of ERISA.

 

 
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Section 7.9     Amendments to Organizational Documents; Other Material
Agreements. No Credit Party will enter into or permit any modification of, or
waive any material right or obligation of any Person under its Organizational
Documents other than amendments, modifications and waivers which could not,
individually or in the aggregate, (a) have a Material Adverse Change or (b)
adversely affect the Lender’s rights under any Transaction Document.

 

Section 7.10     Investment Policy. Other than with respect to Permitted
Investment Policy Amendments, SWK Holdings will not amend, supplement, waive, or
otherwise modify the Investment Policy.

 

Section 7.11     Underlying Agreements. No Credit Party will amend, modify,
waive, supplement or grant a forbearance with respect to any Underlying
Agreement of any Eligible Asset that has the effect of (a) deferring the payment
of any monetary obligation due to any Credit Party thereunder by an Obligor in
excess of $100,000, (b) allowing a monetary obligation in excess of $100,000
required to be paid in cash to any Credit Party, to be paid in-kind or other
non-cash consideration, (c) having or reasonably likely to result in a Material
Adverse Change. For the avoidance of doubt, the dollar amounts set forth in the
foregoing clauses (a) and (b) shall apply solely with respect to the Credit
Parties’ pro rata share of the relevant investment (for example, in the case
where a Permitted Investment constitutes a partial interest in a syndicated Loan
Asset, the foregoing clauses (a) and (b) shall be measured solely as they relate
to the Credit Parties’ interest in such Loan Asset and not the overall loan
facility). Without the prior consent of the Lender, no Credit Party will, with
respect to a Material Investment, initiate litigation or commence an insolvency
proceeding under the Bankruptcy Law for an Obligor’s default or breach under any
Underlying Agreement with respect to such Material Investment. For the avoidance
of doubt, as it relates to any Permitted Investments not otherwise constituting
an Eligible Asset, the foregoing restrictions shall not apply to such Permitted
Investments; provided, that no Credit Party will amend, modify, waive,
supplement, or grant a forbearance with respect to any Underlying Agreement
other than in compliance with the Performance Standard.

 

ARTICLE VIII - Financial Covenants

 

Section 8.1     Minimum Asset Coverage Ratio. The Borrowers shall not permit the
Asset Coverage Ratio to be less than 1.6 to 1.0 at any time; provided, that, if
the Borrowers prepay the Loans within 3 Business Days of Borrowers’ failure to
comply with the foregoing requirement such that, after giving effect to such
prepayment, the Asset Coverage Ratio is greater than or equal to 1.6 to 1.0,
then no Event of Default shall be deemed to have occurred pursuant to this
Section 8.1.

 

Section 8.2     Minimum Interest Coverage Ratio. Commencing with the Fiscal
Quarter ending September 30, 2013, the Borrowers shall not permit the Interest
Coverage Ratio to be less than 3.0 to 1.0 as of the last day of any Fiscal
Quarter.

 

Section 8.3     Minimum Liquidity. The Borrowers shall not permit the aggregate
Liquidity of the Credit Parties to be less than the aggregate amount of all
unfunded commitments and/or future funding commitments of the Credit Parties
with respect to any Eligible Assets at any time.

 

 
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ARTICLE IX - Events of Default and Remedies

 

Section 9.1     Events of Default. Each of the following events constitutes an
Event of Default under this Agreement:

 

(a)     any Credit Party fails to pay (i) any principal owing in respect of any
Loan when due and payable or (ii) any interest owing in respect of any Loan
within 2 Business Days of when due and payable;

 

(b)     any Credit Party fails to pay any Obligation (other than the Obligations
in subsection (a) above) within 5 Business Days after the same becomes due and
payable;

 

(c)     any Credit Party fails to duly observe, perform or comply with any
covenant, agreement or provision of Section 6.4, Article VII, or Article VIII;

 

(d)     any Credit Party fails (other than as referred to in subsections (a),
(b), or (c) above) to duly observe, perform or comply with any covenant,
agreement, condition or provision of any Transaction Document to which it is a
party, and such failure remains unremedied for a period of 30 days after the
occurrence of such Default;

 

(e)     any representation or warranty previously, presently or hereafter made
in writing by or on behalf of any Credit Party in connection with any
Transaction Document shall prove to have been false or incorrect in any material
respect on any date on or as of which made, or any Transaction Document at any
time ceases to be valid, binding and enforceable as warranted in Section 5.4;

 

(f)     any Credit Party fails to duly observe, perform or comply with any
Underlying Agreement with respect to any Material Investment, and such failure
(i) permits the related Obligor to terminate such Underlying Agreement or (ii)
excuses such Obligor from performing its material obligations thereunder
including any monetary obligation in excess of $250,000;

 

(g)     any Credit Party (i) fails to pay any portion, when such portion is due,
of any of its Indebtedness in excess of $250,000, individually or in the
aggregate, and such failure shall continue unremedied beyond any grace period
applicable thereto, or (ii) breaches or defaults in the performance of any
agreement or instrument by which any such Indebtedness is issued, evidenced,
governed, or secured, and any such failure, breach or default continues beyond
any applicable period of grace provided therefor and such breach or default
results in such Indebtedness becoming due prior to its scheduled maturity or
presently enables or permits the holder or holders of such Indebtedness or any
trustee or agent on its or their behalf to cause such Indebtedness to become due
or to require the prepayment, repurchase, redemption or defeasance thereof,
prior to its scheduled maturity;

 

(h)     the occurrence of any Change of Control;

 

(i)     any Credit Party:

 

(i)     suffers the entry against it of a judgment, decree or order for relief
by a Governmental Authority of competent jurisdiction in an involuntary
proceeding commenced under any applicable bankruptcy, insolvency or other
similar Law of any jurisdiction now or hereafter in effect, including the
federal Bankruptcy Code, as from time to time amended, or has any such
proceeding commenced against it which remains undismissed for a period of 60
days; or

 

 
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(ii)     commences a voluntary case under any applicable bankruptcy, insolvency
or similar Law now or hereafter in effect, including the federal Bankruptcy
Code, as from time to time amended; or applies for or consents to the entry of
an order for relief in an involuntary case under any such Law; or makes a
general assignment for the benefit of creditors; or is generally not paying (or
admits in writing its inability to pay) its debts as such debts become due; or
takes corporate or other action authorizing any of the foregoing; or

 

(iii)     suffers the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee or similar official of all or a
substantial part of its assets or of any part of the Collateral in a proceeding
brought against or initiated by it, and such appointment or taking possession is
neither made ineffective nor discharged within 60 days after the making thereof,
or such appointment or taking possession is at any time consented to, requested
by, or acquiesced to by it; or

 

(iv)     suffers the entry against it of a final judgment for the payment of
money in excess of $250,000 (not covered by insurance satisfactory to the Lender
in its reasonable discretion), unless the same is discharged within 60 days
after the date of entry thereof or an appeal or appropriate proceeding for
review thereof is taken within such period and a stay of execution pending such
appeal is obtained; or

 

(v)     suffers a writ or warrant of attachment or any similar process to be
issued by any Governmental Authority against all or any substantial part of its
assets or any part of the Collateral, and such writ or warrant of attachment or
any similar process is not stayed or released within 60 days after the entry or
levy thereof or after any stay is vacated or set aside; or

 

(vi)     any Transaction Document after delivery thereof shall for any reason
cease to be in full force and effect and valid, binding and enforceable in
accordance with its terms against the Credit Parties party thereto or shall be
repudiated by any of them, or, if applicable, cease to create a valid and
perfected Lien of the priority required thereby on any of the Collateral
purported to be covered thereby, or any Credit Party or any of their Affiliates
shall so state in writing, in each case except to the extent permitted by the
terms of this Agreement.

 

Upon the occurrence of an Event of Default described in subsection (i)(i),
(i)(ii) or (i)(iii) of this section with respect to any Credit Party, all of the
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by the Borrowers and each other Credit Party who at any
time ratifies or approves this Agreement. During the continuance of any other
Event of Default, the Lender at any time and from time to time may, upon notice
to the Borrowers, declare any or all of the Obligations immediately due and
payable, and all such Obligations shall thereupon be immediately due and
payable, without demand, presentment, notice of demand or of dishonor and
nonpayment, protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other notice or declaration of any
kind, all of which are hereby expressly waived by the Borrowers and each Credit
Party who at any time ratifies or approves this Agreement. Upon the acceleration
of the Obligations pursuant to this Section 9.1, the Lender shall be entitled to
a Prepayment Premium (if such acceleration occurs on or before the Maturity
Date) in addition to all other amounts due and payable in respect of the Loans
and any other Obligations.

 

 
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Section 9.2     Remedies. If any Event of Default shall occur and be continuing,
the Lender may protect and enforce its rights under the Loan Documents by any
appropriate proceedings, including proceedings for specific performance of any
covenant or agreement contained in any Loan Document. All rights, remedies and
powers conferred upon the Lender under the Loan Documents shall be deemed
cumulative and not exclusive of any other rights, remedies or powers available
under the Loan Documents or at Law or in equity.

 

ARTICLE X - Guaranty

 

Section 10.1     Guaranty. Each Guarantor hereby absolutely and unconditionally
guarantees to the Lender the prompt payment when due, whether at stated
maturity, upon acceleration or otherwise, and at all times thereafter, of the
Obligations and all costs and expenses including, without limitation, all court
costs and attorneys’ and paralegals’ fees and expenses paid or incurred by the
Lender in endeavoring to collect all or any part of the Obligations from, or in
prosecuting any action against, the Borrowers or any other Guarantor of all or
any part of the Obligations (such costs and expenses, together with the
Obligations, collectively the “Guaranteed Obligations”). Each Guarantor further
agrees that the Guaranteed Obligations may be extended or renewed in whole or in
part without notice to or further assent from it, and that it remains bound upon
its guarantee notwithstanding any such extension or renewal.

 

Section 10.2     Guaranty of Payment. This guaranty is a guaranty of payment and
not of collection. Each Guarantor hereby waives any right to require the Lender
to sue the Borrowers, any other Guarantor or any other Person obligated for all
or any part of the Guaranteed Obligations (each, an “Obligated Party”), or
otherwise to enforce its payment against any collateral securing all or any part
of the Guaranteed Obligations.

 

Section 10.3     No Discharge or Diminishment of Guaranty.

 

(a)     Except as otherwise provided for herein, the obligations of each
Guarantor hereunder are unconditional and absolute and not subject to any
reduction, limitation, impairment or termination for any reason (other than the
indefeasible payment in full in cash of the Guaranteed Obligations), including:
(i) any claim of waiver, release, extension, renewal, settlement, surrender,
alteration, or compromise of any of the Guaranteed Obligations, by operation of
law or otherwise; (ii) any change in the corporate existence, structure or
ownership of the Borrowers, any other Guarantor, or any other Person liable for
any of the Guaranteed Obligations; (iii) any insolvency, bankruptcy,
reorganization or other similar proceeding affecting any Obligated Party, or
their assets or any resulting release or discharge of any obligation of any
Obligated Party; or (iv) the existence of any claim, setoff or other rights that
such Guarantor may have at any time against any Obligated Party, the Lender, or
any other Person, whether in connection herewith or in any unrelated
transactions.

 

 
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(b)     The obligations of each Guarantor hereunder are not subject to any
defense or setoff, counterclaim, recoupment, or termination whatsoever by reason
of the invalidity, illegality, or unenforceability of any of the Guaranteed
Obligations or otherwise, or any provision of applicable law or regulation
purporting to prohibit payment by any Obligated Party, of the Guaranteed
Obligations or any part thereof.

 

(c)     Further, the obligations of each Guarantor hereunder are not discharged
or impaired or otherwise affected by: (i) the failure of the Lender to assert
any claim or demand or to enforce any remedy with respect to all or any part of
the Guaranteed Obligations; (ii) any waiver or modification of or supplement to
any provision of any agreement relating to the Guaranteed Obligations; (iii) any
release, non-perfection, or invalidity of any indirect or direct security for
the obligations of the Borrowers for all or any part of the Guaranteed
Obligations or any obligations of any other Person liable for any of the
Guaranteed Obligations; (iv) any action or failure to act by the Lender with
respect to any collateral securing any part of the Guaranteed Obligations; or
(v) any default, failure or delay, willful or otherwise, in the payment or
performance of any of the Guaranteed Obligations, or any other circumstance,
act, omission or delay that might in any manner or to any extent vary the risk
of such Guarantor or that would otherwise operate as a discharge of such
Guarantor as a matter of law or equity (other than the indefeasible payment in
full in cash of the Guaranteed Obligations).

 

Section 10.4     Defenses Waived. To the fullest extent permitted by applicable
Law, each Guarantor hereby waives any defense based on or arising out of any
defense of the Borrowers or any other Guarantor or the unenforceability of all
or any part of the Guaranteed Obligations from any cause, or the cessation from
any cause of the liability of the Borrowers or any other Guarantor, other than
the indefeasible payment in full in cash of the Guaranteed Obligations. Without
limiting the generality of the foregoing, each Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and, to the fullest extent
permitted by Law, any notice not provided for herein, as well as any requirement
that at any time any action be taken by any Person against any Obligated Party,
or any other Person. The Lender may, at its election, foreclose on any
Collateral held by it by one or more judicial or nonjudicial sales, accept an
assignment of any such Collateral in lieu of foreclosure or otherwise act or
fail to act with respect to any collateral securing all or a part of the
Guaranteed Obligations, compromise or adjust any part of the Guaranteed
Obligations, make any other accommodation with any Obligated Party, or exercise
any other right or remedy available to it against any Obligated Party, without
affecting or impairing in any way the liability of such party under this Article
X except to the extent the Guaranteed Obligations have been fully and
indefeasibly paid in full in cash and no Commitments of the Lender that would
give rise to any Obligations remain outstanding. To the fullest extent permitted
by applicable Law, each Guarantor hereby waives any defense arising out of any
such election even though that election may operate, pursuant to applicable Law,
to impair or extinguish any right of reimbursement or subrogation or other right
or remedy of such Guarantor against any Obligated Party or any security.

 

 
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Section 10.5     Rights of Subrogation. No Guarantor will assert any right,
claim or cause of action, including, without limitation, a claim of subrogation,
contribution or indemnification that it has against any Obligated Party, or any
collateral, until the Guaranteed Obligations have been fully and indefeasibly
paid in full in cash and no Commitments of the Lender that would give rise to
any Obligations remain outstanding.

 

Section 10.6     Reinstatement; Stay of Acceleration. If at any time any payment
of any portion of the Guaranteed Obligations is rescinded or must otherwise be
restored or returned upon the insolvency, bankruptcy, or reorganization of any
Credit Party or otherwise, each Guarantor’s obligations under this Article X
with respect to that payment shall be reinstated at such time as though the
payment had not been made and whether or not the Lender is in possession of this
Agreement. If acceleration of the time for payment of any of the Guaranteed
Obligations is stayed upon the insolvency, bankruptcy or reorganization of any
Credit Party, all such amounts otherwise subject to acceleration under the terms
of any agreement relating to the Guaranteed Obligations shall nonetheless be
payable by the Guarantors forthwith on demand by the Lender.

 

Section 10.7     Information. Each Guarantor assumes all responsibility for
being and keeping itself informed of each other Guarantor’s financial condition
and assets, and of all other circumstances bearing upon the risk of nonpayment
of the Guaranteed Obligations and the nature, scope and extent of the risks that
such party assumes and incurs under this Article X, and agrees that the Lender
shall not have any duty to advise any such party of information known to it
regarding those circumstances or risks.

 

Section 10.8     Maximum Liability. In any action or proceeding involving any
state corporate law, or any state, federal or foreign bankruptcy, insolvency,
reorganization or other Law affecting the rights of creditors generally, if the
obligations of any Guarantor under this Article X would otherwise be held or
determined to be avoidable, invalid or unenforceable on account of the amount of
such party’s liability under this Article X, then, notwithstanding any other
provision of this Agreement to the contrary, the amount of such liability shall,
without any further action by such Guarantor or the Lender, be automatically
limited and reduced to the highest amount that is valid and enforceable as
determined in such action or proceeding (such highest amount determined
hereunder being the relevant Guarantor’s “Maximum Liability”). This Section 10.8
is intended solely to preserve the rights of the Lender to the maximum extent
not subject to avoidance under applicable Law, and no Guarantor nor any other
Person shall have any right or claim under this Section 10.8 with respect to
such Maximum Liability, except to the extent necessary so that the obligations
of any Guarantor hereunder shall not be rendered voidable under applicable law.
Each Guarantor agrees that the Guaranteed Obligations may at any time and from
time to time exceed the Maximum Liability of such Guarantor without impairing
this guaranty or affecting the rights and remedies of the Lender hereunder;
provided, that nothing in this sentence shall be construed to increase any
Guarantor’s obligations hereunder beyond its Maximum Liability.

 

Section 10.9     Liability Cumulative. The liability of each Guarantor under
this Article X is in addition to and shall be cumulative with all liabilities of
such Credit Party to the Lender under this Agreement and the other Loan
Documents to which such Credit Party is a party or in respect of any obligations
or liabilities of the other Credit Parties, without any limitation as to amount,
unless the instrument or agreement evidencing or creating such other liability
specifically provides to the contrary.

 

 
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ARTICLE XI - Miscellaneous

 

Section 11.1     Waivers and Amendments; Acknowledgments.

 

(a)     Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by the Lender in exercising any right, power or remedy
that the Lender may have under any of the Loan Documents shall operate as a
waiver thereof or of any other right, power or remedy, nor shall any single or
partial exercise by the Lender of any such right, power or remedy preclude any
other or further exercise thereof or of any other right, power or remedy. No
waiver of any provision of any Loan Document and no consent to any departure
therefrom shall ever be effective unless it is in writing and signed as provided
below in this section, and then such waiver or consent shall be effective only
in the specific instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on any Credit Party shall in
any case entitle any Credit Party to any other or further notice or demand in
similar or other circumstances. This Agreement and the other Transaction
Documents set forth the entire understanding between the parties hereto with
respect to the transactions contemplated herein and therein and supersede all
prior discussions and understandings with respect to the subject matter hereof
and thereof, and no waiver, consent, release, modification or amendment of or
supplement to this Agreement or any other Loan Document shall be valid or
effective against any party hereto unless the same is in writing and signed by
such party.

 

(b)     Acknowledgments and Admissions. Each Credit Party hereby represents,
warrants, acknowledges and admits that:

 

(i)     it has been advised by counsel in the negotiation, execution and
delivery of the Loan Documents to which it is a party;

 

(ii)     it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by the Lender, whether
written, oral or implicit, other than as expressly set out in this Agreement or
in such Loan Documents delivered on or after the date hereof;

 

(iii)     there are no representations, warranties, covenants, undertakings or
agreements by the Lender with respect to the Loan Documents except as expressly
set out in this Agreement or in the other Loan Documents delivered on or after
the date hereof;

 

(iv)     the Lender has no fiduciary obligation toward it with respect to any
Loan Document or the transactions contemplated thereby;

 

(v)     the relationship pursuant to the Loan Documents between the Credit
Parties, on one hand, and the Lender, on the other hand, is and shall be solely
that of debtor and creditor, respectively;

 

 
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(vi)     no partnership or joint venture exists with respect to the Loan
Documents between any Credit Party and the Lender;

 

(vii)    should a Default occur or exist, the Lender will determine in its
discretion and for its own reasons what remedies and actions it will or will not
exercise or take at that time;

 

(viii)   without limiting any of the foregoing, no Credit Party is relying upon
any representation or covenant by the Lender, or any representative thereof, and
no such representation or covenant has been made, that the Lender will, at the
time of any Default, or at any other time, waive, negotiate, discuss, or take or
refrain from taking any action permitted under the Loan Documents with respect
to any such Default or any other provision of the Loan Documents; and

 

(ix)     the Lender has relied upon the truthfulness of the acknowledgments in
this section in deciding to execute and deliver this Agreement and to become
obligated hereunder.

 

(c)     Joint Acknowledgment. This Agreement and the other Transaction Documents
represent the final agreement between the parties and may not be contradicted by
evidence of prior, contemporaneous, or subsequent oral agreements of the
parties. There are no unwritten oral agreements between the parties.

 

Section 11.2     Survival of Agreements; Cumulative Nature. All of the Credit
Parties’ various representations, warranties, covenants and agreements in the
Loan Documents shall survive the execution and delivery of this Agreement and
the other Transaction Documents and the performance hereof and thereof,
including the making of the Loans and delivery of the other Transaction
Documents, and shall further survive until all of the Obligations are
indefeasibly paid in full in cash to the Lender and no Commitments of the Lender
that would give rise to any Obligations remain outstanding. All statements and
agreements contained in any certificate or other instrument delivered by any
Credit Party to the Lender pursuant to any Transaction Document shall be deemed
representations and warranties by the Borrowers or agreements and covenants of
the Borrowers under this Agreement. The representations, warranties,
indemnities, and covenants made by the Credit Parties in the Loan Documents, and
the rights, powers, and privileges granted to the Lender in the Loan Documents,
are cumulative, and, except for expressly specified waivers and consents, no
Loan Document shall be construed in the context of another to diminish, nullify,
or otherwise reduce the benefit to the Lender of any such representation,
warranty, indemnity, covenant, right, power or privilege. In particular and
without limitation, no exception set out in this Agreement to any
representation, warranty, indemnity, or covenant herein contained shall apply to
any similar representation, warranty, indemnity, or covenant contained in any
other Loan Document, and each such similar representation, warranty, indemnity,
or covenant shall be subject only to those exceptions which are expressly made
applicable to it by the terms of the various Loan Documents.

 

 
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Section 11.3     Notices. All notices, requests, consents, demands and other
communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document, and shall
be deemed sufficiently given or furnished if delivered by personal delivery, by
facsimile, by delivery service with proof of delivery, or by registered or
certified United States mail, postage prepaid, to the Borrowers and the Credit
Parties at the address of the Borrowers specified below and to the Lender at the
address specified below (unless changed by similar notice in writing given by
the particular Person whose address is to be changed). Any such notice or
communication shall be deemed to have been given (a) in the case of personal
delivery or delivery service, as of the date of first attempted delivery during
normal business hours at the address provided herein, (b) in the case of
facsimile, upon receipt, or (c) in the case of registered or certified United
States mail, three days after deposit in the mail.

 

If to the Borrowers and/or any Credit Party:

 

c/o SWK Holdings Corporation

15770 North Dallas Parkway

Suite 1290

Dallas, Texas 75248

Attention: J. Brett Pope, Chief Executive Officer

Facsimile: (972) 687-7255

 

with a copy to:

 

Holland & Knight LLP

300 Crescent Court, 11th Floor

Dallas, Texas 75201

Attention: Ryan Magee

Facsimile (214) 964-9501

 

If to the Lender:

 

c/o Carlson Capital, L.P.

2100 McKinney Avenue

Suite 1800

Dallas, Texas 75201

Attention: Christopher W. Haga; and Thomas Cason, General Counsel’s Office

Facsimile: (214) 932-9712

 

Section 11.4     Payment of Expenses; Indemnity.

 

(a)     Payment of Expenses. The Borrowers will promptly (and in any event,
within 10 days after any invoice or other statement or notice) pay: (i) all
transfer, stamp, mortgage, court or documentary, intangible, recording, filing
or other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Agreement or any of the other Transaction
Documents or any other document or transaction referred to herein or therein,
(ii) all reasonable costs and expenses incurred by or on behalf of the Lender
(including attorneys’ fees, consultants’ fees and engineering fees, travel costs
and miscellaneous expenses) in connection with (1) the preparation and
negotiation of this Agreement and the other Transaction Documents, (2) the
filing, recording, re-filing and re-recording of any Transaction Documents and
any other documents or instruments or further assurances required to be filed or
recorded or re-filed or re-recorded by the terms of any Transaction Document,
(3) monitoring or confirming (or preparation or negotiation of any document
related to) any Credit Party’s compliance with any covenants or conditions
contained in this Agreement or in any Transaction Document, and (3) any
amendments or waivers of the provisions of any Transaction Document, and
(iii) all costs and expenses incurred by or on behalf of the Lender (including
without limitation attorneys’ fees, consultants’ fees and accounting fees) in
connection with the preservation of any rights under the Transaction Documents
or the defense or enforcement of any of the Transaction Documents (including
this Section), any attempt to cure any breach thereunder by any Credit Party, or
the defense of the Lender’s exercise of its rights thereunder.

 

 
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(b)     Indemnity. Each Credit Party agrees to indemnify the Lender, its
Affiliates and each of their respective directors, officers, employees, equity
owners, agents and advisors (each an “Indemnified Party”), upon demand, from and
against any and all liabilities, obligations, broker’s fees, claims, losses,
damages, penalties, fines, actions, judgments, suits, settlements, costs,
expenses or disbursements (including fees and expenses of attorneys,
accountants, experts and advisors) of any kind or nature whatsoever (in this
section collectively called “liabilities and costs”) which to any extent (in
whole or in part) may be imposed on, incurred by, or asserted against an
Indemnified Party arising out of, resulting from, or in any other way associated
with any of the Collateral, the Transaction Documents and the transactions and
events (including the enforcement or defense thereof) at any time associated
therewith or contemplated therein (whether arising in contract or in tort or
otherwise). Among other things, the foregoing indemnification covers all
liabilities and costs incurred by an Indemnified Party related to any breach of
a Transaction Document by a Credit Party, any bodily injury to any Person or
damage to any Person’s property.

 

The foregoing indemnification shall apply whether or not such liabilities and
costs are in any way or to any extent owed, in whole or in part, under any claim
or theory of strict liability or caused, in whole or in part by any negligent
act or omission of any kind by the Lender (in each case whether alleged, arising
or imposed in a legal proceeding brought by or against any Credit Party, the
Lender, or any other Person);

 

provided, that the Lender shall not be entitled under this section to receive
indemnification for that portion, if any, of any liabilities and costs that is
proximately caused by its own gross negligence or willful misconduct, as
determined in a final non-appealable judgment by a court of competent
jurisdiction. If any Person (including the Borrowers, any other Credit Party or
any of their respective Affiliates) ever alleges such gross negligence or
willful misconduct by the Lender, the indemnification provided for in this
section shall nonetheless be paid upon demand, subject to later adjustment or
reimbursement, until such time as a court of competent jurisdiction enters a
final non-appealable judgment as to the extent and effect of the alleged gross
negligence or willful misconduct. As used in this section the term “Lender”
shall refer not only to the Lender but also to each director, officer, agent,
trustee, attorney, employee, representative and Affiliate of or for the Lender.

 

 
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Section 11.5     Successors and Assigns. All grants, covenants and agreements
contained in the Transaction Documents shall bind and inure to the benefit of
the parties thereto and their respective successors and assigns; provided,
however, that no Credit Party may assign or transfer any of its rights or
delegate any of its duties or obligations under any Transaction Document without
the prior consent of the Lender.

 

Section 11.6     Assignment of Loans and Note; Replacement of Note.

 

(a)     Assignment of Loans and Note. The Lender may not assign all or part of
any Loan or all or part of the Note to any Person without the prior written
consent of the Borrowers, not to be unreasonably withheld, except for
assignments (i) to any Affiliate of the Lender, (ii) to any Approved Fund or
(iii) if an Event of Default is then in existence, to any Person. In the case of
any such assignment, the Borrowers shall deliver a replacement Note for such
Note (or such portion thereof) made payable to such Person as the Lender may
request and substantially in the form of Exhibit A. For the avoidance of doubt,
it shall be reasonable for the Borrowers to withhold consent to an assignment by
the Lender if the assignment is to a direct competitor of the Borrowers.

 

(b)     Replacement of Note. Upon receipt by the Borrowers of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
the Note, and satisfactory indemnification, if requested, the Borrowers, at
their own expense, shall execute and deliver to the Lender, in lieu thereof, a
new Note.

 

(c)     The Borrowers shall maintain a copy of each assignment and assumption
delivered to it by the Lender and a register for the recordation of the names
and addresses of any assignees, and the Commitments of, and principal amounts
(and stated interest) of the Loans owing to, each such assignee pursuant to the
terms hereof from time to time (the “Register”). The entries in the Register
shall be conclusive absent manifest error, and the Borrowers and the Lender
shall treat each Person whose name is recorded in the Register pursuant to the
terms hereof as the Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrowers and the Lender, at
any reasonable time and from time to time upon reasonable prior notice.

 

Section 11.7     Confidentiality.

 

(a)     Subject to subsection (d) below, notwithstanding the termination of this
Agreement and except as otherwise provided in subsection (b) or subsection (c)
below, the Lender shall maintain the confidentiality of any information
delivered to the Lender by or on behalf of the Borrowers or any other Credit
Party in connection with the transactions contemplated by or otherwise pursuant
to the Transaction Documents that is proprietary or confidential in nature
(collectively, the “Borrower Confidential Information”) and shall not, without
the prior written consent of the Borrowers, disclose any Borrower Confidential
Information to another Person or use any Borrower Confidential Information for
purposes other than those contemplated herein and in the other Transaction
Documents.

 

 
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(b)     Notwithstanding subsection (a) above, the Lender may disclose Borrower
Confidential Information to its Affiliates and its and its Affiliates’
respective directors, officers, members, partners, employees, and agents
(including attorneys, accountants, and consultants) to whom such disclosure is
reasonably necessary for the execution or effectuation hereof; provided, that
the Lender notifies all such Persons that the Borrower Confidential Information
disclosed to them is subject to this Section 11.7 and requires them not to
disclose or use such information in breach of this Section 11.7. Notwithstanding
subsection (a) above, the Lender may also disclose Borrower Confidential
Information (i) to any Person to any prospective purchaser or assignee of the
Loans, or any portion thereof or any participation therein (if such Person has
agreed in writing prior to its receipt of such Borrower Confidential Information
to be bound by the provisions of this Section 11.7), (ii) to any federal or
state regulatory authority having jurisdiction over it, (iii) to effect
compliance with any law, rule, regulation or order applicable to it, including,
without limitation, in connection with any required financial reporting
disclosures by the Lender to the holders of its or any of its Affiliates’ Equity
Interests, (iv) in response to any subpoena or other legal process, (v) in
connection with any litigation to which it is a party, or (vi) if an Event of
Default has occurred and is continuing, to the extent it may reasonably
determine such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under the
Transaction Documents.

 

(c)     If the Lender is requested or required by legal process (including law
or regulation, oral questions, interrogatories, request for information or
documents, subpoena, and civil investigative demand) to disclose any Borrower
Confidential Information, then, to the extent legally permitted to do so, the
Lender shall promptly notify the Borrowers of such request prior to complying
with such process so that the Credit Parties may seek an appropriate protective
order or waive the Lender’s compliance with this Section 11.7. Notwithstanding
subsection (a) above, if, after the Lender gives such notice to the Borrowers
and after providing the Credit Parties a reasonable opportunity to obtain a
protective order or to grant such waiver (so long as the granting of such time
does not put the Lender in breach of its obligations to disclose), the Lender is
nonetheless legally compelled to disclose such information, the Lender may do so
without violating this section.

 

(d)     Any Borrower Confidential Information which becomes publicly available
by any reason other than (i) a breach by the Lender hereunder or (ii) a breach
by a third party of a confidential obligation to the relevant party hereunder of
which the Lender has knowledge, shall no longer be deemed to be Borrower
Confidential Information.

 

Section 11.8     Governing Law; Submission to Process. Except to the extent that
the law of another jurisdiction is expressly elected in a Transaction Document,
this Agreement and the other Transaction Documents shall be governed by and
construed in accordance with the internal laws of the State of Texas, without
giving effect to any choice or conflict of law provision (whether of the State
of Texas or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Texas. Each Credit Party hereby
irrevocably (a) submits itself to the non-exclusive jurisdiction of the state
and federal courts sitting in Dallas County, Texas, (b) agrees and consents that
service of process may be made upon it and any of its Subsidiaries in any legal
proceeding relating to the Transaction Documents or the Obligations by any means
allowed under Texas or federal law, and (c) waives any objection that it may now
or hereafter have to the venue of any such proceeding being in such a court and
any claim that any such proceeding brought in such a court has been brought in
an inconvenient forum. Each Credit Party hereby makes the foregoing submissions,
agreements, consents and waivers on behalf of and with respect to each of its
Subsidiaries, and each Guarantor (by its execution hereof or of a separate
guaranty) hereby also makes such submissions, agreements, consents and waivers
for itself.

 

 
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Section 11.9     Limitation on Interest. The Lender and the Credit Parties
intend to contract in strict compliance with applicable usury Law from time to
time in effect. In furtherance thereof such Persons stipulate and agree that
none of the terms and provisions contained in the Transaction Documents shall
ever be construed to provide for interest in excess of the Highest Lawful Rate
from time to time in effect. Neither any Credit Party nor any present or future
guarantors, endorsers, or other Persons hereafter becoming liable for payment of
any Obligation shall ever be liable for unearned interest thereon or shall ever
be required to pay interest thereon in excess of the Highest Lawful Rate from
time to time in effect, and the provisions of this section shall control over
all other provisions of the Loan Documents that may be in conflict or apparent
conflict herewith.

 

Section 11.10   Severability. If any term or provision of any Transaction
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Transaction Documents shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by applicable Law.

 

Section 11.11   Counterparts; Fax. This Agreement may be separately executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement. This Agreement and the Transaction Documents may be
validly executed and delivered in counterparts exchanged via facsimile,
electronic mail in portable document format (.pdf) or other electronic
transmission, each of which counterparts shall be deemed originals for all
purposes.

 

 
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Section 11.12    Waiver of Jury Trial, Punitive Damages, etc. Each Credit Party
and the Lender each hereby knowingly, voluntarily, intentionally, and
irrevocably (a) waives, to the maximum extent not prohibited by Law, any right
it may have to a trial by jury in respect of any litigation based hereon, or
directly or indirectly at any time arising out of, under or in connection with
the Transaction Documents or any transaction contemplated thereby or associated
therewith, before or after maturity; (b) waives, to the maximum extent not
prohibited by Law, any right it may have to claim or recover in any such
litigation any “Special Damages” as defined below, (c) certifis that no party
hereto nor any representative or agent or counsel for any party hereto has
represented, expressly or otherwise, or implied that such party would not, in
the event of litigation, seek to enforce the foregoing waivers, and
(d) acknowledges that it has been induced to enter into this Agreement, the
other Transaction Documents and the transactions contemplated hereby and thereby
by, among other things, the mutual waivers and certifications contained in this
Section. As used in this Section, “Special Damages” includes all special,
consequential, exemplary, or punitive damages (regardless of how named), but
does not include any payments or funds which any party hereto has expressly
promised to pay or deliver to any other party hereto.

 

 

 

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

 

  BORROWERS:           SWK HOLDINGS CORPORATION,     a Delaware corporation    
                 By: /s/ J. Brett Pope     Name:  J. Brett Pope     Title:   
Chief Executive Officer  

  SWK FUNDING LLC,     a Delaware limited liability company                     
By: /s/  J. Brett Pope     Name:  J. Brett Pope     Title:    Chief Executive
Officer  

 

 

  GUARANTORS:          

SWK HP HOLDINGS GP LLC,

    a Delaware limited liability company                      By: /s/ J. Brett
Pope     Name:  J. Brett Pope     Title:    Chief Executive Officer  

 

  SWK ADVISORS LLC,     a Delaware limited liability company                   
  By: /s/  J. Brett Pope     Name:  J. Brett Pope     Title:    Chief Executive
Officer  

  

 

 
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  LENDER:           DOUBLE BLACK DIAMOND, L.P.,     a Delaware limited
partnership           By: Carlson Capital, L.P.,
its Investment Advisor            

By:

Asgard Investment Corp. II,
its General Partner

                     By: /s/ Clint D. Carlson     Name:  Clint D. Carlson    
Title:    President  

 

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