EXHIBIT
10.3


 


CONFIDENTIAL TREATMENT


EPIX Medical, Inc. has requested that the
marked portions of this document be accorded confidential

treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.


 


Final
Version


 




 





LOAN AGREEMENT


 


By and Between


 


EPIX MEDICAL, INC.


 


AND


 


SCHERING AKTIENGESELLSCHAFT


 


dated as of May 26, 2003




 





 

















 


TABLE OF CONTENTS


 


	
  1.

  	
  DEFINITIONS

  
	
   

  
	
  1.1

  	
  DEFINED TERMS

  
	
  1.2

  	
  OTHER DEFINITIONAL PROVISIONS

  
	
   

  
	
  2.

  	
  THE LOANS; PAYMENT OF PRINCIPAL AND
  INTEREST; RELATED MATTERS

  
	
   

  
	
  2.1

  	
  MAXIMUM PRINCIPAL AMOUNT OF LOANS; OTHER
  PROVISIONS RE: THE LOANS

  
	
  2.2

  	
  PROCEDURES FOR DISBURSEMENTS OF FUNDS

  
	
  2.3

  	
  INTEREST CALCULATIONS

  
	
  2.4

  	
  PAYMENT OF PRINCIPAL AND INTEREST

  
	
  2.5

  	
  OTHER PROVISIONS

  
	
  2.6

  	
  PAYMENTS BY EPIX

  
	
  2.7

  	
  TERMINATION

  
	
   

  
	
  3.

  	
  CONDITIONS PRECEDENT

  
	
   

  
	
  3.1

  	
  CONDITIONS PRECEDENT TO THE INITIAL LOAN

  
	
  3.2

  	
  CONDITIONS PRECEDENT TO ALL LOANS

  
	
   

  
	
  4.

  	
  REPRESENTATIONS AND WARRANTIES

  
	
   

  
	
  4.1

  	
  ORGANIZATION AND QUALIFICATION

  
	
  4.2

  	
  DUE AUTHORIZATION

  
	
  4.3

  	
  NO DEFAULT; COMPLIANCE WITH LAWS

  
	
  4.4

  	
  NO REQUIRED GOVERNMENTAL AUTHORIZATIONS

  
	
  4.5

  	
  COMMISSION FILINGS; NASDAQ LISTING

  
	
  4.6

  	
  INTELLECTUAL PROPERTY

  
	
  4.7

  	
  NO MATERIAL ADVERSE EFFECT

  
	
  4.8

  	
  PERFECTED FIRST PRIORITY LIENS

  
	
  4.9

  	
  TITLE; ABSENCE OF LIENS

  
	
  4.10

  	
  COMPLIANCE WITH LAWS

  
	
  4.11

  	
  NO PROCEEDINGS

  
	
  4.12

  	
  DELIVERY OF DOCUMENTS

  
	
  4.13

  	
  NO VIOLATIONS; TAXES AND ASSESSMENTS

  
	
  4.14

  	
  ENVIRONMENTAL MATTERS

  
	
  4.15

  	
  OTHER REPRESENTATIONS

  
	
  4.16

  	
  REPRESENTATIONS AND WARRANTIES APPLICABLE
  TO SUBSIDIARIES

  
	
  4.17

  	
  REAFFIRMATION

  
	
   

  
	
  5.

  	
  AFFIRMATIVE COVENANTS

  
	
   

  
	
  5.1

  	
  MAINTENANCE

  
	
  5.2

  	
  CONDITION OF COLLATERAL; NO LIENS;
  MAINTENANCE OF CERTAIN COLLATERAL

  
	
  5.3

  	
  COMPLIANCE WITH LAWS

  
	
  5.4

  	
  AFFIRMATIVE FINANCIAL COVENANTS

  
	
  5.5

  	
  NASDAQ LISTING

  
					



 


1

















 


	
  5.6

  	
  NOTICE OF ADVERSE EVENTS

  
	
  5.7

  	
  FINANCIAL STATEMENTS AND OTHER INFORMATION

  
	
  5.8

  	
  OTHER
  PROVISIONS

  
	
   

  
	
  6.

  	
  NEGATIVE COVENANTS

  
	
   

  
	
  6.1

  	
  AMENDMENTS OF DOCUMENTS

  
	
  6.2

  	
  CONSOLIDATION, MERGER, OR ACQUISITIONS;
  LIQUIDATION

  
	
  6.3

  	
  OTHER LIENS

  
	
  6.4

  	
  DISPOSITION OF ASSETS OR COLLATERAL

  
	
  6.5

  	
  OTHER LIABILITIES

  
	
  6.6

  	
  LOANS OR INVESTMENTS

  
	
  6.7

  	
  GUARANTIES; CONTINGENT LIABILITIES

  
	
  6.8

  	
  DIVIDENDS AND OTHER DISTRIBUTIONS

  
	
  6.9

  	
  TRANSACTIONS WITH AFFILIATES

  
	
  6.10

  	
  OTHER COVENANTS

  
	
  6.11

  	
  SUBSIDIARIES

  
	
   

  
	
  7.

  	
  EVENTS OF DEFAULT

  
	
   

  
	
  7.1

  	
  FAILURE TO PAY

  
	
  7.2

  	
  FAILURE TO PERFORM OR OBSERVE COVENANTS

  
	
  7.3

  	
  SECURITY

  
	
  7.4

  	
  TRANSACTION DOCUMENTS

  
	
  7.5

  	
  FALSE REPRESENTATION OR WARRANTY

  
	
  7.6

  	
  TERMINATION OF THE RESEARCH AGREEMENT

  
	
  7.7

  	
  DEFAULT ON OTHER DEBT

  
	
  7.8

  	
  CESSATION OF BUSINESS

  
	
  7.9

  	
  NON-APPROVABLE LETTER FOR MS-325

  
	
  7.10

  	
  INABILITY TO PAY DEBTS; BANKRUPTCY OR
  INSOLVENCY

  
	
  7.11

  	
  CERTAIN JUDGMENTS

  
	
  7.12

  	
  CHANGE OF CONTROL

  
	
   

  
	
  8.

  	
  REMEDIES

  
	
   

  
	
  8.1

  	
  RIGHTS UNDER TRANSACTION DOCUMENTS

  
	
  8.2

  	
  RIGHTS IN GENERAL

  
	
  8.3

  	
  SETOFF RIGHTS

  
	
  8.4

  	
  ADDITIONAL RIGHTS TO TERMINATE THIS
  AGREEMENT

  
	
  8.5

  	
  CUMULATIVE REMEDIES; NO WAIVER BY SCHERING

  
	
  8.6

  	
  WAIVERS AND CONSENTS RELATING TO REMEDIES

  
	
  8.7

  	
  POWERS OF ATTORNEY

  
	
   

  
	
  9.

  	
  COSTS, EXPENSES AND TAXES; INDEMNIFICATION;
  LIMITATIONS ON SCHERING’S LIABILITY

  
	
   

  
	
  9.1

  	
  COSTS AND EXPENSES

  
	
  9.2

  	
  INDEMNIFICATION BY EPIX

  
	
  9.3

  	
  LIMITATIONS ON SCHERING’S LIABILITY

  
					



 


2

















 


	
  10.

  	
  OTHER PROVISIONS

  
	
   

  
	
  10.1

  	
  ENTIRE AGREEMENT; AMENDMENTS; SCHERING’S
  CONSENT

  
	
  10.2

  	
  SPECIFIC PERFORMANCE

  
	
  10.3

  	
  NOTICES

  
	
  10.4

  	
  NO THIRD PARTY BENEFICIARIES

  
	
  10.5

  	
  JOINT EFFORTS

  
	
  10.6

  	
  GOVERNING LAW

  
	
  10.7

  	
  OTHER PROVISIONS

  
	
  10.8

  	
  NO AGENCY RELATIONSHIP

  
	
  10.9

  	
  FURTHER ACKNOWLEDGMENTS AND AGREEMENTS OF
  EPIX AND SCHERING

  
			



 


3

















 


EXHIBITS


 


	
  Exhibit
  A

  	
   

  	
  Research Agreement

  
	
  Exhibit
  B

  	
   

  	
  Note

  
	
  Exhibit
  C

  	
   

  	
  Security Agreement

  
	
  Exhibit
  D

  	
   

  	
  Epix Investment Policy and Guidelines

  
	
   

  
	
  SCHEDULES

  
	
   

  
	
  Schedule

  	
   

  	
  4.5

  	
  Material
  Contingent Liabilities

  
	
  Schedule

  	
   

  	
  A

  	
  Loans

  



 


4

















 


LOAN AGREEMENT


 


This Loan Agreement (this “Agreement”)
is made as of May 26, 2003 between Epix Medical, Inc. (“Epix”) and
Schering Aktiengesellschaft, Berlin, Germany (“Schering”).


 


WITNESSETH:


 


WHEREAS, Schering has agreed, subject to the
terms and conditions contained in this Agreement, to provide certain loans to
Epix in the maximum principal amount of Fifteen Million Dollars ($15,000,000).


 


AGREEMENT


 


NOW, THEREFORE, in consideration of the
premises and the mutual covenants herein contained, the parties hereto (the “Parties”)
hereby agree as follows:


 


1.               Definitions


 


1.1            Defined Terms. 
As used herein, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms
of the terms defined):


 


“Advance” means
the making of any Loan by or on behalf of Schering hereunder.


 


“Affiliate” means any corporation,
firm, partnership or other entity which directly or indirectly controls or is
controlled by or is under common control with a Party to this Agreement. For
purposes of this definition, “control” means ownership, directly or through one
or more Affiliates, of fifty percent (50%) or more of the shares of the stock
entitled to vote for the election of directors, in the case of a corporation,
or fifty percent (50%) or more of the equity interests in the case of any other
type of legal entity, status as a general partner in any partnership, or any
other arrangement whereby a Party controls or has the right to control the
Board of Directors or equivalent governing body of a corporation or other
entity.


 


“Agreement” means this Loan Agreement,
as amended, supplemented, restated or otherwise modified from time to time  in writing by the Parties.


 


“Collateral” or “Secured Assets”
means all of the assets in which Epix has granted or does grant Schering a Lien
pursuant to the Security Agreement and/or any other Loan Document.


 


“Default Rate” means a rate of
interest equal to [*****] percent [*****] per annum in excess of the interest
rate or interest rates otherwise applicable at any time to any Loan.


 


“Document” means any contract, other
agreement, instrument, undertaking, other paper or writing or other document of
any kind or nature whatsoever.


 


5

















 


“Equity
Interests” means any stock or other equity interest of any kind or nature
whatsoever.


 


“Exhibit” means all Exhibits attached
hereto and made a part hereof as if fully set forth herein.


 


“GAAP” means United States generally
accepted accounting principles as defined by controlling pronouncements of the
Financial Accounting Standards Board, as from time to time supplemented and
amended.


 


“Governmental Authority” means any
United States or foreign federal, national, state or local governmental authority,
agency, department or instrumentality or other regulatory body of any kind or
nature whatsoever, including any (i) court and (ii) that has jurisdiction in
whole or in part relating to the Products, including the right to issue,
condition, otherwise modify, withdraw or otherwise affect any Governmental
Authorization.


 


“Governmental Authorization” means any
permit, authorization, license or other approval of any kind or nature
whatsoever issued or issuable by any Governmental Authority.


 


“including” means “including, without
limitation”, “includes” means “includes, without limitation”, and “include”
means “include, without limitation”.


 


“Intellectual Property” means any
rights of any kind or nature in or to any patents, trademarks, service marks,
copyrights, trade secrets, processes, other proprietary rights, other
inventions, other know-how of any kind or nature whatsoever and other
intellectual property rights of any kind or nature whatsoever (including as to
each of the foregoing any rights obtained as a licensee or sublicensee),
including any applications to or for any of the foregoing.


 


“Interest Rate” means, with respect to
each Loan, the lesser of (a) a fluctuating interest rate per annum equal to
[*****] percent ([*****]) above the Prime Rate with changes in such fluctuating
rate to take effect with each change in the Prime Rate provided that following
the occurrence of an Event of Default, the interest rate applicable to each
Loan shall be immediately increased to the Default Rate and (b) the highest
rate of interest permitted from time to time by applicable law.


 


“Liabilities” means any liabilities,
contractual obligations, common law obligations, obligations arising under Law
or any other obligations of any kind or nature whatsoever, as determined in
accordance with GAAP.


 


“Lien” means any mortgage, security
interest, assignment, pledge, hypothecation, lien, conditional sale or other
title retention agreement, financing lease having substantially the same effect
as any of the foregoing, right, other preferential arrangement or other
encumbrance of any kind or nature whatsoever.


 


“Loan” or “Loans” means any
loan made by or on behalf of Schering to Epix relating to this Agreement.


 


6

















 


“Loan Documents” means (i) this
Agreement, (ii) the Security Agreement, (iii) the Note and (iv) any Compliance
Certificates and/or Supplemental Certificates and the initial certificate
referred to in Section 3.1(h) hereof.


 


“Material Adverse Effect” means (i)
any material adverse change in Epix’ business, operations, properties or other
assets, results of operations or condition (financial or otherwise), (ii) any
other material adverse change in, or other material adverse event, occurrence
or other circumstance affecting, the Secured Assets or Schering’s interest
therein or the right or ability of Epix to manufacture or sell the Products, or
(iii) without limiting the generality of clause (i) or clause (ii) the
occurrence of any Order issued enjoining or otherwise prohibiting in any
material respect the manufacture or sale of any material Product or the
consummation of any other material transactions contemplated by the Research
Agreement.


 


“MRI” means magnetic resonance
imaging.


 


“Note” means that certain Promissory
Note of even date herewith, a copy of which is attached hereto as Exhibit B, as
amended, supplemented, restated or otherwise modified from time to time.


 


“Obligations” means (i) all of the
principal of and all of the interest on the Loans and (ii) all other monetary
and non-monetary obligations of Epix to Schering under the terms of this
Agreement and each other Loan Document.


 


“Order” means any injunction, writ, restraining order or other
similar order of any kind or nature of or by any Governmental Authority.


 


“Organizational Documents” means the
Documents related to the creation, organization and internal regulation of any
Person, including the certificate of incorporation or articles of
incorporation, as applicable, and by-laws, of any Person, each as amended and/or
restated.


 


“Person” means an individual, limited
liability company, corporation, partnership, business or other trust,
unincorporated association, joint venture, Governmental Authority or other
entity of any kind or nature whatsoever.


 


“Prime Rate” means the prime rate as
quoted by Bank of America on Reuters screen <USPRIME1> or, if none, by
another nationally recognized source reasonably selected by Schering and
reasonably acceptable to Epix.


 


“Proceeding” means any claim, demand,
proceeding, investigation or other action.


 


“Products” means products using MRI
technology that the Parties desire to sell.


 


“related to” means “arising out of, in
connection with or otherwise related to”, “relates to” means “arises out
of, is in connection with or otherwise relates to” and “relate to” has a
substantially similar meaning.


 


7

















 


“Research Agreement” means the
Collaborative Research Agreement in the form of Exhibit A, as amended,
supplemented, restated or otherwise modified from time to time, providing for,
among other things, a joint collaboration by Epix and Schering with respect to
the development and commercialization of new technology and products for use in
magnetic resonance imaging.


 


“SEC” means the Securities and
Exchange Commission.


 


“Security Agreement” means the
Security Agreement in the form of Exhibit C, as amended, supplemented, restated
or otherwise modified from time to time, providing for, among other things, a
grant by Epix to Schering of a first priority Lien in the Secured Assets.


 


“Subsidiary” means any Person in which
Epix directly or indirectly owns fifty percent (50%) or more of (i) the Equity
Interests generally entitled to vote on matters and/or (ii) the Equity
Interests.


 


“Transaction Documents” means this
Agreement, the Research Agreement and all of the other Loan Documents.


 


“UCC” means the Uniform Commercial
Code as in effect from time to time in the State of New York.


 


1.2            Other Definitional Provisions.  The words “hereof”, “herein”, “hereto” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement.  Section, Subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.  Amendments and modifications
each include extensions, consolidations, renewals or replacements.  In addition, the following terms are defined
herein.


 


	
  Section

  	
   

  	
  Defined Terms

  
	
  ¶1

  	
   

  	
  Agreement

  
	
  §2.2(c)

  	
   

  	
  Business Day

  
	
  §7.12

  	
   

  	
  Change of Control

  
	
  §4.5

  	
   

  	
  Commission Reports

  
	
  §3.2(b)

  	
   

  	
  Compliance Certificate

  
	
  §4.6

  	
   

  	
  Environmental Laws

  
	
  ¶1

  	
   

  	
  Epix

  
	
  §7

  	
   

  	
  Event of Default

  
	
  §4.5

  	
   

  	
  Exchange Act

  
	
  §2.2(b)

  	
   

  	
  FDA

  
	
  §3.1

  	
   

  	
  Initial Loan

  
	
  §4.3

  	
   

  	
  Law

  
	
   

  	
   

  	
   

  
	
  §2.1

  	
   

  	
  Maximum Principal Amount of Loans

  
	
  §2.2(b)

  	
   

  	
  NDA

  
	
  ¶1

  	
   

  	
  Parties

  



 


8

















 


	
  Section

  	
   

  	
  Defined Terms

  
	
  §4.17

  	
   

  	
  Requested Loan

  
	
  ¶1

  	
   

  	
  Schering

  
	
  §2.2(b)

  	
   

  	
  Strategic Collaboration Agreement 

  
	
  §3.2(a)

  	
   

  	
  Supplemental Certificate

  
	
  §7.10

  	
   

  	
  Undismissed

  



 


2.               The Loans; Payment of Principal and
Interest; Related Matters.


 


2.1                                 Maximum Principal Amount of Loans; Other
Provisions Re: the Loans.  Subject
to all of the terms and conditions of this Agreement, including the conditions
precedent hereto, (a) Schering agrees to lend to Epix up to Fifteen Million
Dollars ($15,000,000) (the “Maximum Principal Amount of Loans”) and (b)
the Loans shall be made by Schering to Epix at the times provided for in this
Article II.  The Loans shall be payable
in accordance with the terms of this Agreement and the Note.  Anything to the contrary notwithstanding in
this Agreement, the Parties agree that 
(a) to the extent any Loan is repaid, such amount may be borrowed again
and (b) Schering shall have no obligation to provide any Loans on or after the
earliest of any of the following occur: (A) an Event of Default occurs and/or
(B) the Research Agreement is terminated for any reason, other than as the result of a breach by Schering
pursuant to Section 8.2 of the Research Agreement or an early termination
for convenience
by Schering pursuant to Section 8.2.3 of the Research  Agreement.  Schering shall not be obligated to make Loans
to or on behalf of Epix in amounts which, when aggregated, exceed the Maximum
Principal Amount of Loans.


 


2.2                                 Procedures for Disbursements of
Funds.  Subject to the other
provisions of this Agreement:


 


(a)                                  On
or following the date hereof, Epix may, from time to time, submit to Schering a
written request for a Loan in a principal amount not less than $[*****]
provided that the principal amount outstanding under this Agreement shall not
exceed $7.5 million, except as specified in Section 2.2(b) below.


 


(b)                                 Upon or following
the one (1) year anniversary of the date hereof, Epix may, from time to time,
submit to Schering a written request for a Loan in a principal amount not less
than $[*****] such that the principal amount outstanding under this Agreement
shall not exceed $15 million; provided, however, that Schering shall have no
obligation to make any Loan(s) in excess of the initial $7.5 million and Epix
agrees not to request any such Loan(s) if (i) Epix has received a
“non-fileable” letter relating to its submission of a new drug application
(“NDA”) for Compound MS-325 (as defined in the Strategic Collaboration
Agreement by and between Epix and Schering, dated as of June 9, 2000, as
thereafter amended from time to time (the “Strategic Collaboration Agreement”))
from the U.S. Food and Drug Administration (“FDA”) on or before March 1, 2004,
and (ii) Epix has not, at the time of requesting such Loan, received a
“fileable” letter with respect to such NDA.


 


9

















 


(c)                                  Epix
shall be limited to submitting requests for Loans pursuant to Section 2.2(a)
and (b) and to making repayments of Loans pursuant to Section 2.4 hereof an
aggregate number of [*****] times per annum. 
Schering shall, subject to the other provisions of this Agreement, make
the Loan requested by Epix within five (5) Business Days (defined as any day,
other than a Saturday or Sunday, on which federally chartered banks in the
United States and Germany are open for business) after the receipt by Schering
of a request for funds meeting the requirements of this Agreement.  Upon disbursements to Epix by Schering of
any funds under this Agreement, Schering may, at its election, present the Note
to Epix for notation on Schedule A attached hereto of any additional principal
amount outstanding as a consequence of the Loan by Schering.


 


2.3                                 Interest Calculations.


 


(a)                                  The
Loans shall bear interest at the Interest Rate.  Interest shall accrue from the date each such Loan is made.  Interest on the Loans shall be calculated on
a daily basis on the basis of a 360 day year, and on the basis of the actual
days elapsed, upon the outstanding principal balance, including by reason of a
deferred payment because the scheduled or actual payment date is not a Business
Day.


 


(b)                                  Without
limiting the generality of the term Interest Rate, if the interest rate
calculated in accordance with any provision of this Agreement for any Loan
(including any application of the Default Rate) would at any time exceed the
maximum permitted by the law of the State of New York, then for such period as
such rate would exceed the maximum permitted by such Law (and no longer) the
rate of interest payable on any such Loan shall be reduced to the maximum
permitted by the law of the State of New York and any interest payments
received in excess of such maximum rate shall be repaid to Epix.


 


2.4                                 Payment of Principal and Interest.


 


(a)                                  Payment
of Interest.  All interest accruing
under Section 2.3 on any Loan shall be payable to Schering from time to time on
the earliest of each of the following: 
(i) five (5) Business Days after each anniversary of the Note, (ii) on
any day on which any payment of principal by Epix is made in whole or in part
and (iii) on any other day in which any payment of principal is required to be
made in whole or in part, including by reason of any acceleration of the Loans
provided that to the extent that Schering has not accelerated the Loans and
principal is payable, paid or required to be paid in part, then the interest
payable pursuant to this Section 2.4 shall relate only to such principal.


 


(b)                                 Payment
of Principal.  The principal of the
Loans shall be paid to Schering from time to time on the earliest of each of
the following times: (i) (A) principal shall be paid such that the maximum
principal amount outstanding hereunder shall be reduced to $7.5 million  on May 15, 2007 and to zero on May 15,
2008; and (B) notwithstanding clause (A), if the term of the Research Program
under the Research Agreement is extended by mutual written agreement for an
additional two (2) years pursuant to Section 2.1 of the Research Agreement,
principal shall be paid such that the maximum principal amount outstanding
under this Agreement shall instead be reduced to $7.5 million  on May 15, 2009 and to zero on May 15,
2010, respectively, (ii) the


 


10

















 


date that Schering declares an acceleration of the Loans pursuant to an
Event of Default and (iii) at such other times as is or may be provided
elsewhere in this Agreement or in the Note. 
Schering shall have the right, but not the obligation, to include as an
Exhibit to the Note a grid which identifies the payments made and any such
indications or other determinations by Schering relating thereto shall
conclusively be deemed correct except to the extent of any manifest error.  Anything to the contrary in this Agreement
notwithstanding, all principal of the Loans and all accrued and unpaid interest
thereon shall be repaid no later than May 15, 2008 (or, if applicable, pursuant
to Section 2.4(b)(i)(B), May 15, 2010). 
Upon any repayment by Epix to Schering from time to time of any Loans
under this Agreement, Schering may, at its election, present the Note to Epix
for notation on Schedule A attached thereto of any reduction in principal
amount outstanding as a consequence of such repayment.


 


(c)                                  Other
Provisions Relating to Payment of Principal and Interest.  All payments of principal and interest shall
be paid in United States dollars and made by wire transfer of immediately
available funds to an account designated from time to time by Schering in
writing.  Notwithstanding any other
provisions of this Agreement to the contrary, all Loans shall be immediately
due and payable, together with all accrued interest thereon, upon the
declaration of an Event of Default by Schering and acceleration of any Loans by
Schering in accordance with the terms of this Agreement.


 


2.5                                 Other Provisions.  If the outstanding principal amount or the accrued interest under
this Agreement are not paid when due by Epix, without demand, presentment or
notice by Schering of any kind (all of which are expressly waived by Epix to
the extent permitted by applicable law), as and when due in accordance with
this Article II and Article VIII, then, in addition to any other rights or
remedies Schering may have in accordance with the terms hereof, Schering shall
have the right, effective upon written notice to Epix, to withhold and retain,
as an offset against principal and interest due hereunder, up to one hundred
percent (100%) of:


 


(a)                                  the
royalty payments due in accordance with Sections 7.7 and 7.8 of the Strategic
Collaboration Agreement, for any given calendar quarter otherwise payable by
Schering to Epix, and


 


(b)                                 of
the operating margin payments in the U.S. in accordance with Section 7.6 of the
Strategic Collaboration Agreement, for any given calendar quarter otherwise
payable by Schering to Epix, until such time as all outstanding amounts of
principal and interest hereunder are completely paid.


 


2.6                                 Payments by Epix.  All payments (including prepayments) to be made by Epix hereunder
on account of principal, interest or otherwise shall be made to Schering
without deduction, set-off or counterclaim of any kind or nature whatsoever,
including any valid or alleged claims of Epix pursuant to the Research
Agreement, unless otherwise agreed to in writing by Schering and except as
otherwise provided in Section 2.5 above. 
Notwithstanding the preceding sentence, Epix may set off any such
amounts to the extent it has obtained a final non-


 


11

















 


appealable judgment against Schering for a fixed amount from a court of
competent jurisdiction, it being agreed that Epix may not set off for more than
such fixed amount.


 


2.7                                 Termination.  This Agreement may be terminated by Epix at
any time upon written notice to Schering and repayment of the Obligations in
full in accordance with the terms of this Agreement.  Upon any such termination, Schering agrees to (i) file within
five (5) Business Days of written notice such UCC termination statements as
shall be necessary to terminate any Liens upon the Collateral, and (ii) promptly
return the original Note to Epix marked “cancelled”.


 


3.                                       Conditions Precedent.


 


3.1                                 Conditions Precedent to the Initial
Loan.  The agreement of Schering
to make each Loan, including the first loan to be made after the date hereof
(the “Initial Loan”), is subject to the satisfaction, or written waiver
by Schering, concurrently with the making of each such Loan (except as
otherwise specified herein), of the following conditions precedent:


 


(a)                                   Research
Agreement.  The Parties shall have
executed and delivered the Research Agreement.


 


(b)                                 Security
Agreement, Etc.  Schering shall have
received each of the Security Agreement and the Note, each duly executed and
delivered by, as applicable, a duly authorized officer of Epix.


 


(c)                                  Perfection
of Liens.  All actions reasonably
requested by Schering to assure that it has, and will continue to have, until
the final and indefeasible payment in full of the Loans, a perfected first
priority security interest and Lien  in all of the Collateral shall have been
effected and Schering shall have received evidence reasonably satisfactory to
it that all such actions have been effected in all respects, including the
proper filing and indexing of applicable UCC-1 financing statements covering
the Collateral.


 


(d)                                 Representations
and Warranties.  The representations
and warranties contained in this Agreement and each other Transaction Document
by each Person that is a signatory thereto (other than Schering or any
Affiliate of Schering) shall be true and correct in all material respects (and
as to those representations and warranties containing materiality
qualifications shall be true and correct) on and as of the date the Initial
Loan is provided as if such representations and warranties were made on such
date, unless such representation or warranty specifically refers only to a
prior date or unless such representation or warranty has been affected by an
occurrence which is permitted by the terms of this Agreement, such occurrence
to be notified by Epix to Schering.


 


(e)                                  No
Material Adverse Effect.  As of the
date of execution of this Agreement, since December 31, 2002 there shall not
have occurred any Material Adverse Effect.


 


(f)                                    Receipt
of Other Transaction Documents.  All
of the other Transaction Documents, in form and substance reasonably
satisfactory to Schering, shall have been properly executed by each Party
thereto and delivered to Schering.


 


12

















 


(g)                                 Financing
Statement Searches and Similar Searches. 
Schering shall have received UCC-1 financing statement searches and
other searches and such other evidence as Schering reasonably requires to show
that there are no Liens in the Collateral.


 


(h)                                 No
Event of Default or Material Default; Compliance Certificate.  There shall be no Event of Default or
material default, which, with or without notice or the lapse of time or both,
would become an Event of Default, and Schering shall have received a
certificate, in form and substance reasonably satisfactory to Schering, signed
by the chief financial officer of Epix dated as of the making of the Initial
Loan, stating that to his or her actual knowledge (after reading the
Transaction Documents for the purpose of providing such Certificate) (i) all
representations and warranties made by Epix set forth in this Agreement and the
other Transaction Documents are true and correct on and as of such date (unless
such representation or warranty specifically refers to only a prior date or
unless such representation or warranty has been affected by an occurrence which
is permitted by the terms of this Agreement, such occurrence to be notified by
Epix to Schering), (ii) on such date, after giving effect to the Initial Loan,
Epix is in compliance in all material respects with all the terms and
provisions set forth in this Agreement and the other Transaction Documents and
(iii) on such date no Event of Default or other material default, which, with
or without notice or the lapse of time or both, would become an Event of
Default has occurred and is continuing, and such statements shall be true and
correct.


 


(i)                                     No
Order; Status of Collateral.  No
Order shall have been issued by any Governmental Authority enjoining or
otherwise prohibiting, in any material respect, the consummation of the
transactions contemplated by the Research Agreement and/or no material patent
(owned or licensed) constituting Collateral shall be determined to be invalid
in a final nonappealable judgment.


 


(j)                                     Corporate
Documents.  Schering shall have
received with respect to Epix and any other parties to the Transaction
Documents copies of their relevant proceedings relating to the transactions
contemplated hereby and thereby, incumbency certificates, copies of
Organizational Documents, good standing certificates, and similar Documents as Schering
reasonably requests, and all such Documents shall be in form and substance
reasonably satisfactory to Schering.


 


3.2                                 Conditions Precedent to All Loans.  The obligation of Schering to make any Loan
after the Initial Loan is subject to the satisfaction of each of the following
conditions precedent as of the date of the making of each such Loan:


 


(a)                                  Representations
and Warranties.  The representations
and warranties made by Epix in or pursuant to this Agreement and in any other
Transaction Document shall be true and correct in all material respects (and as
to those representations and warranties containing materiality qualifications,
shall be true and correct) on and as of the dates the Loan is requested to be
provided and is provided as fully as if made on and as of each such date (or if
expressly applicable only to an earlier date, such as financial statements, as
of such date or unless such representation or warranty has been affected by an
occurrence which is permitted by the terms of this Agreement, such occurrence
to be notified by Epix to Schering); provided, however, Epix


 


13

















 


may provide a supplement that is attached to and cross referenced in
the Compliance Certificate for events occurring after the date hereof that
cause such representations and warranties to not be true (“Supplemental
Certificates”), provided further that the condition in this Section shall
not be deemed satisfied if (i) the items contained in any one or more such
Supplemental Certificates individually or in the aggregate do or will have or,
in Schering’s reasonable good faith judgment may be expected to have, a
Material Adverse Effect or (ii) the events or circumstances relating to any
such items also relate to a material breach or other default by Epix or any
Affiliate of Epix under any Transaction Document.


 


(b)                                 No
Event of Default or Material Default; Compliance Certificate.  There shall be no Event of Default or
material default, which, with notice or the lapse of time or both, would become
an Event of Default, and, in addition, Schering shall have received a
certificate, in form and substance reasonably satisfactory to Schering, signed
by the chief financial officer of Epix, dated as of the making of the Loan (the
“Compliance Certificate”), stating that to his actual knowledge (after
reading the Transaction Documents for the purposes of providing the Compliance
Certificate), (i) all representations and warranties made by Epix in this
Agreement and the other Transaction Documents are true and correct in all
material respects on and as of such date, after giving effect to the
Supplemental Certificate attached thereto, (ii) on such date Epix is in
compliance in all material respects with all the terms and provisions set forth
in this Agreement and the other Transaction Documents and (iii) on such date no
Event of Default or material default, which with or without notice or the
passage of time or both will become an Event of Default, has occurred and is
continuing, and the statements therein shall be true and correct.


 


(c)                                  Research
Agreement.  The Research Agreement
shall have not been terminated as a result of breach by Epix or a termination for convenience by
Epix.


 


(d)                                 No
Order; No Judgment.  No Order shall
have been issued by any Governmental Authority enjoining or otherwise
prohibiting, in any material respect, the manufacture or sale of any material
Product or the consummation of the other transactions contemplated by the
Research Agreement.


 


(e)                                  Status
of Collateral.  No material patent
(owned or licensed) constituting Collateral shall be determined to be invalid
in a final nonappealable judgment.


 


(f)                                    Financing
Statement Searches and Similar Searches. 
Schering shall have received UCC-1 financing statement searches and
other searches and such other evidence as Schering reasonably requires to show
that there are no Liens in the Collateral in favor of any Person other than
Schering.


 


The request by or on behalf of Epix for each
Loan and making of each Loan by Schering hereunder shall constitute a
representation and warranty by Epix as of the date of such request for
borrowing and the date of the making of the Loan that the conditions in
Sections 3.1 (with respect to the Initial Loan) and 3.2 (with respect to each
Loan after the Initial Loan) have been satisfied.


 


14

















 


4.               Representations and Warranties.


 


Epix represents and warrants to Schering,
knowing and intending that Schering will rely thereon in making each Loan, that
the following statements are true and accurate:


 


4.1                                 Organization and Qualification.  Epix is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware.  Epix has the power and
authority, and all necessary Governmental Authorizations, to own, lease,
operate and encumber its assets and to carry on its business as now
conducted.  Epix is duly qualified and
in good standing in each jurisdiction where such qualification is required, except
for any qualifications not obtained which would not be reasonably expected to
have a Material Adverse Effect on Epix.


 


4.2                                 Due Authorization.  The execution, delivery and performance by Epix of this Agreement
and the other Transaction Documents are within Epix’s power and authority, and
have been duly authorized by all necessary action on the part of Epix.  Epix has delivered to Schering true and
complete copies of Epix’s resolutions necessary to authorize the transactions
contemplated by this Agreement and the other Transaction Documents and of Epix’s Organizational
Documents in effect on the date of the Initial Loan, all certified by a duly
authorized officer of Epix.


 


4.3                                 No Default; Compliance with Laws.  The execution, delivery and performance by
Epix of this Agreement and the other Transaction Documents do not and will not
(i) violate any of Epix’s
Organizational Documents, and/or any material United States or foreign
federal, state or local regulation, rule, statute, ordinance, judicial decision
or other law of any kind or nature whatsoever, including any Order of any
Governmental Authority applicable
to Epix or its assets (collectively, “Law” or “Laws”),
(ii) constitute a material default
under (including a breach of) any Document filed by Epix with the SEC to
which Epix is a Party or by which Epix or its assets is subject or bound (any
consents required thereby having previously been obtained), after giving effect to any
applicable grace periods thereto, or (iii) result in the
imposition of any Lien, including any restriction on any assets of Epix (except
for the Liens granted to Schering, and the restrictions in favor of Schering,
contained in this Agreement and the other Loan Documents).  Except for defaults which individually or in
the aggregate are not material, Epix is not in default under any Document to
which it is a party or by which it or its assets is otherwise bound or
subject.  This Agreement and each
Transaction Document to which Epix is a party or to which Epix or its assets is
subject or bound has been duly executed and delivered on behalf of Epix and
are, and as to those Transaction Documents to which Epix hereafter becomes a
party, subject or bound will be, legal, valid and binding obligations of Epix,
enforceable against Epix in accordance with their respective terms.


 


4.4                                 No Required Governmental
Authorizations.  No Governmental
Authorization is required by, and no other action is required by, and no notice
or filing is required to be given to or made with, any Governmental Authority
or other Person for the due execution, delivery and performance by Epix of, or
for the validity or enforceability of, this Agreement or any other Transaction
Document.


 


15

















 


4.5                                 Commission Filings; NASDAQ
Listing.  Epix has heretofore
delivered to Schering true and complete copies of its (i) Annual Report on Form
10-K for the fiscal year ended December 31, 2002, (ii) Quarterly Report on Form
10-Q for each of the fiscal quarters ended March 31, June 30 and September 30,
2002, (iii) Proxy Statement for the annual meeting of stockholders held in
2002, and (iv) all other reports, filings on Form 8-K and registration
statements filed by Epix with the SEC since December 31, 2001, in
each case as filed with the Commission. 
Epix has filed all required forms, reports and documents with the
Commission since December 31, 2001 (collectively, the “Commission Reports”),
all of which were prepared in accordance with the applicable requirements of
the Securities Act of 1933, as amended, and the rules and regulations
thereunder and the Securities Exchange Act of 1934, as amended together with
the rules and regulations thereunder (the “Exchange Act”) in all
material respects.  Except to the
extent, if any, as may be disclosed in any Commission Report filed subsequent
thereto, as of their respective dates, the Commission Reports, including any
financial statements or schedules included therein, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and complied as to
form and substance in all material respects with all applicable Laws.  Each of the financial statements (including,
in each case, any related notes thereto) contained in the Commission Reports
has been prepared in accordance with GAAP (except as may be indicated
in the notes thereto), and each fairly presents in accordance with generally
accepted accounting principles the financial position of Epix as at the
respective dates thereof and the results of its operations and changes in cash
flow for the periods indicated, except as may be indicated in the notes thereto
and/or in any Commission Report subsequent thereto, and except that the
unaudited interim financial statements are subject to normal and recurring
year-end adjustments which were not and are not expected to be material in
amount.  As of the date hereof, except
for Liabilities shown in the balance sheet of Epix as at December 31, 2002,
including the notes thereto (the “2002 Balance Sheet”), or incurred in
the ordinary course of business since the date of such Balance Sheet, Epix does
not have any material Liabilities.  Epix
does not have any material contingent Liabilities, except as set forth on
Schedule 4.5 hereof.


 


4.6                                 Intellectual Property.  The representations and warranties of EPIX
set forth in the Security Agreement are true and complete, and are incorporated
herein by reference in their entirety.


 


4.7                                 No Material Adverse Effect.  As of the date of execution of this
Agreement, since December 31, 2002 there has not been, and Epix has not
suffered or otherwise incurred, a Material Adverse Effect.


 


4.8                                 Perfected First Priority Liens.  The security interest and other Liens
granted in the Collateral by Epix constitute first priority Liens in the
Collateral in favor of Schering.  No
Intellectual Property (or any rights thereto) relating to MRI is owned by or
licensed to any Subsidiary or Affiliate of Epix.  No Person other than Schering has any Liens in the Collateral.
Epix acknowledges that any Liens against the Collateral in favor of
any Person other than Schering would constitute a violation of Article VI
hereof.


 


16

















 


4.9                                 Title; Absence of Liens.  Epix has good and marketable title to all of
the Collateral.  None of the Collateral
is subject to any prohibition against encumbering, pledging, hypothecating or
assigning the same or requires notice or consent (except where consent has been
previously and properly obtained) in connection therewith.


 


4.10                           Compliance With Laws.  Epix is in compliance in all material
respects with all Laws
applicable to Epix or the conduct of its business or the ownership of the
Collateral.  Epix has not
received any written notice
alleging any violation of any such Laws.


 


4.11                           No Proceedings. 
As of the date of execution of this Agreement, there are no Proceedings
of any kind or nature whatsoever, including any before any arbitrator or
Governmental Authority, pending or, to Epix’s knowledge, threatened against
Epix that may, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect.  All material
pending or threatened Proceedings are described in Epix’s December 31, 2002
Annual Report on Form 10-K, in the footnotes to the financial statements.


 


4.12                           Delivery of Documents.  All originals or copies of Transaction
Documents and Documents relating to the Secured Assets provided by or on behalf
of Epix to or on behalf of Schering are true, correct and complete.


 


4.13                           No Violations; Taxes and Assessments.  Epix is not in, and no event or condition
has occurred and is continuing which constitutes or results in (in each case
with or without the giving of notice, lapse of time or both), (a) a default
under any term of its Organizational Documents or under any Document filed by Epix with the SEC to
which Epix is a party or by which Epix or any of its assets is subject or
bound, except for defaults which will not have, and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
or (b) the imposition of any Lien or restriction on any Secured Asset.  Epix has filed all material federal, state
and local tax returns and other tax reports it is required to file (or has
obtained valid, written extensions which are in full force and effect as to any
not so filed), except
where the failure to do so would not be reasonably expected to have a Material
Adverse Effect.  Epix
has paid all taxes, assessments and other governmental charges due and payable, except those
contested in good faith and has made adequate provision for the payment of such
taxes, assessments and charges accrued but not yet payable or contested in good
faith.


 


4.14                           Environmental Matters.  Without limiting the generality of the other
provisions of the Agreement, (a) Epix has been and is in compliance with (i)
all Laws relating to environmental conditions or other environmental matters of
any kind or nature (“Environmental Laws”) (including that there has been
no release of any hazardous materials by Epix that has not been in
compliance in all material respects with applicable Environmental Laws)
and (ii) all Governmental Authorizations that are required pursuant to
Environmental Laws and (b) there are no claims relating to any actual or
alleged environmental Liabilities pending against or, to Epix’s knowledge,
threatened against it, except for any non-compliance and/or claims which will
not have or could not be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect.  To Epix’s knowledge, Epix
is not subject to any material Liability relating to any environmental
condition or other environmental matter of any kind or nature, including any
past or present use, management, transport, treatment, generation, storage,
disposal, release or


 


17

















 


other handling of any hazardous materials, which could be reasonably expected
to have a Material Adverse Effect.


 


4.15                           Other Representations.  No part of Epix’s business is conducted
through any unincorporated association or other Person.  Epix has not, within the five (5) years
preceding the date of this Agreement (a) changed its name, (b) used any name
other than Epix Medical, Inc., or (c) merged or consolidated with, or acquired
all or substantially all of the assets of, any other Person or business.  No part of the proceeds of any Loan will be
used, directly or indirectly, to purchase or carry any “margin stock” (as defined
in Regulation U issued by the Board of Governors of the Federal Reserve
System), to extend credit to others for the purpose of purchasing or carrying
any such margin stock, or for any other purpose that violates any provision of
Regulations G, T, U or X issued by the Board of Governors of the Federal
Reserve System.  Epix is not an
“investment company” registered or required to be registered under the
Investment Company Act of 1940, as amended, nor is Epix controlled by any such
entity.


 


4.16                           Representations and Warranties
Applicable to Subsidiaries.  All
of the representations and warranties made, or hereafter reaffirmed or deemed
made or reaffirmed, apply to each then existing Subsidiary of Epix, as fully in
all respects as if each representation or warranty specifically so stated.


 


4.17                           Reaffirmation. 
All of the
representations, warranties and statements made herein shall survive until
the full and final and indefeasible payment of the principal of and interest on
the Loans.  Epix’s requesting any Loan
hereunder (“Requested Loan”) and/or Epix’s acceptance of each Loan under
this Agreement shall each automatically constitute, without any further action
of any kind or nature whatsoever on the part of Epix, a complete reaffirmation,
as of the date of each Requested Loan and/or the making of each such Loan, of
the representations and warranties set forth in this Agreement and in the other
Loan Documents and the Research Agreement (or, as to those representations and
warranties expressly applicable only to any earlier date, such as financial
statements, as of such date) as fully as if all such representations were fully
repeated in all respects.  Schering’s
requiring or not requiring from time to time a Compliance Certificate
confirming same shall not in any manner diminish each such deemed reaffirmation
or otherwise change the effect of the preceding sentence.


 


5.                                       Affirmative Covenants.


 


Epix covenants and agrees that, until the
later of (i) full and final payment of the principal of the Loans and all
interest thereon and all other payment obligations under this Agreement and
(ii) the expiration of any obligation by Schering to make any further Loans to
Epix, Epix shall, and shall cause its Subsidiaries to:


 


5.1                                 Maintenance. 
Maintain and preserve in full force and effect its existence and good
standing and all other rights, powers, franchises, licenses and qualifications
necessary for its ownership, lease or use of its assets and/or the conduct of
its business, shall pay before they become delinquent all taxes, assessments
and governmental charges lawfully imposed upon it or any of its assets or
required to be collected by it, and shall pay, when due, all other Liabilities of


 


18

















 


any kind or nature now or hereafter owing by it provided that Epix may
delay the payment of any such
Liabilities contested in good faith by it.


 


5.2                                 Condition of Collateral; No Liens;
Maintenance of Certain Collateral.  Preserve the Collateral from loss, damage, or destruction of any
kind or nature whatsoever, and keep the Collateral free and clear of any Lien,
except the Liens created by the Security Agreement and each other Loan Document and for licenses of the Collateral in
the ordinary course of business.  In addition, Epix shall, to the extent required by the payment
terms herein and/or therein and except as may otherwise be provided for in any
other Loan Document, pay to Schering all Proceeds of Collateral (as defined in
the Security Agreement), whereupon such Proceeds shall become Schering’s sole
property to the extent of the Obligations.


 


5.3                                 Compliance with Laws.  Comply in all material respects with all
applicable Laws.


 


5.4                                 Affirmative Financial Covenants.  Maintain gross cash and cash equivalents
exceeding US$2,000,000 at any time.


 


5.5                                 NASDAQ
Listing.  Maintain listing with
NASDAQ national market as long as any principal or interest under the Loans has
not been repaid.


 


5.6                                 Notice of Adverse Events.  Promptly notify Schering in writing of the
occurrence or existence of any of the following:  (a) any Event of Default, any material default which, with the
giving of notice, lapse of time or both, would become an Event of Default, or
any other event, circumstance or condition which constitutes, or would reasonably be
expected to in the future constitute or cause, a Material Adverse Effect; (b)
any material, adverse
Proceeding that relates to any of the Secured Assets filed or instituted by or
against it, or to its knowledge threatened by or against it, which would be reasonably expected to
have a Material Adverse Effect, and (c) any of the
representations and warranties by it contained in this Agreement or any other
Loan Document ceases to be materially true, correct and complete (or true,
correct and complete as to representations and warranties qualified by
materiality).


 


5.7                                 Financial Statements and Other
Information.  Deliver to
Schering the following documents and information (a) as soon as same is
reasonably available, but not more than forty-five days after the end of each
fiscal quarter (90 days after December 31), its Annual Report on Form
10-K, and its Quarterly Report on Form 10-Q, as each is filed under the
Exchange Act, (b) contemporaneously with its being filed with the SEC, a copy
of all reports on Form 8-K, and (c) as soon as practicable, except as legally
prohibited, copies of all such financial statements and reports as it shall
send to its stockholders, the SEC or any other similar
regulatory authority, to the extent any such reports furnished to any such
regulatory authority are not confidential. 
For purposes
hereof, the written notice to Schering of the filing of any of the foregoing
reports with the SEC shall be deemed delivery to Schering hereunder.  As of their respective
dates, such reports (including the financial statements contained therein),
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading, and will comply in all material respects with all applicable
Laws.  Within fifteen (15) days after
the end of each quarter, and otherwise promptly upon Schering’s request,


 


19

















 


Epix shall provide to Schering (a) a certificate executed by an
executive officer of Epix reasonably satisfactory to Schering stating that to
his or her actual knowledge there then exists no Event of Default hereunder,
and no material default or other event, circumstance or condition which, with
the giving of notice or lapse of time or both, would constitute an Event of
Default and/or (b) such other Documents or information as Schering may
reasonably request in connection with the Loans.  At any time and from time to time upon three (3) Business Days
notice by Schering and for the sole purpose of permitting Schering to determine
compliance with the provisions of this Agreement and the other Transaction
Documents and/or to assess the value of the Collateral, Epix shall give
Schering and/or any representative of Schering access during normal business
hours to inspect any of the Collateral and Documents that relate to the
Collateral and to examine, copy and make abstracts from any and all books,
records and Documents relating to the Collateral in the possession of Epix, subject to such confidentiality
covenants as Epix may reasonably require.


 


5.8                                 Other Provisions. 
Epix will from time to time, take such further actions, including the
execution and delivery of such Documents, as Schering may reasonably request in
order to carry out the purposes of this Agreement and the other Transaction
Documents (including to provide Schering with a first priority perfected lien
in the Collateral).  Epix agrees that
(a) Schering may, so long as same is consistent with the Security Agreement,
file UCC-1 financing statements in any office Schering reasonably elects; and
(b) Epix shall maintain complete and accurate books and records in accordance with GAAP
of all its operations and assets, including records of the Collateral.


 


6.                                       Negative Covenants


 


Any of the financial thresholds mentioned in
this Section 6 shall relate in aggregate to Epix including its subsidiaries.


 


Epix covenants and agrees that, until the
later of (i) full and final payment of the principal of the Loans and all
interest thereon and all other payment Obligations under this Agreement and the
other Loan Documents,
and (ii) the expiration of any obligation by Schering to make any further Loans
to Epix, Epix shall not, directly or indirectly, and will not permit any of its
Subsidiaries to, directly or indirectly:


 


6.1                                 Amendments of Documents.  Amend, supplement, restate or otherwise
modify (including terminate) any Document that constitutes a Secured Asset  if such amendment, supplement,
restatement or other modification would be reasonably expected to have a
Material Adverse Effect.


 


6.2                                 Consolidation, Merger, or Acquisitions;
Liquidation.  Enter into any merger,
consolidation, reorganization or recapitalization or sale of all or substantially
all of its assets without the prior written consent of Schering, which will not
be unreasonably withheld, other
than (i) a merger in which Epix is the surviving corporation, or (ii) a merger
in which the surviving corporation (other than Epix) expressly assumes its
obligations under this Agreement and the other Transaction Documents in writing
and agrees to be bound hereby and thereby; provided that the
consummation of such merger mentioned under (i) and (ii) shall not result in a


 


20

















 


breach of Sections 6.5 and 6.7 below by the surviving company; and
provided further that it is agreed that Schering may for any reason withhold
its consent to any such transaction that would result in a Change of Control of
Epix (except as
permitted in Section 7.12); or take any steps in
contemplation of dissolution or liquidation.


 


6.3                                 Other
Liens.  Create or permit to
exist any Lien upon or with respect to any of the Collateral, whether now owned
or hereafter acquired.


 


6.4                                 Disposition of Assets or Collateral.  Sell, lease, or in any manner whatsoever
otherwise transfer or dispose of (including by granting any license therein) all or any Collateral
in the Field (as that term is defined in the Strategic Collaboration Agreement)
to any Person, except
upon notice to Schering, licenses of the Collateral in the ordinary course of
business.   Nothing
contained herein shall preclude any grants outside the Field.


 


6.5                                 Other Liabilities.  Incur, create, assume or permit to exist any indebtedness or
other Liability on account of borrowed money except (a) Obligations to
Schering, (b) loans from third parties in order to repay the outstanding
principal under the Loans and interest thereof, provided that such third party
loan amount (including principal and interest) shall not exceed the outstanding
principal and interest under the Loans, (c) accounts payable less than ninety
(90) days and accrued expenses of Epix incurred in the ordinary course of
business, and (d) Liabilities that do not exceed,
individually or in the aggregate, Fifteen Million Dollars ($15,000,000).


 


6.6                                 Loans or Investments.  Make or agree to make any loans, advances (other than prepaid expenses) or
other extensions of credit of any kind or nature to, or any investments of any
kind or nature in, any Person (including any Subsidiary) in an aggregate amount
for all Persons not to exceed [*****] at one or more times for all such loans,
advances and investments, provided that no such advance, loan or
investment shall be made at any time that any Event of Default has occurred and
is continuing, or any material default or other material event or condition
which, with the giving of notice, the lapse of time or both would constitute an
Event of Default, shall have occurred and be continuing.  Notwithstanding the foregoing, Epix may make
short-term investments in instruments consistent with Epix’s Investment Policy in the form
attached as Exhibit D, as the same may be amended, restated or modified from
time to time in form reasonably acceptable to Schering and upon approval of
Epix’s Audit Committee.


 


6.7                                 Guaranties; Contingent Liabilities.  (a) Assume, guarantee, endorse, contingently
agree to purchase or otherwise become liable for the obligations of any Person
other than any Subsidiary, except (i) by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business, (ii) guarantees of employee credit cards not to
exceed [*****] in the aggregate at any time, (iii) contingent liabilities
incurred in licensing transactions in the ordinary course of business, (iv)
milestone, development or royalty payments to Schering and/or other third
parties in connection with licensing and other arrangements inside or outside the Field, or
(b) agree to maintain the working capital, net worth or similar position of or
provide any other credit support to any Person.


 


6.8                                 Dividends and Other Distributions.  Except for redemptions of stock from current
or former employees in the ordinary course of business for amounts in the
aggregate not in


 


21

















 


excess of [*****] annually or stock dividends or the issuance of preferred
stock as payment-in-kind, declare or pay any dividend or make
any other distribution of any kind or nature on, or redeem, retire or otherwise
acquire, directly or indirectly, any stock, interest or other Equity Interests.


 


6.9                                 Transactions with Affiliates.  Enter into any transaction with any
Affiliate on a basis less favorable to Epix than if such transactions were at
arm’s length transaction with a third-party that is not an Affiliate of Epix.


 


6.10                           Other
Covenants.  (a) Compromise,
settle or adjust any claim relating to any of the Collateral in excess of [*****]without
Schering’s prior written consent, which will not be unreasonably withheld or
delayed; (b) change, alter or modify, or permit any change, alteration or
modification of, its Organizational Documents in a manner materially adversely
affecting Schering; (c) change any of the following prior to giving Schering 15
Business Days written notice: (i) the location stated in Article 4 for the
maintenance of its books and records, principal place of business or chief
executive office, or (ii) the name under which Epix conducts any of its
business or operations; or (d) enter into any agreement or other Document
containing any provision that would be violated by the performance or
observance of any of Epix’s
obligations under this Agreement or any other Transaction Document.


 


6.11                           Subsidiaries.  Permit any Subsidiary to own or acquire any
Intellectual Property that, if owned or acquired by Epix, would be or become a
Secured Asset.


 


7.                                       Events of Default.


 


At such times as any Loans are then outstanding hereunder, the
occurrence of any of the following shall constitute an event of default (“Event
of Default”).


 


7.1                                 Failure to Pay. 
Epix fails to pay within (a) five Business Days of the due date any
principal of or interest on any Loan, whether due pursuant to any principal
payment date, any required prepayment date, any acceleration or otherwise, or
(b) ten (10) Business Days after Schering correctly gives notice that any
monetary Obligation other than principal and interest is due to Schering
pursuant to the terms of any Loan Document.


 


7.2                                 Failure to Perform or Observe
Covenants.  Epix fails to
perform or observe in any material respect any covenant, term, condition or
other non-monetary Obligation of this Agreement or any other Transaction
Document;  provided
that such event shall be an Event of Default only if such default continues for
a period of ten (10)  Business Days
after Schering has given to Epix written notice stating such default has
occurred; provided further, however, that (i) as to a failure by Epix to
perform or observe the covenant set forth in Section 5.5 hereof following the
approval of MS-325 by the FDA, such event shall be deemed an Event of Default
only if such default continues for a period of ninety (90) days, and (ii) as to
a failure by Epix to perform or observe any covenants set forth in Sections
[*****] (prior to the approval of MS-325 by the FDA), [*****], [*****] hereof,
there shall be no notice required and no cure period required to be given, and as to any
non-appealable judgment of the willful and intentional failure by Epix to
perform or observe any covenant, term or condition of this Agreement or any
other


 


22

















 


Transaction Document, there shall be no notice required and no cure
period required to be given and (iii) it is understood that such required
notice and such required cure period shall not apply to any default or Event of
Default occurring under any other Section in this Article VII (whether or not
same also occurs under this Section 7.2).


 


7.3                                 Security. 
Schering shall not have as of the date hereof or shall at any time
hereafter cease to have a valid and perfected first priority Lien in all of the
Collateral other than as a
result of any act or omission of Schering, including that (i)
the grant of the Lien in any of the Collateral shall never have been effective
or shall cease to be effective to grant to Schering (or Schering shall
otherwise not have obtained or cease to have) a perfected first priority
security interest and Lien in all of the Collateral or (ii) any material patent
(owned or licensed) constituting Collateral shall in a final non appealable
judgment be determined to be invalid.


 


7.4                                 Transaction Documents.  There is a non-appealable judgment
that this Agreement or any other Transaction Document shall not have been as of
the date hereof, or shall cease
to be, valid, effective and enforceable in any material respect.


 


7.5                                 False Representation or Warranty.  Any representation, warranty or statement by
Epix contained in this Agreement or any other Transaction Document when made,
reaffirmed or hereby deemed made or reaffirmed is or was, when made, reaffirmed
or hereby deemed made or reaffirmed, materially incorrect.


 


7.6                                 Termination of the Research Agreement.  One year following either (i) the termination by Schering
under Section 8.2 of
the Research Agreement by reason of a material breach thereof by Epix, or (ii) termination by Epix under Section
8.2.3 of the Research Agreement  for convenience.


 


7.7                                 Default on Other Debt.  Any payment default or other material
default occurs under any obligations, that individually or in the aggregate
exceeds [*****] of Epix  to any one or
more third parties that entitles such third parties to declare such indebtedness
or other obligation due prior to its date of maturity and such default is not
cured within sixty (60) days,
exclusive of any vendor dispute in the ordinary course of business provided
that Epix had reserved therefor in full.


 


7.8                                 Cessation of Business.  (a) Epix ceases to do business as a going
concern; or (b) the termination, suspension or loss of any Governmental
Authorization or other asset occurs which results in Epix having to cease a
substantial part of its operations by reason of such loss for a period of more
than twenty (20) Business Days; (c) without limiting the generality of Section
7.9, Epix takes any action to authorize its liquidation or dissolution or
suffers any liquidation or dissolution; (d) any Governmental Authority, or
other entity with power to do so, commences proceedings to condemn, seize or
expropriate assets of Epix necessary for the conduct of Epix’s business and such
proceedings remain Undismissed for twenty (20) Business Days, or Epix abandons
such assets or suspends operation thereof for a period of twenty (20) Business
Days.


 


23

















 


7.9                                 Non-approvable letter for MS-325.  Epix receives a non-approvable letter for
MS-325 from the FDA and the Parties, or Schering in good faith, consequently
decide to (i) not further proceed with the development of MS-325, or (ii) to
proceed with the development / registration of an indication completely new or
significantly reduced in comparison to the initially filed indication.
Notwithstanding the foregoing, no Event of Default shall be deemed to have
occurred pursuant to this Section for a period of thirty (30) days following
receipt of any such non-approvable letter.


 


7.10                           Inability to Pay Debts; Bankruptcy or
Insolvency.  Any one or more of
the following occur:  (a) Epix shall
commence any Proceeding (i) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or other relief of debtors, seeking to have an order for relief
entered with respect to it or seeking to adjudicate it a bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition with creditors or other similar relief with respect to
it or its debts, or (ii) seeking appointment of a receiver, trustee, custodian
or other similar official for it or for all or any substantial part of its
assets, or Epix shall make a general assignment for the benefit of its
creditors or a bulk sale; (b) there shall be commenced against Epix any
Proceeding of a nature referred to in clause (i) above which (A) results either
in the entry of an Order for relief or an appointment and any such Order or
appointment remains undismissed in a manner reasonably satisfactory to Schering
(“Undismissed”) for a period of twenty (20) Business Days; the foregoing
shall include the commencement against Epix of any Proceeding seeking issuance
of a warrant of attachment, execution, distraint or similar process against all
or any substantial part of its assets which results in the entry of an Order
for any such relief which remains Undismissed in a manner reasonably
satisfactory to Schering for twenty (20) Business Days; or (c) Epix takes any
action substantially in furtherance of, or expressly authorizing or indicating
its consent to, approval of or acquiescence in or expressly proposes to take
any of the acts set forth in clause (a) or (b) above; or (d) Epix shall
generally not be able to or fail to, or shall expressly admit in writing its
inability to, pay its debts generally as they become due.


 


7.11                           Certain Judgments.  (a) One or more judgments or orders for the payment of money
exceeding [*****] in the aggregate are rendered against Epix, and any such
judgment or order continues unsatisfied and not effectively and continuously
stayed within sixty (60) days of such judgment or order; or (b) any substantial
part of the assets of Epix becomes subject to attachment, execution, levy or
like process which shall not have been effectively and continuously stayed
within sixty (60) days of such attachment, etc.


 


7.12                           Change of Control.  There occurs a Change of Control of Epix.  “Change of Control” means any of the
following:  (i) any person (as such term
is used in Sections 13(d) and 14(d)(2) of the Exchange Act) shall become the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of Epix’s securities representing fifty percent (50%)
or more of the voting power of all then outstanding securities of Epix having
the right under ordinary circumstances to vote in an election of the Board of
Directors (including that any Epix securities that any such person has the
right to acquire pursuant to any agreement, or upon exercise of conversion
rights, warrants or options, or otherwise, shall be deemed beneficially owned
by such person); (ii)
there shall be consummated any corporate transaction,


 


24

















 


including
a consolidation or merger, of Epix in which Epix is not the continuing or
surviving corporation or pursuant to which shares of Epix’s capital stock are
converted into cash, securities or other property, other than (x) a
consolidation or merger of Epix in which the holders of Epix’s voting stock
immediately prior to the consolidation or merger shall, upon consummation of
the consolidation or merger, own at least fifty percent (50%) of the voting
stock of the surviving entity after such consolidation or merger or (y) a
consolidation, merger or other corporate transaction, unless the Research
Agreement shall have been terminated by Schering for convenience; or (iii) there shall be
consummated any sale, lease, exchange or transfer (in any single transaction or
series of related transactions) of all or substantially all of the assets or
business of Epix.


 


8.                                       Remedies.


 


8.1                                 Rights Under Transaction Documents.  Epix acknowledges that certain rights and
remedies of Schering upon an Event of Default are provided in the Security
Agreement.  


 


8.2                                 Rights in General.  Upon or at any time after the occurrence of any Event of Default
Schering shall have the option, from time to time, to effect one or more of the
following (to be effected by written notice by Schering), (a) all obligations
of Schering to make any Loans after the occurrence of an Event of Default shall
terminate, (b) the principal and interest of the Loans and all other
Obligations shall become and be immediately due and payable, without
presentment, demand, protest, or further notice of any kind or nature
whatsoever, all of which are, to the maximum extent permitted by applicable
law, hereby expressly waived by Epix, (c) Schering shall have the right, but
not the obligation, to terminate the Research Agreement; and (d) Schering shall
be entitled to exercise forthwith (to the extent and in such order as Schering
may elect, in its sole and absolute discretion) any and/or all rights and
remedies provided to Schering in this Agreement, the Security Agreement, the
Research Agreement and/or any other Transaction Document, all rights and
remedies of Schering under the UCC, and all other rights and remedies that may
otherwise be available to Schering pursuant to any other Document, at law or in
equity.


 


8.3                                 Setoff Rights. 
To the extent that Epix does not timely pay any amounts under this
Agreement or under any other Loan Document, Schering and/or its Affiliates
shall at any time and from time to time have the right to set-off all of its
payment obligations under the Research Agreement against any amounts due
hereunder (including any due by reason of any acceleration) or thereunder.  Upon the occurrence of an Event of Default,
Schering is hereby authorized at any time and from time to time, without notice
to Epix (any such notice being expressly waived by Epix), to set off and apply
(and/or to cause any Affiliate of Schering to set off and apply) any and all
amounts due by Schering and/or any Affiliate of Schering to Epix (including
pursuant to the Research Agreement) against any or all of the Obligations of
Epix now or hereafter existing under this Agreement or any other Loan Document,
irrespective of whether or not (a) Schering and/or such Affiliate shall have
made any demand and (b) any such Obligations may be unmatured.  Epix further agrees that the rights stated
in this Section 8.3 are in addition to other rights and remedies (including
other rights of set-off such as those pursuant to Section 2.5 hereof) that
Schering may have.


 


25

















 


8.4                                 Additional Rights to Terminate This
Agreement.  If all of the
conditions precedent to the Initial Loan shall not have been satisfied by
November 15, 2003, Schering shall have the right, at its election, to terminate
this Agreement and/or not make any further Loans pursuant to this
Agreement.  Such termination shall be
treated as an Event of Default for the purposes of this Agreement, including
for the purposes of determining Schering’s rights and remedies pursuant to
Article VIII hereof.


 


8.5                                 Cumulative Remedies; No Waiver by
Schering.  No remedy referred to
in this Agreement is intended to be exclusive, but each shall be cumulative and
in addition to any other remedy referred to in this Agreement or otherwise
available to Schering pursuant to any other Transaction Document, at law or in
equity.  No express or implied waiver by
Schering of any default or Event of Default shall in any way be, or be
construed to be, a waiver of any future or subsequent default or Event of
Default.  Any failure or delay of
Schering in exercising any rights granted it hereunder and/or under any other
Transaction Document, including upon any occurrence of any of the contingencies
set forth herein, shall not constitute a waiver of any such right upon the
continuation or recurrence of any such contingency or similar contingencies,
and any single or partial exercise of any particular right by Schering shall
not exhaust the same or constitute a waiver of any other right.


 


8.6                                 Waivers and Consents Relating to
Remedies.  In connection with
any action or proceeding relating to this Agreement, any of the Loans, any of
the other Transaction Documents, any of the Collateral, or any act or omission
relating to any of the foregoing:  (a)
EPIX AND SCHERING WAIVE THE RIGHT TO TRIAL BY JURY; (b) Epix waives personal
service of any summons, complaint or other process in connection with any such
action or proceeding and agrees that service thereof may be made, as Schering
may elect, by certified mail directed to Epix at the location provided for
notices to Epix under this Agreement or, in the alternative, in any other form
or manner permitted by law; (c) Epix agrees that all of the Collateral
constitutes security for all of the Obligations, and agrees that Schering shall
be entitled to sell, retain or otherwise deal with any or all of the
Collateral, in any order or simultaneously as Schering shall determine in its
sole and absolute discretion; without limiting the generality of the foregoing,
such rights shall be free of any requirement for the marshaling of assets or
any other restriction that, in the absence of this Agreement and/or the Transaction
Documents, may be placed upon Schering in dealing with the Collateral; (d) Epix
agrees that Schering may at Schering’s election proceed directly against Epix
for collection of any or all of the Obligations prior to, during and/or after
selling, retaining or otherwise dealing with any of the Collateral; and (e) to
the fullest extent permitted by law, Epix (i) waives demand, presentment,
notice of dishonor or protest under or related to this Agreement and/or any
other Transaction Document; and (ii) consents to any of the following by
Schering: (A) any extension, postponement of time of payment or other
indulgence, (B) any substitution, exchange or release of or failure to perfect
or failure to continue perfection of Collateral, (C) any addition to, or
release of, any Person primarily or secondarily liable for the Obligations, and
(D) after the occurrence and during the continuance of an Event of Default any
acceptance of partial payments and the settlement, compromise or adjustment
thereof.


 


8.7                                 Powers of Attorney.  Epix hereby constitutes and appoints Schering (and any employee
or agent of Schering, with full power of substitution) its true and lawful
attorney and


 


26

















 


agent in fact to take any or all of the actions described below in
Schering’s or Epix’s
name and at Epix’s
expense:


 


(a)                                  Evidence
of Liens.  Schering may prepare
and/or execute such financing statements and other Documents and take such
other actions as Schering deems necessary or proper in order to create, perfect
or continue the security interests and other Liens provided for by this
Agreement and/or any of the other Loan Documents, and Schering may file the
same (or a photocopy) in any appropriate governmental office.


 


(b)                                 Other
Actions.  Schering may take any and
all action that it reasonably deems necessary or appropriate to preserve its
interest in the Collateral; to the extent same relates to any default by Epix
hereunder or under any other Transaction Document, Epix shall reimburse Schering
for same on demand.  All sums payable by
Epix to Schering under Sections 8.7(b) and 8.7(c) shall constitute Obligations,
shall be secured by the Collateral, and shall be payable on ten (10) Business
Days notice with interest at the Interest Rate from the respective dates such
sums are expended.


 


(c)                                  Schering’s
Right to Cure.  In the event Epix fails
to perform any of its Obligations within ten (10) days following notice from
Schering, then Schering may from time to time perform the same but shall not be
obligated to do so (including that Schering shall not be required to perform
any Obligations which are the same type as those which Schering may have at any
time hereafter elected to perform).


 


(d)                                 Collections;
Modification of Terms.  Upon the
occurrence and during the continuance of any Event of Default, Schering may (i)
demand, sue for, collect and give receipts for any money, instruments or
property payable or receivable on account of or in exchange for any of the
Collateral, or make any compromises it deems necessary or proper, including
extending the time of payment, permitting payment in installments, or otherwise
modifying the terms or rights relating to any of the Collateral, all of which
may be effected without notice to or consent by Epix and without otherwise
discharging or affecting the Obligations, the Collateral or the Liens granted
under any of the Loan Documents, and (ii) take any actions Schering reasonably
elects relating to the Collateral, subject to Section 8.1.


 


(e)                                  Irrevocability.
 Except as may be provided to the
contrary in this Section 8.7 with respect to any power, Epix covenants and
agrees [*****].  Epix further covenants
and agrees that the powers of attorney granted by this Section 8.7 are coupled
with an interest and shall be irrevocable until the later of full and final
payment of the principal of the Loans and all interest thereon and all other
payment obligations under this Agreement and the other Loan Documents, that
said powers are granted solely for the protection of Schering’s interest and
Schering shall have no duty to exercise any thereof; that the decision whether
to exercise any of such powers, and the manner of exercise, shall be solely
within Schering’s discretion; and that neither Schering nor any of its directors,
officers, employees or agents shall be liable for any act of omission or
commission, or for any mistake or error of judgment, in connection with any
such powers except any act of commission constituting gross negligence or
willful misconduct.


 


27

















 


9.                                       Costs, Expenses and Taxes;
Indemnification; Limitations on Schering’s Liability.


 


9.1                                 Costs and Expenses.  Epix agrees to pay on demand (a) all losses, costs and expenses
(including reasonable fees and expenses of attorneys and accountants, including
any such reasonable fees and expenses of attorneys and accountants incurred to
enforce any rights of Schering or obligations of Epix hereunder or under any
other Loan Document) from time to time incurred by Schering relating to the
enforcement of this Agreement, the Security Agreement and/or any of the other
Loan Documents and/or (b) the preservation of any rights (including remedies)
of Schering under this Agreement, the Security Agreement and/or any other Loan
Document.  With respect to any amount
advanced or expended by Schering and required to be reimbursed by Epix pursuant
to the foregoing provisions of this Section 9.1, Epix shall also pay Schering
interest on such amount at the Interest Rate, such interest to commence from
the date of advance or expenditure. 
Epix’s
obligations under Sections 9.1 and 9.2 shall survive termination of the other
provisions of this Agreement.


 


9.2                                 Indemnification by Epix.  Epix hereby covenants and agrees to
indemnify, defend and hold harmless Schering and its officers, directors,
employees and agents (and hereby releases each such Person) from and against
any and all claims, demands, damages, Liabilities, costs and expenses
(including the reasonable fees and out-of-pocket expenses of counsel), other
Proceedings and losses of any kind or nature whatsoever which may be incurred
or suffered by or asserted against or threatened to be asserted against
Schering or any such other Person relating to this Agreement or any Loan,
including: (a) any Proceeding relating to any of the Collateral in which
Schering or any of its Affiliates has the right to enforce its rights hereunder
or thereunder or any act or omission relating to any of the foregoing, (b) any
taxes, Liabilities, claims or damages relating to the Collateral or Schering’s
Liens thereon; or (c) the correctness, validity or genuineness of any
instruments or other Documents that may be released or endorsed to Epix by
Schering (which shall automatically be deemed to be without recourse to
Schering in any event), except
if the foregoing results from the gross negligence of willful misconduct of
Schering or its employees or agents.  The foregoing provisions of this Section 9.2
shall not constitute a release of Schering from its obligation to make Loans
pursuant to and subject to the terms hereof, to the extent it breaches its
obligation to do so.


 


9.3                                 Limitations on Schering’s Liability.


 


(a)                                  No
Inquiry Obligation of Schering. 
Schering shall not be obligated to inquire into the accuracy, correctness,
or reasonableness of any Document furnished to it in connection with any
Requested Loan.


 


(b)                                 No
Obligation of Schering.  Schering
shall not have any responsibility whatsoever as to use of any Loan.  Anything to the contrary in this Agreement notwithstanding,
any approval or non-approval by Schering of any one or more matters involving
any Transaction Document, any of the work done pursuant thereto or any other
actions contemplated by any such Document shall not create any responsibility
or liability of any kind or nature whatsoever for Schering or in any manner
reduce or otherwise affect its rights to repayment of the Loans.


 


(c)                                  No
Reliance on Schering’s Procedures. 
Epix shall have no right to rely upon any procedure required by Schering
under any Transaction Document, such procedures being for the sole protection
of Schering and no other Person. 
Further, Schering is entitled to


 


28

















 


take any discretionary action permitted under any Transaction Document
solely for its own protection.


 


(d)                                 Limitation
on Schering’s Liabilities.  Schering
shall have no liability for [*****].


 


10.                                 Other Provisions.


 


10.1                           Entire Agreement; Amendments; Schering’s
Consent.  This Agreement, the
Security Agreement and the other Loan Documents supersede, with respect to
their subject matter, all prior and contemporaneous agreements, understandings,
inducements or conditions among or between the Parties, whether express or
implied, oral or written, and constitute the entire agreement of the
Parties.  No amendment or waiver of any
provision of this Agreement or any Loan Document, nor consent to any departure
by any Party therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Party against whom enforcement is sought, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. 
To the extent this Agreement and any other Loan Document or the Research
Agreement are actually inconsistent, then this Agreement shall control except
to the extent otherwise expressly provided in this Agreement, any other Loan
Document or the Research Agreement.  If
a Schedule is not attached hereto, or such Schedule does not contain all
information contemplated hereby, then Epix’s disclosure re: same shall for
the purposes of this Agreement be “none” or “no exceptions”.


 


10.2                           Specific Performance.  Subject to the provisions of Section 9.3, in
the event of any breach or threatened breach of any provision of this
Agreement, an aggrieved Party shall have the right, in addition to any other
rights existing in its favor under this Agreement, to enforce its rights and to
enforce the obligations of the breaching Party by an action or actions for
specific performance and/or injunctive or other equitable relief in order to
enforce or prevent any actual or threatened violations of the provisions of
this Agreement.  The exercise of any
such rights shall not require the posting of any bond or other consideration or
the proof of any actual damages.


 


10.3                           Notices.  All
notices and other communications relating to this Agreement or any of the other
Loan Documents to be effective shall be in writing (including by telecopy), and
shall be deemed to have been duly given or made when delivered by hand, or
three Business Days after delivery to a nationally recognized overnight courier
service (against a signed receipt) or, in the case of telecopy notice, when
sent and confirmed as received, addressed to Epix at: 71 Rogers Street,
Cambridge, MA 02142-1118, Attention: Chief Financial Officer; with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center,
Boston, MA 02111, Attention: William T. Whelan, Esquire and to Schering at:
Muellerstrasse 178, 13353 Berlin, Germany, Attention: Finance Department, with
a copy to: Muellerstrasse 178, 13353 Berlin, Germany, Attention: Legal
Department, or to such other address as the respective Party or its successors
or assigns may subsequently designate by proper notice.


 


10.4                           No Third Party Beneficiaries.  The Parties do not intend that any other
Person shall be a third party beneficiary of this Agreement or that this
Agreement shall otherwise inure


 


29

















 


to the benefit of any third party, including that the Parties intend
and agree that no other Person shall have the right to enforce any obligation
hereunder.  Without limiting the
generality of the foregoing, Loans that are used to make advances or other
payments directly to any Person other than Epix shall not in any manner create
or be deemed a recognition by Schering of any third party beneficiary status of
any such Person.


 


10.5                           Joint Efforts. 
This Agreement and each of the other Loan Documents shall each be construed
to be the joint efforts of the Parties and shall not be construed more severely
against any one Party.


 


10.6                           Governing Law. 
This Agreement and the other Loan Documents shall be governed by, and
construed in accordance with, the laws of the State of New York (except to the
extent otherwise expressly provided in any other Loan Document) without giving
effect to the principles of conflicts of laws.


 


10.7                           Other Provisions.  Epix shall take all actions, including the execution and delivery
of all Documents, reasonably requested by Schering with respect to the
transactions contemplated hereby. 
Throughout this Agreement, the masculine shall include the feminine and
vice versa and the singular shall include the plural and vice versa, unless the
context of this Agreement indicates otherwise. 
This Agreement shall be binding upon and inure to the benefit of Epix
and Schering and shall not be assignable without the prior written consent of
the other Party, which consent shall not be unreasonably withheld or delayed
(except that Schering may assign this Agreement to an Affiliate without Epix’s
consent and except as
permitted under Section 6.2), except that no assignments
hereof shall relieve any assigning Party of its obligations hereunder and any
such assigning Party shall continue to be a primary obligor as fully as if such
assignment had not occurred.  Any
purported assignment not made in accordance with the terms hereof shall be
void.  This Agreement may be executed by
fax and in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.  Subject to
Section 7.4 hereof, any provision of this Agreement, the Research Agreement
and/or any of the other Loan Documents that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement, the Research Agreement and/or such other Loan
Documents, as applicable, or affecting the validity or enforceability of such
provision in any other jurisdiction and each provision which is not wholly
unenforceable shall be enforced to the maximum extent permitted by law.  The table of contents, headings and schedule
of defined terms preceding the text of this Agreement are inserted solely for
convenience of reference and shall not constitute a part of this Agreement nor
affect its meaning, construction or effect. 
The phrase “amended, supplemented, restated or otherwise modified” and
other reasonably similar phrases include any change by way of waiver and
includes extensions, renewals, refinancings and replacements.  The terms “default”, “default under any
Document” and similar terms includes any breach of any Document and any
noncompliance with, and any failure to observe, the terms of any Document.  Any brokerage, commission or finder’s fee
payable in connection with the Loans and the transactions contemplated hereby
is payable by the Party incurring same and such Party incurring same shall
indemnify the other Party in respect of same.


 


30

















 


10.8                           No Agency Relationship.  The Parties agree that neither Party is in
any respect the agent of the other Party for any purpose of any kind or nature
whatsoever.


 


10.9                           Further Acknowledgments and
Agreements of Epix and Schering.  Epix and Schering acknowledge and agree that they (i) have
independently reviewed and approved the provisions of this Agreement, including
the Exhibits attached hereto and any and all other Documents as they or their
counsel have deemed appropriate, and (ii) have entered into this Agreement and
have executed the other Transaction Documents executed by them voluntarily,
without duress or coercion, and have done all of the above with the advice of
their legal counsel.  Epix acknowledges
and agrees that, to the extent deemed necessary by them or their counsel, they
and their counsel have independently reviewed, investigated and/or have full
knowledge of all aspects of the transactions and the basis for the transactions
contemplated by this Agreement or any other Transaction Documents and/or have
chosen not to so review and investigate (in which case, Epix acknowledges and agrees
that it has knowingly and upon the advice of counsel waived any claim or
defense based on any fact or any aspect of the transaction that any
investigation would have disclosed), including the risks and benefits of the
various waivers of rights contained in this Agreement (including the waiver of
the right to a jury trial).


 


[Signature Lines are on the Next Page]


 


31

















 


IN WITNESS WHEREOF, the undersigned have set
their hands and seals or caused these presents to be executed by their proper
officers and sealed with their seal the day and year first above written.


 


	
  (Corporate Seal)

  	
   

  	
  EPIX MEDICAL, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By: 

  	
   

  	
   

  
	
  Name: 

  	
   

  	
   

  	
   

  	
  Name: 

  	
   

  	
   

  
	
  Title: 

  	
   

  	
   

  	
   

  	
  Title: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SCHERING AKTIENGESELLSCHAFT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By: 

  	
   

  	
   

  
	
  Name: 

  	
  Prof. Dr. Günter Stock

  	
   

  	
  Name:  Prof. Dr. Björn
  Wallmark

  
	
  Title: 

  	
  Member of the Vorstand

  	
   

  	
  Title:  Head of Corporate
  Research

  
													



 


32

















 


	
  STATE OF

  	
  )

  
	
   

  	
  ), SS:

  
	
  COUNTY OF

  	
  )

  



 


BE IT REMEMBERED, that on this
       day of May, 2003, before me the
subscriber, a Notary Public of the State of
                         ,
personally appeared,
                     ,
the                           of EPIX MEDICAL, INC., a Delaware
corporation, who, I am satisfied, is the person who executed the within
instrument as the
                  
of said company, and he acknowledged that he signed, sealed with the proper
corporate seal and delivered the same as such officer, that the within
instrument is the voluntary act and deed of said company made by virtue of
authority of its board of directors, and that he received a true copy of the
within instrument on behalf of said company.


 


	
   

  	
   

  	
   

  
	
   

  	
  Notary Public to the Commonwealth of Massachusetts

  
	
   

  	
  [Seal]

  
	
   

  	
   

  



 


33

















 


EXHIBIT A


 


See
Exhibit 10.2 to this 8-K/A


 


1

















 


EXHIBIT
B


 


PROMISSORY NOTE


 


	
  Maximum Principal Balance of

  	
   

  	
  Date:  May 26, 2003

  
	
  US$15,000,000.00

  	
   

  	
  Cambridge, Massachusetts

  



 


This Promissory Note (“Note”) is executed and delivered under and
pursuant to the terms of that certain Loan Agreement dated as of the date
hereof (as amended, restated, supplemented or modified from time to time, the
“Loan Agreement”) by and between EPIX MEDICAL, INC., a Delaware corporation
with a place of business at 71 Rogers Street, Cambridge, Massachusetts
(“Borrower”), and SCHERING AKTIENGESELLSCHAFT, a German corporation (“Lender”).  Capitalized terms not otherwise defined
herein shall have the meanings provided in the Loan Agreement.


 


FOR VALUE RECEIVED, Borrower hereby promises to pay to the order of
Lender, at the office of Lender located at Muellerstrasse 178, 13353 Berlin,
Germany, Attention: Finance Department or at such other place as Lender may
from time to time designate to Borrower in writing:


 


(i)                                     the
principal sum of FIFTEEN MILLION AND 00/100 (US$15,000,000.00) DOLLARS in
currency of the United States of America, or, such lesser amount as shall then
equal the aggregate unpaid principal balance of the Loans as may be due and
owing under the Loan Agreement, payable in accordance with the provisions of
the Loan Agreement, subject to acceleration upon the occurrence of an Event of
Default under the Loan Agreement or earlier termination of the Loan Agreement
pursuant to the terms thereof; and


 


(ii)                                  interest
on the principal amount of this Note from time to time outstanding until such
principal amount is paid in full at the applicable Interest Rate in accordance
with the provisions of the Loan Agreement. 
In no event, however, shall interest exceed the maximum interest rate
permitted by law.  Upon and after the
occurrence of an Event of Default, and during the continuation thereof,
interest shall be payable at the Default Rate.


 


This Note is the Note referred to in the Loan Agreement and is secured
by the liens granted pursuant to the Security Agreement, is entitled to the
benefits of the Loan Agreement and the other Loan Documents and is subject to
all of the agreements, terms and conditions therein contained.  This Note may be prepaid in whole or in part
at any time without premium or penalty.


 


This Note may be assigned only in accordance with the Loan
Agreement.  This Note is not negotiable
by Lender except to an Affiliate.


 


If an Event of Default under Section 7.10 of the Loan Agreement shall
occur, then this Note shall immediately become due and payable, without notice,
together with reasonable


 


1

















 


attorneys’ fees if the collection hereof is placed in the hands of an
attorney to obtain or enforce payment hereof. 
If any other Event of Default shall occur under the Loan Agreement or
any of the Loan Documents, then this Note may, as provided in the Loan Agreement,
be declared to be immediately due and payable, without a notice period,
together with reasonable attorneys’ fees, if the collection hereof is placed in
the hands of an attorney to obtain or enforce payment hereof.


 


This Note shall be governed by and construed and enforced in accordance
with the laws of the State of New York.


 


Borrower expressly waives any presentment, demand, protest, notice of
protest, or notice of any kind except as expressly provided in the Loan
Agreement.


 


	
   

  	
   

  	
  EPIX MEDICAL, INC.,

  
	
   

  	
   

  	
  Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	 

							



 


 


	
  STATE
  OF              )

  
	
   

  	
  SS.:

  
	
  COUNTY
  OF          )

  
	
   

  	
   

  
			



 


On the
             day of
                      ,
2003, before me personally came                         ,
to me known, who being by me duly sworn, did depose and say that he/she is the
                                 
of Epix Medical, Inc., the Borrower described in and which executed the
foregoing instrument; and that he/she signed his/her name thereto as the act
and deed of such corporation by order of the board of directors of said
corporation.


 


	
   

  	
   

  	
   

  
	
   

  	
  Notary Public

  	
   

  



 


2

















 


EXHIBIT
C


 


Final Version


 


SECURITY AGREEMENT


 


THIS SECURITY AGREEMENT (as amended, supplemented,
restated or otherwise modified, the “Security Agreement”) is entered into as of
May 26, 2003, between EPIX MEDICAL, INC., a Delaware corporation, with its
principal offices in Cambridge, Massachusetts (the “Debtor”), and SCHERING
AKTIENGESELLSCHAFT, a German corporation having its principal offices at 13342
Berlin, Germany (the “Secured Party “).


 


WHEREAS, on and as of the date hereof, the Debtor and
Secured Party have executed and delivered a certain Loan Agreement providing
for a maximum principal amount of loans of Fifteen Million Dollars
($15,000,000); such Loan Agreement, and any and all amendments, modifications,
extensions, restatements, renewals, refinancings and/or replacements thereof
from time to time is hereinafter referred to as the “Loan Agreement”;
and the Debtor has executed and delivered to Secured Party a certain
Non-Negotiable Note (“Note”) with a maximum principal amount of Fifteen Million
Dollars ($15,000,000) (such note, and any and all amendments, modifications,
extensions, restatements, renewals, refinancings and/or replacements thereof
from time to time being herein referred to as the “Note”);


 


WHEREAS, the indebtedness evidenced by the Note is
secured as hereinafter provided; and


 


WHEREAS, Debtor, in consideration of and in order to
induce Secured Party, from time to time and in accordance with and subject to
the provisions set forth in the Loan Agreement, to make advances aggregating to
a maximum principal amount of Fifteen Million Dollars ($15,000,000), has
determined that it is in the best interest of Debtor to execute, deliver and
perform this Security Agreement;


 


NOW, THEREFORE, for valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the Debtor and the
Secured Party hereby agree as follows:


 


1.                                       Definitions.  As used in this Security Agreement, and in
addition to terms defined elsewhere in this Security Agreement, the following
terms have the following meanings:


 


“Event of
Default”  shall mean (a) a breach or
default by Debtor under this Security Agreement or (b) an Event of Default as
defined in the Loan Agreement.


 


“Proceeds” has the meaning assigned to it under
the Uniform Commercial Code provided
that Proceeds shall also be deemed to include (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
Debtor from time to time with respect to any of the Secured Assets, and (ii) any and all
payments (in any form whatsoever) made or due and payable to Debtor from time
to time in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Secured Assets by any Governmental
Authority (or any Person acting under color of Governmental Authority), provided further that with respect to 


 


1

















 


whatever is collected on, or distributed on
account of Secured Assets, Proceeds shall mean exclusively
any and all royalties
from time to time paid or payable under or in connection with any of the
Secured Assets after the
date hereof.


 


“relating to” means “arising out of, in connection
with or otherwise relating to”, and “relates to” and “related to” each has a
substantially similar meaning.


 


“Secured Assets” shall mean and include (i) all
of the Debtor’s right, title and interest in and to (a) any and all letters
patent, or other patents, whether issued in the United States or any other
country, and the inventions described and claimed therein relating to magnetic
resonance imaging (“MRI”), including but not limited to those  set forth on Schedule 1 attached
hereto, whether in good standing or expired, whether now existing or
hereinafter arising or created, and whether owned by Debtor singly or jointly
with another Person (including but not limited to the “Joint Patents” as that
term is defined in the Research Agreement (defined below)) or employed by
Debtor pursuant to license or other grant (hereinafter referred to collectively
as the “Patents”); (b) all applications for Patents and any Patent which may be
issued upon any of said applications and any future patent applications of Debtor
and all applications for re-instatement of any expired Patents (hereinafter
referred to collectively as the “Applications”); (c) any reissue, extension,
division or continuation of the Patents or the Applications (such reissues,
extensions, divisions and continuations being herein referred to collectively
as the “Reissued Patents”); (d) all future royalties or other fees paid or
payment or payments made or to be made to the Debtor in respect of the Patents
(the “Royalties”); and (ii) Proceeds of any and all of the foregoing (the
Patents, Applications, Reissued Patents and Royalties and Proceeds being herein
referred to collectively as the “Patent Rights”); (iii) all rights, interests,
claims and demands that the Debtor has or may have in existing and future
profits and damages for past and future infringements of the Patent Rights
(such rights, interests, claims and demands being herein called the “Claims”)
(the Patent Rights and Claims collectively referred to as the “Patent
Collateral”); (iv) all license and other agreements pursuant to which such
Patent Rights were acquired; (v) all other intangible assets, including
know-how, of every kind and description (including rights under any license
agreement pursuant to which such know-how was granted), now owned or hereafter
acquired by the Debtor, and whether now existing or hereafter arising, relating
to any products involving
MRI, and (vi) all books and records relating to the assets described in
clauses (i), (ii), (iii), (iv) and (v), whether in writing or electronic
form.


 


“Uniform Commercial Code” means the Uniform
Commercial Code as the same may from time to time be in effect in the State of Delaware.


 


2.                                       Definitions
Incorporated.  All capitalized terms
used herein, unless otherwise specifically defined, shall have the meaning
ascribed to such terms in the Loan Agreement, in the Note or in the
Collaborative Research Agreement by and between the Debtor and the Secured
Party, dated as of May 26, 2003, as thereafter amended, supplemented, restated
or otherwise modified from time to time (the “Research Agreement”).  It is agreed that in connection therewith,
the Parties shall look first to the Loan Agreement, then to the Note and then
to the Research Agreement.  In the event of
any conflict or inconsistency between the terms of the Loan Agreement, the Note, the Research Agreement and this
Security Agreement, the Loan Agreement shall prevail.


 


2

















 


3.                                       Security
Interest.  The Debtor hereby grants
to the Secured Party a security interest in all of the Debtor’s right, title
and interest in and to the Secured Assets to secure (i) the prompt and complete
payment when due of all principal of and interest heretofore or hereafter owing
or outstanding under the Loan Agreement and/or the Note, (ii) the prompt and
complete payment when due by the Debtor of all costs and expenses (including
reasonable attorney’s fees and expenses) incurred by the Secured Party in the
collection of amounts due under and/or in enforcing its rights under the Loan
Agreement, the Note and/or this Security Agreement and (iii) the prompt and
complete performance when due by the Debtor of all its obligations under the
Loan Agreement, the Note and/or this Security Agreement (the obligations listed
in (i), (ii) and (iii) being referred to collectively herein as the
“Obligations”).


 


4.                                       Debtor
Remains Liable.  Anything herein to
the contrary notwithstanding, (i) Debtor shall remain liable under all
contracts and agreements of every kind and nature whatsoever (“contracts and
agreements” or “contracts or agreements”) included in the Secured Assets to the
extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Security Agreement had not been
executed, (ii) the exercise by the Secured Party of any of its rights hereunder
shall not release Debtor from any of its duties or obligations under the
contracts and agreements included in the Secured Assets, and (iii) unless the
Secured Party in its exercise of  any
rights or remedies expressly assumes by written agreement any of the contracts
or agreements, the Secured Party shall not have any obligation or other
Liability under the contracts and agreements included in the Secured Assets
including without limitation to be obligated to perform any of the obligations
or duties of Debtor thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder.


 


5.                                       Records.  Debtor will at all times keep accurate and
complete records of all items included in the Secured Assets, and the Secured
Party shall have the right at all reasonable times, following reasonable
advance notice without material disruption to the business of the Debtor, to
examine and inspect the same and to make copies thereof.


 


6.                                       Representations,
Warranties and Covenants of the Debtor. 
With respect to the Secured Assets, Debtor hereby represents, warrants
and covenants to the Secured Party as follows:


 


(i)                                     (A)                              Debtor
is the sole owner of the Secured Assets, except for the assets listed in Schedule
6(i) attached hereto.  No Subsidiary
or Affiliate of Debtor owns or will own any Patent Rights rights under
contracts or agreements or other rights or assets of any kind or nature
relating to MRI.


 


(B)        The Secured Assets listed
in Schedule 6(i) hereof are licensed to Debtor and pursuant to the
license agreements identified on that Schedule, true and complete copies of
which license agreements have previously been provided to Lender.  Debtor is in material compliance with all of
each such license agreement, and each such license agreement is in full force
and effect, enforceable in accordance with its terms, and has not been varied,
amended or modified in any manner.


 


3

















 


(ii)                                  Until
all principal and interest which may be outstanding under the Loan Agreement is
indefeasibly paid in full, Debtor will have such rights of ownership or other
rights to each item of the Secured Assets as Debtor has on and as of the date
hereof; the same will be used solely in connection with the Debtor’s business;
all of the Secured Assets are free and clear of all Liens, including any
security interests or collateral interests of any other party.


 


(iii)                               Debtor
hereby authorizes Secured Party to file all financing statements and amendments
and supplements thereto, if any, including continuation statements with respect to the Secured Assets
reasonably necessary in the judgment of the Secured Party to perfect the
security interest in the Secured Assets granted hereby.  At the written request of the Secured Party,
Debtor will attend to the filing of any and all continuation statements, as may
be reasonably requested by the Secured Party in order to continue the
perfection of the security interests of the Secured Party hereunder.


 


(iv)                              Debtor
shall, from time to time as requested by the Secured Party, take such action,
including without limitation to execute and deliver to the Secured Party all
such instruments, assignments, supplements, further assurances and security or
other agreements, as may be reasonably required or reasonably requested by the
Secured Party in order to perfect and continue the Secured Party’s security
interest in the Secured Assets hereunder and to provide the Secured Party with
the full benefits contemplated by this Agreement.


 


(v)                                 Debtor
agrees to pay, and to hold the Secured Party harmless from, any and all
Liabilities, costs and expenses (including, without limitation, reasonable
legal fees and expenses) except those caused by the willful misconduct or gross
negligence of the Secured Party (1) with respect to, or resulting from, any
delay in paying, any and all withholding or other taxes
which may be payable or determined to be payable with respect to any of the
Secured Assets, and (2) in connection with any of the transactions contemplated
by this Security Agreement.


 


(vi)                              Debtor
will not create, incur or permit to exist, and it will defend the Secured
Assets against, and it will take such other action as is necessary, or
reasonably requested by the Secured Party, to promptly remove, any Lien or
claim on or to the Secured Assets, other than the liens created hereby, and,
subject to the terms of any agreements relating to licensed Secured Assets, it
will defend the right, title and interest of the Secured Party in and to any of
the Secured Assets against the claims and demands of all persons whomsoever.


 


(vii)                           Debtor
will not sell or otherwise transfer in any manner whatsoever any of the Secured
Assets, except upon the advance written consent of the Secured Party  or as otherwise permitted under
the Loan Agreement.


 


(viii)                        Debtor has
the power to execute and deliver this Security Agreement and to perform its
obligations hereunder and has taken all necessary action and has received all
required consents (private and governmental) to authorize such execution,
delivery and performance, and this Security Agreement constitutes the legal,
valid and binding obligation of the Debtor, enforceable against it in
accordance with its terms.  Furthermore,
the execution, delivery and performance of this Security Agreement by Debtor
does not and will not violate any material Law applicable to Debtor in connection with
the transactions contemplated hereby.


 


4

















 


(ix)                                The
execution, performance and delivery of this Security Agreement does not violate
or conflict in any material
respect with the terms or provisions of, or the Debtor’s
performance under, any contract or agreement by or to which the Debtor is a
party, bound or subject.


 


(x)                                   Debtor
is not in material default under any contract or agreement by or to which the
Debtor is now or hereafter a party, bound or subject that is part of the
Secured Assets.  Debtor will perform and
comply in all material respects with all obligations under all provisions of
any Document filed by
Debtor with the Securities and Exchange Commission to which
Debtor is a party or by which it or any of its assets is bound that relates to
the Secured Assets, after
giving effect to any applicable grace periods thereto.


 


(xi)                                Debtor
does not transact and has not transacted within the past five (5) years, any
part of its business under any trade names, division names, assumed names or
other names.


 


(xii)                             Debtor
is a Delaware corporation whose chief executive office is located at Cambridge,
Massachusetts.


 


(xiii)                          (a)
Debtor is the true and lawful exclusive owner of the Patent Rights set forth on
Schedule 1 hereto; (b) the Patent Collateral is valid and enforceable;
(c) Debtor has no notice of any suits or actions commenced or threatened
against it, or notice of claims asserted or threatened against it, with
reference to the Patent Rights and the interests granted herein; and (d) the
Patent Rights and all interests granted herein are so granted free from all
liens, charges, claims, options, licenses, pledges and encumbrances of every
kind and character, except for licenses granted by Debtor set forth on Schedule
6(xiii) hereto.


 


(xiv)                         (a) until
all of the Obligations have been satisfied in full, Debtor will not enter into
any agreement, including without limitation, license agreements, which are
inconsistent with Debtor’s obligations under this Security Agreement; and (b)
if Debtor acquires rights to any new Patent Collateral, the provisions of this
Security Agreement shall automatically apply thereto and Debtor shall give the
Lender prompt written notice thereof along with an amended Schedule 1.


 


Notwithstanding anything to the contrary contained
herein, including, without limitation, the provisions of clauses (i), (v) and
(vi) of this Section 6, Debtor may, prior to the occurrence of an Event of
Default, without the consent of the Secured Party, grant licenses to or under
the Secured Assets that are consistent with any existing or future license
granted by the Debtor to the Secured Party or any of its affiliates, and any
payments received by Debtor in connection with the grant of any such license
(whether in the form of license fees, upfront payments, milestone payments,
royalties or otherwise) shall not be considered Proceeds covered by the
security interest granted to the Secured Party hereunder; provided that, all
Proceeds from the grant of any such license that are received by the Debtor or
which the Debtor is entitled to receive subsequent to the occurrence of an Event
of Default shall be considered Proceeds covered by the security interest
granted to the Secured Party hereunder.


 


5

















 


7.                                       Maintenance
of Patent and Prosecution of Patent Application.


 


(a)                                  Debtor
shall, at its own expense, diligently maintain all Patents and diligently file
and prosecute all Applications relating to the inventions described and claimed
in the Patent Collateral in the United States Patent and Trademark Office, and
shall pay or cause to be paid in their customary fashion all fees and
disbursements in connection therewith, and shall not abandon any such
Application prior to the exhaustion of all administrative and judicial remedies
or disclaim or dedicate any Patent without the prior written consent of the
Lender.  Debtor shall not abandon any
Patent Collateral without the prior written consent of the Lender, which shall
not be unreasonably withheld.


 


(b)                                 Any
and all fees, costs and expenses, including reasonable attorneys’ fees and
expenses incurred by the Lender in connection with the preparation,
modification, enforcement or termination of this Security Agreement and all
other documents relating hereto and the consummation of this transaction, the
filing and recording of any documents (including all taxes in connection
therewith) in public offices, the payment or discharge of any taxes, counsel
fees, maintenance fees, encumbrances or costs otherwise incurred in defending
or prosecuting any actions or proceedings arising out of or related to the Patent
Collateral shall be paid by Debtor on demand by the Lender.


 


(c)                                  Debtor
shall have the right to bring suit in the name of Debtor to enforce the Patent
Collateral, in which case the Lender may, at the Lender’s sole option, be
joined as a nominal party to such suit if the Lender shall be satisfied that
such joinder is necessary and advisable and that the Lender is not thereby
incurring any risk of liability by such joinder.  Debtor shall promptly, upon demand, reimburse and indemnify,
defend and hold harmless the Lender for all damages, costs and expenses,
including reasonable attorneys’ fees, incurred by the Lender pursuant to this
paragraph and all other actions and conduct of Debtor with respect to the
Patent Rights.


 


8.                                       Secured
Party’s Duties.  The powers
conferred on the Secured Party hereunder are solely to protect its interest in
the Secured Assets and shall not impose any duty of any kind or nature upon it
to exercise any such powers.  Secured
Party shall have no obligation of any kind or nature to preserve rights against
any Person.


 


9.                                       Default
Remedies.


 


(a)                                  Except
as expressly and unambiguously set forth herein, this Security Agreement shall
be deemed absolute and without conditions. 
Upon an Event of Default, the Secured Party may enforce its rights with
respect to the Secured Assets without first being required to attempt
collection of any sums due from the Debtor. 
If an Event of Default shall occur, the Secured Party shall have the
following rights:


 


(i)                                     to
perform any defaulted covenant or agreement of this Security Agreement, the
Loan Agreement and the Research Agreement to such extent as the Secured Party
shall reasonably determine and advance such monies as it shall deem reasonably
advisable for the aforesaid purpose and all monies so advanced, together with


 


6

















 


interest thereon from the date advanced until paid at
a rate per annum equal to the rate then in effect on the Note, shall be secured
hereby and shall be repaid promptly after notice of the amount due without
demand; provided, however, that nothing herein contained shall be construed to
require the Secured Party to advance money for any of the aforesaid purposes;


 


(ii)                                  to
notify all account debtors, to the extent permitted by applicable Law, to pay
directly to the Secured Party or otherwise as the Secured Party may specify all
amounts it owes then or thereafter to Debtor until such time as the Secured
Party has received all amounts to which it is entitled under the Note and this
Security Agreement;


 


(iii)                               to
take control of any and all proceeds to which the Secured Party may be entitled
under this Security Agreement, the Loan Agreement, the Note, or under any
applicable laws;


 


(iv)                              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 Debtor or any other Person (all and each of which demands,
advertisements and/or notices are hereby expressly waived), to take immediate possession
of the Secured Assets, and, with or without taking possession of the Secured
Assets, to sell, lease, collect, receive, appropriate, realize upon or
otherwise dispose of in any manner whatsoever (or contract to do so), any or
all of the Secured Assets or any part thereof, at one or more times, either at
public or private sale, upon commercially reasonable terms  and in accordance with the UCC,
and the Secured Party may become the purchaser thereof at any one or more
public sale or sales and, to the extent permitted by Law, upon any one or more
private sale or sales, free of any right or equity of redemption in Debtor,
such right or equity being hereby released; provided that, any sale may be
adjourned at any time and from time to time to a reasonably specified time and
place by announcement at the time and place of sale or by publication or
otherwise of the time and place of such adjourned sale; provided further that,
the proceeds of any sale shall be applied (1) first to the expenses of taking,
holding and preparing for sale or disposition, and sale or disposition and the
like (including reasonable attorneys’ fees), (2) next to the interest due under
the Loan Agreement and/or the Note, (3) next to the principal due under Loan
Agreement and/or the Note and the other amounts secured under clauses (i) and
(ii) of Section 3 hereof, (4) next to all other amounts secured under Section 3
hereof, (5) next to the holder of any subordinate security interest therein if
written notification of demand therefor is received and verified by the Debtor
before distribution of the proceeds (or, if there is a dispute with respect
thereto, the Secured Party can deposit such amount with a court or an
appropriate third party) and (6) lastly, any surplus to Debtor and Debtor shall
remain liable for any deficiency if the proceeds of any sales or other dispositions
of the Secured Assets are insufficient to pay all amounts to which Secured
Party is entitled, Debtor also being liable for the reasonable fees and
expenses of any attorneys employed by Secured Party to collect such deficiency;
and provided that, any such sale or sales, public or private, may be made on
credit at the sole discretion of the Secured Party;


 


7

















 


(v)                                 to
take immediate possession of the Secured Assets and to use or operate the
Secured Assets in order to preserve the same or their value, and collect,
receive and use all of the net profits from such use or operation to pay
indebtedness secured by such Secured Assets; provided that, any continuing
royalties or other similar amounts derived from the commercial sale of any
products developed from the Secured Assets under the Research Agreement (as
opposed to the sale of any products deriving from intellectual property that
may be developed by the Secured Party) shall be allocated between the parties
in accordance with Section 7.4.1 of the Research Agreement; provided further
that, any sale or license by the Secured Party of any intellectual property
included in the Secured Assets to any third party shall be deemed to be solely
for the account of the Secured Party and not in any manner or portion for the
account of Debtor or distributable to Debtor under and pursuant to the terms of
the Research Agreement;


 


(vi)                              to
require Debtor, to the extent practicable, to assemble the Secured Assets and
make them available to the Secured Party at such locations as the Secured Party
shall reasonably designate;


 


(vii)                           to
enter all of the Debtor’s facilities to remove the Secured Assets therefrom and
take possession of the appropriate portions of the Debtor’s books and records
and computer hardware and software, and to use all of the same in a manner the
Secured Party deems appropriate in order to preserve and sell or otherwise
dispose of the Secured Assets;


 


(viii)                        to
(without assuming any obligations or liability or any kind or nature
thereunder), at any time and from time to time, enforce against any licensee or
sublicensee all rights and remedies of the Debtor in, to and under any patent,
know-how and/or other licenses included in the Secured Assets and, in the
exercise of commercial reasonableness, take or refrain from taking any action
under any such licenses, and the Debtor hereby releases the Secured Party free
and harmless from and against any claims arising out of any lawful action so
taken or omitted to be taken under applicable law with respect thereto;


 


(ix)                                to
proceed to protect and enforce its rights under the Loan Agreement, the Note
and this Security Agreement by a suit or suits in equity or at law, whether for
specific performance or observance of any terms, provisions, covenants or
conditions herein or therein contained in aid of the execution of any power
therein or herein granted, for any foreclosure hereunder or thereunder, or for
the enforcement of any other proper legal or equitable remedy;


 


(x)                                   to
exercise any such additional and/or different rights or remedies as are
provided for in the Loan Agreement and/or the Note; and


 


(xi)                                to
act as true and lawful attorney-in-fact of the Debtor, with full power of
substitution, with full irrevocable power and authority in the place and stead
of the Debtor, in the name of the Debtor, or in its own name, for the purpose
of carrying out the terms of this Security Agreement, to take any and all
appropriate action, including, 


 


8

















 


without limitation, to execute, deliver, record and
file any and all Documents which may be reasonably necessary or desirable to
accomplish the purposes of this Security Agreement.


 


(b)                                 The
Secured Party shall, in addition, have any and all other rights and remedies
provided by law or equity, including, without limitation, the rights and
remedies of a secured party under the Uniform Commercial Code.  All of the Secured Party’s rights and
remedies will be cumulative, and no waiver of any default will affect any other
subsequent default.  The rights and
remedies provided in this Security Agreement are cumulative, may be exercised
concurrently or separately, may be exercised from time to time and in such
order, without any marshalling, as the Secured Party shall determine.  Debtor expressly acknowledges that the
Secured Party is not obligated to first foreclose its security interest
in the Joint Patents, the decision as to the order in which the Secured Assets
are to be addressed hereunder being in Lender’s sole and absolute
discretion.  To the extent permitted by
applicable Law, Debtor waives all claims, damages and demands against Secured
Party arising out of the repossession, retention, sale or other disposition of
the Secured Assets.  Nothing herein
contained shall be construed as preventing the Secured Party from taking all
reasonable and lawful actions to protect its interest in the event that
liquidation, insolvency, bankruptcy, reorganization or foreclosure proceedings
of any nature whatsoever affecting the property or assets of Debtor are
voluntarily or involuntarily instituted. 
The Secured Party’s sole duty with respect to the Secured Assets,
including, without limitation the custody, safekeeping and physical
preservation of the Secured Assets shall be those duties which are imposed by
the Uniform Commercial Code and cannot, by contract, be waived or otherwise
eliminated.  Neither the Secured Party,
nor any of its respective directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon all or any part of the
Secured Assets or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of any Secured Assets upon the request of the Debtor
or otherwise.


 


(c)                                  (i)   The Debtor expressly acknowledges that the
Secured Party may record evidence of this Security Agreement  and the security interest created hereby
with the appropriate government filing/recording office(s) in such countries as
the Secured Party desires in its sole discretion, whether by filing or
recording a Patent Collateral Assignment in the form of Exhibit A
attached hereto or with such other forms as may be customary, necessary and appropriate
for similar use in a particular country. The Debtor agrees to execute and
deliver promptly all such forms presented to it by the Secured Party.


 


(ii)   Contemporaneously herewith,
the Debtor shall execute and deliver to the Secured Party a Patent Assignment
in the form attached hereto as Exhibit B (and such other forms as may be
customary, necessary and appropriate for similar use in a particular country
other than the United States of America that the Secured Party may present to
the Debtor in the future) permanently assigning all Debtor’s rights in the
Patent Collateral to the Secured Party. 
Such assignment document(s) shall be held by the Secured Party in escrow
until the occurrence of an Event of Default hereunder or under the Loan
Documents. After such occurrence, in addition to all other rights and remedies
of the Secured Party set forth herein, the Secured Party may, at its sole
option, record such escrowed documents with the United States Patent and


 


9

















 


Trademark Office and with the appropriate government filing/recording
office(s) in such other countries as the Secured Party desires in its sole
discretion.


 


10.                                 General
Provisions.


 


(a)                                  This
Security Agreement and the security interests of the Secured Party in the
Secured Assets created hereby shall cease and terminate only upon final
indefeasible repayment in full of the principal and any accrued interest under
and pursuant to the Loan Agreement.


 


(b)                                 Debtor
hereby waives all demands, notices, presentments, claims, defenses and protests
of any kind, except (if any) as expressly and unambiguously provided herein and
unless not permitted by applicable law.


 


(c)                                  This
Security Agreement shall be construed to be a contract made under and pursuant
to the laws of the State of New York, and all of the terms, covenants and
conditions contained herein shall be governed by and construed in accordance
with such laws, without giving effect to the conflict of laws principles
contained in such laws.


 


(d)                                 This
Security Agreement, all supplements hereto and all amendments hereof, shall
inure to the benefit of and be binding upon the Debtor, the Secured Party, and
their respective successors and assigns, but this Security Agreement may not be
assigned by Debtor or the Secured Party without the advance written consent of
the other party; provided, however, that the Secured Party may assign this
Security Agreement to an Affiliate without the Debtor’s advance consent.


 


(e)                                  No
course of dealing between the Debtor and the Secured Party or any delay on the
part of the Secured Party in exercising any rights hereunder shall affect the
rights of the Secured Party, on any future occasion, to insist on strict
compliance with the terms hereof or to exercise any available remedy.  All consents and waivers shall be in
writing.  No waiver by either party of
any term, provision, covenant or condition contained in this Security
Agreement, or of any breach of any such term, provision, covenant or condition,
shall constitute a waiver by that party of any subsequent breach or justify or
authorize the non-observance by the other party on any other occasion of such
term, provision, covenant or condition contained in this Security Agreement.


 


(f)                                    Subject
to the provisions of Section 7.4 of the Loan Agreement, the invalidity or
unenforceability of any term or condition hereof shall not affect the validity
or enforceability of any other term or condition hereof or of this Security
Agreement as a whole and each such term or condition which is enforceable in
part but not enforceable in whole shall be enforced to the maximum extent
permitted by applicable law.


 


(g)                                 Titles
of Sections and Subsections are for convenience only, and shall not modify
rights and obligations created hereby. 
All references herein to Sections or Subsections shall refer to the
corresponding Sections or Subsections of this Security Agreement unless
specific reference is made to Sections or Subsections of another document.  Use of the words “hereby”, “herein”,
“hereto”, “hereof”, “hereunder” and similar words shall be deemed to refer to
this


 


10

















 


Security Agreement in its
entirety and not merely to the Sections or Subsections wherein any such word
may appear unless otherwise specifically herein provided to the contrary.  No one Party shall be deemed or construed as
the drafter of this Security Agreement, and this Security Agreement shall not
be construed more severely against any Party.


 


(h)                                 All
of the terms, covenants and conditions contained in this Security Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that Debtor’s obligations hereunder
may not be delegated to any other person without the prior consent of Secured
Party and any such attempted delegation without such consent shall be void.


 


(i)                                      DEBTOR
HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY.


 


(j)                                      No
remedy herein conferred upon the Secured Party is intended to be exclusive of
any other remedy and each and every such remedy shall be cumulative and shall
be in addition to every other remedy provided hereunder or now or hereafter
existing at law or in equity.


 


 


[THE REMAINDER OF THIS
PAGE LEFT INTENTIONALLY BLANK]


 


11

















 


IN WITNESS WHEREOF, the parties have caused this
Security Agreement to be executed at the time first above written by their
officers thereunto duly authorized.


 


 


	
   

  	
  SCHERING AKTIENGESELLSCHAFT

  
	
   

  	
  (“SECURED PARTY”)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: Prof. Dr. Günter Stock

  
	
   

  	
  Title: Member of the Vorstand

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: Prof. Dr. Björn Wallmark

  
	
   

  	
  Title: Head of Corporate Research

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EPIX MEDICAL, INC.

  
	
   

  	
  (“DEBTOR”)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


 


	
  Schedule 1

  	
   

  	
  Certain Patents and
  Patent Applications

  
	
  Schedule 6(i)

  	
   

  	
  Secured Assets that are
  licensed to Debtor

  
	
  Schedule 6(xiii)

  	
   

  	
  License in the Secured
  Assets granted by Debtor

  
	
  Exhibit A

  	
   

  	
  Form of Patent
  Collateral Assignment

  
	
  Exhibit B

  	
   

  	
  Form of U.S. Patent
  Assignment

  



 


12

















 


	
  STATE OF

  	
  )

  
	
   

  	
  ), SS:

  
	
  COUNTY OF

  	
  )

  



 


BE IT REMEMBERED, that on this
           day of May, 2003,
before me the subscriber, a Notary Public of the State of
                            ,
personally appeared,
                         ,
the
                         
of EPIX MEDICAL, INC., a Delaware corporation, who, I am satisfied, is the
person who executed the within instrument as the
                    
of said company, and he acknowledged that he signed, sealed with the proper
corporate seal and delivered the same as such officer, that the within
instrument is the voluntary act and deed of said company made by virtue of
authority of its board of directors, and that he received a true copy of the
within instrument on behalf of said company.


 


	
   

  	
   

  	
   

  
	
   

  	
  Notary Public to the Commonwealth of Massachusetts

  
	
   

  	
  [Seal]

  



 


13

















 


Schedule
1

Secured
Assets


 


The following patent families constitute existing utility applications
assigned to EPIX or in the case of the MET-1 patent family exclusively licensed
from The General Hospital Corporation of Boston, Massachusetts (Agreement of
March 24, 1992 amended July 10, 1995). 
MET-9 is assigned to Dyax and EPIX with EPIX having exclusive rights to
MRI applications (Agreement of June 20, 1997 amended March 17, 2003).


 


	
  MET-1

  	
  US

  	
   

  	
  [*****]

  
	
   

  	
  US-CIP

  	
   

  	
  [*****]

  
	
   

  	
  PCT

  	
   

  	
  [*****]

  
	
   

  	
  EPO

  	
   

  	
  [*****]

  
	
   

  	
  CANADA

  	
   

  	
  [*****]

  
	
   

  	
  HONG KONG

  	
   

  	
  [*****]

  
	
   

  	
  LATVIA

  	
   

  	
  [*****]

  
	
   

  	
  SINGAPORE

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  
	
  MET-3

  	
  US

  	
   

  	
  [*****]

  
	
   

  	
  PCT

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  
	
  MET-4

  	
  PCT

  	
   

  	
  [*****]

  
	
   

  	
  AUSTRALIA

  	
   

  	
  [*****]

  
	
   

  	
  ISRAEL

  	
   

  	
  [*****]

  
	
   

  	
  NEW ZEALAND

  	
   

  	
  [*****]

  
	
   

  	
  SINGAPORE

  	
   

  	
  [*****]

  
	
   

  	
  SOUTH AFRICA

  	
   

  	
  [*****]

  
	
   

  	
  SWAZILAND

  	
   

  	
  [*****]

  
	
   

  	
  TAIWAN

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  
	
  MET-5

  	
  US CON Publication

  	
   

  	
  [*****]

  
	
   

  	
  PCT

  	
   

  	
  [*****]

  
	
   

  	
  EPO

  	
   

  	
  [*****]

  
	
   

  	
  AUSTRALIA

  	
   

  	
  [*****]

  
	
   

  	
  CHINA

  	
   

  	
  [*****]

  
	
   

  	
  ISRAEL

  	
   

  	
  [*****]

  
	
   

  	
  NEW ZEALAND

  	
   

  	
  [*****]

  
	
   

  	
  SINGAPORE

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  
	
  MET-6

  	
  US

  	
   

  	
  [*****]

  
	
   

  	
  PCT

  	
   

  	
  [*****]

  
	
   

  	
  AUSTRALIA

  	
   

  	
  [*****]

  
	
   

  	
  NEW ZEALAND

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  
	
  MET-7

  	
  AUSTRALIA

  	
   

  	
  [*****]

  



 


14

















 


	
   

  	
  EPO

  	
   

  	
  [*****]

  
	
   

  	
  NEW ZEALAND

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  
	
  MET-8

  	
  US

  	
   

  	
  [*****]

  
	
   

  	
  PCT

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  
	
  MET-9

  	
  US Application

  	
   

  	
  [*****]

  
	
   

  	
  PCT

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  
	
  MET-10

  	
  US

  	
   

  	
  [*****]

  
	
   

  	
  PCT

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  
	
  MET-11

  	
  PCT

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  
	
  MET-12

  	
  US

  	
   

  	
  [*****]

  
	
   

  	
  PCT

  	
   

  	
  [*****]

  
	
  MET-14

  	
  PCT

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  
	
  MET-15

  	
  PCT

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  
	
  MET-16

  	
  US Publication

  	
   

  	
  [*****]

  
	
   

  	
  PCT

  	
   

  	
  [*****]

  



 


15

















 


Schedule 6(i)


Collateral
not Owned


 


EPIX’ MET-1 family of world patents listed below is
exclusively licensed from The General Hospital Corporation of Boston,
Massachusetts (Agreement of March 24, 1992 amended July 10, 1995).  There are EPO divisional and Japanese
applications being prosecuted by EPIX.


 


	
  MET-1 Patents

  	
   

  	
   

  
	
  US

  	
   

  	
  [*****]

  
	
  US-CIP

  	
   

  	
  [*****]

  
	
  PCT

  	
   

  	
  [*****]

  
	
  EPO

  	
   

  	
  [*****]

  
	
  CANADA

  	
   

  	
  [*****]

  
	
  HONG KONG

  	
   

  	
  [*****]

  
	
  LATVIA

  	
   

  	
  [*****]

  
	
  SINGAPORE

  	
   

  	
  [*****]

  



 


16

















 


Schedule
6 (xiii)


 


Licenses Granted by Debtor


 


 


Strategic Collaboration Agreement dated June 9, 2000 with Schering AG


 


Amendment No. 1 to Strategic Collaboration Agreement dated December 22,
2000 with Schering AG


 


Worldwide License Agreement dated September 25, 2001 with Bracco
Imaging SPA


 


Amended and Restated Strategic Collaboration Agreement dated June 9,
2000 with Tyco/Mallinckrodt Inc


 


Development and License Agreement dated March 29, 1996, as amended
October October 4, 1999 with Daiichi Radioisotope Laboratories, Ltd


 


Reacquisition Agreement dated December 22, 2000 with Daiichi
Radioisotope Laboratories, Ltd


 


17

















 


EXHIBIT A


 


PATENT
COLLATERAL ASSIGNMENT


 


This Agreement is made on
the           day of
            , 2003
between EPIX MEDICAL, INC. a Delaware corporation having a mailing address at                                 ,
Cambridge, Massachusetts (“Assignor”) and SCHERING AKTIENGESELLSCHAFT, a German
corporation having a mailing address at 13342 Berlin, Germany (“Lender”).


 


BACKGROUND


 


Assignor has executed and delivered its promissory note to the Lender
pursuant to a certain Loan Agreement of even date herewith between Assignor and
the Lender (as amended from time to time, the “Loan Agreement”).  In order to induce the Lender to execute and
deliver the Loan Agreement, Assignor has agreed to collaterally assign to
Lender certain patent rights, all as more fully set forth in that certain
Security Agreement of even date herewith between Assignor and Lender, a true
copy of which is attached hereto as Exhibit A  (the “Security Agreement”).


 


NOW,
THEREFORE, in consideration of the premises, Assignor
hereby agrees with Lender as follows:


 


1.                                       Capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Loan Agreement or the Security Agreement.


 


2.                                       To
secure the complete and timely satisfaction of all Obligations of Assignor to
Lender, Assignor has granted, assigned 
and conveyed to Lender, pursuant to the terms and conditions of the
Security Agreement, a security interest in Assignor’s entire right, title and
interest in and to, among other things, the Patents, Applications, Reissued
Patents, Royalties, Claims and Proceeds thereof, including but not limited to
those Patents and Applications listed in Schedule 1 attached to the
Security Agreement that is attached hereto.


 


3.                                       Assignor
has agreed that, until all of the Obligations shall have been satisfied in
full, it will not enter into any agreement (for example, a license agreement or
patent assignment) which is inconsistent with Assignor’s obligations and
covenants under the Security Agreement.


 


4.                                       Assignor
authorizes Lender to modify this Agreement by amending Schedule 1
attached to the Security Agreement that is attached hereto to include any
future Patents and Applications.


 


5.                                       If
any Event of Default shall have occurred and be continuing, Assignor hereby
authorizes and empowers Lender to make, constitute and appoint any officer or
agent of Lender, as Lender may select in its exclusive discretion, as
Assignor’s true and lawful attorney-in-fact, with the power to endorse
Assignor’s name on all Applications, documents, papers and instruments necessary
for Lender to use the Patents, or to grant or issue any exclusive or
nonexclusive license under the Patents to any third person, or necessary for
Lender to assign,


 


18

















 


pledge, convey or otherwise transfer title in or
dispose of the Patents to any third person. 
Assignor hereby ratifies all that such attorney shall lawfully do or
cause to be done by virtue hereof.  This
power of attorney shall be irrevocable for the life of this Agreement.


 


WITNESS the execution hereof under seal as of the day
and year first above written.


 


 


	
  ATTEST:

  	
   

  	
  ASSIGNOR:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EPIX MEDICAL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LENDER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SCHERING AKTIENGESELLSCHAFT

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By 

  	
   

  



 


CERTIFICATE
OF ACKNOWLEDGEMENT


 


	
  COMMONWEALTH OR STATE OF
                        

  	
  :

  	
   

  
	
   

  	
  :

  	
  ss

  
	
  COUNTY
  OF                                        

  	
  :

  	
   

  



 


Before me, the undersigned, a Notary Public in and for the country
aforesaid, on this
            day of
                 ,
20       , personally appeared                              
to me known personally, and who, being by me duly sworn, deposes and says that
he/she is the
                       
of
                             ,
and that the seal affixed to the foregoing instrument is the corporate seal of
said corporation, and that said instrument was signed and sealed on behalf of
said corporation by authority of its Board of Directors, and said
                         acknowledged
said instrument to be the free act and deed of said corporation.


 


	
   

  	
   

  	
   

  
	
   

  	
  Notary Public

  	
   

  
	
   

  	
  My commission expires:

  	
   

  



 


19

















 


Exhibit
B


 


PATENT
ASSIGNMENT


 


WHEREAS,  EPIX MEDICAL, INC., having a place of
business at 71 Rogers Street, Cambridge, Massachusetts (the “Grantor”)
is the owner of the entire right, title and interest in and to the United
States patents and patent applications listed on Schedule A attached
hereto and made a part hereof, the inventions described therein and all rights
associated therewith (collectively, the “U.S. Patent Collateral”), which are
registered in the United States Patent and Trademark Office or which are the
subject of pending applications in the United States Patent and Trademark
Office; and


 


WHEREAS,
SCHERING AKTIENGESELLSCHAFT, having a place of business
at 13342 Berlin, Germany (the “Grantee”), is desirous of acquiring said
Patent Collateral;


 


WHEREAS,
pursuant to those certain Loan Agreement of even date herewith and Security
Agreement of even date herewith, each between Grantor and Grantee, the Grantee
has a security interest in the assets of the Grantor adequate to carry on the
business of the Grantor with respect to the Patent Collateral; and


 


WHEREAS,
the Security Agreement provides that this Assignment shall become effective
upon the occurrence of an Event of Default as defined in the Security
Agreement.


 


NOW,
THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the Grantor, its successors and assigns does hereby
transfer, assign and set over unto Grantee, its successors, transferees and
assigns, all of its present and future right, title and interest in and to the
Patent Collateral and all proceeds thereof and all rights and proceeds
associated therewith.


 


IN
WITNESS WHEREOF, the undersigned has caused this
Patent Assignment to be executed by its duly authorized officer on this 21th
day of May, 2003.


 


	
  ATTEST:

  	
   

  	
  EPIX MEDICAL, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (SEAL)

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
										



 


20

















 


	
  STATE OF

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss:

  
	
  COUNTY OF

  	
  )

  	
   

  



 


On this, the
                 
day of May, 2003, before me, a Notary Public, the undersigned officer,
personally appeared                                                     ,
who acknowledged himself/herself to be the
                                         
of  EPIX MEDICAL, INC. and that
he/she, in such capacity, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing on behalf of said
corporation pursuant to a resolution of the board of directors of said
corporation.


 


IN WITNESS WHEREOF, I hereunto set my hand and official seal.


 


	
   

  	
   

  
	
   

  	
  Notary Public

  
	
  My commission expires:

  	
   

  



 


21

















 


SCHEDULE
A


 


	
  MET-3

  	
   

  	
  US

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MET-4

  	
   

  	
  US Application

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MET-5

  	
   

  	
  US Application

  	
   

  	
  [*****]

  
	
   

  	
   

  	
  US CON Publication

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MET-6

  	
   

  	
  US

  	
   

  	
  [*****]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MET-7

  	
   

  	
  US Application

  	
   

  	
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22

















 


EXHIBIT D


 


EPIX’ INVESTMENT POLICY and GUIDELINES


 


POLICY


 


Cash is a resource that will be invested if not immediately required to
fund operations.


 


PURPOSE


 


To establish the responsibility, authority and guidelines for the
investment of the Company’s surplus cash. 
“Surplus cash” is cash in corporate accounts not immediately required to
fund operations, debt repayments, working capital, capital investment, or other
outstanding near-term financial obligations.


 


RESPONSIBILITY


 


The Treasury Department, including the CFO and one other person
designated by the CFO, will be responsible for managing and investing the cash
for the Company.  The CFO and designee
will have the authority to: 1) open accounts with banks, brokerage and other
financial institutions; 2) establish safekeeping accounts or other arrangement
for the custody of securities; 3) execute documents as necessary; 4) select or
change investment managers and be responsible for monitoring and reporting the
results of all investment managers to the Board of Directors.


 


The surplus cash of the Company will be invested in accordance with
this policy.  Any exceptions to this
policy will require the written approval of the Chief Financial Officer and the
Chief Executive Officer.


 


INVESTMENT OBJECTIVES


 


The primary objective of the Company’s investment program is safety and
preservation of principal which will be achieved by investing in high-quality,
diversified portfolios.  These investments
will also satisfy the following objectives:


 


Liquidity of investments sufficient to satisfy the Company’s cash flow
requirements.


 


Maximize the return on invested funds, as compared to industry
averages, while adhering to the stated objectives and risk profile.


 


RISK PROFILE


 


The Company will attempt to ensure the safety of its invested funds by
minimizing interest rate, reinvestment and event risk.


 


The risk associated with fluctuating interest rates is a change in the
market value of investments.  Generally,
securities should be purchased with the intention of holding to maturity even
though a sale of securities may be necessary to meet capital requirements.


 

















 


Reinvestment risk results from having to reinvest funds at maturity at
rates lower than previously earned. Selecting investments with maturities
consistent with the Company’s needs as reflected on the cash flow plan will
help to limit this risk.


 


Event risk impacts the liquidity of a security.  The Company will invest in safe, high quality
securities and monitor the portfolio and credit markets to respond to a
reduction in the credit rating of any investment issuer, guarantor or
depository.  The portfolio will include
only marketable securities with active secondary or resale markets to ensure
liquidity.


 


LIQUIDITY and MATURITY


 


The
Company will provide a cash flow projection which will serve as the basis for
establishing portfolio maturities. 
These projections will be updated quarterly or more frequently, if
necessary.


 


Excess cash is invested with liquidity in mind, and without any loss of
principal.  Daily liquidity is
essential; restrictions on liquidity are:


 


At least $1 million must be available each business day until 1:30p.m.
Eastern time with no loss of principal.


 


The remainder of the funds is to be invested, consistent with
anticipated cash needs, in securities with maturities no longer than 24
months.  The average maturity of the
portfolio may not exceed 12 months.


 


For securities which have put dates, reset dates, or are traded based
on their average maturity, the put date, reset date, or average maturity will
be used, instead of the final maturity date, for maturity guideline purposes.


 


Repositioning of these securities before their maturity, generating
small gains or losses, is permitted for managing liquidity requirements
only.  Any repositioning of securities
causing a gain or loss must be pre-approved by the Chief Financial Officer for
fiduciary control purposes.


 


INVESTMENT RESTRICTIONS


 


Investments shall be made in the context of the following investment
guidelines:


 


ELIGIBLE INVESTMENTS


 


1.                                        Direct
obligations of the U.S. Treasury, including bills, notes, and bonds.


 


2.                                      Obligations
issued or guaranteed by agencies or instrumentalities of the U.S. government.


 

















 


3.                                      Bank obligations,
including certificates of deposit, bank notes, and bankers acceptances.  Investments in these securities is limited
to banks whose long term debt is rated “A” or higher by Moody’s or Standard
& Poor’s and short term obligations are rated “A1” or higher by Moody’s or
“P1” or higher by Standard & Poor’s.


 


4.                                         Corporate
obligations, including intermediate term notes rated “A” or higher by Moody’s
or Standard & Poor’s and Commercial Papers rated “A1” or higher by Moody’s,
or “P1” or higher by Standard & Poor’s.


 


5.                                         Repurchase
agreements collateralized at a minimum of 102% with U.S. Treasury securities or
other securities rated “AAA” or equivalent that would be permitted by this
policy.


 


6.                                         Money market
funds over $1 billion in assets, with an historically constant dollar net asset
value, consisting of eligible investments as stated above are appropriate for
investing, as long as the fund’s manager has been in business over five years,
has name recognition, and has performance that is easily tracked.


 


7.                                         U.S. and
dollar denominated international corporate debt of all types is acceptable as
long as the issuer meets credit rating and marketability guidelines.


 


8.                                         For all
eligible investments the coupon and the maturity value must be known for the
life of the security at the time of purchase. 
Exceptions may be granted on a case by case basis for floating rate
notes by the CFO.


 


CONCENTRATION LIMITS


 


There is no limit to the percentage of the portfolio which may be
maintained in securities issued by the U.S. Treasury or by its agencies and
instrumentalities.  However, no single
government agency shall comprise more than 30% of the total portfolio.


 


No one issuer or group of issuers from the same holding company, is to
exceed 15% of the portfolio at time of purchase, with the exception of
Government securities.  No single
industry shall comprise more the 25% of the total portfolio.


 


U.S. bank and insurance company securities (CDs, commercial papers,
BAs, etc.) must not in total exceed 60% of the portfolio.  Holdings of one issuer cannot exceed
$1,000,000 or 15% of the total portfolio at the time of purchase.


 


UNACCEPTABLE INVESTMENTS


 


No investment will be permitted in common stocks, preferred stocks,
options (put or calls,), commodities, foreign securities, futures or mutual
funds whose underlying securities are ineligible investments according to this
investment policy.


 


The short sales or margin of securities.


 


Securities whose structure could cause it to have an interest rate
adjustment that could cause the current coupon to be reset to zero for any
period.


 

















 


Securities that are linked to the fluctuation of currencies, non-U.S.
interest rates, stock indices, levels of inflation or similar market
indicators.


 


INVESTMENT PERFORMANCE


 


The company shall review the performance of Merrill Lynch Investment
Managers on a quarterly basis.  Merrill
Lynch Investment Managers will issue a quarterly investment performance
analysis using time weighted measures. 
A quarterly meeting will be held with the Chief Financial Officer and
her/his designee to review performance figures and any updated liquidity needs.


 


On a monthly basis, Merrill Lynch Investment Managers will provide Epix
Medical, Inc. with the necessary standard and custom reports to satisfy the
company’s accounting and informational needs. 
These reports will be provided to the company within a reasonable period
of time following the close of the company’s fiscal month.


 


CREDIT QUALITY


 


Trends for a given company or industry must be reviewed periodically by
the Investment officer and adjustments in percentage positions made
accordingly.  Should any investment held
in the Epix Medical, Inc. portfolio fall short of prescribed guidelines,
immediate notification must be made to the individual appointed by the board to
oversee fiduciary control.


 


MARKETABILITY


 


All securities are to be purchased through investment banking and
brokerage firms of high quality and reputation, with a history of making
markets for the securities in which we invest. 
In the unlikely even that securities must be sold before their maturity,
the securities must be easily remarketed. 
To accomplish this, the securities must be conventional “products” with
strong name recognition.


 


TRADING GUIDELINES


 


Normal investing practice is to reinvest the funds on the day a
security matures, to minimize lost interest. 
A daily transaction log is to be maintained and available for review at
any time.  All trading firms must
generate a hard copy document for each transaction which is mailed to us on a
timely basis, and then matched to the transaction log.  Quarterly summaries of our investment
holdings and cash usage are to be made available for board review.


 


SAFEKEEPING


 


Assets are to be held in a segregated bank custody account with
separate fiduciary account documents executed by the bank.  Assets shall not be held by any investment
manager.


 

















 


FIDUCIARY DISCRETION


 


The Chief Financial Officer or other individual appointed by the Board
and her/his authorized employees are responsible for securing and managing
investments and cash for operations. 
These individuals have full discretion to invest any excess capital
subject to strict adherence to these guidelines.  These guidelines are to be reviewed periodically with the Chief
Financial Officer or Chief Executive Officer and revisions made consistent with
objectives set forth herein.


 

















 


Schedule 4.5


 


Material Contingent Liabilities as of May 14, 2003


 


Facility Lease as amended May 21, 2002 of 22,950 square feet at 71
Rogers Street and adjacent locations through December 31, 2007, Cambridge, MA


 


Facility Sublease as amended December 31, 2002 of 13,310 square feet at
161 First Street through October 31, 2003, Cambridge, MA


 


Various Operating Leases of Office Equipment with an approximate total
commitment of $400,000


 


Strategic Collaboration Agreement dated June 9, 2000 with Schering AG


 


Amended and Restated License Agreement dated July 10, 1995 with The
General Hospital Corporation


 


Worldwide License Agreement dated September 25, 2001 with Bracco
Imaging SPA Amended and Restated Strategic Collaboration Agreement dated June
9, 2000 with Tyco/Mallinckrodt Inc


 


Reacquisition Agreement dated December 22, 2000 with Daiichi
Radioisotope Laboratories, Ltd


 

















 


SCHEDULE A


 




	
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