Document:

cnat-ex1035_766.htm

 

Exhibit 10.35

THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.  THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM.  THE ISSUER OF THESE SECURITIES MAY REQUIRE EVIDENCE REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS NOTE HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA OR ANY OTHER STATE AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SUCH SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE OR SUCH PROVISIONS OF THE CORPORATIONS CODE OF ANY SUCH OTHER STATE.  THE RIGHTS OF THE HOLDER OF THIS NOTE ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

CONATUS PHARMACEUTICALS INC.

CONVERTIBLE PROMISSORY NOTE

	
$15,000,000
	
 
	
February 15, 2017

 

FOR VALUE RECEIVED, Conatus Pharmaceuticals Inc., a Delaware corporation (the “Company”), promises to pay to Novartis Pharma AG, a Swiss corporation or its registered assigns (“Investor”), in lawful money of the United States of America the principal sum of Fifteen Million Dollars ($15,000,000) (the “Issue Price”), or such lesser amount as shall be equal to the outstanding principal amount hereof, together with interest from the date of this Convertible Promissory Note (this “Note”) on the unpaid principal balance at a rate equal to 6% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days. This Note is issued pursuant to that certain Investment Agreement dated December 19, 2016 by and among the Company and the Investor (the “Agreement”), and the Investor and the Company shall be bound by all the terms, conditions and provisions of the Agreement.  This Note is an unsecured obligation of the Company and unsubordinated general obligation of the Company and shall rank equally in right of payment with all of the Company’s other existing and future unsecured and unsubordinated debt. 

The following is a statement of the rights of Investor and the conditions to which this Note is subject, and to which Investor, by the acceptance of this Note, agrees:

 

 

 

1. Maturity; Payment.

(a) Maturity; Payment.  

(i) Unless earlier converted into Conversion Shares pursuant to Section 2 of this Note, the outstanding principal and accrued but previously unpaid interest thereon shall become due and payable on December 31, 2019 (the “Maturity Date”).  All payments by the Company under this Note shall be applied first to the accrued interest due and payable hereunder and the remainder, if any, to the outstanding principal.

(ii) Unless earlier converted into Conversion Shares pursuant to Section 2 of this Note, and upon expiration of the time periods specified in Section 2(b) of this Note, upon earlier of (A) the occurrence of a Change of Control prior to the Maturity Date or (B) or the termination of the Option, Collaboration and License Agreement between the Company and Investor (the “License Agreement”) in its entirety by Novartis pursuant to Section 12.2 or 12.5 of the License Agreement (a “License Agreement Termination”), an amount equal to the outstanding principal and accrued but previously unpaid interest thereon shall become due and payable.    

(iii) Payment of this Note shall be made at the offices of the Investor, or such other place as Investor shall have designated to the Company in writing, in lawful money of the United States of America, and shall be in full satisfaction of the Company’s obligations under this Note. 

(b) Voluntary Prepayment.  The Company may prepay this Note in whole or in part, at any time prior to the Maturity Date after providing 5 Business Days prior written notice.  Prepayment shall be without any prepayment penalties and interest will no longer continue to accrue on any prepaid principal amounts after such prepayments.

2. Conversion.

(a) Optional Conversion at Election of Company.  Subject to the limitations set forth in Section 2(c) below, at any time prior to the Maturity Date, the Company may elect in its sole discretion to convert all or part of the outstanding principal and accrued but previously unpaid interest thereon into fully paid and non-assessable shares of Common Stock (the “Conversion Shares”).  The number of Conversion Shares to be issued upon such conversion shall be equal to the quotient obtained by dividing the outstanding principal and accrued but previously unpaid interest thereon which the Company elects to convert (such amount to applied first to accrued and unpaid interest, then to outstanding principal), as of the Conversion Date, by the Conversion Price, rounded down to the nearest whole share.  The Investor acknowledges that any such election by the Company in accordance with this Section 2(a) shall be binding upon the Investor.

(b) Optional Conversion at Election of Investor.  Subject to the limitations set forth in Section 2(c) below, the Investor may elect in its sole discretion to convert all or part of the outstanding principal and accrued but previously unpaid interest thereon into Conversion Shares upon any of (i) a Change of Control of the Company, or (ii) a License Agreement Termination.  The Company shall notify the Investor in writing at least 10 Business Days prior to 

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the execution of any agreement providing for a Change of Control of the Company, which notice shall set forth all terms of such Change of Control.  If the Investor elects to exercise its option pursuant to this Section 2(b), it shall provide an Election Notice (as defined below) no later than 10 Business Days after receiving notice of a Change of Control or of a License Agreement Termination.

(c) Limitation on Issuance of Common Stock.  Notwithstanding anything contained herein to the contrary, if the aggregate number of Conversion Shares issued by the Company to the Investor pursuant to all Notes issued under the Agreement would exceed, in the aggregate, the lesser of (i) 19.0% of the Company’s outstanding shares of Common Stock on a fully-diluted basis on the date of the Agreement and (ii) 19.0% of the Company’s outstanding shares of Common Stock on a fully-diluted basis on any Conversion Date, then (A) only that amount of the outstanding principal on this Note and accrued but previously unpaid interest thereon that would not cause Investor and such Affiliates to exceed such ownership threshold shall be converted (as determined by Investor in its sole discretion) and (B) any remaining unconverted principal outstanding on this Note and accrued but previously unpaid interest thereon shall be repaid by the Company to Investor in immediately available funds.

(d) Conversion Procedure.

(i) Conversion.  The Company shall deliver a written notice to Investor of the Company’s election to convert the Note pursuant to Section 2(a) and the Investor shall deliver a written notice to the Company of the Investor’s election to convert the Note pursuant to Section 2(b), which notice shall state therein the amount of the unpaid principal amount of this Note to be converted (the “Election Notice”).  If this Note is converted pursuant to Section 2(a) or 2(b), the Investor agrees to deliver the original of this Note (or a notice to the effect that the original Note has been lost, stolen or destroyed and an agreement acceptable to the Company whereby the holder agrees to indemnify the Company from any loss incurred by it in connection with this Note) upon the occurrence of such conversion for cancellation, and within three trading days after the Conversion Date, (A) certificates evidencing that number of Conversion Shares to which Investor shall be entitled upon such conversion shall be transmitted by the Company’s transfer agent to the Investor by crediting the account of the Investor’s prime broker with The Depository Trust Company through its Deposit / Withdrawal at Custodian system if the Company is then a participant in such system and the shares are eligible for resale by the Investor without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by physical delivery to the Investor with any required legends set forth in the Agreement, and (B) the Company shall issue to the Investor a new convertible promissory note, in the same form hereof, representing the balance of the principal amount not otherwise converted into Conversion Shares pursuant to the terms hereof.  

(ii) Upon conversion of this Note pursuant to Section 2(a) or 2(b), the Persons entitled to receive the Conversion Shares issuable upon such conversion shall be treated for all purposes as the record holder of such shares.

(iii) Fractional Shares; Interest; Effect of Conversion.  No fractional shares shall be issued upon conversion of this Note.  Upon conversion of this Note in full, the Company shall be forever released from all its obligations and liabilities under this Note and this Note shall 

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be deemed of no further force or effect, whether or not the original of this Note has been delivered to the Company for cancellation.

The entire unpaid principal of this Note and the interest then accrued on this Note shall become and be immediately due and payable, without any notice or demand of any kind or any presentment or protest, if any one of the following events (each an “Event of Default”) shall occur, whether voluntarily or involuntarily, or, without limitation, occurring or brought about by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any governmental body:

(a) If default shall be made in the payment of any installment of principal of any of the Notes, or of any installment of interest on any of the Notes, and if any such default shall remain unremedied for 15 days; or

(b) The Company or any of its subsidiaries fails to make any payment when due under the terms of any Indebtedness to be paid by such Person (excluding this Note but including any other Indebtedness of the Company to Investor) and such failure continues beyond any period of grace provided with respect thereto, or defaults in the observance or performance of any other agreement, term or condition contained in any such Indebtedness, and the effect of such failure or default is to cause Indebtedness in an aggregate amount of $2,000,000 or more to become due prior to its stated date of maturity; or

(c) A final judgment or order for the payment of money in excess of $1,000,000 is rendered against the Company or any of its subsidiaries and the same remains undischarged for a period of 30 days during which execution shall not be effectively stayed, or any judgment, writ, assessment, warrant of attachment, or execution or similar process shall be issued or levied against a substantial part of the property of Company or any of its subsidiaries and such judgment, writ, or similar process is not released, stayed, vacated or otherwise dismissed within 30 days after issue or levy; or

(d) If the Company (i) makes a composition or an assignment for the benefit of creditors or trust mortgage, (ii) applies for, consents to, acquiesces in, files a petition seeking or admits (by answer, default or otherwise) the material allegations of a petition filed against it seeking the appointment of a trustee, receiver or liquidator, in bankruptcy or otherwise, of itself or of all or a substantial portion of its assets, or a reorganization, arrangement with creditors or other remedy, relief or adjudication available to or against a bankrupt, insolvent or debtor under any bankruptcy or insolvency law or any law affecting the rights of creditors generally, or (iii) admits in writing its inability to pay its debts generally as they become due; or

(e) If an order for relief shall have been entered by a bankruptcy court or if a decree, order or judgment shall have been entered adjudging the Company or any of its subsidiaries insolvent, or appointing a receiver, liquidator, custodian or trustee, in bankruptcy or otherwise, for it or for all or a substantial portion of its assets, or approving the winding-up or liquidation of its affairs on the grounds of insolvency or nonpayment of debts, and such order for relief, decree, order or judgment shall remain undischarged or unstayed for a period of 60 days; or if any substantial part of the property of the Company or any of its subsidiaries is sequestered 

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or attached and shall not be returned to the possession of the Company or such subsidiary or released from such attachment within 60 days.

3. Definitions. As used in this Note, the following capitalized terms have the following meanings:

(a) “Business Days” shall mean any day other than a Saturday, Sunday or a United States federal holiday.

(b) “Change of Control” shall mean (i) any “person” or “group” (within the meaning of Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of more than 50% of the outstanding voting securities of the Company having the right to vote for the election of members of the Board of Directors, (ii) any reorganization, merger or consolidation of the Company, other than a transaction or series of related transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction or series of related transactions retain, immediately after such transaction or series of related transactions, at least a majority of the total voting power represented by the outstanding voting securities of the Company or such other surviving or resulting entity or (iii) a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company (excluding the License Agreement).

(c) “Common Stock” shall mean the Company’s common stock, par value $0.0001 per share.

(d) “Conversion Date” shall mean the date on which the Company or the Investor delivers an Election Notice.

(e) “Conversion Price” shall mean 120% of the 20-day trailing average closing price per share for the Common Stock, as reported on the Company’s trading market, based on the 20 trading days immediately prior to the Conversion Date. 

(f) “Indebtedness” of any Person means and includes the aggregate amount of, without duplication (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services (other than accounts payable incurred in the ordinary course of business determined in accordance with generally accepted accounting principles), (iv) all obligations under capital leases of such Person, (v) all obligations or liabilities of others secured by a lien on any asset of such Person, whether or not such obligation or liability is assumed, (vi) all guaranties of such Person of the obligations of another Person, (vii) all obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement upon an event of default are limited to repossession or sale of such property), (viii) net exposure under any interest rate swap, currency swap, forward, cap, floor or other similar contract that is not entered to in connection with a bona fide hedging operation that provides offsetting benefits to such Person, which agreements shall 

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be marked to market on a current basis, and (ix) all reimbursement and other payment obligations, contingent or otherwise, in respect of letters of credit.

(g) “Investor” shall mean the Person specified in the introductory paragraph of this Note or any Person who shall at the time be the registered holder of this Note.

(h) “Person” shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority.

(i) “Securities Act” shall mean the Securities Act of 1933, as amended.

4. Miscellaneous.

(a) Successors and Assigns.  The rights and obligations of the Company and Investor shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.  Each party will not assign this Note or any rights or obligations hereunder without the prior written consent of the other party; provided, however, that Investor may assign this Note to any of its affiliates and any such assignee may assign the Note to Investor or any other affiliate of Investor, in any such case, without such consent.

(b) Waiver and Amendment.  Any provision of this Note may be amended, waived or modified upon the written consent of the Company and the Investor. Any amendment or waiver effected in accordance with this Section 4(b) shall be binding upon the Investor (and of any securities into which this Note is convertible), and each future holder of all such securities and the Company.

(c) Notices.  All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall be in writing and faxed, mailed, emailed or delivered to, the receiving party at the address or facsimile number shown on the signature page of this Note or at such other address or facsimile number as such receiving party shall have most recently furnished in writing or by email to the sending party.  All such notices and communications will be deemed effectively given upon the earlier of (i) when received, (ii) when delivered personally, (iii) when sent by confirmed electronic mail or confirmed facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (iv) one business day after being deposited with an overnight courier service of recognized standing or (v) four days after being deposited in the U.S. mail, first class with postage prepaid.

(d) Usury.  In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

(e) Waivers.  The Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.

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(f) Governing Law.  This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law provisions of the State of Delaware, or of any other state.

(g) Waiver of Jury Trial; Judicial Reference.  By acceptance of this Note, Investor hereby agrees and the Company hereby agrees to waive their respective rights to a jury trial of any claim or cause of action based upon or arising out of this Note.

(h) Counterparts.  This Note may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Note.

[Signature Page Follows]

 

 

 

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The Company has caused this Note to be issued as of the date first written above.

					
	
CONATUS PHARMACEUTICALS INC.

	
a Delaware corporation

	
 

	
By:
	
 
	
/s/ Steven J. Mento, Ph.D.

	
Name: Steven J. Mento, Ph.D.

	
Title: President & Chief Executive Officer

	
 

	
Address:
	
 
	
16745 W. Bernardo Drive, Suite 200

	
 
	
 
	
San Diego, CA 92127

	
 
	
 

	
Facsimile No.:  +1 (858) 376-2680

 

ACKNOWLEDGED AND AGREED BY INVESTOR:

 

							
	
NOVARTIS PHARMA AG

	
 

	
By:
	
 
	
/s/ Nigel Sheail

	
Name: Nigel Sheail

	
Title: Head of Business Development & Licensing

	
 

	
Address:
	
 
	
 

	
 
	
 
	
 

	
 
	
 

	
Facsimile No.:
	
 
	
 

	
 

	
Email:
	
 
	
 

 

							
	
By:
	
 
	
/s/ Gerrard Terlouw, PhD

	
Name: Gerrard Terlouw, PhD

	
Title: Head BD&L, Immunology & Dermatology

	
 

	
Address:
	
 
	
 

	
 
	
 
	
 

	
 
	
 

	
Facsimile No.:
	
 
	
 

	
 

	
Email:xoma-ex1060_339.htm

 

Exhibit 10.60

EXECUTION VERSION

PROTECTIVE RIGHTS AGREEMENT

THIS PROTECTIVE RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of December 21, 2016 by and between XOMA (US) LLC, a Delaware limited liability company (“Grantor”), and HealthCare Royalty Partners II, L.P., a Delaware limited partnership (“HC Royalty”).

 

RECITALS:

 

A.Grantor and HC Royalty are parties to that certain Royalty Interest Acquisition Agreement of even date herewith.

 

B.The Royalty Interest Acquisition Agreement provides that Grantor has agreed to assign to HC Royalty, and HC Royalty has agreed to acquire from Grantor, the Assigned Rights (as defined in the Royalty Interest Acquisition Agreement).

 

C.Grantor has agreed pursuant to the terms of the Royalty Interest Acquisition Agreement to enter into this Agreement, under which Grantor grants to HC Royalty a security interest in and to the Collateral as security for the due performance and payment of all of Grantor’s obligations to HC Royalty under the Royalty Interest Acquisition Agreement.

 

AGREEMENT:

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor and HC Royalty, with intent to be legally bound hereby, covenant and agree as follows:

 

SECTION 1.Definitions.

 

For purposes of this Agreement, capitalized terms used herein shall have the meanings set forth below. Capitalized terms used herein and not otherwise defined shall have the meaning given such terms in the UCC or the Royalty Interest Acquisition Agreement, as applicable.

 

“Agreement” has the meaning set forth in the preamble to this Agreement.

 

“Collateral” has the meaning set forth in Section 2 of this Agreement.

 

“Default” means (i) a default under one or more of the Transaction Documents, which default, if reasonably capable of being cured within 30 days, continues without cure for such period, (ii) a Recharacterization or (iii) an Insolvency Event.

 

“Grantor” has the meaning set forth in the preamble to this Agreement.

 

“HC Royalty” has the meaning set forth in the preamble to this Agreement.

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“Party” means any of Grantor or HC Royalty as the context indicates and “Parties” shall mean all of Grantor and HC Royalty.

 

“Royalty Interest Acquisition Agreement” means the Royalty Interest Acquisition Agreement entered into as of the date hereof by and between Grantor, XOMA Corporation and HC Royalty, as the same may be amended, modified or supplemented in accordance with the terms thereof, relating to that certain Amended and Restated License Agreement, dated effective as of October 27, 2006, between Grantor (as successor in interest to XOMA Ireland Limited) and DYAX Corp., a Delaware corporation.

 

“Secured Obligations” means all obligations and liabilities of every nature of Grantor now or hereafter existing under or arising out of or in connection with the Royalty Interest Acquisition Agreement and each other Transaction Document to which it is a party, whether for damages, principal, interest, reimbursement of fees, expenses, indemnities or otherwise (including without limitation interest, fees and other amounts that, but for the filing of a petition in bankruptcy with respect to Grantor, would accrue on such obligations, whether or not a claim is allowed against Grantor for such interest, fees and other amounts in the related bankruptcy proceeding), whether voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from HC Royalty as a preference, fraudulent transfer or otherwise.

 

“Transfer” means any sale, conveyance, assignment, disposition, pledge, hypothecation or transfer.

 

“UCC” means the Uniform Commercial Code, as in effect on the date of this Agreement in the State of New York.

 

SECTION 2.Grant of Security.

 

Grantor hereby grants HC Royalty a security interest in all of its right, title, and interest in, to and under the following property, whether now or hereinafter existing or acquired, whether tangible or intangible and wherever the same may be located (collectively, the “Collateral”):

 

(a)the Assigned Rights, including, without limitation, the Purchased Interest, whether it constitutes an account or a payment intangible under the UCC, and whether or not evidenced by an instrument or a general intangible, and the absolute right to payment and receipt of the Purchased Interest under or pursuant to the License Agreements;

 

(b)all books, records and database extracts of Grantor specifically relating to any of the foregoing Collateral; and

 

(c)all Proceeds of or from any and all of the foregoing Collateral, including all payments under any indemnity, warranty or guaranty, and all money now or at any 

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time in the possession or under the control of, or in transit to, HC Royalty, relating to any of the foregoing Collateral.

 

Each item of Collateral listed in this Section 2 that is defined in Article 9 of the UCC shall have the meaning set forth in the UCC, it being the intention of Grantor that the description of the Collateral set forth above be construed to include the broadest possible range of assets described herein.

 

The Assigned Rights have been sold, assigned, transferred and conveyed to HC Royalty pursuant to the Royalty Interest Acquisition Agreement and it is the intention of the Parties that such transaction be treated as a true and absolute sale. The security interest granted in this Section 2 is granted as a precaution against the possibility, contrary to the Parties’ intentions, that the transaction be characterized as other than a true and absolute sale.

 

SECTION 3.Security for Obligations.

 

This Agreement secures, and the Collateral is collateral security for, the due and punctual payment or performance in full (including without limitation the payment of amounts that would become due but for the operation of the automatic stay under Subsection 362(a) of the United States Bankruptcy Code) of all Secured Obligations.

 

SECTION 4.Grantor to Remain Liable.

 

Anything contained herein to the contrary notwithstanding, (a) Grantor shall remain liable under any contracts and agreements included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by HC Royalty of any of its rights hereunder shall not release Grantor from any of its duties or obligations under any contracts and agreements included in the Collateral, and (c) HC Royalty shall not have any obligation or liability under any contracts, licenses, and agreements included in the Collateral by reason of this Agreement, nor shall HC Royalty be obligated (i) to perform any of the obligations or duties of Grantor thereunder, (ii) to take any action to collect or enforce any claim for payment assigned hereunder, or (iii) to make any inquiry as to the nature or sufficiency of any payment Grantor may be entitled to receive thereunder.

 

SECTION 5.Representations and Warranties.

 

Grantor represents and warrants as follows:

 

(a)Validity.  This Agreement creates a valid security interest in the Collateral securing the payment and performance in full of the Secured Obligations. Upon the filing of appropriate UCC financing statements in the filing offices listed on Schedule 5(b), all filings, registrations, recordings and other actions necessary or appropriate to create, preserve, protect and perfect a first priority security interest will have been accomplished and such security interest will be prior to the rights of all other Persons therein and free and clear of any and all Liens, except any Liens created in favor of HC Royalty pursuant to this Agreement and any other Transaction Document to which HC Royalty is a party.

 

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(b)Authorization, Approval.  No authorization, approval, or other action by, and no notice to or filing with, any government or agency of any government or other Person is required either (i) for the grant by Grantor of the security interest granted hereby or for the execution, delivery and performance of this Agreement by Grantor; or (ii) for the perfection of, and the first priority of, the grant of the security interest created hereby or the exercise by HC Royalty of its rights and remedies hereunder, other than in the case of clause (ii), the filing of financing statements in the offices listed on Schedule 5(b).

 

(c)Enforceability.  This Agreement is the legally valid and binding obligation of Grantor, enforceable against Grantor in accordance with its terms, subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or general equitable principles.

 

(d)Office Locations; Type and Jurisdiction of Organization. The sole place of business, the chief executive office and each office where Grantor keeps its records regarding the Collateral are, as of the date hereof, located at the locations set forth on Schedule 5(d); Grantor’s type of organization (e.g., corporation) and jurisdiction of organization are listed on Schedule 5(d).

 

(e)Names.  Except as set forth on Schedule 5(e), Grantor (or any predecessor by merger or otherwise) has not, within the five (5) year period preceding the date hereof, had a different name from the name listed for Grantor on the signature pages hereof.

 

(f)Ownership of Collateral; No Other Filings.  Except for the security interest created by this Agreement and the assignment effected pursuant to the Royalty Interest Acquisition Agreement, Grantor owns the Collateral free and clear of any Lien, except those Liens created in favor of HC Royalty pursuant to any other Transaction Document to which HC Royalty is a party.  Grantor has the power to transfer and grant a lien and security interest in each item of Collateral upon which it purports to grant a lien or security interest hereunder. Except as such as may have been filed in favor of HC Royalty relating to the Transaction Documents, no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office.  No recordation of Licensee’s licensed rights in the subject patents has been made with the United States Patent and Trademark Office.

 

SECTION 6.Further Assurances.

 

Grantor agrees that from time to time, at its expense, Grantor will promptly execute and deliver and will cause to be executed and delivered all further instruments and documents, and will take all further action, that may be necessary, or that HC Royalty may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable HC Royalty to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, Grantor will: (i) deliver such other instruments or notices, in each case, as may be necessary, or as HC Royalty may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby or to enable HC Royalty to exercise and enforce its rights and remedies hereunder with respect to any Collateral, (ii) appear in and take commercially reasonable efforts to defend any action or proceeding to which Grantor is a party 

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that may affect Grantor’s title to or HC Royalty’s security interest in all or any part of the Collateral, and (iii) use commercially reasonable efforts to obtain any necessary consents of third parties to the assignment and perfection of a security interest to HC Royalty with respect to any Collateral.  Grantor hereby authorizes HC Royalty to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral.

 

Grantor agrees to furnish HC Royalty promptly upon reasonable request by HC Royalty, with any information that is reasonably requested by HC Royalty in order to complete such financing statements, continuation statements, or amendments thereto.

 

SECTION 7.Certain Covenants of Grantor.

 

Grantor shall:

 

(a)not use or permit any Collateral to be used unlawfully or in violation of any provision of the Transaction Documents or any applicable statute, regulation or ordinance or any policy of insurance covering the Collateral;

 

(b)give HC Royalty thirty (30) days’ written notice after any change in Grantor’s name, identity or corporate structure or reincorporation, reorganization, or taking of any other action that results in a change of the jurisdiction of organization of Grantor;

 

(c)give HC Royalty thirty (30) days’ written notice after any change in Grantor’s sole place of business, chief executive office or the office where Grantor keeps its records regarding the Collateral or a reincorporation, reorganization or other action that results in a change of the jurisdiction of organization of Grantor; and

 

(d)pay promptly when due all taxes, assessments and governmental charges or levies imposed upon, and all claims against, the Collateral, except to the extent the validity thereof is being diligently contested in good faith and the applicable Grantor maintains reserves appropriate therefor under the generally accepted accounting principles used by Grantor in the preparation of its financial statements; provided that Grantor shall in any event pay such taxes, assessments, charges, levies or claims not later than three (3) Business Days prior to the date of any proposed sale under any judgment, writ or warrant of attachment entered or filed against Grantor or any of the Collateral as a result of the failure to make such payment; provided that the foregoing covenant shall not apply to any such taxes, assessments and governmental charges or levies imposed upon or claims against HC Royalty as owner of the Collateral.

 

SECTION 8.Special Covenants With Respect to the Collateral.

 

(a)Grantor shall:

 

(i)diligently keep reasonable records respecting the Collateral and at all times keep at least one (1) complete set of its records, if any, concerning such Collateral at its chief executive office or principal place of business;

(ii)not create, incur, assume or cause to exist any Lien on any property included within the definition of Collateral except any Liens created in favor of HC Royalty 

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pursuant to this Agreement and any other Transaction Document to which HC Royalty is a party; and

(iii)not Transfer, or agree to Transfer, any Collateral; provided that Grantor may Transfer or agree to Transfer any Collateral in connection with the merger or consolidation of the Grantor or the assignment of such Grantor’s obligations and rights by operation of law so long as the Person into which the Grantor has been merged or consolidated or which has acquired such Collateral of the Grantor has delivered evidence to HC Royalty, in form and substance reasonably satisfactory to HC Royalty, that such Person has assumed all of Grantor’s obligations under the Transaction Documents.

 

(b)Grantor shall, concurrently with the execution and delivery of this Agreement, execute and deliver to HC Royalty one original of a Special Power of Attorney in the form of Exhibit I annexed hereto for execution of an assignment of the Collateral to HC Royalty, or the implementation of the sale or other disposition of the Collateral pursuant to HC Royalty’s good faith exercise of the rights and remedies granted hereunder; provided, however, HC Royalty agrees that it will not exercise its rights under such Special Power of Attorney unless a Default has occurred and is continuing.

 

(c)Grantor further agrees that a breach of any of the covenants contained in this Section 8  (other than the covenant contained in Section 8(a)(i)) will cause irreparable injury to HC Royalty, that HC Royalty has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 8 shall be specifically enforceable against Grantor, and Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants (other than any such defense based on the assertion that Grantor had performed and is performing such covenant(s)).

 

SECTION 9.Standard of Care.

 

The powers conferred on HC Royalty hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of good faith and of reasonable care in the accounting for monies actually received by HC Royalty hereunder, HC Royalty shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.  HC Royalty shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which HC Royalty accords its own property.

 

SECTION 10. Remedies Upon Default.

 

(a)If, and only if, any Default shall have occurred and be continuing, HC Royalty may, in good faith, exercise in respect of the Collateral (i) all rights and remedies provided for herein, under the Royalty Interest Acquisition Agreement or otherwise available to it, and (ii) all the rights and remedies of a secured party on default under the Uniform Commercial Code, in all relevant jurisdictions.

(b)Anything contained herein to the contrary notwithstanding, upon the occurrence and during the continuation of a Default, HC Royalty shall have the right (but not the obligation) to bring suit, in the name of Grantor, HC Royalty or otherwise, to exercise its rights 

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with respect to any Collateral (it being understood that this Section 10(b) shall not supersede Section 6.07 of the Royalty Interest Acquisition Agreement), in which event Grantor shall, at the request of HC Royalty, do any and all lawful acts and execute any and all documents required by HC Royalty in aid of such enforcement. Grantor shall promptly, upon demand, reimburse and indemnify HC Royalty as provided in Section 12 hereof in connection with the exercise of its rights under this Section 10.

 

SECTION 11. Application of Proceeds.

 

Except as expressly provided elsewhere in this Agreement, all proceeds received by HC Royalty in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in good faith to satisfy (to the extent of the net proceeds received by HC Royalty) such item or part of the Secured Obligations as HC Royalty may designate.

 

SECTION 12. Expenses.

 

Grantor agrees to pay to HC Royalty upon demand the amount of any and all documented, reasonable out-of-pocket costs and expenses, including the reasonable fees and expenses of not more than one counsel per jurisdiction and of any experts and agents, that HC Royalty may reasonably and actually incur in connection with (i) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral during the continuance of a Default, (ii) the exercise or enforcement of any of the rights of HC Royalty hereunder, or (iii) the failure by Grantor to perform or observe any of the provisions hereof, which failure, if reasonably capable of being cured within 30 days, continues without cure for such period; provided that any such costs and expenses in respect of the enforcement of and disputes under the License Agreement shall be subject to Section 6.07 of the Royalty Interest Acquisition Agreement in lieu of this Section 12.

 

SECTION 13. Continuing Security Interest.

 

This Agreement shall create a continuing security interest in the Collateral and shall (i) be binding upon Grantor and its respective successors and assigns, and (ii) inure, together with the rights and remedies of HC Royalty hereunder, to the benefit of HC Royalty and its successors, transferees and assigns.

 

SECTION 14. Amendments.

 

(a)This Agreement or any term or provision hereof may not be amended, changed or modified except with the written consent of the Parties and the approval of such amendment, change or modification by counsel to HC Royalty. No waiver of any right hereunder shall be effective unless such waiver is signed in writing by the Party against whom such waiver is sought to be enforced.

(b)No failure or delay by either Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

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(c)No waiver or approval hereunder shall, except as may otherwise be stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by applicable law.

 

SECTION 15. Notices.

 

All notices, consents, waivers and other communications hereunder shall be in writing and shall be delivered in accordance with Section 9.02 of the Royalty Interest Acquisition Agreement.

 

SECTION 16. Severability.

 

If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall nevertheless be given full force and effect.  Any provision of this Agreement held invalid or unenforceable only in part or degree by a court of competent jurisdiction shall remain in full force and effect to the extent not held invalid or unenforceable.

 

SECTION 17. Headings and Captions.

 

The headings and captions in this Agreement are for convenience and reference purposes only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.

 

SECTION 18. Governing Law; Jurisdiction.

 

(a)This Agreement shall be governed by, and construed, interpreted and enforced in accordance with, the laws of the State of New York, USA without giving effect to the principles of conflicts of law thereof (other than Section 5-1401 of the General Obligations Law of the State of New York). Each Party unconditionally and irrevocably consents to the exclusive jurisdiction of the courts of the State of New York, USA located in the County of New York and the Federal district court for the Southern District of New York located in the County of New York with respect to any suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.  Each Party hereby further irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of any Transaction Document.

 

(b)Each Party hereby irrevocably consents to the service of process out of any of the courts referred to in subsection (a) above of this Section 18 in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at its address set forth in this Agreement.  Each Party hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any suit, action or proceeding commenced hereunder or under any other Transaction Document that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of a Party to serve process on the other Party in any other manner permitted by law.

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SECTION 19. Waiver of Jury Trial.

 

EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED UNDER THIS AGREEMENT (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY HERETO WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.

 

SECTION 20. Counterparts; Effectiveness.

 

This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. This Agreement shall become effective when each Party shall have received a counterpart hereof signed by the other Party.  Any counterpart may be executed by .pdf signature and such .pdf signature shall be deemed an original.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

 

 

	
	
XOMA (US) LLC

	
By:  /s/ James R. Neal

	
Name: James R. Neal

	
Title: Senior Vice President and Chief Operating Officer

	
 

	
HEALTHCARE ROYALTY PARTNERS II, L.P.

	
 

	
By:  HealthCare Royalty GP II, LLC, its general partner

	
By:  /s/ Clarke B. Futch

	
Name: Clarke B. Futch

	
Title: Managing Partner

 

 

 

 

SCHEDULE 5(b)

TO

PROTECTIVE RIGHTS AGREEMENT

 

 

Filing Offices

 

 

U C C:

 

Secretary of State of the State of Delaware

 

 

 

SCHEDULE 5(d)

TO

PROTECTIVE RIGHTS AGREEMENT

 

 

Office Locations, Type and Jurisdiction of Organization

 

 

Sole Place of Business and Chief Executive Office of Grantor:

 

c/o XOMA Corporation 2910 Seventh Street

Berkeley, CA 94710

 

Addresses of the Properties at which Grantor Maintains Records Relating to the Collateral:

 

c/o XOMA Corporation 2910 Seventh Street

Berkeley, CA 94710

 

Jurisdiction of Organization:

 

Delaware

 

Type of Organization:

 

Limited liability company

 

 

 

SCHEDULE 5(e)

TO

PROTECTIVE RIGHTS AGREEMENT

 

 

Name Changes

 

None.

 

 

 

EXHIBIT I TO PROTECTIVE RIGHTS AGREEMENT

 

SPECIAL POWER OF ATTORNEY

 

 

 

 

	
STATE OF 
	
 
	
   )

	
 
	
 
	
   )
	
ss.:

	
COUNTY OF 
	
 
	
   )

 

 

 

 

KNOW ALL MEN BY THESE PRESENTS, that each of XOMA (US) LLC (“Grantor”), hereby appoints and constitutes HEALTHCARE ROYALTY PARTNERS II, L.P. (“HC Royalty”) and each of its successors and assignees, its true and lawful attorney, with full power of substitution and with full power and authority to perform the following acts on behalf of Grantor upon any default under the Transaction Documents that is continuing (a) to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (b) to receive, endorse and collect any drafts or other instruments, documents and chattel paper constituting Collateral in connection with clause (a) above, (c) to file any claims or take any action or institute any proceedings that HC Royalty may in its good faith sole discretion deem necessary or desirable for the collection of any of the Collateral, (d) to pay or discharge taxes or liens levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by HC Royalty in its reasonable commercial judgment, any such payments made by HC Royalty to become obligations of Grantor to HC Royalty, due and payable immediately without demand, and (e) to sign and endorse any invoices, drafts against debtors, verifications, notices and other documents relating to the Collateral.

 

This Power of Attorney is made pursuant to a Protective Rights Agreement, dated as of December 21, 2016 between Grantor and HC Royalty (the “Protective Rights Agreement”) relating to the Royalty Interest Acquisition Agreement, entered into as of December 21, 2016, by and between Grantor, XOMA Corporation and HC Royalty and the Amended and Restated License Agreement, dated effective as of October 27, 2006, between Grantor (as successor in interest to XOMA Ireland Limited) and DYAX Corp., a Delaware corporation, and is subject to the terms and provisions of the Protective Rights Agreement.

 

Terms used herein and not otherwise defined herein shall have the meanings given to such terms in the Protective Rights Agreement. This Power of Attorney, being coupled with an interest, is irrevocable until the termination of the Protective Rights Agreement.

 

	
Date: 
	
 
	
 
	
 

	
 
	
 
	
XOMA (US) LLC

	
 
	
 
	
By:  

	
 
	
 
	
Name:

	
 
	
 
	
Title:

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