Exhibit 10.4

 

security agreement

 

This Security Agreement dated as of December 22, 2016 (“Security Agreement”), is
made by and among Oncobiologics, Inc. a Delaware corporation (“Grantor”), and
the Purchasers listed on the signature pages hereto (each, a “Secured Party”
and, collectively, the “Secured Parties”).

 

Recitals

 

A.        Secured Party has made and has agreed to make certain advances of
money and to extend certain financial accommodations to Grantor as evidenced by
those certain Senior Secured Promissory Notes dated December 22, 2016 executed
by Grantor in favor of each Secured Party and such other Senior Secured
Promissory Notes that may be executed by Grantor in favor of each Secured Party
after the date hereof (each, a “Note” and, collectively, the “Notes”) pursuant
to that certain Note and Warrant Purchase Agreement dated December 22, 2016 by
and between Grantor and the Secured Parties (the “Purchase Agreement”), such
advances, future advances, and financial accommodations being referred to herein
as the “Loans”.

 

B.        It is a condition precedent to the obligation of the Purchasers to
make their respective extensions of credit to the Company under the Purchase
Agreement that the Grantor shall have executed and delivered this Agreement and
the IP Security Agreement to the Purchasers and the Secured Parties.

 

Agreement

 

Now, Therefore, in order to induce the Secured Parties to make the Loans and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, Grantor hereby
represents, warrants, covenants and agrees as follows:

 

1.         Defined Terms. When used in this Security Agreement the following
terms shall have the meanings set forth below (such meanings being equally
applicable to both the singular and plural forms of the terms defined). Any term
used in the UCC and not defined herein shall have the meaning given to such term
in the UCC. Any other capitalized terms used but not defined herein shall have
the meaning given to such term in the Purchase Agreement.

 

“Bankruptcy Code” means Title XI of the United States Code.

 

“Collateral” shall have the meaning assigned to such term in Section 2 of this
Security Agreement.

 

“Contracts” means all contracts (including any customer, vendor, supplier,
service or maintenance contract), personal property leases, licenses,
undertakings, purchase orders, permits, franchise agreements or other agreements
(other than any right evidenced by Chattel Paper, Documents or Instruments),
whether in written or electronic form, in or under which Grantor now holds or
hereafter acquires any right, title or interest, including, without limitation,
with

 

 

 

 

respect to an Account, any agreement relating to the terms of payment or the
terms of performance thereof.

 

“Copyright License” means any agreement, whether in written or electronic form,
in which Grantor now holds or hereafter acquires any interest, granting any
right in or to any Copyright or Copyright registration (whether Grantor is the
licensee or the licensor thereunder) including, without limitation, licenses
pursuant to which Grantor has obtained the exclusive right to use a copyright
owned by a third party.

 

“Copyrights” means all of the following now owned or hereafter acquired or
created (as a work for hire for the benefit of Grantor) by Grantor or in which
Grantor now holds or hereafter acquires or receives any right or interest, in
whole or in part: (a) all copyrights, whether registered or unregistered, held
pursuant to the laws of the United States, any State thereof or any other
country; (b) registrations, applications, recordings and proceedings in the
United States Copyright Office or in any similar office or agency of the United
States, any State thereof or any other country; (c) any continuations, renewals
or extensions thereof; (d) any registrations to be issued in any pending
applications, and shall include any right or interest in and to work protectable
by any of the foregoing which are presently or in the future owned, created or
authorized (as a work for hire for the benefit of Grantor) or acquired by
Grantor, in whole or in part; (e) prior versions of works covered by copyright
and all works based upon, derived from or incorporating such works; (f) income,
royalties, damages, claims and payments now and hereafter due and/or payable
with respect to copyrights, including, without limitation, damages, claims and
recoveries for past, present or future infringement; (g) rights to sue for past,
present and future infringements of any copyright; and (h) any other rights
corresponding to any of the foregoing rights throughout the world.

 

“Event of Default” means (i) any failure by Grantor forthwith to pay or perform
any of the Secured Obligations, (ii) any breach by Grantor of any warranty,
representation, or covenant set forth herein, and (iii) any “Event of Default”
as defined in the Notes.

 

“Intellectual Property” means any intellectual property, in any medium, of any
kind or nature whatsoever, now or hereafter owned or acquired or received by
Grantor or in which Grantor now holds or hereafter acquires or receives any
right or interest, and shall include, in any event, any Copyright, Trademark,
Patent, License, trade secret, customer list, marketing plan, internet domain
name (including any right related to the registration thereof), proprietary or
confidential information, mask work, source, object or other programming code,
invention (whether or not patented or patentable), technical information,
procedure, design, knowledge, know-how, software, data base, data, skill,
expertise, recipe, experience, process, model, drawing, material or record.

 

“IP Security Agreement” means the Intellectual Property Security Agreement of
even date herewith by and between Grantor and the Secured Parties and all
Schedules thereto, as the same may from time to time be amended, modified,
supplemented or restated.

 

“License” means any Copyright License, Patent License, Trademark License or
other license of rights or interests, whether in-bound or out-bound, whether in
written or electronic form, now or hereafter owned or acquired or received by
Grantor or in which Grantor now holds

 

2. 

 

 

or hereafter acquires or receives any right or interest, and shall include any
renewals or extensions of any of the foregoing thereof.

 

“Lien” means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

 

“Patent License” means any agreement, whether in written or electronic form, in
which Grantor now holds or hereafter acquires any interest, granting any right
with respect to any invention on which a Patent is in existence (whether Grantor
is the licensee or the licensor thereunder).

 

“Patents” means all of the following in which Grantor now holds or hereafter
acquires any interest: (a) all letters patent of the United States or any other
country, all registrations and recordings thereof and all applications for
letters patent of the United States or any other country, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country; (b) all reissues, divisions,
continuations, renewals, continuations-in-part or extensions thereof; (c) all
petty patents, divisionals and patents of addition; (d) all patents to issue in
any such applications; (e) income, royalties, damages, claims and payments now
and hereafter due and/or payable with respect to patents, including, without
limitation, damages, claims and recoveries for past, present or future
infringement; and (f) rights to sue for past, present and future infringements
of any patent.

 

“Permitted Lien” means: (a) any Liens existing on the date of this Security
Agreement and set forth on Schedule A attached hereto; (b) Liens for taxes,
fees, assessments or other governmental charges or levies, either not delinquent
or being contested in good faith by appropriate proceedings; (c) Liens (i) upon
or in any Equipment acquired or held by Grantor to secure the purchase price of
such Equipment or indebtedness (including capital leases) incurred solely for
the purpose of financing the acquisition of such Equipment or (ii) existing on
such Equipment at the time of its acquisition, provided that the Lien is
confined solely to the Equipment so acquired, improvements thereon and the
Proceeds of such Equipment; (d) leases or subleases and licenses or sublicenses
granted to others in the ordinary course of Grantor’s business; (e) any right,
title or interest of a licensor under a license; (f) Liens arising from
judgments, decrees or attachments to the extent and only so long as such
judgment, decree or attachment has not caused or resulted in an Event of
Default; (g) easements, reservations, rights-of-way, restrictions, minor defects
or irregularities in title and other similar Liens affecting real property not
interfering in any material respect with the ordinary conduct of the business of
Grantor; (h) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; (i) Liens arising solely by virtue of any statutory or
common law provision relating to banker’s liens, rights of setoff or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; (j) Liens in favor of a depository bank or a
securities intermediary pursuant to such depository bank’s or securities
intermediary’s customary customer account agreement; provided that any such
Liens shall at no time secure any indebtedness or obligations other than
customary fees and charges payable to such depository bank or securities
intermediary; (k) statutory or common law Liens of landlords and carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other similar
Liens, arising in the ordinary

 

3. 

 

 

course of business and securing obligations that are not yet delinquent or are
being contested in good faith by appropriate proceedings; (l) Liens incurred or
deposits made to secure the performance of tenders, bids, leases, statutory or
regulatory obligations, surety and appeal bonds, government contracts,
performance and return-of-money bonds, and other obligations of like nature, in
each case, in the ordinary course of business; (m) Liens incurred or deposits
made in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other types of social security; (n)
pledges and deposits securing liability for reimbursement or indemnification
obligations in respect of letters of credit or bank guarantees for the benefit
of landlords; (o) Liens securing subordinated debt (provided such Liens are
subordinated to Secured Party’s security interest on terms acceptable to Secured
Party); and (p) Liens incurred in connection with the extension, renewal or
refinancing of indebtedness secured by Liens permitted under the preceding
clauses, provided that any extension, renewal or replacement Lien shall be
limited to the property encumbered by the existing Lien and the principal amount
of the indebtedness being extended, renewed or refinanced does not increase.

 

“Pro Rata” means, as to any Secured Party at any time, the percentage equivalent
at such time of such Secured Party’s aggregate unpaid principal amount of Loans,
divided by the combined aggregate unpaid principal amount of all Loans of all
Secured Parties.

 

“Secured Obligations” means (a) the obligation of Grantor to repay the Secured
Parties all of the unpaid principal amount of, and accrued interest on
(including any interest that accrues after the commencement of bankruptcy), the
Loans, (b) the obligation of Grantor to pay any fees, costs or expenses of
Secured Party under the Notes, the Purchase Agreement, this Security Agreement,
or the IP Security Agreement and (c) all other obligations of the Grantor
arising under the Transaction Documents.

 

“Security Agreement” means this Security Agreement and all Schedules hereto, as
the same may from time to time be amended, modified, supplemented or restated.

 

“Trademark License” means any agreement, whether in written or electronic form,
in which Grantor now holds or hereafter acquires any interest, granting any
right in and to any Trademark or Trademark registration (whether Grantor is the
licensee or the licensor thereunder).

 

“Trademarks” means any of the following in which Grantor now holds or hereafter
acquires any interest: (a) any trademarks, tradenames, corporate names, company
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature, now existing
or hereafter adopted or acquired, all registrations and recordings thereof and
any applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country (collectively, the “Marks”); (b) any
reissues, extensions or renewals thereof; (c) the goodwill of the business
symbolized by or associated with the Marks; (d) income, royalties, damages,
claims and payments now and hereafter due and/or payable with respect to the
Marks, including, without limitation, damages, claims and recoveries for past,
present or future infringement; and (e) rights to sue for past, present and
future infringements of the Marks.

 

4. 

 

 

“UCC” means the Uniform Commercial Code as the same may from time to time be in
effect in the State of New York (and each reference in this Security Agreement
to an Article thereof shall refer to that Article as from time to time in
effect); provided, however, in the event that, by reason of mandatory provisions
of law, any or all of the attachment, perfection or priority of the Secured
Parties’ security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of New York,
the term “UCC” shall mean the Uniform Commercial Code (including the Articles
thereof) as in effect at such time in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection or priority and
for purposes of definitions related to such provisions.

 

2.         Grant of Security Interest. As collateral security for the full,
prompt, complete and final payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all the Secured Obligations and in
order to induce the Secured Parties to cause the Loans to be made, Grantor
hereby assigns, conveys, mortgages, pledges, hypothecates and transfers to the
Secured Parties, and hereby grants to the Secured Parties, a security interest
in all of Grantor’s right, title and interest in, to and under the following,
whether now owned or hereafter acquired (all of which being collectively
referred to herein as the “Collateral”):

 

(a)          All Accounts of Grantor;

 

(b)          All Chattel Paper of Grantor;

 

(c)          The Commercial Tort Claims of Grantor more particularly described
on Schedule E attached hereto;

 

(d)          All Commodity Accounts of Grantor;

 

(e)          All Contracts of Grantor;

 

(f)           All Deposit Accounts of Grantor;

 

(g)          All Documents of Grantor;

 

(h)          All General Intangibles of Grantor, including, without limitation,
Intellectual Property;

 

(i)           All Goods of Grantor, including, without limitation, Equipment,
Inventory, and Fixtures;

 

(j)           All Instruments of Grantor, including, without limitation,
Promissory Notes;

 

(k)          All Investment Property of Grantor;

 

(l)           All Letter-of-Credit Rights and Letters of Credit of Grantor;

 

(m)         All Money of Grantor;

 

5. 

 

 

(n)          All Securities Accounts of Grantor;

 

(o)          All Supporting Obligations of Grantor;

 

(p)          All property of Grantor held by any Secured Party, or any other
party for whom any Secured Party is acting as agent, including, without
limitation, all property of every description now or hereafter in the possession
or custody of or in transit to any Secured Party or such other party for any
purpose, including, without limitation, safekeeping, collection or pledge, for
the account of Grantor, or as to which Grantor may have any right or power;

 

(q)          All other goods and personal property of Grantor, wherever located,
whether tangible or intangible, and whether now owned or hereafter acquired,
existing, leased or consigned by or to Grantor; and

 

(r)          To the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for and rents,
profits and products of each of the foregoing.

 

Notwithstanding the foregoing provisions of this Section 2, the grant,
assignment and transfer of a security interest as provided herein shall not
extend to, and the term “Collateral” shall not include: (a) “intent-to-use”
trademarks at all times prior to the first use thereof, whether by the actual
use thereof in commerce, the recording of a statement of use with the United
States Patent and Trademark Office or otherwise; (b) voting stock in excess of
65% of the outstanding voting stock of any foreign subsidiary (or of any
domestic subsidiary, substantially all the assets of which consist of ownership
interests in foreign subsidiaries) of Grantor; (c) assets located outside the
United States to the extent a Lien on such assets cannot be perfected by the
filing of UCC financing statements in the jurisdiction of organization of the
Grantor; (d) property owned by Grantor that is subject to a Lien of the type
described in clause (c) of the definition of “Permitted Lien” if the contractual
obligation pursuant to which such Lien is granted prohibits or requires the
consent of any Person other than the Company which has not been obtained as a
condition to the creation of any other Lien on such equipment; or (e) any
Account, Chattel Paper, General Intangible or Promissory Note in which Grantor
has any right, title or interest if and to the extent such Account, Chattel
Paper, General Intangible or Promissory Note includes a provision containing a
restriction on assignment such that the creation of a security interest in the
right, title or interest of Grantor therein would be prohibited and would, in
and of itself, cause or result in a default thereunder enabling another person
party to such Account, Chattel Paper, General Intangible or Promissory Note to
enforce any remedy with respect thereto; provided that the foregoing exclusion
shall not apply if (i) such prohibition has been waived or such other person has
otherwise consented to the creation hereunder of a security interest in such
Account, Chattel Paper, General Intangible or Promissory Note or (ii) such
prohibition would be rendered ineffective pursuant to Sections 9-406(d),
9-407(a) or 9-408(a) of the UCC, as applicable and as then in effect in any
relevant jurisdiction, or any other applicable law (including the Bankruptcy
Code) or principles of equity; provided further that immediately upon the
ineffectiveness, lapse or termination of any such provision, the Collateral
shall include, and Grantor shall be deemed to have granted on the date hereof a
security interest in, all its rights, title and interests in and to such
Account, Chattel Paper, General Intangible or Promissory Note as if such
provision had never been in effect; and provided further that the foregoing
exclusion shall in no way be

 

6. 

 

 

construed so as to limit, impair or otherwise affect any Secured Party’s
unconditional continuing security interest in and to all rights, title and
interests of Grantor in or to any payment obligations or other rights to receive
monies due or to become due under any such Account, Chattel Paper, General
Intangible or Promissory Note and in any such monies and other proceeds of such
Account, Chattel Paper, General Intangible or Promissory Note.

 

If Grantor shall at any time acquire a Commercial Tort Claim, Grantor shall
immediately notify Secured Party in a writing signed by Grantor of the brief
details thereof and grant to Secured Party in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Security
Agreement, with such writing to be in form and substance satisfactory to Secured
Party.

 

3.         Rights Of Secured Parties; Collection Of Accounts.

 

(a)          Notwithstanding anything contained in this Security Agreement to
the contrary, Grantor expressly agrees that it shall remain liable under each of
its Contracts, Chattel Paper, Documents, Instruments, and Licenses to observe
and perform all the conditions and obligations to be observed and performed by
it thereunder and that it shall perform all of its duties and obligations
thereunder, all in accordance with and pursuant to the terms and provisions of
each such Contract, Chattel Paper, Document, Instrument, and License. No Secured
Party shall have any obligation or liability under any such Contract, Chattel
Paper, Document, Instrument or License by reason of or arising out of this
Security Agreement or the granting to the Secured Parties of a lien therein or
the receipt by any Secured Party of any payment relating to any such Contract,
Chattel Paper, Document, Instrument or License pursuant hereto, nor shall any
Secured Party be required or obligated in any manner to perform or fulfill any
of the obligations of Grantor under or pursuant to any such Contract, Chattel
Paper, Document, Instrument or License, or to make any payment, or to make any
inquiry as to the nature or the sufficiency of any payment received by it or the
sufficiency of any performance by any party under any such Contract, Chattel
Paper, Document, Instrument or License, or to present or file any claim, or to
take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled at any
time or times.

 

(b)          The Secured Parties authorize Grantor to collect its Accounts. Upon
the occurrence and during the continuance of any Event of Default, at the
request of the Majority Holders, Grantor shall deliver all original and other
documents evidencing and relating to the performance of labor or service which
created such Accounts, including, without limitation, all original orders,
invoices and shipping receipts.

 

(c)          Upon the written consent of the Majority Holders, any Secured Party
may at any time, upon the occurrence and during the continuance of any Event of
Default, notify Account Debtors of Grantor, parties to the Contracts of Grantor,
obligors in respect of Instruments of Grantor, and obligors in respect of
Chattel Paper of Grantor that the Accounts and the right, title and interest of
Grantor in and under such Contracts, Instruments and Chattel Paper have been
assigned to the Secured Parties and that payments shall be made directly to
Secured Parties. Upon the occurrence and during the continuance of any Event of
Default, upon the request of the Majority Holders, Grantor shall so notify such
Account Debtors, parties to such

 

7. 

 

 

Contracts, obligors in respect of such Instruments and obligors in respect of
such Chattel Paper. Upon the written consent of the Majority Holders, any
Secured Party may, in its name or in the name of others, communicate with such
Account Debtors, parties to such Contracts, obligors in respect of such
Instruments and obligors in respect of such Chattel Paper to verify with such
parties, to such Secured Party’s satisfaction, the existence, amount and terms
of any such Accounts, Contracts, Instruments or Chattel Paper.

 

4.         Representations And Warranties. Grantor hereby represents and
warrants to the Secured Parties that:

 

(a)          Except for the security interest granted to the Secured Parties
under this Security Agreement and Permitted Liens, Grantor is the sole legal and
equitable owner of each item of the Collateral in which it purports to grant a
security interest hereunder.

 

(b)          No effective security agreement, financing statement, equivalent
security or lien instrument or continuation statement covering all or any part
of the Collateral exists, except such as may have been filed in favor of the
Secured Parties pursuant to this Security Agreement and except for Permitted
Liens.

 

(c)          This Security Agreement creates a legal and valid security interest
on and in all of the Collateral in which Grantor now has rights. Upon filing of
the applicable UCC financing statements the Secured Parties will have a
perfected first priority Lien in the Collateral.

 

(d)          Grantor’s correct legal name and taxpayer identification number are
set forth on the signature page hereof. The jurisdiction under whose law Grantor
was organized is set forth on the signature page hereof. Grantor’s chief
executive office, principal place of business, and the place where Grantor
maintains its records concerning the Collateral are presently located at the
address set forth on the signature page hereof. The Collateral consisting of
Goods, other than motor vehicles and other mobile goods, is presently located at
such address and at such additional addresses set forth on Schedule B attached
hereto.

 

(e)          All Collateral of Grantor existing as of the date hereof consisting
of Chattel Paper, Instruments or Investment Property comprising certificated
securities is set forth on Schedule C attached hereto.

 

(f)           The name and address of each depository institution at which
Grantor maintains any Deposit Account and the account number and account name of
each such Deposit Account are listed on Schedule D attached hereto. The name and
address of each securities intermediary or commodity intermediary at which
Grantor maintains any Securities Account or Commodity Account and the account
number and account name of each such Securities Account or Commodity Account are
listed on Schedule D attached hereto. Grantor agrees to amend Schedule D upon
Majority Holders’ request to reflect the opening of any additional Deposit
Account, Securities Account or Commodity Account, or the closing or changing the
account name or number on any existing Deposit Account, Securities Account, or
Commodity Account.

 

(g)          The Grantor does not have any direct or indirect subsidiaries other
than Oncobiologics Limited, a company limited by shares organized under the laws
of England and Wales (the “UK Subsidiary”). The UK Subsidiary does not have any
significant assets or operations.

 

8. 

 

 

5.         Covenants. Unless the Majority Holders otherwise consent (which
consent shall not be unreasonably withheld), Grantor covenants and agrees with
the Secured Parties that from and after the date of this Security Agreement and
until the Secured Obligations have been performed and paid in full and any
commitment of the Secured Parties to make Loans to Grantor has expired or
terminated:

 

5.1           Disposition of Collateral. Grantor shall not sell, lease, transfer
or otherwise dispose of any of the Collateral (each, a “Transfer”), or attempt
or contract to do so, other than (a) the sale of Inventory in the ordinary
course of business, (b) the granting of Licenses in the ordinary course of
business, (c) the disposal of worn-out or obsolete Equipment, and (d) Transfers
of Collateral for fair market value as determined by Grantor in its good faith
business judgment, not exceeding $250,000 in the aggregate in any given fiscal
year.

 

5.2           Change of Name, Jurisdiction of Organization, Relocation of
Business. Grantor shall not change its name or jurisdiction of organization or
relocate its chief executive office, principal place of business or its records
from such address(es) provided to the Secured Parties pursuant to Section 4(d)
above without at least seven (7) days prior notice to the Secured Parties.

 

5.3           Limitation on Liens on Collateral. Grantor shall not, directly or
indirectly, create, permit or suffer to exist, and shall defend the Collateral
against and take such other action as is necessary to remove, any Lien on the
Collateral, except (a) Permitted Liens and (b) the Lien granted to the Secured
Parties under this Security Agreement.

 

5.4           Insurance. Grantor shall maintain insurance policies insuring the
Collateral against loss or damage from such risks and in such amounts and forms
and with such companies as are customarily maintained by businesses similar to
Grantor.

 

5.5           Taxes, Assessments, Etc. Grantor shall pay promptly when due all
property and other taxes, assessments and government charges or levies imposed
upon, and all claims (including claims for labor, materials and supplies)
against, the Collateral, except to the extent the validity or amount thereof is
being contested in good faith and adequate reserves are being maintained in
connection therewith.

 

5.6           Defense of Intellectual Property. Grantor shall (i) protect,
defend and maintain the validity and enforceability of all Intellectual
Property, including Copyrights, Patents and Trademarks material to Grantor’s
business and (ii) detect infringements of all Copyrights, Patents and Trademarks
material to Grantor’s business. Before abandoning or deciding not to maintain
any material Intellectual Property, including deciding not to pursue
nonprovisional applications claiming priority to provisional patent applications
or pursue or maintain foreign Intellectual Property, in each case material to
Grantor’s business, Grantor shall, at least 60 days in advance, obtain the
written consent of the Majority Holders to abandon or no longer maintain such
Intellectual Property.

 

5.7           Further Assurances. At any time and from time to time, upon the
written request of the Majority Holders, and at the sole expense of Grantor,
Grantor shall promptly and duly execute and deliver any and all such further
instruments and documents and take such

 

9. 

 

 

further action as the Majority Holders may reasonably deem necessary or
desirable to obtain the full benefits of this Security Agreement, including,
without limitation, (a) executing, delivering and causing to be filed any
financing or continuation statements under the UCC with respect to the security
interests granted hereby, (b) at the Majority Holders’ reasonable request,
filing or cooperating with the Secured Parties in filing any forms or other
documents required to be recorded with the United States Patent and Trademark
Office or the United States Copyright Office, (c) at the Majority Holders’
reasonable request, placing the interest of the Secured Parties as lienholder on
the certificate of title (or similar evidence of ownership) of any vehicle,
watercraft or other Equipment constituting Collateral owned by Grantor which is
covered by a certificate of title (or similar evidence of ownership),
(d) executing and delivering and using commercially reasonable efforts to cause
the applicable depository institution, securities intermediary, commodity
intermediary or issuer or nominated party under a Letter of Credit to execute
and deliver a collateral control agreement with respect to any Deposit Account,
Securities Account or Commodity Account or Letter-of-Credit Right in or to which
Grantor now or hereafter has any right or interest and (e) at the Majority
Holders’ reasonable request, using commercially reasonable efforts to obtain
acknowledgments from bailees having possession of any Collateral and waivers of
liens from landlords of any location where any of the Collateral may from time
to time be stored or located. Grantor also hereby authorizes the Secured Parties
to file any such financing or continuation statement without the signature of
Grantor.

 

5.8           Additional Grantor. The Grantor shall cause each subsidiary of the
Grantor formed or acquired after the date hereof to immediately become a party
hereto (an “Additional Grantor”), by executing and delivering an Additional
Grantor Joinder in substantially the form of Annex A attached hereto and comply
with the provisions hereof applicable to the Grantor. Concurrent therewith, the
Additional Grantor shall deliver replacement schedules for, or supplements to
all other schedules to (or referred to in) this Agreement, as applicable, which
replacement schedules shall supersede, or supplements shall modify, the
schedules then in effect. The Additional Grantor shall also deliver such
opinions of counsel, authorizing resolutions, good standing certificates,
incumbency certificates, organizational documents, financing statements and
other information and documentation as the Agent may reasonably request. Upon
delivery of the foregoing to the Secured Parties, the Additional Grantor shall
be and become a party to this Security Agreement with the same rights and
obligations as the Grantor, for all purposes hereof as fully and to the same
extent as if it were an original signatory hereto and shall be deemed to have
made the representations, warranties and covenants set forth herein as of the
date of execution and delivery of such Additional Grantor Joinder, and all
references herein to the “Grantor” shall be deemed to include each Additional
Grantor.

 

6.         Secured Parties’ Appointment as Attorney-in-Fact; Performance by
Secured Parties.

 

(a)          Subject to Section 6(b) below, Grantor hereby irrevocably
constitutes and appoints the Secured Parties, and any officer or agent of
Secured Parties, with full power of substitution, as its true and lawful
attorney-in-fact with full, irrevocable power and authority in the place and
stead of Grantor and in the name of Grantor or in its own name, from time to
time, at the Secured Parties’ discretion, for the purpose of carrying out the
terms of this Security Agreement, upon the written consent of the Majority
Holders, to take any and all appropriate

 

10. 

 

 

action and to execute and deliver any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Security
Agreement and, without limiting the generality of the foregoing, hereby gives
the Secured Parties, upon the written consent of the Majority Holders, the power
and right, on behalf of Grantor, without notice to or assent by Grantor to do
the following:

 

(i)          to ask, demand, collect, receive and give acquittances and receipts
for any and all monies due or to become due under any Collateral and, in the
name of Grantor, in its own name or otherwise to take possession of, endorse and
collect any checks, drafts, notes, acceptances or other Instruments for the
payment of monies due under any Collateral and to file any claim or take or
commence any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Secured Parties for the purpose of
collecting any and all such monies due under any Collateral whenever payable;

 

(ii)         to pay or discharge any Liens, including, without limitation, any
tax lien, levied or placed on or threatened against the Collateral, to effect
any repairs or any insurance called for by the terms of this Security Agreement
and to pay all or any part of the premiums therefor and the costs thereof, which
actions shall be for the benefit of the Secured Parties and not Grantor;

 

(iii)       to (1) direct any person liable for any payment under or in respect
of any of the Collateral to make payment of any and all monies due or to become
due thereunder directly to the Secured Parties or as the Secured Parties shall
direct, (2) receive payment of any and all monies, claims and other amounts due
or to become due at any time arising out of or in respect of any Collateral,
(3) sign and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other Instruments and
Documents constituting or relating to the Collateral, (4) commence and prosecute
any suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce any
other right in respect of any Collateral, (5) defend any suit, action or
proceeding brought against Grantor with respect to any Collateral, (6) settle,
compromise or adjust any suit, action or proceeding described above, and in
connection therewith, give such discharges or releases as the Secured Parties
may deem appropriate, (7) license, or, to the extent permitted by an applicable
License, sublicense, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any Copyright, Patent or Trademark throughout
the world for such term or terms, on such conditions and in such manner as the
Secured Parties shall in their discretion determine, and (8) sell, transfer,
pledge, make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Secured Parties were the
absolute owners thereof for all purposes; and

 

(iv)        to do, at the Secured Parties’ option and Grantor’s expense, at any
time, or from time to time, all acts and things which the Secured Parties may
reasonably deem necessary to protect, preserve or realize upon the Collateral
and the Secured Parties’ security interest therein in order to effect the intent
of this Security Agreement, all as fully and effectively as Grantor might do;
and

 

(v)        to file any UCC-1 financing statements, including such financing
statements describing the Collateral as “all assets of the Debtor, whether now
owned or hereafter acquired” or words of similar import. 

 

11. 

 

 

(b)          The Secured Parties agree that, except upon the occurrence and
during the continuation of an Event of Default, they shall not exercise the
power of attorney or any rights granted to the Secured Parties pursuant to this
Section 6. Grantor hereby ratifies, to the extent permitted by law, all that
said attorney shall lawfully do or cause to be done by virtue hereof. The power
of attorney granted pursuant to this Section 6 (a)(i)-(iv) is a power coupled
with an interest and shall be irrevocable until the Secured Obligations are
completely and indefeasibly paid and performed in full and the Secured Parties
no longer have any commitment to make any Loans to Grantor.

 

(c)          If Grantor fails to perform or comply with any of its agreements
contained herein and the Secured Parties, as provided for by the terms of this
Security Agreement, shall perform or comply, or otherwise cause performance or
compliance, with such agreement, the reasonable expenses, including reasonable
attorneys’ fees and costs, of the Secured Parties incurred in connection with
such performance or compliance, together with interest thereon at a rate of
interest equal to the highest per annum rate of interest charged on the Loans,
shall be payable by Grantor to the Secured Parties within five (5) business days
of demand and shall constitute Secured Obligations secured hereby.

 

7.         Rights And Remedies Upon Default. After any Event of Default shall
have occurred and while such Event of Default is continuing:

 

(a)          Upon the written consent of the Majority Holders, the Secured
Parties may exercise in addition to all other rights and remedies granted to
them under this Security Agreement, the IP Security Agreement, the Notes, or the
Purchase Agreement all rights and remedies of a secured party under the UCC.
Without limiting the generality of the foregoing, Grantor expressly agrees that
in any such event the Secured Parties, without demand of performance or other
demand, advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon Grantor or any other
person, may (i) reclaim, take possession, recover, store, maintain, finish,
repair, prepare for sale or lease, shop, advertise for sale or lease and sell or
lease (in the manner provided herein) the Collateral, and in connection with the
liquidation of the Collateral and collection of the accounts receivable pledged
as Collateral, use any Trademark, Copyright, or process used or owned by Grantor
and (ii) forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and may forthwith sell, lease, assign, give an
option or options to purchase or sell or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or more parcels
at public or private sale or sales, at any exchange or broker’s board or at any
Secured Party’s offices or elsewhere at such prices as they may deem
commercially reasonable, for cash or on credit or for future delivery without
assumption of any credit risk. Grantor further agrees, at the Majority Holders’
request, to assemble the Collateral and make it available to the Secured Parties
at places which the Secured Parties shall reasonably select, whether at
Grantor’s premises or elsewhere. The Secured Parties shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale as provided in Section 7(e), below, with Grantor remaining liable for
any deficiency remaining unpaid after such application. Grantor agrees that the
Secured Parties need not give more than ten (10) days’ notice of the time and
place of any public sale or of the time after which a private sale may take
place and that such notice is reasonable notification of such matters.

 

12. 

 

 

(b)          As to any Collateral constituting certificated securities or
uncertificated securities, if, at any time when Secured Parties shall determine
to exercise their right to sell the whole or any part of such Collateral
hereunder, such Collateral or the part thereof to be sold shall not, for any
reason whatsoever, be effectively registered under Securities Act of 1933, as
amended (as so amended the “Act”), the Secured Parties may, in their discretion
(subject only to applicable requirements of law), sell such Collateral or part
thereof by private sale in such manner and under such circumstances as the
Secured Parties may deem necessary or advisable, but subject to the other
requirements of this Section 7(b), and shall not be required to effect such
registration or cause the same to be effected. Without limiting the generality
of the foregoing, in any such event the Secured Parties may, in their
discretion, (i) in accordance with applicable securities laws, proceed to make
such private sale notwithstanding that a registration statement for the purpose
of registering such Collateral or part thereof could be or shall have been filed
under the Act; (ii) approach and negotiate with a single possible purchaser to
effect such sale; and (iii) restrict such sale to a purchaser who will represent
and agree that such purchaser is purchasing for its own account, for investment,
and not with a view to the distribution or sale of such Collateral or part
thereof. In addition to a private sale as provided above in this Section 7(b),
if any of such Collateral shall not be freely distributable to the public
without registration under the Act at the time of any proposed sale hereunder,
then the Secured Parties shall not be required to effect such registration or
cause the same to be effected but may, in their discretion (subject only to
applicable requirements of law), require that any sale hereunder (including
a sale at auction) be conducted subject to such restrictions as the Secured
Parties may, in their discretion, deem necessary or appropriate in order that
such sale (notwithstanding any failure so to register) may be effected in
compliance with the Bankruptcy Code and other laws affecting the enforcement of
creditors’ rights and the Act and all applicable state securities laws.

 

(c)          Grantor also agrees to pay all fees, costs and expenses of the
Secured Parties, including, without limitation, reasonable attorneys’ fees,
incurred in connection with the enforcement of any of their rights and remedies
hereunder.

 

(d)          The Proceeds of any sale, disposition or other realization upon all
or any part of the Collateral shall be distributed by the Secured Parties in the
following order of priorities:

 

First, to each Secured Party in an amount sufficient to pay in full the costs of
such Secured Party in connection with such sale, disposition or other
realization, including all fees, costs, expenses, liabilities and advances
incurred or made by any Secured Party in connection therewith, including,
without limitation, reasonable attorneys’ fees;

 

Second, to the Secured Parties in amounts proportional to the Pro Rata share of
the then unpaid Secured Obligations of each Secured Party; and

 

Finally, upon payment in full of the Secured Obligations, to Grantor or its
representatives, in accordance with the UCC or as a court of competent
jurisdiction may direct.

 

(e)          As among the Secured Parties, the costs of enforcing or pursuing
any right or remedy hereunder, including without limitation any repossession,
sale, possession and management (including, without limitation, reasonable
attorneys’ fees), and distribution shall be borne Pro Rata by the

 

13. 

 

 

Secured Parties. Each Secured Party shall reimburse each other Secured Party, as
applicable, for its Pro Rata share of all such costs promptly upon demand. For
the avoidance of doubt, this clause (e) shall in no event limit the obligations
of the Grantor to pay all costs of enforcement pursuant to Section 7(c).

 

8.         Actions by the Secured Parties and Amendments. All actions, omissions
and decisions of the Secured Parties hereunder or any amendment of this Security
Agreement , the Notes or the Purchase Agreement (each called herein an “Act of
the Secured Parties”) shall be determined by and require the written consent of
the Majority Holders. Each Secured Party shall take such actions and execute
such documents as may be necessary to confirm or accomplish any Act of the
Secured Parties. Notwithstanding the foregoing, the consent of each affected
Secured Party shall be necessary to do the following to any Note:

 

(a)          reduce the percentage of the principal and interest amount of Loans
whose holders must consent to constitute Majority Holders’ consent;

 

(b)          reduce the rate of or change the time for payment of interest on
any Loan;

 

(c)          reduce the principal of or change the fixed maturity of any Loan;
or

 

(d)          make any Loan payable in money other than that stated in the Note.

 

9.         Unequal Payment by Grantor. Each Secured Party agrees that if it
shall obtain or receive, through the exercise of any right granted to the
Secured Parties under this Security Agreement, under the Notes or by applicable
law, including, but not limited to any right of set-off, any secured claim under
Section 506 of the Bankruptcy Code or any other security or interest, any
payment or payments greater than its Pro Rata share of all Loans, as measured
immediately prior to the receipt of such payment or payments, then (a) such
Secured Party shall promptly purchase at par (and shall be deemed to have
thereupon purchased) from the other Secured Parties, a participation in the
Loans of such other Secured Parties, so that each Secured Party shall have
received payments in proportion to its Pro Rata share immediately prior to such
transactions and (b) such other adjustments shall be made from time to time as
shall be equitable to ensure that the Secured Parties share the benefits of such
payment on a Pro Rata basis. The term “Loan” as used in this paragraph shall
include accrued interest thereon.

 

10.       Indemnity. Grantor agrees to defend, indemnify and hold harmless the
Secured Parties and their officers, employees, and agents against (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Security
Agreement and (b) all losses or expenses in any way suffered, incurred, or paid
by any Secured Party as a result of or in any way arising out of, following or
consequential to the transactions contemplated by this Security Agreement
(including without limitation, reasonable attorneys fees and expenses), except
for losses arising from or out of such Secured Party’s gross negligence or
willful misconduct.

 

11.       Reinstatement. This Security Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Grantor for liquidation or reorganization, should Grantor become insolvent or
make an assignment for the benefit of creditors or should a receiver or trustee
be appointed for all or any significant part of Grantor’s property and assets,
and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant

 

14. 

 

 

to applicable law, rescinded or reduced in amount, or must otherwise be restored
or returned by any obligee of the Secured Obligations, whether as a “voidable
preference,” “fraudulent conveyance,” or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Secured Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.

 

12.       Security Interests Absolute. All rights of the Secured Parties and all
obligations of the Grantor hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Security
Agreement, the Notes or any agreement entered into in connection with the
foregoing, or any portion hereof or thereof; (b) any change in the time, manner
or place of payment or performance of, or in any other term of, all or any of
the Secured Obligations, or any other amendment or waiver of or any consent to
any departure from the Notes or any other agreement entered into in connection
with the foregoing; (c) any exchange, release or nonperfection of any of the
Collateral, or any release or amendment or waiver of or consent to departure
from any other collateral for, or any guarantee, or any other security, for all
or any of the Secured Obligations; (d) any action by the Secured Parties to
obtain, adjust, settle and cancel in its sole discretion any insurance claims or
matters made or arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute any legal or equitable defense
available to the Grantor, or a discharge of all or any part of the Security
Interests granted hereby. Until the Secured Obligations shall have been paid and
performed in full, the rights of the Secured Parties shall continue even if the
Secured Obligations are barred for any reason, including, without limitation,
the running of the statute of limitations or bankruptcy. Grantor hereby waives
presentment, demand, protest or any notice (to the maximum extent permitted by
applicable law) of any kind in connection with this Security Agreement or any
Collateral. In the event that at any time any transfer of any Collateral or any
payment received by the Secured Parties hereunder shall be deemed by final order
of a court of competent jurisdiction to have been a voidable preference or
fraudulent conveyance under the bankruptcy or insolvency laws of the United
States, or shall be deemed to be otherwise due to any party other than the
Secured Parties, then, in any such event, the Grantor’s obligations hereunder
shall survive cancellation of this Security Agreement, and shall not be
discharged or satisfied by any prior payment thereof and/or cancellation of this
Agreement, but shall remain a valid and binding obligation enforceable in
accordance with the terms and provisions hereof. The Grantor waives all right to
require the Secured Parties to proceed against any other person or entity or to
apply any Collateral which the Secured Parties may hold at any time, or to
marshal assets, or to pursue any other remedy. The Grantor waives any defense
arising by reason of the application of the statute of limitations to any
obligation secured hereby.

 

13.       Miscellaneous.

 

13.1         Waivers; Modifications. None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Grantor and the Majority Holders. Each
Secured Party acknowledges that because this Security Agreement may be amended
with the consent of the Majority Holders, each Secured Party’s rights hereunder
may be amended or waived without such Secured Party’s consent.

 

15. 

 

 

13.2         Termination of this Security Agreement. Subject to Section 11
hereof, this Security Agreement shall terminate upon the payment and performance
in full of the Secured Obligations and the expiration or termination of any
commitment of the Secured Parties to make Loans to Grantor.

 

13.3         Successor and Assigns. This Security Agreement and all obligations
of Grantor hereunder shall be binding upon the successors and assigns of
Grantor, and shall, together with the rights and remedies of the Secured Parties
hereunder, inure to the benefit of the Secured Parties, any future holder of any
of the Secured Obligations and their respective successors and assigns. No sales
of participations in the Secured Obligations or any portion thereof or interest
therein, and no sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Secured Obligations or any
portion thereof or interest therein, shall in any manner affect the lien granted
to the Secured Parties hereunder.

 

13.4         Governing Law. In all respects, including all matters of
construction, validity and performance, this Security Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of New York applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of laws, except to
the extent that the UCC provides for the application of the law of a different
jurisdiction.

 

13.5         Counterparts; Facsimile or PDF Copies. This Security Agreement may
be executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same agreement.  Executed copies of the signature pages of this Security
Agreement sent by facsimile or transmitted electronically in Portable Document
Format (“PDF”), or any similar format, shall be treated as originals, fully
binding and with full legal force and effect, and the parties waive any rights
they may have to object to such treatment.

 

13.6         Notices. All notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement.

 

[Signature pages follow.]

 

16. 

 

 

In Witness Whereof, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.

 

Address Of Grantor   Oncobiologics, Inc., as Grantor       7 Clarke Drive   By:
/s/ Lawrence A. Kenyon

 

Cranbury, New Jersey  08512   Printed Name: Lawrence A. Kenyon

 

    Title: Chief Financial Officer

 

   

Jurisdiction of Organization of Grantor

 

Delaware

 

Signature page to Security Agreement

 

 

 

 

Accepted And Acknowledged By:         , as Secured Party  

 

By:    

 

Printed Name:    

 

Title:    

 

Signature page to Security Agreement

 

 

 

 

ANNEX A

to

SECURITY

AGREEMENT

 

FORM OF ADDITIONAL GRANTOR JOINDER

 

Security Agreement dated as of December 22, 2016 made by

Oncobiologics, Inc.

and its subsidiaries party thereto from time to time, as Grantors

to and in favor of

the Secured Parties identified therein (the “Security Agreement”)

 

Reference is made to the Security Agreement as defined above; capitalized terms
used herein and not otherwise defined herein shall have the meanings given to
such terms in, or by reference in, the Security Agreement.

 

The undersigned hereby agrees that upon delivery of this Additional Grantor
Joinder to the Secured Parties referred to above, the undersigned shall (a) be
an Additional Grantor under the Security Agreement, (b) have all the rights and
obligations of the Grantors under the Security Agreement as fully and to the
same extent as if the undersigned was an original signatory thereto and (c) be
deemed to have made the representations and warranties set forth therein as of
the date of execution and delivery of this Additional Grantor Joinder. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO
THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET
FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF
JURY TRIAL PROVISIONS SET FORTH THEREIN.

 

Attached hereto are supplemental and/or replacement Schedules to the Security
Agreement, as applicable.

 

An executed copy of this Joinder shall be delivered to the Secured Parties, and
the Secured Parties may rely on the matters set forth herein on or after the
date hereof. This Joinder shall not be modified, amended or terminated without
the prior written consent of the Secured Parties.

 

 

 

 

IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the name and on behalf of the undersigned.

 

  [Name of Additional Grantor]         By:     Name:     Title:          
Address: