Exhibit 10.2

 

NEITHER THIS WARRANT NOR THE SECURITIES FOR WHICH THIS WARRANT IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE, AND, ACCORDINGLY, MAY NOT BE OFFERED FOR
SALE OR SOLD, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”) OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

WARRANT AGREEMENT

 

To Purchase Shares of the Common Stock of

 

ALBIREO PHARMA, INC.

 

Dated as of ________________ __, 2020 (the “Effective Date”)

 

WHEREAS, Albireo Pharma, Inc., a Delaware corporation (the “Company”), has
entered into a Loan and Security Agreement of even date herewith (as amended and
in effect from time to time, the “Loan Agreement”) with Hercules Capital, Inc.,
a Maryland corporation, in its capacity as administrative agent and collateral
agent for itself and the Lender (as defined below) (the “Warrantholder”), and
the several banks and other financial institutions or entities from time to time
party thereto (collectively, the “Lender”);

 

WHEREAS, pursuant to the Loan Agreement, the Company has agreed to issue to the
Warrantholder this Warrant Agreement, evidencing the right to purchase shares of
the Company’s Common Stock (this “Warrant,” “Warrant Agreement,” or this
“Agreement”);

 

NOW, THEREFORE, in consideration of the Warrantholder having executed and
delivered the Loan Agreement and provided the financial accommodations
contemplated therein, and in consideration of the mutual covenants and
agreements contained herein, the Company and the Warrantholder agree as follows:

 

SECTION 1.     GRANT OF THE RIGHT TO PURCHASE COMMON STOCK.

 

(a)               For value received, the Company hereby grants to the
Warrantholder, and the Warrantholder is entitled, upon the terms and subject to
the conditions hereinafter set forth, to subscribe for and purchase, from the
Company, up to the number of fully paid and non-assessable shares of Common
Stock (as defined below) as determined pursuant to Section 1(b) below, at a
purchase price per share equal to the Exercise Price (as defined below). The
number and Exercise Price of such shares are subject to adjustment as provided
in Section 8. As used herein, the following terms shall have the following
meanings:

 

 

 

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

 

“Charter” means the Company’s Certificate of Incorporation or other
constitutional document, as may be amended and in effect from time to time.

 

“Common Stock” means the Company’s common stock, $0.01 par value per share and
any class and/or series of Company capital stock for or into which such common
stock may be converted or exchanged in a reorganization, recapitalization or
similar transaction.

 

“Exercise Price” means [the lower of: (i) the closing price of the Company’s
Common Stock on April 22, 2020 and (ii) the lowest three-day volume-weighted
average price (“VWAP”) between April 22, 2020 and the date of the Loan
Agreement], subject to adjustment from time to time in accordance with the
provisions of this Warrant.1

 

“Liquid Sale” means the closing of a Merger Event in which the consideration
received by the Company and/or its stockholders, as applicable, consists solely
of cash, Marketable Securities or a combination thereof.

 

“Marketable Securities” in connection with a Merger Event means securities
meeting all of the following requirements: (i) the issuer thereof is then
subject to the reporting requirements of Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is then
current in its filing of all required reports and other information under the
Act and the Exchange Act; (ii) the class and series of shares or other security
of the issuer that would be received by the Warrantholder in connection with the
Merger Event were the Warrantholder to exercise this Warrant on or prior to the
closing thereof is then traded on a national securities exchange or
over-the-counter market; and (iii) following the closing of such Merger Event,
the Warrantholder would not be restricted from publicly re-selling all of the
issuer’s shares and/or other securities that would be received by the
Warrantholder in such Merger Event were the Warrantholder to exercise this
Warrant in full on or prior to the closing of such Merger Event, except to the
extent that any such restriction (x) arises solely under federal or state
securities laws, rules or regulations, and (y) does not extend beyond six (6)
months from the closing of such Merger Event.

 

“Merger Event” means any of the following: (i) a sale, lease or other transfer
of all or substantially all assets of the Company, (ii) any merger or
consolidation involving the Company in which the Company is not the surviving
entity or in which the outstanding shares of the Company’s capital stock are
otherwise converted into or exchanged for shares of capital stock or other
securities or property of another entity and in which the holders of a majority
of the outstanding shares of capital stock of the Company immediately prior to
such merger or consolidation do not hold a majority of the outstanding shares of
capital stock of the surviving entity or other entity immediately following such
merger or consolidation, or (iii) any sale by holders of the outstanding voting
equity securities of the Company in a single transaction or series of related
transactions of shares constituting a majority of the outstanding combined
voting power of the Company.

 

 

1The Exercise Price will be fixed, and inserted here, immediately prior to the
Effective Date.

 

2

 

 

“Purchase Price” means, with respect to any exercise of this Warrant, an amount
equal to the then-effective Exercise Price multiplied by the number of shares of
Common Stock as to which this Warrant is then exercised.

 

“Warrant Coverage” means 1% of $10,000,000 (the initial amount of the Tranche 1
Term Loan Advance, as such term is defined in the Loan Agreement).

 

(b)               Number of Shares. This Warrant shall be exercisable for an
aggregate of that number of shares of Common Stock equal to the quotient of (i)
the Warrant Coverage divided by (ii) the Exercise Price, subject to adjustment
from time to time in accordance with the provisions of this Warrant.

 

SECTION 2.     TERM OF THE AGREEMENT.

 

The term of this Agreement and the right to purchase Common Stock as granted
herein shall commence on the Effective Date and, subject to Section 8(a) below,
shall be exercisable until 5:00 p.m. (Eastern Time) on the seventh (7th)
anniversary of the Effective Date.

 

SECTION 3.     EXERCISE OF THE PURCHASE RIGHTS.

 

(a)               Exercise. The purchase rights set forth in this Agreement are
exercisable by the Warrantholder, in whole or in part, at any time, or from time
to time, prior to the expiration of the term set forth in Section 2, by
tendering to the Company at its principal office a notice of exercise in the
form attached hereto as Exhibit I (the “Notice of Exercise”), duly completed and
executed. Promptly upon receipt of the Notice of Exercise and the payment of the
Purchase Price in accordance with the terms set forth below, and in no event
later than three (3) business days thereafter, the Company or its transfer agent
shall either (i) issue to the Warrantholder a certificate for the number of
shares of Common Stock purchased or (ii) credit the same via book entry to the
Warrantholder, and the Company shall execute the acknowledgment of exercise in
the form attached hereto as Exhibit II (the “Acknowledgment of Exercise”)
indicating the number of shares which remain subject to future purchases under
this Warrant, if any.

 

The Purchase Price may be paid at the Warrantholder’s election either (i) by
cash or check, or (ii) by surrender of all or a portion of the Warrant for
shares of Common Stock to be exercised under this Agreement and, if applicable,
an amended Agreement setting forth the remaining number of shares purchasable
hereunder, as determined below (“Net Issuance”). If the Warrantholder elects the
Net Issuance method, the Company will issue shares of Common Stock in accordance
with the following formula:

 

3

 

 

   X = Y(A-B)

A

 

Where:X =          the number of shares of Common Stock to be issued to the
Warrantholder.

 

Y =          the number of shares of Common Stock requested to be exercised
under this Agreement.

 

A =          the then-current fair market value of one (1) share of Common Stock
at the time of exercise.

 

B =          the then-effective Exercise Price.

 

For purposes of the above calculation, the current fair market value of shares
of Common Stock shall mean with respect to each share of Common Stock:

 

(i)            at all times when the Common Stock shall be traded on a national
securities exchange, inter-dealer quotation system or over-the-counter bulletin
board service, the average of the closing prices over a five (5) trading day
period ending two (2) trading days before the day the current fair market value
of the securities is being determined;

 

(ii)           if the exercise is in connection with a Merger Event, the per
share value received by the holders of the outstanding shares of Common Stock
pursuant to such Merger Event as determined in accordance with the definitive
transaction documents executed among the parties in connection therewith; or

 

(iii)          in cases other than as described in the foregoing clauses (i) and
(ii), as determined in good faith by the Company’s Board of Directors.

 

Upon partial exercise by either cash or, upon request of the Warrantholder and
surrender of all or a portion of this Warrant, Net Issuance, prior to the
expiration or earlier termination hereof, the Company shall promptly issue an
amended Agreement representing the remaining number of shares purchasable
hereunder. All other terms and conditions of such amended Agreement shall be
identical to those contained herein, including, but not limited to the Effective
Date hereof. In no event shall the Company be required to net cash settle an
exercise of this Warrant.

 

(b)           Exercise Prior to Expiration. To the extent this Warrant is not
previously exercised as to all shares subject hereto, and if the then-current
fair market value of one share of Common Stock is greater than the Exercise
Price then in effect, or, in the case of a Liquid Sale, where the value per
share of Common Stock (as determined as of the closing of such Liquid Sale in
accordance with the definitive agreements executed by the parties in connection
with such Merger Event) to be paid to the holders thereof is greater than the
Exercise Price then in effect, this Agreement shall be deemed automatically
exercised on a Net Issuance basis pursuant to Section 3(a) (even if not
surrendered) as of immediately before its expiration determined in accordance
with Section 2. For purposes of such automatic exercise, the fair market value
of one share of Common Stock upon such expiration shall be determined pursuant
to Section 3(a). To the extent this Warrant or any portion hereof is deemed
automatically exercised pursuant to this Section 3(b), the Company agrees to
promptly notify the Warrantholder of the number of shares of Common Stock if
any, the Warrantholder is to receive by reason of such automatic exercise, and
to issue or cause its transfer agent to issue a certificate or a book-entry
credit to the Warrantholder evidencing such shares.

 

4

 

 

SECTION 4.    RESERVATION OF SHARES.

 

During the term of this Agreement, the Company will at all times have authorized
and reserved a sufficient number of shares of its Common Stock to provide for
the exercise of the rights to purchase Common Stock as provided for herein. If
at any time during the term hereof the number of authorized but unissued shares
of Common Stock shall not be sufficient to permit exercise of this Warrant in
full, the Company will take such corporate action as may, in the opinion of its
counsel, be reasonably necessary to increase its authorized but unissued shares
of Common Stock to such number of shares as shall be sufficient for such
purposes.

 

SECTION 5.    NO FRACTIONAL SHARES OR SCRIP.

 

No fractional shares or scrip representing fractional shares shall be issued
upon the exercise of this Warrant, but rather the number of shares of Common
Stock to be issued shall be rounded down to the nearest whole number.

 

SECTION 6.    NO RIGHTS AS STOCKHOLDER.

 

Without limitation of any provision hereof, the Warrantholder agrees that this
Agreement does not entitle the Warrantholder to any voting rights or other
rights as a stockholder of the Company prior to the exercise of any of the
purchase rights set forth in this Agreement.

 

SECTION 7.    THE WARRANTHOLDER REGISTRY.

 

The Company shall maintain a registry showing the name and address of the
registered holder of this Agreement. The Warrantholder's initial address, for
purposes of such registry, is set forth in Section 12(g) below. The
Warrantholder may change such address by giving written notice of such changed
address to the Company.

 

SECTION 8.    ADJUSTMENT RIGHTS.

 

The Exercise Price and the number of shares of Common Stock purchasable
hereunder are subject to adjustment from time to time, as follows:

 

(a)              Merger Event. In connection with a Merger Event that is a
Liquid Sale, this Warrant shall, on and after the closing thereof, automatically
and without further action on the part of any party or other person, represent
the right to receive the consideration payable on or in respect of all shares of
Common Stock that are issuable hereunder as of immediately prior to the closing
of such Merger Event less the Purchase Price for all such shares of Common Stock
(such consideration to include both the consideration payable at the closing of
such Merger Event and all deferred consideration payable thereafter, if any,
including, but not limited to, payments of amounts deposited at such closing
into escrow and payments in the nature of earn-outs, milestone payments or other
performance-based payments), and such Merger Event consideration shall be paid
to the Warrantholder as and when it is paid to the holders of the outstanding
shares of Common Stock. In connection with a Merger Event that is not a Liquid
Sale, the Company shall cause the successor or surviving entity to assume this
Warrant and the obligations of the Company hereunder on the closing thereof, and
thereafter this Warrant shall be exercisable for the same number and type of
securities or other property as the Warrantholder would have received in
consideration for the shares of Common Stock issuable hereunder had it exercised
this Warrant in full as of immediately prior to such closing, at an aggregate
Exercise Price no greater than the aggregate Exercise Price in effect as of
immediately prior to such closing, and subject to further adjustment from time
to time in accordance with the provisions of this Warrant. The provisions of
this Section 8(a) shall similarly apply to successive Merger Events.

 

5

 

 

(b)          Reclassification of Shares. Except for Merger Events subject to
Section 8(a), if the Company at any time shall, by combination,
reclassification, exchange or subdivision of securities or otherwise, change any
of the securities as to which purchase rights under this Agreement exist into
the same or a different number of securities of any other class or classes of
securities, this Agreement shall thereafter represent the right to acquire such
number and kind of securities as would have been issuable as the result of such
change with respect to the securities which were subject to the purchase rights
under this Agreement immediately prior to such combination, reclassification,
exchange, subdivision or other change. The provisions of this Section 8(b) shall
similarly apply to successive combination, reclassification, exchange,
subdivision or other change.

 

(c)          Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Common Stock, (i) in the case of a subdivision,
the Exercise Price shall be proportionately decreased and the number of shares
for which this Warrant is exercisable shall be proportionately increased, or
(ii) in the case of a combination, the Exercise Price shall be proportionately
increased and the number of shares for which this Warrant is exercisable shall
be proportionately decreased.

 

(d)          Dividends. If the Company at any time while this Agreement is
outstanding and unexpired shall:

 

(i)         pay a dividend with respect to the Common Stock payable in
additional shares of Common Stock, then the Exercise Price shall be adjusted,
from and after the date of determination of stockholders entitled to receive
such dividend, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (A) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (B) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution, and the number of
shares of Common Stock for which this Warrant is exercisable shall be
proportionately increased; or

 

6

 

 

(ii)        make any other dividend or distribution on or with respect to Common
Stock, except any dividend or distribution specifically provided for in any
other clause of this Section 8, then, in each such case, provision shall be made
by the Company such that the Warrantholder shall receive upon exercise or
conversion of this Warrant a proportionate share of any such dividend or
distribution as though it were the holder of the Common Stock (or other stock
for which the Common Stock is convertible) as of the record date fixed for the
determination of the stockholders of the Company entitled to receive such
dividend or distribution.

 

(e)          Notice of Certain Events. If: (i) the Company shall declare any
dividend or distribution upon its outstanding Common Stock, payable in stock,
cash, property or other securities (provided that the Warrantholder in its
capacity as lender under the Loan Agreement consents to such dividend); (ii) the
Company shall offer for subscription pro rata to the holders of its Common Stock
any additional shares of stock of any class or other rights; (iii) there shall
be any Merger Event; or (iv) there shall be any voluntary dissolution,
liquidation or winding up of the Company; then, in connection with each such
event, the Company shall give the Warrantholder notice thereof at the same time
and in the same manner as it gives notice thereof to the holders of outstanding
Common Stock. In addition, if at any time the number of shares of Common Stock
(or other securities of any other class or classes of securities of the Company
for which this Warrant is then exercisable) outstanding is reduced such that the
number of shares of Common Stock or other securities issuable upon exercise of
this Warrant shall exceed five percent (5%) of the then outstanding class of
such securities, then, within three (3) business days of such event, the Company
shall give the Warrantholder written notice thereof.

 

SECTION 9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

 

(a)           Reservation of Common Stock. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued and
outstanding, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, that the
Common Stock issuable pursuant to this Agreement may be subject to restrictions
on transfer under state and/or federal securities laws. The Company has made
available to the Warrantholder true, correct and complete copies of its Charter
and bylaws currently in effect. The issuance of certificates or book-entry
credit for shares of Common Stock upon exercise of this Warrant shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and related
issuance of shares of Common Stock. The Company further covenants and agrees
that the Company will, at all times during the term hereof, have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant.

 

7

 

 

(b)          Due Authority. The execution and delivery by the Company of this
Agreement and the performance of all obligations of the Company hereunder,
including the issuance to the Warrantholder of the right to acquire the shares
of Common Stock, have been duly authorized by all necessary corporate action on
the part of the Company. This Agreement: (i) does not violate the Company's
Charter or current bylaws; (ii) does not contravene any law or governmental
rule, regulation or order applicable to the Company; and (iii) (except as may be
described in Schedule 5.3 to the Loan Agreement), does not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which the Company is a party or by
which it is bound. This Agreement constitutes a legal, valid and binding
agreement of the Company, enforceable in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting creditors’ rights generally (including, without
limitation, fraudulent conveyance laws) and by general principles of equity,
regardless of whether considered in a proceeding in equity or at law.

 

(c)          Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Agreement.

 

(d)          Exempt Transaction. Subject to the accuracy of the Warrantholder’s
representations in Section 10, the issuance of this Warrant and the Common Stock
upon exercise of this Agreement will constitute a transaction exempt from (i)
the registration requirements of Section 5 of the Act, in reliance upon Section
4(a)(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.

 

(e)          Information Rights. At all times (if any) prior to the earlier to
occur of (x) the date on which all shares of Common Stock issued on exercise of
this Warrant have been sold, or (y) the expiration or earlier termination of
this Warrant, when the Company shall not be required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act or shall not have timely filed all such
required reports, the Warrantholder shall be entitled to the information rights
contained in Section 7.1(b) – (f) of the Loan Agreement, and in any such event
Section 7.1(b) – (f) of the Loan Agreement is hereby incorporated into this
Agreement by this reference as though fully set forth herein, provided, however,
that the Company shall not be required to deliver a Compliance Certificate once
all Indebtedness (as defined in the Loan Agreement) owed by the Company to the
Warrantholder has been repaid. All information provided by the Company to the
Warrantholder pursuant to this Section 9(e) shall constitute Confidential
Information, as defined in the Loan Agreement, so long as it satisfies the
requirements of Section 11.12 thereof.

 

8

 

 

(f)           Registration of Shares. On or prior to the 60th calendar day
following the Effective Date, the Company shall file with the Securities and
Exchange Commission a registration statement on Form S-3 registering for resale
on a delayed or continuous basis under Rule 415 of the Act all of the shares of
Common Stock issuable on exercise of this Warrant (the “Registration
Statement”). The Company shall use its commercially reasonable efforts to cause
the Registration Statement to be declared effective as soon as possible but, in
any event, no later than 180 calendar days after the Effective Date. All fees
and expenses incident to the Company’s performance of or compliance with its
obligations under this Section 9(f) (excluding any underwriting discounts and
selling commissions) shall be borne by the Company.

 

(g)          Rule 144 Compliance. The Company shall, at all times prior to the
earlier to occur of (i) the date of sale or other disposition by the
Warrantholder of this Warrant or all shares of Common Stock issued on exercise
of this Warrant or (ii) the registration pursuant to subsection (f) above of the
shares issuable on exercise of this Warrant, or (iii) the expiration or earlier
termination of this Warrant if the Warrant has not been exercised in full or in
part on such date, use reasonable efforts to timely file all reports required
under the Exchange Act and otherwise timely take all actions necessary to permit
the Warrantholder to sell or otherwise dispose of this Warrant and the shares of
Common Stock issued on exercise hereof pursuant to Rule 144 promulgated under
the Act as amended and in effect from time to time, provided that the foregoing
shall not apply in the event of a Merger Event following which the successor or
surviving entity is not subject to the reporting requirements of the Exchange
Act. If the Warrantholder proposes to sell Common Stock issuable upon the
exercise of this Agreement in compliance with Rule 144, then, upon the
Warrantholder’s written request to the Company, the Company shall furnish to the
Warrantholder, within five (5) business days after receipt of such request, a
written statement confirming the Company’s compliance with the filing and other
requirements of such Rule.

 

(h)          Shell Company Status.  The Company is not and has never been a
“shell” company as described in Rule 144(i)(1) under the Securities Act.

 

SECTION 10.            REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.

 

This Agreement has been entered into by the Company in reliance upon the
following representations and covenants of the Warrantholder:

 

(a)           Investment Purpose. This Warrant and the shares issued on exercise
hereof will be acquired for investment and not with a view to the sale or
distribution of any part thereof in violation of applicable federal and state
securities laws, and the Warrantholder has no present intention of selling or
engaging in any public distribution of the same except pursuant to an effective
registration statement or an exemption therefrom.

 

(b)           Private Issue. The Warrantholder understands that (i) the Common
Stock issuable upon exercise of this Agreement is not, as of the Effective Date,
registered under the Act or qualified under applicable state securities laws,
and (ii) the Company’s reliance on exemption from such registration is
predicated on the representations set forth in this Section 10.

 

9

 

 

(c)           Financial Risk. The Warrantholder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to bear the economic
risks of its investment.

 

(d)          Accredited Investor. The Warrantholder is an “accredited investor”
within the meaning of Rule 501 of Regulation D promulgated under the Act, as
presently in effect (“Regulation D”).

 

(e)           No Short Sales. The Warrantholder has not at any time on or prior
to the Effective Date engaged in any short sales or equivalent transactions in
the Common Stock. The Warrantholder agrees that at all times from and after the
Effective Date and on or before the expiration or earlier termination of this
Warrant, it shall not engage in any short sales or equivalent transactions in
the Common Stock.

 

SECTION 11.           TRANSFERS.

 

Subject to compliance with applicable federal and state securities laws, this
Agreement and all rights hereunder are transferable, in whole or in part,
without charge to the holder hereof (except for transfer taxes) upon surrender
of this Agreement properly endorsed. Each taker and holder of this Agreement, by
taking or holding the same, consents and agrees that this Agreement, when
endorsed in blank, shall be deemed negotiable, and that the holder hereof, when
this Agreement shall have been so endorsed and its transfer recorded on the
Company’s books, shall be treated by the Company and all other persons dealing
with this Agreement as the absolute owner hereof for any purpose and as the
person entitled to exercise the rights represented by this Agreement. The
transfer of this Agreement shall be recorded on the books of the Company upon
receipt by the Company of a notice of transfer in the form attached hereto as
Exhibit III (the “Transfer Notice”), at its principal offices and the payment to
the Company of all transfer taxes and other governmental charges imposed on such
transfer. Until the Company receives such Transfer Notice, the Company may treat
the registered owner hereof as the owner for all purposes. Notwithstanding
anything herein or in any legend to the contrary, the Company shall not require
an opinion of counsel in connection with any sale, assignment or other transfer
by the Warrantholder of this Warrant (or any portion hereof or any interest
herein) or of any shares of Common Stock issued upon any exercise hereof to an
affiliate (as defined in Regulation D) of the Warrantholder, provided that such
affiliate is an “accredited investor” as defined in Regulation D.

 

SECTION 12.            MISCELLANEOUS.

 

(a)           Effective Date. The provisions of this Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Agreement shall be binding
upon any successors or assigns of the Company.

 

10

 

 

(b)          Remedies. In the event of any default hereunder, the non-defaulting
party may seek to protect and enforce its rights either by suit in equity and/or
by action at law, including but not limited to an action for damages as a result
of any such default, and/or an action for specific performance for any default
where the Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable.

 

(c)           No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Agreement, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.

 

(d)          Additional Documents. The Company agrees to supply such other
documents as the Warrantholder may from time to time reasonably request.

 

(e)           Attorneys’ Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party shall be entitled to reasonable and documented attorneys’ fees
and expenses and all reasonable and documented costs of proceedings incurred in
enforcing this Agreement. For the purposes of this Section 12(e), attorneys’
fees shall include without limitation fees incurred in connection with the
following: (i) contempt proceedings; (ii) discovery; (iii) any motion,
proceeding or other activity of any kind in connection with an insolvency
proceeding; (iv) garnishment, levy, and debtor and third party examinations; and
(v) post-judgment motions and proceedings of any kind, including without
limitation any activity taken to collect or enforce any judgment.

 

(f)           Severability. In the event any one or more of the provisions of
this Agreement shall for any reason be held invalid, illegal or unenforceable,
the remaining provisions of this Agreement shall be unimpaired, and the invalid,
illegal or unenforceable provision shall be replaced by a mutually acceptable
valid, legal and enforceable provision, which comes closest to the intention of
the parties underlying the invalid, illegal or unenforceable provision.

 

(g)           Notices. Except as otherwise provided herein, any notice, demand,
request, consent, approval, declaration, service of process or other
communication that is required, contemplated, or permitted under this Agreement
or with respect to the subject matter hereof shall be in writing, and shall be
deemed to have been validly served, given, delivered, and received upon the
earlier of: (a) personal delivery to the party to be notified, (b) when sent by
confirmed telex, electronic transmission or facsimile if sent during normal
business hours of the recipient, and if not, then on the next business day,
(c) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt, and shall be addressed to the party to be
notified as follows:

 

11

 

 

If to the Warrantholder:

 

Hercules CAPITAL, INC.

Legal Department

Attention: Chief Legal Officer

400 Hamilton Avenue, Suite 310

Palo Alto, CA 94301

Facsimile: 650-473-9194

Telephone: 650-289-3060

 

With a copy to:

 

Barnes & Thornburg LLP

Attention: Troy Zander

655 W. Broadway, Suite 900

San Diego, CA 92101

Telephone: 650-260-4767

 

If to the Company:

 

Albireo Pharma, Inc.

Attention: Chief Financial Officer

10 Post Office Square, Suite 1000

Boston, MA 02109

Telephone: 857-254-4184

 

with copies (which shall not constitute notice) to:

 

Albireo Pharma, Inc.

Attention: Chief Legal Officer

10 Post Office Square, Suite 1000

Boston, MA 02109

Telephone: 857-254-4181

 

and to:

 

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Attention: Megan Gates, Esq.

One Financial Center

Boston, Massachusetts 02111

Telephone: (617) 348-4443

 

or to such other address as each party may designate for itself by like notice.

 

(h)             Entire Agreement; Amendments. This Agreement constitutes the
entire agreement and understanding of the parties hereto in respect of the
subject matter hereof, and supersedes and replaces in their entirety any prior
proposals, term sheets, letters, negotiations or other documents or agreements,
whether written or oral, with respect to the subject matter hereof. None of the
terms of this Agreement may be amended except by an instrument executed by each
of the parties hereto.

 

12

 

 

(i)            Headings. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.

 

(j)            Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed (or had an opportunity to discuss) with its
counsel this Agreement and, specifically, the provisions of Sections 12(n),
12(o), 12(p), 12(q) and 12(r).

 

(k)           No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.

 

(l)            No Waiver. No omission or delay by the Warrantholder at any time
to enforce any right or remedy reserved to it, or to require performance of any
of the terms, covenants or provisions hereof by the Company at any time
designated, shall be a waiver of any such right or remedy to which the
Warrantholder is entitled, nor shall it in any way affect the right of the
Warrantholder to enforce such provisions thereafter during the term of this
Agreement.

 

(m)          Survival. All agreements, representations and warranties contained
in this Agreement or in any document delivered pursuant hereto shall be for the
benefit of the Warrantholder or the Company, as the context requires, and shall
survive the execution and delivery of this Agreement and the expiration or other
termination of this Agreement.

 

(n)           Governing Law. This Agreement has been negotiated and delivered to
the Warrantholder in the State of California, and shall be deemed to have been
accepted by the Warrantholder in the State of California. Delivery of Common
Stock to the Warrantholder by the Company under this Agreement is due in the
State of California. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.

 

(o)          Consent to Jurisdiction and Venue. All judicial proceedings arising
in or under or related to this Agreement may be brought in any state or federal
court of competent jurisdiction located in the State of California. By execution
and delivery of this Agreement, each party hereto generally and unconditionally:
(i) consents to personal jurisdiction in Santa Clara County, State of California
(solely with respect to matters arising under or relating to this Agreement);
(ii) waives any objection as to jurisdiction or venue in Santa Clara County,
State of California; (iii) agrees not to assert any defense based on lack of
jurisdiction or venue in the aforesaid courts; and (iv) irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.
Service of process on any party hereto in any action arising out of or relating
to this Agreement shall be effective if given in accordance with the
requirements for notice set forth in Section 12(g), and shall be deemed
effective and received as set forth in Section 12(g). Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of either party to bring proceedings in the courts of any other
jurisdiction.

 

13

 

 

(p)          Mutual Waiver of Jury Trial. Because disputes arising in connection
with complex financial transactions are most quickly and economically resolved
by an experienced and expert person and the parties wish applicable state and
federal laws to apply (rather than arbitration rules), the parties desire that
their disputes arising under or in connection with this Warrant be resolved by a
judge applying such applicable laws. EACH OF THE COMPANY AND THE WARRANTHOLDER
SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF
ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM
(COLLECTIVELY, "CLAIMS”) ASSERTED BY THE COMPANY AGAINST THE WARRANTHOLDER OR
ITS ASSIGNEE OR BY THE WARRANTHOLDER OR ITS ASSIGNEE AGAINST THE COMPANY
RELATING TO THIS WARRANT. This waiver extends to all such Claims, including
Claims that involve persons or entities other than the Company and the
Warrantholder; Claims that arise out of or are in any way connected to the
relationship between the Company and the Warrantholder; and any Claims for
damages, breach of contract, specific performance, or any equitable or legal
relief of any kind, arising out of this Agreement.

 

(q)          Arbitration. If the Mutual Waiver of Jury Trial set forth in
Section 12(p) is ineffective or unenforceable, the parties agree that all Claims
shall be submitted to binding arbitration in accordance with the commercial
arbitration rules of JAMS (the “Rules”), such arbitration to occur before one
arbitrator, which arbitrator shall be a retired California state judge or a
retired Federal court judge. Such proceeding shall be conducted in Santa Clara
County, State of California, with California rules of evidence and discovery
applicable to such arbitration. The decision of the arbitrator shall be binding
on the parties, and shall be final and nonappealable to the maximum extent
permitted by law. Any judgment rendered by the arbitrator may be entered in a
court of competent jurisdiction and enforced by the prevailing party as a final
judgment of such court.

 

(r)           Pre-arbitration Relief. In the event Claims are to be resolved by
arbitration, either party may seek from a court of competent jurisdiction
identified in Section 12(o), any prejudgment order, writ or other relief and
have such prejudgment order, writ or other relief enforced to the fullest extent
permitted by law notwithstanding that all Claims are otherwise subject to
resolution by binding arbitration.

 

14

 

 

(s)          Counterparts. This Agreement and any amendments, waivers, consents
or supplements hereto may be executed in any number of counterparts (including
by facsimile or electronic delivery (PDF), and by different parties hereto in
separate counterparts, each of which when so delivered shall be deemed an
original, but all of which counterparts shall constitute but one and the same
instrument.

 

(t)           Specific Performance. The parties hereto hereby declare that it is
impossible to measure in money the damages which will accrue to the
Warrantholder by reason of the Company’s failure to perform any of the
obligations under this Agreement and agree that the terms of this Agreement
shall be specifically enforceable by the Warrantholder. If the Warrantholder
institutes any action or proceeding to specifically enforce the provisions
hereof, any person against whom such action or proceeding is brought hereby
waives the claim or defense therein that the Warrantholder has an adequate
remedy at law, and such person shall not offer in any such action or proceeding
the claim or defense that such remedy at law exists.

 

(u)          Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is
lost, stolen, mutilated or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may reasonably impose (which shall, in the case of
a mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.

 

(v)          Legends. To the extent required by applicable laws, this Warrant
and the shares of Common Stock issuable hereunder (and the securities issuable,
directly or indirectly, upon conversion of such shares of Common Stock, if any)
may be imprinted with a restricted securities legend in substantially the
following form:

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR “BLUE SKY” LAWS
AND MAY BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ONLY
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS.”

 

[Remainder of Page Intentionally Left Blank]

 

15

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be
executed by its officers thereunto duly authorized as of the Effective Date.

 

COMPANY: ALBIREO PHARMA, INC.           By:               Name:   Title:       
      THE WARRANTHOLDER: HERCULES CAPITAL, INC.           By:   Name:   Title:

 

[Signature Page to Warrant to Purchase Stock]

 

 

 

EXHIBIT I

 

NOTICE OF EXERCISE

 

To:          Albireo Pharma, Inc.

 

(1)The undersigned Warrantholder hereby elects to purchase [_______] shares of
the Common Stock of Albireo Pharma, Inc. (the “Company”), pursuant to the terms
of the Warrant Agreement dated as of May __, 2020 (the “Agreement”) between the
Company and Hercules Capital, Inc., and tenders herewith payment of the Purchase
Price in full, together with all applicable transfer taxes, if any. [NET
ISSUANCE: elects pursuant to Section 3(a) of the Agreement to effect a Net
Issuance.]

 

(2)Please issue a certificate or certificates or book-entry credit(s)
representing said shares of Common Stock in the name of the undersigned or in
such other name as is specified below.

 

        (Name)                 (Address)

 

THE WARRANTHOLDER:   HERCULES CAPITAL, INC.           By:             Name:  
Title:

 

Exhibit I

 

 

 

EXHIBIT II

 

(i)         ACKNOWLEDGMENT OF EXERCISE

 

The undersigned [____________________________________], hereby acknowledges
receipt of the “Notice of Exercise” from Hercules Capital, Inc. to purchase
[____] shares of the Common Stock of Albireo Pharma, Inc., pursuant to the terms
of the Warrant Agreement by and between Albireo Pharma, Inc. and Hercules
Capital, Inc., dated as of May __, 2020 (the “Agreement”), and further
acknowledges that [______] shares remain subject to purchase under the terms of
the Agreement.

 

  COMPANY: ALBIREO PHARMA, INC.                 By:                       Title:
            Date:  

 

Exhibit II

 

 

 

EXHIBIT III

 

TRANSFER NOTICE

 

(To transfer or assign the foregoing Agreement execute this form and supply
required information. Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Agreement and all rights evidenced thereby are
hereby transferred and assigned to

 

_________________________________________________________________

(Please Print)

 

whose address is___________________________________________________

 

________________________________________________________________

 

Dated: ____________________________________

 

Holder’s Signature: _______________________________

 

Holder’s Address: _______________________________

 

_____________________________________________________

 

Signature Guaranteed:____________________________________________

 

 

NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Agreement, without alteration or enlargement or any
change whatever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Agreement.

 

Exhibit III