Document:

Exhibit 10.5

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (as the same may from time to time be amended, modified, supplemented or restated, this “Agreement”) dated as of December 28, 2016 (the “Effective Date”) among OXFORD FINANCE LLC, a Delaware limited liability company with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314 (“Oxford”), as collateral agent (in such capacity, “Collateral Agent”), the Lenders listed on Schedule 1.1 hereof or otherwise a party hereto from time to time including Oxford in its capacity as a Lender and HORIZON TECHNOLOGY FINANCE CORPORATION, a Delaware corporation with an office located at 312 Farmington Avenue, Farmington, Connecticut 06032 (“Horizon”) (each a “Lender” and collectively, the “Lenders”), and STRONGBRIDGE BIOPHARMA PUBLIC LIMITED COMPANY, a public limited company incorporated under the laws of Ireland with company number 562659 and having its registered office at Arthur Cox Building, Earlsfort Terrace, Dublin 2, Ireland (“Irish Borrower”), CORTENDO CAYMAN LTD., an exempted company incorporated in the Cayman Islands with its registered office located at Maples Corporate Services PO Box 309 Ugland House Grand Cayman KY1-1104 (“Cayman Borrower”), CORTENDO AB (PUBL), a public limited company incorporated under the laws of Sweden with corporate identity number 556537-6554 and having its registered office at Box 47 433 21 Partille Gothenburg Sweden (“Swedish Borrower”) and STRONGBRIDGE U.S. INC., a Delaware corporation with an office located at 900 Northbrook Drive, Suite 200, Trevose, Pennsylvania 19053 (“US Borrower” and together with Irish Borrower, Cayman Borrower and Swedish Borrower, individually and collectively, jointly and severally, “Borrower”), provides the terms on which the Lenders shall lend to Borrower and Borrower shall repay the Lenders.  The parties agree as follows:

 

1.                                      ACCOUNTING AND OTHER TERMS

 

1.1                               Accounting terms not defined in this Agreement shall be construed in accordance with GAAP.  Calculations and determinations must be made in accordance with GAAP.  Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13.  All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.  All references to “Dollars” or “$” are United States Dollars, unless otherwise noted.

 

1.2                               In this Agreement, where it relates to Irish Borrower, a reference to the term “examiner” shall have the meaning given to it in Section 508 of the Irish Companies Act and the term “examinership” shall be construed in accordance with the Irish Companies Act.

 

2.                                      LOANS AND TERMS OF PAYMENT

 

2.1                               Promise to Pay.  Borrower hereby unconditionally promises to pay each Lender, the outstanding principal amount of all Term Loans advanced to Borrower by such Lender and accrued and unpaid interest thereon and any other amounts due hereunder as and when due in accordance with this Agreement.

 

2.2                               Term Loans.

 

(a)                                 Availability.  (i) Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, to make term loans to Borrower on the Effective Date in an aggregate amount of Twenty Million Dollars ($20,000,000.00) according to each Lender’s Term A Loan Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “Term A Loan”, and collectively as the “Term A Loans”).  After repayment, no Term A Loan may be re-borrowed.

 

(ii)                                  Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, during the Second Draw Period, to make term loans to Borrower in an aggregate amount up to Ten Million Dollars ($10,000,000.00) according to each Lender’s Term B Loan Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “Term B Loan”, and collectively as the “Term B Loans”).  After repayment, no Term B Loan may be re-borrowed.

 

(iii)                               Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, during the Third Draw Period, to make term loans to Borrower in an aggregate amount up

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

to Ten Million Dollars ($10,000,000.00) according to each Lender’s Term C Loan Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “Term C Loan”, and collectively as the “Term C Loans”; each Term A Loan, Term B Loan or Term C Loan is hereinafter referred to singly as a “Term Loan” and the Term A Loans, the Term B Loans and the Term C Loans are hereinafter referred to collectively as the “Term Loans”).  After repayment, no Term C Loan may be re-borrowed.

 

(b)                                 Repayment.  Borrower shall make monthly payments of interest only commencing on the first (1st) Payment Date following the Funding Date of each Term Loan, and continuing on the Payment Date of each successive month thereafter through and including the Payment Date immediately preceding the Amortization Date.  Borrower agrees to pay, on the Funding Date of each Term Loan, any initial partial monthly interest payment otherwise due for the period between the Funding Date of such Term Loan and the first Payment Date thereof.  Commencing on the Amortization Date, and continuing on the Payment Date of each month thereafter, Borrower shall make consecutive equal monthly payments of principal, together with applicable interest, in arrears, to each Lender, as calculated by Collateral Agent (which calculations shall be deemed correct absent manifest error) based upon: (1) the amount of such Lender’s Term Loan, (2) the effective rate of interest, as determined in Section 2.3(a), and (3) a repayment schedule equal to (i) thirty (30) months if Term C Loans are not made hereunder and (ii) twenty-four (24) months if Term C Loans are made hereunder.  All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on the Maturity Date.  Each Term Loan may only be prepaid in accordance with Sections 2.2(c) and 2.2(d).

 

(c)                                  Mandatory Prepayments.  If the Term Loans are accelerated following the occurrence of an Event of Default, Borrower shall immediately pay to Lenders, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of: (i) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon through the prepayment date, (ii) the Final Payment, (iii) the Prepayment Fee, plus (iv) all other Obligations that are due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts. Notwithstanding (but without duplication with) the foregoing, on the Maturity Date, if the Final Payment had not previously been paid in full in connection with the prepayment of the Term Loans in full, Borrower shall pay to Collateral Agent, for payment to each Lender in accordance with its respective Pro Rata Share, the Final Payment in respect of the Term Loan(s).

 

(d)                                 Permitted Prepayment of Term Loans.  Borrower shall have the option to prepay all, but not less than all, of the Term Loans advanced by the Lenders under this Agreement, provided Borrower (i) provides written notice to Collateral Agent of its election to prepay the Term Loans at least thirty (30) days prior to such prepayment, and (ii) pays to the Lenders on the date of such prepayment, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of (A) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon through the prepayment date, (B) the Final Payment, (C) the Prepayment Fee, plus (D) all other Obligations that are due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts.

 

2.3                               Payment of Interest on the Credit Extensions.

 

(a)                                 Interest Rate.  Subject to Section 2.3(b), the principal amount outstanding under the Term Loans shall accrue interest at a floating per annum rate equal to the Basic Rate, determined by Collateral Agent on the Funding Date of the applicable Term Loan and monthly thereafter, which interest shall be payable monthly in arrears in accordance with Sections 2.2(b) and 2.3(e). Interest shall accrue on each Term Loan commencing on, and including, the Funding Date of such Term Loan, and shall accrue on the principal amount outstanding under such Term Loan through and including the day on which such Term Loan is paid in full.

 

(b)                                 Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall accrue interest at a floating per annum rate equal to the rate that is otherwise applicable thereto plus five percentage points (5.00%) (the “Default Rate”).  Payment or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Collateral Agent.

 

(c)                                  360-Day Year.  Interest shall be computed on the basis of a three hundred sixty (360) day year, and the actual number of days elapsed.

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

(d)                                 Debit of Accounts.  Collateral Agent and each Lender may debit (or ACH) any deposit accounts, maintained by Borrower or any of its Subsidiaries, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes the Lenders under the Loan Documents when due.  Any such debits (or ACH activity) shall not constitute a set-off.

 

(e)                                  Payments.  Except as otherwise expressly provided herein, all payments by Borrower under the Loan Documents shall be made to the respective Lender to which such payments are owed, at such Lender’s office in immediately available funds on the date specified herein. Unless otherwise provided, interest is payable monthly on the Payment Date of each month.  Payments of principal and/or interest received after 12:00 noon Eastern time are considered received at the opening of business on the next Business Day.  When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest, as applicable, shall continue to accrue until paid. All payments to be made by Borrower hereunder or under any other Loan Document, including payments of principal and interest, and all fees, expenses, indemnities and reimbursements, shall be made without set-off, recoupment or counterclaim, in Dollars and in immediately available funds.

 

2.4                               Secured Promissory Notes.  The Term Loans shall be evidenced by a Secured Promissory Note or Notes in the form attached as Exhibit D hereto (each a “Secured Promissory Note”), and shall be repayable as set forth in this Agreement.  Borrower irrevocably authorizes each Lender to make or cause to be made, on or about the Funding Date of any Term Loan or at the time of receipt of any payment of principal on such Lender’s Secured Promissory Note, an appropriate notation on such Lender’s Secured Promissory Note Record reflecting the making of such Term Loan or (as the case may be) the receipt of such payment.  The outstanding amount of each Term Loan set forth on such Lender’s Secured Promissory Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender’s Secured Promissory Note Record shall not limit or otherwise affect the obligations of Borrower under any Secured Promissory Note or any other Loan Document to make payments of principal of or interest on any Secured Promissory Note when due.  Upon receipt of an affidavit of an officer of a Lender as to the loss, theft, destruction, or mutilation of its Secured Promissory Note, Borrower shall issue, in lieu thereof, a replacement Secured Promissory Note in the same principal amount thereof and of like tenor.

 

2.5                               Fees.  Borrower shall pay to Collateral Agent:

 

(a)                                 Good Faith Deposit.  An amount of One Hundred Thousand Dollars ($100,000.00) has been received by Collateral Agent as good faith deposit from Borrower on or about November 14, 2016 and after deduction therefrom of Lenders’ Expenses incurred through the Effective Date payable pursuant to Section 2.5(e) hereof, the remaining balance, if any, shall be applied towards the facility fee due on the Effective Date.  For the purposes of clarity, Borrower shall be responsible for all Lender’s Expenses payable pursuant to Section 2.5(e) hereof.

 

(b)                                 Facility Fee.  A fully earned, non-refundable facility fee of Two Hundred Thousand Dollars ($200,000.00) to be shared between the Lenders pursuant to their respective Commitment Percentages payable on the Effective Date;

 

(c)                                  Final Payment.  The Final Payment, when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares;

 

(d)                                 Prepayment Fee.  The Prepayment Fee, if and when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares; and

 

(e)                                  Lenders’ Expenses.  All Lenders’ Expenses incurred through and after the Effective Date, when due.

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

2.6                               Withholding.

 

(a)                                 Payments received by the Lenders from Borrower hereunder will be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any governmental authority (including any interest, additions to tax or penalties applicable thereto).  Specifically, however, if at any time any Governmental Authority, applicable law, regulation or international agreement requires Borrower to make any withholding or deduction from any such payment or other sum payable hereunder to the Lenders, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, each Lender receives a net sum equal to the sum which it would have received had no withholding or deduction been required and Borrower shall pay the full amount withheld or deducted to the relevant Governmental Authority; provided, that a Lender that shall have become a Lender pursuant to a Lender Transfer shall be entitled to receive only such additional amounts as a Lender party hereto on the Effective Date would have been entitled to receive pursuant to this Section 2.6.  Borrower will, upon request, furnish the Lenders with proof reasonably satisfactory to the Lenders indicating that Borrower has made such withholding payment; provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower.  The agreements and obligations of Borrower contained in this Section 2.6 shall survive the termination of this Agreement.

 

(b)                                 On or prior to the date of this Agreement, each Lender shall deliver to Borrower a complete and properly executed IRS Form W-9 certifying that it is not subject to back-up withholding.  If any assignee of a Lender’s rights under Section 12.1 of this Agreement is not a “United States Person” as defined in Section 7701(a)(30) of the IRC (“Non-U.S. Lender”), such Non-U.S. Lender shall, upon becoming party to this Agreement, deliver to Borrower a complete and properly executed IRS Form W-8BEN, W-8BEN-E, W-8ECI or W-8IMY, as appropriate, or any successor form prescribed by the IRS, certifying that such Non-U.S. Lender is entitled to an exemption from U.S. withholding tax on interest and other amounts payable under this Agreement.

 

3.                                      CONDITIONS OF LOANS

 

3.1                               Conditions Precedent to Initial Credit Extension.  Each Lender’s obligation to make a Term A Loan is subject to the condition precedent that Collateral Agent and each Lender shall consent to or shall have received, in form and substance satisfactory to Collateral Agent and each Lender, such documents, and completion of such other matters, as Collateral Agent and each Lender may reasonably deem necessary or appropriate, including, without limitation:

 

(a)                                 Loan Documents, each duly executed by Borrower and each Subsidiary, as applicable;

 

(b)                                 duly executed Control Agreements with respect to any Collateral Accounts maintained by Borrower or any of its Subsidiaries;

 

(c)                                  duly executed original Secured Promissory Notes in favor of each Lender according to its Term A Loan Commitment Percentage;

 

(d)                                 if applicable, the certificate(s) for the Shares, together with Assignment(s) Separate from Certificate, duly executed in blank;

 

(e)                                  share pledge agreements with respect to Shares of Swedish Borrower, US Borrower and Cayman Borrower, each in such form and substance as is acceptable to Collateral Agent in its sole discretion;

 

(f)                                   duly executed notices and acknowledgments required under the Irish Security Documents;

 

(g)                                  the Operating Documents and good standing certificates (to the extent such concept or a similar concept exists under the laws of any relevant jurisdiction) of Borrower and its Subsidiaries certified by the Secretary of State (or equivalent agency) of Borrower’s and such Subsidiaries’ jurisdiction of organization or 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

formation and each jurisdiction in which Borrower and each Subsidiary is qualified to conduct business, each as of a date no earlier than thirty (30) days prior to the Effective Date;

 

(h)                                 a completed Perfection Certificate for Borrower and each of its Subsidiaries;

 

(i)                                     duly executed officer’s certificate for Irish Borrower executed by the chief financial officer of Irish Borrower, attaching the Annual Projections, for fiscal years 2017 and 2018;

 

(j)                                    duly executed Officer’s Certificate for Borrower;

 

(k)                                 certified copies, dated as of date no earlier than thirty (30) days prior to the Effective Date, of financing statement searches, as Collateral Agent shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;

 

(l)                                     a landlord’s consent executed in favor of Collateral Agent in respect of all of Borrower’s and each Subsidiaries’ leased locations;

 

(m)                             a bailee waiver (if applicable) executed in favor of Collateral Agent in respect of each third party bailee where Borrower or any Subsidiary maintains Collateral having a book value in excess of One Hundred Thousand Dollars ($100,000.00);

 

(n)                                 a duly executed legal opinion of counsel to US Borrower and a duly executed legal opinion of William Fry (as Irish counsel to the Collateral Agent in respect of Irish Borrower and Irish Security Documents) dated as of the Effective Date;

 

(o)                                 evidence satisfactory to Collateral Agent and the Lenders that the insurance policies required by Section 6.5 hereof are in full force and effect, together with appropriate evidence showing loss payable and/or additional insured clauses or endorsements required under Section 6.5 in favor of Collateral Agent, for the ratable benefit of the Lenders, and the Lenders; and

 

(p)                                 evidence satisfactory to Collateral Agent and the Lenders that the Keveyis Acquisition Event has occurred;

 

(q)                                 evidence satisfactory to Collateral Agent and the Lenders that the First Equity Event has occurred; and

 

(r)                                    payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.

 

3.2                               Conditions Precedent to all Credit Extensions.  The obligation of each Lender to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:

 

(a)                                 receipt by the Lenders of an executed Disbursement Letter in the form of Exhibit B attached hereto;

 

(b)                                 the representations and warranties in Section 5 hereof shall be true, accurate and complete in all material respects on the date of the Disbursement Letter and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension.  Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in Section 5 hereof are true, accurate and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date;

 

(c)                                  in such Lender’s sole discretion, there has not been any Material Adverse Change or any material adverse deviation by Borrower from the Annual Projections of Borrower presented to and accepted by Collateral Agent and each Lender;

 

(d)                                 to the extent not delivered at the Effective Date, duly executed original Secured Promissory Notes and Warrants, in number, form and content acceptable to each Lender, and in favor of each Lender according to its Commitment Percentage, with respect to each Credit Extension made by such Lender after the Effective Date; and

 

(e)                                  payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.

 

3.3                               Covenant to Deliver.  Borrower agrees to deliver to Collateral Agent and the Lenders each item required to be delivered to Collateral Agent under this Agreement as a condition precedent to any Credit Extension.  Borrower expressly agrees that a Credit Extension made prior to the receipt by Collateral Agent or any Lender of any such item shall not constitute a waiver by Collateral Agent or any Lender of Borrower’s obligation to deliver such item, and any such Credit Extension in the absence of a required item shall be made in each Lender’s sole discretion.

 

3.4                               Procedures for Borrowing.  Subject to the prior satisfaction of all other applicable conditions to the making of a Term Loan set forth in this Agreement, to obtain a Term Loan, Borrower shall notify the Lenders (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 noon Eastern time three (3) Business Days prior to the date the Term Loan is to be made.  Together with any such electronic, facsimile or telephonic notification, Borrower shall deliver to the Lenders by electronic mail or facsimile a completed Disbursement Letter executed by a Responsible Officer or his or her designee.  The Lenders may rely on any telephone notice given by a person whom a Lender reasonably believes is a Responsible Officer or designee.  On the Funding Date, each Lender shall credit and/or transfer (as applicable) to the Designated Deposit Account, an amount equal to its Term Loan Commitment.

 

4.                                      CREATION OF SECURITY INTEREST

 

4.1                               Grant of Security Interest.  Borrower hereby grants Collateral Agent, for the ratable benefit of the Lenders, and each Lender, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Collateral Agent, for the ratable benefit of the Lenders, and each Lender, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.  Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral, subject only to Permitted Liens that are permitted by the terms of this Agreement to have priority to Collateral Agent’s Lien.  If Borrower shall acquire a commercial tort claim (as defined in the Code), Borrower, shall promptly notify Collateral Agent in a writing signed by Borrower, as the case may be, of the general details thereof (and further details as may be required by Collateral Agent) and grant to Collateral Agent, for the ratable benefit of the Lenders, and each Lender, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Collateral Agent.

 

Notwithstanding anything to the contrary in this Agreement, the Swedish Borrower is not granting any security interests in its assets or property located in Sweden on the Effective Date (other than the pledge of its Shares in US Borrower and Cayman Borrower), provided that it is affirmatively agreed that the Swedish Borrower is granting hereby a security interest in its Intellectual Property and is granting a security interest in any cash that it holds in Collateral Accounts at institutions located in the United States.  Lenders and Borrower hereby agree that the enforcement of Lenders’ security interest under this Agreement in the assets of the Swedish Borrower shall not require any enforcement order, including without limitation through a Swedish public court judgment or by the Swedish Enforcement Authority (“Enforcement Order”) and Borrower shall not object to the enforcement of Lenders’ security interest under this Agreement in the assets of the Swedish Borrower, regardless of where such assets may be located, on the basis that an Enforcement Order was not obtained.

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

Without limiting the provisions of the foregoing and in furtherance thereof, Irish Borrower has entered into the Debenture that is part of the Irish Security Documents and the Swedish Share Pledge, Swedish Borrower has entered into the Cayman Share Pledge and the Security Deed that is part of the Irish Security Documents, and the Cayman Borrower has entered into the Cayman Security Documents.

 

Borrower agrees that, within 30 days after the date hereof, it will either (i) cause Swedish Borrower to enter into the Swedish Security Document and to take all actions necessary, including, without limitation, causing proper recordation of the Swedish Security Document in Sweden and paying all stamp duties and other costs attendant thereto, or (ii) present to the Lenders a written plan acceptable to the Lenders in their sole discretion to have Swedish Borrower enter into an exclusive, perpetual, worldwide written license agreement or a sale agreement with Borrower licensing or selling to the US Borrower all Intellectual Property owned by Swedish Borrower.  Provided that such plan is acceptable to the Lenders in their sole discretion, Borrower will then have 60 days following the approval of such plan by the Lenders to enter into such license agreement or to transfer all Intellectual Property owned by the Swedish Borrower to the US Borrower in accordance with the terms of such sale agreement (the last day of such 60 day period to be not later than the 90th day after the date of this Agreement), the terms and conditions of which shall be satisfactory to the Lenders in their sole discretion.  If Borrower is unable or fails to enter into such license agreement or effectuate such sale and transfer within such 60 day period it shall be required to comply with the terms of subsection (i) of this paragraph within such 60 day period.  Failure to comply with the foregoing shall be deemed to be an Event of Default under this Agreement.  Until such time as Borrower has complied with either subsection (i) or entered into a license agreement or effectuated such sale and transfer complying with subsection (ii) of this paragraph, and notwithstanding anything to the contrary set forth in any of the Loan Documents, Borrower shall maintain at all times in U.S. Collateral Accounts owned by the U.S. Borrower and the Irish Borrower, in the aggregate, an amount of cash and Cash Equivalents equal to 150% of the outstanding principal balance of the Term Loans.

 

If this Agreement is terminated, Collateral Agent’s Lien and each Lender’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash.  Upon payment in full in cash of the Obligations (other than inchoate indemnity obligations) and at such time as the Lenders’ obligation to make Credit Extensions has terminated, Collateral Agent shall, at the sole cost and expense of Borrower, release its Liens in the Collateral and all rights therein shall revert to Borrower.

 

4.2                               Authorization to File Financing Statements.  Borrower hereby authorizes Collateral Agent to file financing statements or take any other action required to perfect Collateral Agent’s security interests in the Collateral (including, without limitation, registration of particulars of this Agreement, the Irish Security Documents, the IP Agreement and the Swedish Share Pledge entered into by Irish Borrower at the Companies Registration Office in Ireland), without notice to Borrower, with all appropriate jurisdictions to perfect or protect Collateral Agent’s interest or rights under the Loan Documents, including a notice that any disposition of the Collateral, except to the extent permitted by the terms of this Agreement, by Borrower, or any other Person, shall be deemed to violate the rights of Collateral Agent under the Code.

 

4.3                               Pledge of Collateral.  Borrower hereby pledges, assigns and grants to Collateral Agent, for the ratable benefit of the Lenders, and each Lender, a security interest in all the Shares, together with all proceeds and substitutions thereof, all cash, stock and other moneys and property paid thereon, all rights to subscribe for securities declared or granted in connection therewith, and all other cash and noncash proceeds of the foregoing, as security for the performance of the Obligations.  On the Effective Date, or, to the extent not certificated as of the Effective Date, within ten (10) days of the certification of any Shares, the certificate or certificates for the Shares will be delivered to Collateral Agent, accompanied by an instrument of assignment or transfer duly executed in blank by Borrower.  To the extent required by the terms and conditions governing the Shares, Borrower shall cause the books of each entity whose Shares are part of the Collateral and any transfer agent to reflect the pledge of the Shares.  Upon the occurrence and during the continuance of an Event of Default hereunder, Collateral Agent may effect the transfer of any securities included in the Collateral (including but not limited to the Shares) into the name of Collateral Agent and cause new (as applicable) certificates representing such securities to be issued in the name of Collateral Agent or its transferee.  Borrower will execute and deliver such documents, and take or cause to be taken such actions, as Collateral Agent may reasonably request to perfect or continue the perfection of Collateral Agent’s security interest in the Shares.  Unless an Event of Default shall have occurred and be continuing, Borrower shall be entitled to exercise any voting rights with respect to the Shares and to give consents, waivers and ratifications in 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

respect thereof, provided that no vote shall be cast or consent, waiver or ratification given or action taken which would be inconsistent with any of the terms of this Agreement or which would constitute or create any violation of any of such terms.  All such rights to vote and give consents, waivers and ratifications shall terminate upon the occurrence and continuance of an Event of Default.

 

5.                                      REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants to Collateral Agent and the Lenders as follows:

 

5.1                               Due Organization, Authorization: Power and Authority.  Borrower and each of its Subsidiaries is duly incorporated or organized, validly existing and in good standing (where such concept exists in the any relevant jurisdiction) as a Registered Organization in its jurisdictions of organization or formation and Borrower and each of its Subsidiaries is qualified and licensed to do business and is in good standing (where such concept exists in any relevant jurisdiction) in any jurisdiction in which the conduct of its businesses or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have a Material Adverse Change.  In connection with this Agreement, Borrower and each of its Subsidiaries has delivered to Collateral Agent a completed perfection certificate signed by an officer (or, if applicable in any relevant jurisdiction, an authorized signatory) of Borrower or such Subsidiary (each a “Perfection Certificate” and collectively, the “Perfection Certificates”).  Borrower represents and warrants that (a) Borrower and each of its Subsidiaries’ exact legal name is that which is indicated on its respective Perfection Certificate and on the signature page of each Loan Document to which it is a party; (b) Borrower and each of its Subsidiaries is an organization of the type and is organized in the jurisdiction set forth on its respective Perfection Certificate; (c) each Perfection Certificate accurately sets forth the applicable Borrower’s and its Subsidiaries’ organizational identification number(s) or accurately states that Borrower or such Subsidiary has none; (d) each Perfection Certificate accurately sets forth the applicable Borrower’s or its Subsidiaries’ place of business, or, if more than one, its chief executive office as well as such Borrower’s and such Subsidiaries’ mailing address (if different than its chief executive office); (e) except as disclosed to the Collateral Agent in the Perfection Certificates, Borrower and each of its Subsidiaries (and each of its respective predecessors) have not, in the past five (5) years, changed its jurisdiction of organization, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificates pertaining to Borrower and each of its Subsidiaries, is accurate and complete in all material respects (it being understood and agreed that Borrower and each of its Subsidiaries may from time to time update certain information in the Perfection Certificates (including the information set forth in clause (d) above) after the Effective Date to the extent permitted by one or more specific provisions in this Agreement); such updated Perfection Certificates subject to the review and approval of Collateral Agent.  If Borrower or any of its Subsidiaries is not now a Registered Organization but later becomes one, Borrower shall notify Collateral Agent of such occurrence and provide Collateral Agent with such Person’s organizational identification number within five (5) Business Days of receiving such organizational identification number.

 

The execution, delivery and performance by Borrower and each of its Subsidiaries of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s or such Subsidiaries’ organizational documents, including its respective Operating Documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law applicable thereto, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or such Subsidiary, or any of their property or assets may be bound or affected, (iv) except for filings referred to in Section 4.2 above, require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect) or are being obtained pursuant to Section 6.1(b), or (v) constitute an event of default under any material agreement by which Borrower or any of such Subsidiaries, or their respective properties, is bound.  Neither Borrower nor any of its Subsidiaries is in default under any agreement to which it is a party or by which it or any of its assets is bound in which such default could reasonably be expected to have a Material Adverse Change.

 

5.2                               Collateral.

 

(a)                                 Borrower and each of the Guarantors have good title to, have rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien under the Loan Documents, free and clear 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

of any and all Liens except Permitted Liens, and neither Borrower nor any of its Subsidiaries have any Deposit Accounts, Securities Accounts, Commodity Accounts or other investment accounts other than the Collateral Accounts or the Permitted Bank of America Account, with respect to which Borrower or such Subsidiary has given Collateral Agent notice and taken such actions as are necessary to give Collateral Agent a perfected first priority security interest therein, except for  the Permitted Bank of America Account in which Collateral Agent shall have an unperfected lien as a result of there being no Control Agreement and the Deposit Account referred to in clause (d) of Permitted Liens definition.  To Borrower’s knowledge, the Accounts are bona fide, existing obligations of the Account Debtors.

 

(b)                                 On the Effective Date, and except as disclosed on the Perfection Certificate (i) the Collateral is not in the possession of any third party bailee (such as a warehouse), and (ii)  no such third party bailee possesses components of the Collateral in excess of One Hundred Thousand Dollars ($100,000.00).  None of the components of the Collateral shall be maintained at locations other than as disclosed in the Perfection Certificates on the Effective Date or as permitted pursuant to Section 6.11.

 

(c)                                  All Inventory is in all material respects of good and marketable quality, free from material defects.

 

(d)                                 Borrower and each of its Subsidiaries is the sole owner of the Intellectual Property each respectively purports to own, free and clear of all Liens other than Permitted Liens.  (i) Each of Borrower’s and its Subsidiaries’ Patents is valid and enforceable and no part of Borrower’s or its Subsidiaries’ Intellectual Property has been judged invalid or unenforceable, in whole or in part, and (ii) to the best of Borrower’s knowledge, no claim has been made that any part of the Intellectual Property or any practice by Borrower or its Subsidiaries violates the rights of any third party except to the extent such claim could not reasonably be expected to have a Material Adverse Change.  Except as noted on the Perfection Certificates, neither Borrower nor any of its Subsidiaries is a party to, nor is bound by, any material license or other material agreement with respect to which Borrower or such Subsidiary is the licensee that (i) prohibits or otherwise restricts Borrower or its Subsidiaries from granting a security interest in Borrower’s or such Subsidiaries’ interest in such material license or material agreement or any other property, or (ii) for which a default under or termination of could interfere with Collateral Agent’s or any Lender’s right to sell any Collateral.  Borrower shall provide written notice to Collateral Agent and each Lender within ten (10) days of Borrower or any of its Subsidiaries entering into or becoming bound by any license or agreement with respect to which Borrower or any Subsidiary is the licensee (other than over-the-counter software that is commercially available to the public).

 

5.3                               Litigation.  Except as disclosed (i) on the Perfection Certificates, or (ii) in accordance with Section 6.9 hereof, there are no actions, suits, investigations, or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries involving more than One Hundred Thousand Dollars ($100,000.00).

 

5.4                               No Material Deterioration in Financial Condition; Financial Statements.  All consolidated financial statements for Borrower and its Subsidiaries, delivered to Collateral Agent fairly present, in conformity with GAAP, in all material respects the consolidated financial condition of Borrower and its Subsidiaries, and the consolidated results of operations of Borrower and its Subsidiaries.  There has not been any material deterioration in the consolidated financial condition of Borrower and its Subsidiaries since the date of the most recent financial statements submitted to any Lender.

 

5.5                               Solvency.  Borrower and each of its Subsidiaries is Solvent.

 

5.6                               Regulatory Compliance.  Neither Borrower nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended.  Neither Borrower nor any of its Subsidiaries is engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors).  Borrower and each of its Subsidiaries has complied in all material respects with the Federal Fair Labor Standards Act.  Neither Borrower nor any of its Subsidiaries has violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a Material Adverse Change.  Neither Borrower’s nor any of its Subsidiaries’ properties or assets has been used by Borrower or such Subsidiary or, to Borrower’s knowledge, by previous 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than in material compliance with applicable laws.  Borrower and each of its Subsidiaries has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.

 

None of Borrower, any of its Subsidiaries, or any of Borrower’s or its Subsidiaries’ Affiliates or any of their respective agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or conspiring to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person.  None of Borrower, any of its Subsidiaries, or to the knowledge of Borrower and any of their Affiliates or agents, acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement, (x) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (y) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law.

 

5.7                               Investments.  Neither Borrower nor any of its Subsidiaries owns any stock, shares, partnership interests or other equity securities except for Permitted Investments.

 

5.8                               Tax Returns and Payments; Pension Contributions.  Borrower and each of its Subsidiaries has timely filed all required tax returns and reports, and Borrower and each of its Subsidiaries, has timely paid all foreign and federal taxes, assessments, deposits and contributions, and material state, and local taxes, assessments, deposits and contributions, owed by Borrower and such Subsidiaries, in all jurisdictions in which Borrower or any such Subsidiary is subject to taxes, including the United States, unless such taxes are being contested in accordance with the following sentence.  Borrower and each of its Subsidiaries, may defer payment of any contested taxes, provided that Borrower or such Subsidiary, (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Collateral Agent in writing of the commencement of, and any material development in, the proceedings, and (c)  posts bonds or takes any other steps required to prevent the Governmental Authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a Permitted Lien.  Neither Borrower nor any of its Subsidiaries is aware of any claims or adjustments proposed for any of Borrower’s or such Subsidiaries’, prior tax years which could result in additional taxes becoming due and payable by Borrower or its Subsidiaries.  Borrower and each of its Subsidiaries have paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and neither Borrower nor any of its Subsidiaries have, withdrawn from participation in, and have not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower or its Subsidiaries, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other Governmental Authority.  For the purposes of this Section 5.8, “material state, and local taxes, assessments, deposits and contributions” shall mean state, and local taxes, assessments, deposits and contributions, in the aggregate amount of Twenty-Five Thousand Dollars ($25,000.00) or more.

 

5.9                               Use of Proceeds.  Borrower shall use the proceeds of the Credit Extensions solely as working capital and to fund its general business requirements in accordance with the provisions of this Agreement, and not for personal, family, household or agricultural purposes.  A portion of the proceeds of the Term A Loans may be used by Borrower for the consummation of the Keveyis Acquisition Event or for its obligations related thereto.

 

5.10                        Shares.  Borrower has full power and authority to create a first priority lien on the Shares and no disability or contractual obligation exists that would prohibit Borrower from pledging the Shares pursuant to this Agreement.  To Borrower’s knowledge, there are no subscriptions, warrants, rights of first refusal or other restrictions on transfer relative to, or options exercisable with respect to the Shares.  The Shares have been and will be duly authorized and validly issued, and are fully paid and non-assessable.  To Borrower’s knowledge, the Shares are not the subject of any present or threatened suit, action, arbitration, administrative or other proceeding, and Borrower knows of no reasonable grounds for the institution of any such proceedings.

 

5.11                        Full Disclosure.  No written representation, warranty or other statement of Borrower or any of its Subsidiaries in any certificate or written statement given to Collateral Agent or any Lender, as of the date such 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Collateral Agent or any Lender, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).

 

5.12                        Definition of “Knowledge.”  For purposes of the Loan Documents, whenever a representation or warranty is made to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of the Responsible Officers.

 

6.                                      AFFIRMATIVE COVENANTS

 

Borrower shall, and shall cause each of its Subsidiaries to, do all of the following:

 

6.1                               Government Compliance.

 

(a)                                 Maintain its and all its Subsidiaries’ legal existence and good standing (where such concept exists in any relevant jurisdiction) in their respective jurisdictions of organization or incorporation and maintain qualification in each jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Change.  Comply with all laws (where such concept exists in any relevant jurisdiction), ordinances and regulations to which Borrower or any of its Subsidiaries is subject, the noncompliance with which could reasonably be expected to have a Material Adverse Change.

 

(b)                                 Obtain and keep in full force and effect, all of the material Governmental Approvals necessary for the performance by Borrower and its Subsidiaries of their respective businesses and obligations under the Loan Documents and the grant of a security interest to Collateral Agent, for the ratable benefit of the Lenders, in all of the Collateral.  Borrower shall promptly provide copies to Collateral Agent of any material Governmental Approvals obtained by Borrower or any of its Subsidiaries.

 

6.2                               Financial Statements, Reports, Certificates.

 

(a)                                 Deliver to each Lender:

 

(i)                                     as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and consolidating balance sheet, income statement and cash flow statement covering the consolidated operations of Borrower and its Subsidiaries for such month certified by a Responsible Officer and in a form reasonably acceptable to Collateral Agent;

 

(ii)                                  as soon as available, but no later than one hundred twenty (120) days after the last day of Borrower’s fiscal year or within five (5) days of filing with the SEC or other applicable authority in the relevant jurisdiction, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Collateral Agent in its reasonable discretion;

 

(iii)                               as soon as available, but no later than thirty (30) days after the last day of each of Borrower’s fiscal years, Borrower’s annual financial projections for the entire current fiscal year which shall be approved by Borrower’s Board of Directors, which annual financial projections shall be set forth in a month-by-month format with respect to the Net Product Revenues (the “Annual Net Product Revenue Projections”) and in a quarter-by-quarter format with respect to all other financial projections contained therein (the Annual Net Product Revenue Projections and the other annual financial projections as originally delivered to Collateral Agent and the Lenders in a certificate of the chief financial officer or controller of Irish Borrower are referred to herein, collectively, as the “Annual Projections”; provided that, any revisions of the Annual Projections (which shall also 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

be approved by Borrower’s Board of Directors) shall be delivered to Collateral Agent and the Lenders no later than seven (7) days after any changes thereto);

 

(iv)                              within five (5) days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or holders of Subordinated Debt;

 

(v)                                 in the event that Borrower becomes subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission,

 

(vi)                              prompt notice of any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries, together with any copies reflecting such amendments or changes with respect thereto;

 

(vii)                           prompt notice of (A) any material change in the composition of the Intellectual Property, (B) the registration of any copyright, including any subsequent ownership right of Borrower or any of its Subsidiaries in or to any copyright, patent or trademark, including a copy of any such registration, and (C) any event that could reasonably be expected to materially and adversely affect the value of the Intellectual Property;

 

(viii)                        as soon as available, but no later than thirty (30) days after the last day of each month, copies of the month-end account statements for each Collateral Account maintained by Borrower or its Subsidiaries, which statements may be provided to Collateral Agent and each Lender by Borrower or directly from the applicable institution(s), and

 

(ix)                              other information as reasonably requested by Collateral Agent or any Lender.

 

Notwithstanding the foregoing, documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower’s website on the internet at Borrower’s website address.

 

(b)                                 Concurrently with the delivery of the financial statements specified in Section 6.2(a)(i) above but no later than thirty (30) days after the last day of each month, deliver to each Lender, a duly completed Compliance Certificate signed by a Responsible Officer.

 

(c)                                  Keep proper books of record and account in accordance with GAAP in all material respects, in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities.  Borrower shall, and shall cause each of its Subsidiaries to, allow, at the sole cost of Borrower, Collateral Agent or any Lender, during regular business hours upon reasonable prior notice (provided that no notice shall be required when an Event of Default has occurred and is continuing), to visit and inspect any of its properties, to examine and make abstracts or copies from any of its books and records, and to conduct a collateral audit and analysis of its operations and the Collateral.  Such audits shall be conducted no more often than twice every year unless (and more frequently if) an Event of Default has occurred and is continuing.

 

6.3                               Inventory; Returns.  Keep all Inventory in good and marketable condition, free from material defects.  Returns and allowances between Borrower, or any of its Subsidiaries, and their respective Account Debtors shall follow Borrower’s, or such Subsidiary’s, customary practices as they exist at the Effective Date.  Borrower must promptly notify Collateral Agent and the Lenders of all returns, recoveries, disputes and claims that involve more than One Hundred Thousand Dollars ($100,000.00) individually or in the aggregate in any calendar year.

 

6.4                               Taxes; Pensions.  Timely file and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely file, all foreign and federal taxes, assessments, deposits and contributions, and material state, and local taxes, assessments, deposits and contributions,  owed by Borrower or its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.8 hereof, and shall deliver to Lenders, on demand, appropriate certificates attesting to such payments, and 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with the terms of such plans.  For the purposes of this Section 6.4, “material state, and local taxes, assessments, deposits and contributions” shall mean state, and local taxes, assessments, deposits and contributions, in the aggregate amount of Twenty-Five Thousand Dollars ($25,000.00) or more.

 

6.5                               Insurance.  Keep Borrower’s and its Subsidiaries’ business and the Collateral insured for risks and in amounts standard for companies in Borrower’s and its Subsidiaries’ industry and location and as Collateral Agent may reasonably request.  Insurance policies shall be in a form, with companies, and in amounts that are reasonably satisfactory to Collateral Agent and Lenders.  All property policies shall have a lender’s loss payable endorsement showing Collateral Agent and each Lender as lender loss payee and waive subrogation against Collateral Agent, and all liability policies (other than those policies issued by insurers located outside of the United States covering activities of the Borrower and its Subsidiaries taking place outside of the United States) shall show, or have endorsements showing, Collateral Agent and each Lender, as additional insured.  The Collateral Agent and each Lender shall be named as lender loss payee and/or additional insured with respect to any such insurance providing coverage in respect of any Collateral (other than those liability policies issued by insurers located outside of the United States covering activities of the Borrower and its Subsidiaries taking place outside of the United States), and each provider of any such insurance shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to the Collateral Agent and the Lenders, that it will give the Collateral Agent and the Lenders thirty (30) days prior written notice before any such policy or policies shall be materially altered or canceled.  At Collateral Agent’s request, Borrower shall deliver certified copies of policies and evidence of all premium payments.  Proceeds payable under any policy shall, at Collateral Agent’s option, be payable to Collateral Agent, for the ratable benefit of the Lenders, on account of the Obligations.  Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to One Hundred Thousand Dollars ($100,000.00) with respect to any loss, but not exceeding One Hundred Thousand Dollars ($100,000.00), in the aggregate for all losses under all casualty policies in any one year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Collateral Agent has been granted a first priority security interest, and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Collateral Agent, be payable to Collateral Agent, for the ratable benefit of the Lenders, on account of the Obligations.  If Borrower or any of its Subsidiaries fails to obtain insurance as required under this Section 6.5 or to pay any amount or furnish any required proof of payment to third persons, Collateral Agent and/or any Lender may make, at Borrower’s expense, all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies Collateral Agent or such Lender deems prudent.

 

6.6                               Operating Accounts.

 

(a)                                 Maintain all of Borrower’s and its Subsidiaries’ Collateral Accounts in accounts which are subject to a Control Agreement in favor of Collateral Agent; provided, however, the Irish Collateral Accounts shall be subject to and must comply with the provisions set forth in the Irish Security Documents, the Cayman Collateral Accounts shall be subject to and must comply with the provisions set forth in the Cayman Security Documents and the Swedish Collateral Accounts shall be subject to and must comply with the provisions set forth in the Swedish Security Document (if the Swedish Security Document is entered into in accordance with Section 4.1).

 

(b)                                 Borrower shall provide Collateral Agent five (5) days’ prior written notice before Borrower or any of its Subsidiaries establishes any new Collateral Account.  In addition, for each Collateral Account that Borrower or any of its Subsidiaries, at any time maintains, Borrower or such Subsidiary shall cause the applicable bank or financial institution at or with which such Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Collateral Agent’s Lien in such Collateral Account in accordance with the terms hereunder prior to the establishment of such Collateral Account, which Control Agreement may not be terminated without prior written consent of Collateral Agent.  The provisions of the previous sentence shall not apply to (i) deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s, or any of its Subsidiaries’, employees and identified to Collateral Agent by Borrower as such in the Perfection Certificates; provided, however, that in no event shall any of the accounts listed in this clause (i) contain funds on deposit in excess of the amount required for Borrower to fund one (1) payroll cycle, (ii) the Irish Collateral Accounts which 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

shall be subject to and must comply with the provisions set forth in the Irish Security Documents, (iii) the Cayman Collateral Accounts which shall be subject to and must comply with the provisions set forth in the Cayman Security Documents and (iv) the Swedish Collateral Account which shall be subject to and must comply with the provisions set forth in the Swedish Security Document.

 

(c)                                  Neither Borrower nor any of its Subsidiaries shall maintain any Collateral Accounts except Collateral Accounts maintained in accordance with Sections 6.6(a) and (b).

 

(d)                                 All proceeds from the sale or licensing of KeveyisTM (dichlorphenamide) product shall be deposited in Collateral Accounts maintained in the United States and subject to Collateral Agreements in favor of the Collateral Agent.

 

6.7                               Protection of Intellectual Property Rights.  Borrower and each of its Subsidiaries shall: (a) use commercially reasonable efforts to protect, defend and maintain the validity and enforceability of its Intellectual Property that is material to Borrower’s business; (b) promptly advise Collateral Agent in writing of material infringement by a third party of its Intellectual Property; and (c) not allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Collateral Agent’s prior written consent.  If Borrower or any of its Subsidiaries (i) obtains any patent, registered trademark or servicemark, registered copyright, registered mask work, or any pending application for any of the foregoing, whether as owner, licensee or otherwise, or (ii) applies for any patent or the registration of any trademark or servicemark, in any part of the world, then Borrower or such Subsidiary shall promptly provide written notice thereof to Collateral Agent and each Lender and shall execute such intellectual property security agreements and other documents and take such other actions as Collateral Agent shall reasonably request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Collateral Agent, for the ratable benefit of the Lenders, and each Lender, in such property.  If Borrower or any of its Subsidiaries decides to register any copyrights or mask works in the United States Copyright Office, Borrower or such Subsidiary shall: (x) provide Collateral Agent and each Lender with at least fifteen (15) days prior written notice of Borrower’s or such Subsidiary’s intent to register such copyrights or mask works together with a copy of the application it intends to file with the United States Copyright Office (excluding exhibits thereto); (y) execute an intellectual property security agreement and such other documents and take such other actions as Collateral Agent may reasonably request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Collateral Agent, for the ratable benefit of the Lenders, and each Lender, in the copyrights or mask works intended to be registered with the United States Copyright Office; and (z) record such intellectual property security agreement with the United States Copyright Office contemporaneously with filing the copyright or mask work application(s) with the United States Copyright Office.  Borrower or such Subsidiary shall promptly provide to Collateral Agent and each Lender with evidence of the recording of the intellectual property security agreement necessary for Collateral Agent to perfect and maintain a first priority perfected security interest in such property.

 

6.8                               Litigation Cooperation.  Commencing on the Effective Date and continuing through the termination of this Agreement, make available to Collateral Agent and the Lenders, without expense to Collateral Agent or the Lenders, Borrower and each of Borrower’s officers, employees and agents and Borrower’s Books, to the extent that Collateral Agent or any Lender may reasonably deem them necessary to prosecute or defend any third-party suit or proceeding instituted by or against Collateral Agent or any Lender with respect to any Collateral or relating to Borrower.

 

6.9                               Notices of Litigation and Default.  Borrower will give prompt written notice to Collateral Agent and the Lenders of any litigation or governmental proceedings pending or threatened (in writing) against Borrower or any of its Subsidiaries, which could reasonably be expected to result in damages or costs to Borrower or any of its Subsidiaries of One Hundred Thousand Dollars ($100,000.00) or more or which could reasonably be expected to have a Material Adverse Change.  Without limiting or contradicting any other more specific provision of this Agreement, promptly (and in any event within three (3) Business Days) upon Borrower becoming aware of the existence of any Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, Borrower shall give written notice to Collateral Agent and the Lenders of such occurrence, which such notice shall include a reasonably detailed description of such Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default.

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

6.10                        Financial Covenant. Irish Borrower shall achieve the following, to be tested as of the last day of the applicable month for each month ending after the Effective Date, on a consolidated basis with respect to Irish Borrower and its Subsidiaries: a minimum amount of Net Products Revenues for the twelve months ended (i) at the end of the applicable month in 2017 and 2018 shown on a schedule to the certificate of the chief financial officer of Irish Borrower delivered on the Effective Date, and (ii) thereafter at the end of each month of at least eighty percent (80%) of the Net Product Revenues projected for such twelve-month period in the Annual Net Product Revenue Projections as delivered to Collateral Agent and Lenders in a certificate of the chief financial officer or controller of Irish Borrower in accordance with Section 6.2(a)(iii), which Annual Net Product Revenue Projections must be reviewed and approved by Collateral Agent and Lenders.

 

6.11                        Landlord Waivers; Bailee Waivers.  In the event that Borrower or any of its Subsidiaries, after the Effective Date, intends to add any new offices or business locations, including warehouses, or otherwise store any portion of the Collateral with, or deliver any portion of the Collateral to, a bailee, in each case pursuant to Section 7.2, then Borrower or such Subsidiary will first receive the written consent of Collateral Agent and, in the event that the new location is the chief executive office of the Borrower or such Subsidiary or the Collateral at any such new location is valued in excess of One Hundred Thousand ($100,000.00) in the aggregate, such bailee or landlord, as applicable, must execute and deliver a bailee waiver or landlord waiver, as applicable, in form and substance reasonably satisfactory to Collateral Agent prior to the addition of any new offices or business locations, or any such storage with or delivery to any such bailee, as the case may be.

 

6.12                        Creation/Acquisition of Subsidiaries.  In the event Borrower, or any of its Subsidiaries creates or acquires any Subsidiary, Borrower shall provide prior written notice to Collateral Agent and each Lender of the creation or acquisition of such new Subsidiary and take all such action as may be reasonably required by Collateral Agent or any Lender to cause each such Subsidiary to become a co-Borrower hereunder or to guarantee the Obligations of Borrower under the Loan Documents and, in each case, grant a continuing pledge and security interest in and to the assets of such Subsidiary (substantially as described on Exhibit A hereto); and Borrower (or its Subsidiary, as applicable) shall grant and pledge to Collateral Agent, for the ratable benefit of the Lenders, a perfected security interest in the Shares of each such newly created Subsidiary.

 

6.13                        Further Assurances.

 

(a)                                 Subject to the provisions of the Loan Documents, execute any further instruments and take further action as Collateral Agent or any Lender reasonably requests to perfect or continue Collateral Agent’s Lien and each Lender’s Lien in the Collateral or to effect the purposes of this Agreement.

 

(b)                                 Deliver to Collateral Agent and Lenders, within five (5) days after the same are sent or received, copies of all material correspondence, reports, documents and other filings with any Governmental Authority that could reasonably be expected to have a material adverse effect on any of the Governmental Approvals material to Borrower’s business or otherwise could reasonably be expected to have a Material Adverse Change.

 

6.14                        Dissolution of BioPancreate.  No later than the six (6) month anniversary of the Effective Date, deliver to Collateral Agent and Lenders evidence satisfactory to them of the dissolution of BioPancreate Inc., a Delaware corporation and wholly owned subsidiary of US Borrower on the Effective Date; provided, however, that during such six-month period, BioPancreate Inc. may not hold assets with an aggregate value in excess of Twenty Five Thousand Dollars ($25,000.00) or any Intellectual Property.

 

6.15                        Notifications relating to Irish Borrower.  Irish Borrower shall promptly notify the Collateral Agent in writing:

 

(a)                                 of any restrictions imposed on any shares of the Irish Borrower pursuant to the Irish Companies Act;

 

(b)                                 of any report made by inspectors appointed to the Irish Borrower pursuant to the Irish Companies Act;

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

(c)                                  of any disclosure made relating to any shares or debentures of the Irish Borrower under the Irish Companies Act;

 

(d)                                 of any declaration, order or deemed order for disqualification or restriction under the Irish Companies Act including Part 14, Chapters 3 and 4 and any notice under the Irish Companies Act including Part 14, Chapter 5, regarding a disqualification or restriction undertaking in respect of any director of the Irish Borrower;

 

(e)                                  of any intention on the part of any person of which it becomes aware to hold the Irish Borrower liable for the whole, or part of any of the debts of any other Borrower or a Subsidiary of any Borrower or of any contribution order or pooling order made under Sections 599 or 600 of the Irish Companies Act;

 

(f)                                   of its intention (and shall notify Collateral Agent forthwith of any intention on the part of any person of which it becomes aware) to present a petition before any competent court or any analogous proceedings or actions for the appointment of an examiner, an administrator, a liquidator or any similar officer to, or over the whole or any part of the assets of any Borrower or any Subsidiary of any Borrower;

 

(g)                                  of any notice received by the Irish Borrower under Section 1002 of the TCA.

 

6.16                        License Agreement between Irish Borrower and U.S. Borrower.  On or before February 28, 2017, the Irish Borrower must enter into an inter-company license or other agreement with U.S. Borrower pursuant to which U.S. Borrower shall have the exclusive rights to market and sell KeveyisTM products in the United States, which license or agreement must be in such form and substance as is reasonably acceptable to Collateral Agent and Lenders.

 

7.                                      NEGATIVE COVENANTS

 

Borrower shall not, and shall not permit any of its Subsidiaries to, do any of the following without the prior written consent of the Required Lenders:

 

7.1                               Dispositions.  Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Swedish Borrower’s Intellectual Property to Borrower pursuant to Section 4.1, (b) of Inventory in the ordinary course of business; (c) of worn out or obsolete Equipment; and (d) in connection with Permitted Liens, Permitted Investments and Permitted Licenses.

 

7.2                               Changes in Business, Management, Ownership, or Business Locations.  (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses engaged in by Borrower as of the Effective Date or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) any Key Person shall cease to be actively engaged in the management of Borrower unless written notice thereof is provided to Collateral Agent within five (5) days of such change, or (ii) enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own more than forty nine percent (49%) of the voting stock of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower’s equity securities in a public offering, a private placement of public equity or to venture capital investors so long as Borrower identifies to Collateral Agent the venture capital investors prior to the closing of the transaction).  Borrower shall not, without at least thirty (30) days’ prior written notice to Collateral Agent: (A) add any new offices or business locations, including warehouses (unless such new offices or business locations (i) contain less than One Hundred Thousand Dollars ($100,000.00) in assets or property of Borrower or any of its Subsidiaries and (ii) are not Borrower’s or its Subsidiaries’ chief executive office); (B) change its jurisdiction of organization, (C) change its organizational structure or type, (D) change its legal name, or (E) change any organizational number (if any) assigned by its jurisdiction of organization.

 

7.3                               Mergers or Acquisitions.  Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock, shares or property of another Person. A Subsidiary may merge or consolidate into another Subsidiary (provided such surviving Subsidiary is a “co-Borrower” hereunder or has provided a secured Guaranty of 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

Borrower’s Obligations hereunder) or with (or into) Borrower provided Borrower is the surviving legal entity, and as long as no Event of Default is occurring prior thereto or arises as a result therefrom.  Without limiting the foregoing, Borrower shall not, without Collateral Agent’s prior written consent, enter into any binding contractual arrangement with any Person to attempt to facilitate a merger or acquisition of Borrower, unless (i) no Event of Default exists when such agreement is entered into by Borrower, (ii) (A) no Event of Default exists when such agreement is entered into by Borrower, and (B) (x) such agreement does not give such Person the right to claim any fees, payments or damages from Borrower in excess of Five Hundred Thousand Dollars ($500,000) or (y) at the time of entering into such agreement Borrower has sufficient cash reserves (net of any fees, payments or damages that Borrower may become liable to pay to such Person under such agreement) to meet its operating needs for the following twelve month period, and (iii) Borrower notifies Collateral Agent in advance of entering into such an agreement.

 

7.4                               Indebtedness.  Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.

 

7.5                               Encumbrance.  Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted herein (except for Permitted Liens that are permitted by the terms of this Agreement to have priority over Collateral Agent’s Lien and each Lender’s Lien), or enter into any agreement, document, instrument or other arrangement (except with or in favor of Collateral Agent, for the ratable benefit of the Lenders) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower, or any of its Subsidiaries, from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s or such Subsidiary’s Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of Permitted Liens herein.

 

7.6                               Maintenance of Collateral Accounts.  Maintain any Collateral Account except pursuant to the terms of Section 6.6 hereof.

 

7.7                               Distributions; Investments. (a) Pay any dividends (other than dividends payable solely in capital stock) or make any distribution or payment in respect of or redeem, retire or purchase any capital stock (other than repurchases pursuant to the terms of employee stock purchase plans, employee restricted stock agreements, stockholder rights plans, director or consultant stock option plans, or similar plans, provided such repurchases do not exceed One Hundred Thousand Dollars ($100,000.00) in the aggregate per fiscal year) or (b) directly or indirectly make any Investment other than Permitted Investments, or permit any of its Subsidiaries to do so.

 

7.8                               Transactions with Affiliates.  Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower or any of its Subsidiaries, except for (a) transactions that are in the ordinary course of Borrower’s or such Subsidiary’s business, upon fair and reasonable terms that are no less favorable to Borrower or such Subsidiary than would be obtained in an arm’s length transaction with a non-affiliated Person, and (b) Subordinated Debt or equity investments by Borrower’s investors in Borrower or its Subsidiaries.

 

7.9                               Subordinated Debt.  (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations owed to the Lenders.

 

7.10                        Compliance.  Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a Material Adverse Change, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower or any of its 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

Subsidiaries, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other Governmental Authority.

 

7.11                        Compliance with Anti-Terrorism Laws.  Collateral Agent hereby notifies Borrower and each of its Subsidiaries that pursuant to the requirements of Anti-Terrorism Laws, and Collateral Agent’s policies and practices, Collateral Agent is required to obtain, verify and record certain information and documentation that identifies Borrower and each of its Subsidiaries and their principals, which information includes the name and address of Borrower and each of its Subsidiaries and their principals and such other information that will allow Collateral Agent to identify such party in accordance with Anti-Terrorism Laws.  Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries permit any Affiliate to, directly or indirectly, knowingly enter into any documents, instruments, agreements or contracts with any Person listed on the OFAC Lists.  Borrower and each of its Subsidiaries shall immediately notify Collateral Agent if Borrower or such Subsidiary has knowledge that Borrower, or any Subsidiary or Affiliate of Borrower, is listed on the OFAC Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering.  Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries, permit any Affiliate to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224 or any similar executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

 

7.12                        Non-U.S. Collateral Accounts.  Have an aggregate balance of greater than Two Hundred Fifty Thousand Dollars ($250,000.00) in all Collateral Accounts that are not U.S. Collateral Accounts.

 

7.13                        Negative Pledge Regarding Intellectual Property.  Create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any Lien of any kind upon any Intellectual Property or Transfer any Intellectual Property, whether now owned or hereafter acquired, other than pursuant to Permitted Licenses.

 

8.                                      EVENTS OF DEFAULT

 

Any one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:

 

8.1                               Payment Default.  Borrower fails to (a) make any payment of principal or interest on any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day grace period shall not apply to payments due on the Maturity Date or the date of acceleration pursuant to Section 9.1 (a) hereof).  During the cure period, the failure to cure the payment default is not an Event of Default (but no Credit Extension will be made during the cure period);

 

8.2                               Covenant Default.

 

(a)                                 Borrower or any of its Subsidiaries fails or neglects to perform any obligation in Sections 4.1 (Grant of Security Interest), 6.2 (Financial Statements, Reports, Certificates), 6.4 (Taxes), 6.5 (Insurance), 6.6 (Operating Accounts), 6.7 (Protection of Intellectual Property Rights), 6.9 (Notice of Litigation and Default), 6.10 (Financial Covenant), 6.12 (Creation/Acquisition of Subsidiaries) or 6.13 (Further Assurances) or Borrower violates any covenant in Section 7; or

 

(b)                                 Borrower, or any of its Subsidiaries, fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period).  Grace periods provided under this Section shall not apply, among other things, to financial covenants or any other covenants set forth in subsection (a) above;

 

8.3                               Material Adverse Change.  A Material Adverse Change occurs;

 

8.4                               Attachment; Levy; Restraint on Business.

 

(a)                                 The service of process seeking to attach, by trustee or similar process, any funds of Borrower or any of its Subsidiaries or of any entity under control of Borrower or its Subsidiaries on deposit with any Lender or any Lender’s Affiliate or any bank or other institution at which Borrower or any of its Subsidiaries maintains a Collateral Account, or (ii) a notice of lien, levy, or assessment is filed against Borrower or any of its Subsidiaries or their respective assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; and

 

(b)                                 (i) any material portion of Borrower’s or any of its Subsidiaries’ assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower or any of its Subsidiaries from conducting any part of its business;

 

8.5                               Insolvency.  (a) Borrower or any of its Subsidiaries is or becomes Insolvent; (b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower or any of its Subsidiaries and not dismissed or stayed within forty-five (45) days (but no Credit Extensions shall be made while Borrower or any Subsidiary is Insolvent and/or until any Insolvency Proceeding is dismissed);

 

8.6                               Other Agreements.  There is a default in any agreement to which Borrower or any of its Subsidiaries is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of One Hundred Thousand Dollars ($100,000.00) or that could reasonably be expected to have a Material Adverse Change;

 

8.7                               Judgments.  One or more judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least One Hundred Thousand Dollars ($100,000.00) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower or any of its Subsidiaries and shall remain unsatisfied, unvacated, or unstayed for a period of ten (10) days after the entry thereof (provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay of such judgment, order or decree);

 

8.8                               Misrepresentations.  Borrower or any of its Subsidiaries or any Person acting for Borrower or any of its Subsidiaries makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Collateral Agent and/or Lenders or to induce Collateral Agent and/or the Lenders to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;

 

8.9                               Subordinated Debt.  A default or breach occurs under any agreement between Borrower or any of its Subsidiaries party to a Loan Document and any creditor of Borrower or any of its Subsidiaries party to a Loan Document that signed a subordination, intercreditor, or other similar agreement with Collateral Agent or the Lenders, or any creditor that has signed such an agreement with Collateral Agent or the Lenders breaches any terms of such agreement;

 

8.10                        Guaranty.  (a) Any Guaranty terminates or ceases for any reason to be in full force and effect; (b) any Guarantor does not perform any obligation or covenant under any Guaranty; (c) any circumstance described 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

in Sections 8.3, 8.4, 8.5, 8.7, or 8.8 occurs with respect to any Guarantor, or (d) the death of a Guarantor who is a natural person or the liquidation, winding up, or termination of existence of any Guarantor that is an entity;

 

8.11                        Governmental Approvals.  Any Governmental Approval shall have been revoked, rescinded, suspended, modified in an adverse manner, or not renewed in the ordinary course for a full term and such revocation, rescission, suspension, modification or non-renewal has resulted in or could reasonably be expected to result in a Material Adverse Change; or

 

8.12                        Lien Priority.  Any Lien created hereunder or by any other Loan Document shall at any time fail to constitute a valid and perfected Lien on any of the Collateral purported to be secured thereby, subject to no prior or equal Lien, other than Permitted Liens which are permitted to have priority in accordance with the terms of this Agreement.

 

8.13                        Delisting. The shares of common stock of Irish Borrower are delisted from NASDAQ because of failure to comply with continued listing standards thereof or due to a voluntary delisting which results in such shares not being listed on any other nationally recognized stock exchange in the United States having listing standards at least as restrictive as the  NASDAQ.

 

9.                                      RIGHTS AND REMEDIES

 

9.1                               Rights and Remedies.

 

(a)                                 Upon the occurrence and during the continuance of an Event of Default, Collateral Agent may, and at the written direction of Required Lenders shall, without notice or demand, do any or all of the following: (i) deliver notice of the Event of Default to Borrower, (ii) by notice to Borrower declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations shall be immediately due and payable without any action by Collateral Agent or the Lenders) or (iii) by notice to Borrower suspend or terminate the obligations, if any, of the Lenders to advance money or extend credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Collateral Agent and/or the Lenders (but if an Event of Default described in Section 8.5 occurs all obligations, if any, of the Lenders to advance money or extend credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Collateral Agent and/or the Lenders shall be immediately terminated without any action by Collateral Agent or the Lenders).

 

(b)                                 Without limiting the rights of Collateral Agent and the Lenders set forth in Section 9.1(a) above, upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall have the right, without notice or demand, to do any or all of the following:

 

(i)                                     foreclose upon and/or sell or otherwise liquidate, the Collateral;

 

(ii)                                  apply to the Obligations any (a) balances and deposits of Borrower that Collateral Agent or any Lender holds or controls, or (b) any amount held or controlled by Collateral Agent or any Lender owing to or for the credit or the account of Borrower; and/or

 

(iii)                               commence and prosecute an Insolvency Proceeding or consent to Borrower commencing any Insolvency Proceeding.

 

(c)                                  Without limiting the rights of Collateral Agent and the Lenders set forth in Sections 9.1(a) and (b) above, upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall have the right, without notice or demand, to do any or all of the following:

 

(i)                                     settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Collateral Agent considers advisable, notify any Person owing Borrower money of Collateral Agent’s security interest in such funds, and verify the amount of such account;

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

(ii)                                  make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral.  Borrower shall assemble the Collateral if Collateral Agent requests and make it available in a location as Collateral Agent reasonably designates.  Collateral Agent may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Collateral Agent a license to enter and occupy any of its premises, without charge, to exercise any of Collateral Agent’s rights or remedies;

 

(iii)                               ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, and/or advertise for sale, the Collateral.  Collateral Agent is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s and each of its Subsidiaries’ labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Collateral Agent’s exercise of its rights under this Section 9.1, Borrower’s and each of its Subsidiaries’ rights under all licenses and all franchise agreements inure to Collateral Agent, for the benefit of the Lenders;

 

(iv)                              place a “hold” on any account maintained with Collateral Agent or the Lenders and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;

 

(v)                                 demand and receive possession of Borrower’s Books;

 

(vi)                              appoint a receiver to seize, manage and realize any of the Collateral, and such receiver shall have any right and authority as any competent court will grant or authorize in accordance with any applicable law, including any power or authority to manage the business of Borrower or any of its Subsidiaries; and

 

(vii)                           subject to clauses 9.1(a) and (b), exercise all rights and remedies available to Collateral Agent and each Lender under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).

 

Notwithstanding any provision of this Section 9.1 to the contrary, upon the occurrence of any Event of Default, Collateral Agent shall have the right to exercise any and all remedies referenced in this Section 9.1 without the written consent of Required Lenders following the occurrence of an Exigent Circumstance.  As used in the immediately preceding sentence, “Exigent Circumstance” means any event or circumstance that, in the reasonable judgment of Collateral Agent, imminently threatens the ability of Collateral Agent to realize upon all or any material portion of the Collateral, such as, without limitation, fraudulent removal, concealment, or abscondment thereof, destruction or material waste thereof, or failure of Borrower or any of its Subsidiaries after reasonable demand to maintain or reinstate adequate casualty insurance coverage, or which, in the judgment of Collateral Agent, could reasonably be expected to result in a material diminution in value of the Collateral.

 

9.2                               Power of Attorney.  To the extent permitted by law, Borrower hereby irrevocably appoints Collateral Agent as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s or any of its Subsidiaries’ name on any checks or other forms of payment or security; (b) sign Borrower’s or any of its Subsidiaries’ name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Collateral Agent determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Collateral Agent or a third party as the Code or any applicable law permits.  Borrower hereby appoints Collateral Agent as its lawful attorney in fact to sign Borrower’s or any of its Subsidiaries’ name on any documents necessary to perfect or continue the perfection of Collateral Agent’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations (other than inchoate indemnity obligations) have been satisfied in full and Collateral Agent and the Lenders are under no further obligation to make Credit Extensions hereunder.  Collateral Agent’s foregoing appointment as Borrower’s or any of its Subsidiaries’ attorney in fact, and all of Collateral Agent’s rights 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

and powers, coupled with an interest, are irrevocable until all Obligations (other than inchoate indemnity obligations) have been fully repaid and performed and Collateral Agent’s and the Lenders’ obligation to provide Credit Extensions terminates.

 

9.3                               Protective Payments.  If Borrower or any of its Subsidiaries fail to obtain the insurance called for by Section 6.5 or fails to pay any premium thereon or fails to pay any other amount which Borrower or any of its Subsidiaries is obligated to pay under this Agreement or any other Loan Document, Collateral Agent may obtain such insurance or make such payment, and all amounts so paid by Collateral Agent are Lenders’ Expenses and immediately due and payable, bearing interest at the Default Rate, and secured by the Collateral.  Collateral Agent will make reasonable efforts to provide Borrower with notice of Collateral Agent obtaining such insurance or making such payment at the time it is obtained or paid or within a reasonable time thereafter.  No such payments by Collateral Agent are deemed an agreement to make similar payments in the future or Collateral Agent’s waiver of any Event of Default.

 

9.4                               Application of Payments and Proceeds.  Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence and during the continuance of an Event of Default, (a) Borrower irrevocably waives the right to direct the application of any and all payments at any time or times thereafter received by Collateral Agent from or on behalf of Borrower or  any of its Subsidiaries of all or any part of the Obligations, and, as between Borrower on the one hand and Collateral Agent and Lenders on the other, Collateral Agent shall have the continuing and exclusive right to apply and to reapply any and all payments received against the Obligations in such manner as Collateral Agent may deem advisable notwithstanding any previous application by Collateral Agent, and (b) the proceeds of any sale of, or other realization upon all or any part of the Collateral shall be applied: first, to the Lenders’ Expenses; second, to accrued and unpaid interest on the Obligations (including any interest which, but for the provisions of the United States Bankruptcy Code, would have accrued on such amounts); third, to the principal amount of the Obligations outstanding; and fourth, to any other indebtedness or obligations of Borrower owing to Collateral Agent or any Lender under the Loan Documents.  Any balance remaining shall be delivered to Borrower or to whoever may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct.  In carrying out the foregoing, (x) amounts received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category, and (y) each of the Persons entitled to receive a payment in any particular category shall receive an amount equal to its pro rata share of amounts available to be applied pursuant thereto for such category.  Any reference in this Agreement to an allocation between or sharing by the Lenders of any right, interest or obligation “ratably,” “proportionally” or in similar terms shall refer to Pro Rata Share unless expressly provided otherwise.  Collateral Agent, or if applicable, each Lender, shall promptly remit to the other Lenders such sums as may be necessary to ensure the ratable repayment of each Lender’s portion of any Term Loan and the ratable distribution of interest, fees and reimbursements paid or made by Borrower.  Notwithstanding the foregoing, a Lender receiving a scheduled payment shall not be responsible for determining whether the other Lenders also received their scheduled payment on such date; provided, however, if it is later determined that a Lender received more than its ratable share of scheduled payments made on any date or dates, then such Lender shall remit to Collateral Agent or other Lenders such sums as may be necessary to ensure the ratable payment of such scheduled payments, as instructed by Collateral Agent.  If any payment or distribution of any kind or character, whether in cash, properties or securities, shall be received by a Lender in excess of its ratable share, then the portion of such payment or distribution in excess of such Lender’s ratable share shall be received by such Lender in trust for and shall be promptly paid over to the other Lender for application to the payments of amounts due on the other Lenders’ claims.  To the extent any payment for the account of Borrower is required to be returned as a voidable transfer or otherwise, the Lenders shall contribute to one another as is necessary to ensure that such return of payment is on a pro rata basis.  If any Lender shall obtain possession of any Collateral, it shall hold such Collateral for itself and as agent and bailee for Collateral Agent and other Lenders for purposes of perfecting Collateral Agent’s security interest therein.

 

9.5                               Liability for Collateral.  So long as Collateral Agent and the Lenders comply with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Collateral Agent and the Lenders, Collateral Agent and the Lenders shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person.  Borrower bears all risk of loss, damage or destruction of the Collateral.

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

9.6                               No Waiver; Remedies Cumulative.  Failure by Collateral Agent or any Lender, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Collateral Agent or any Lender thereafter to demand strict performance and compliance herewith or therewith.  No waiver hereunder shall be effective unless signed by Collateral Agent and the Required Lenders and then is only effective for the specific instance and purpose for which it is given.  The rights and remedies of Collateral Agent and the Lenders under this Agreement and the other Loan Documents are cumulative.  Collateral Agent and the Lenders have all rights and remedies provided under the Code, any applicable law, by law, or in equity.  The exercise by Collateral Agent or any Lender of one right or remedy is not an election, and Collateral Agent’s or any Lender’s waiver of any Event of Default is not a continuing waiver.  Collateral Agent’s or any Lender’s delay in exercising any remedy is not a waiver, election, or acquiescence.

 

9.7                               Demand Waiver.  Borrower waives, to the fullest extent permitted by law, demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Collateral Agent or any Lender on which Borrower or any Subsidiary is liable.

 

10.                               NOTICES

 

All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below.  Any of Collateral Agent, Lender or Borrower may change its mailing address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.

 

	
If to Borrower:
    	
 
    	
STRONGBRIDGE BIOPHARMA PUBLIC LIMITED COMPANY
   CORTENDO AB
   CORTENDO CAYMAN LTD.
   STRONGBRIDGE U.S. INC.
   900 Northbrook Drive
   Suite 200
   Trevose, Pennsylvania 19053
   Attn: Chief Legal Officer
   Fax: 215-355-7389
   Email: s.long@strongbridgebio.com
    
	
 
    	
 
    	
 
    
	
with a copy (which   shall not constitute notice) to:
    	
 
    	
Reed Smith LLP
   599 Lexington Avenue
   New York, New York 10022
   Attn: Lee Ann Dillon
   Fax: 212-521-5450
   Email: ldillon@reedsmith.com
    
	
 
    	
 
    	
 
    
	
If to Collateral Agent   or Oxford:
    	
 
    	
OXFORD FINANCE LLC
   133 North Fairfax Street
   Alexandria, Virginia 22314
   Attention: Legal Department
   Fax: (703) 519-5225
   Email: LegalDepartment@oxfordfinance.com
    
	
 
    	
 
    	
 
    
	
If to Horizon:
    	
 
    	
HORIZON TECHNOLOGY FINANCE CORPORATION
    

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

	
 
    	
 
    	
312 Farmington Avenue
   Farmington, Connecticut 06032
   Attn: Legal Department
   Fax: (860) 676-8655
   Email: Jay@horizontechfinance.com
    
	
 
    	
 
    	
 
    
	
with a copy (which   shall not constitute notice) to:
    	
 
    	
Greenberg Traurig, LLP
   One International Place
   Boston, MA 02110
   Attn: Jonathan Bell
   Fax: (617) 310-6001
   Email: bellj@gtlaw.com
    

 

11.                               CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

 

New York law governs the Loan Documents without regard to principles of conflicts of law (except as to any other Loan Documents, as expressly set forth therein).  Borrower, Lenders and Collateral Agent each submit to the exclusive jurisdiction of the State and Federal courts in the City of New York, Borough of Manhattan.  NOTWITHSTANDING THE FOREGOING, COLLATERAL AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH COLLATERAL AGENT AND THE LENDERS (IN ACCORDANCE WITH THE PROVISIONS OF SECTION 9.1) DEEM NECESSARY OR APPROPRIATE TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE COLLATERAL AGENT’S AND THE LENDERS’ RIGHTS AGAINST BORROWER OR ITS PROPERTY.  Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court.  Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, first class, registered or certified mail return receipt requested, proper postage prepaid.

 

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT, AND THE LENDERS EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

12.                               GENERAL PROVISIONS

 

12.1                        Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party.  Borrower may not transfer, pledge or assign this Agreement or any rights or obligations under it without Collateral Agent’s and each Lender’s prior written consent (which may be granted or withheld in Collateral Agent’s and each Lender’s discretion, subject to Section 12.6).  The Lenders have the right, without the consent of or notice to Borrower, to sell, transfer, assign, pledge, negotiate, or grant participation in (any such sale, transfer, assignment, negotiation, or grant of a participation, a “Lender Transfer”) all or any part of, or any interest in, the Lenders’ obligations, rights, and benefits under this Agreement and the other Loan Documents; provided, however, that any such Lender Transfer (other than a transfer, pledge, sale or assignment to an Eligible Assignee) of its obligations, rights, and benefits under this Agreement and the other Loan Documents shall require the prior written consent of the Required Lenders (such approved assignee, an “Approved Lender”).  Borrower and Collateral Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned until Collateral Agent shall have received and accepted an effective assignment agreement in 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

form satisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee or Approved Lender as Collateral Agent reasonably shall require.  The Collateral Agent, acting solely for this purpose as an agent of Borrower, shall maintain in the United States a copy of each effective assignment and assumption agreement received and accepted by it and a register for the recordation of the names and addresses of the Lenders, and the interest and principal amount of the Term Loans owing to each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Borrower, the Collateral Agent and the Lenders shall treat each person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement.  The Register shall be available for inspection by Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.  Notwithstanding anything to the contrary contained herein, so long as no Event of Default has occurred and is continuing, no Lender Transfer (other than a Lender Transfer (i) in respect of the Warrants or (ii) in connection with (x) assignments by a Lender due to a forced divestiture at the request of any regulatory agency; or (y) upon the occurrence of a default, event of default or similar occurrence with respect to a Lender’s own financing or securitization transactions) shall be permitted, without Borrower’s consent, to any Person which is an Affiliate or Subsidiary of Borrower, a direct competitor of Borrower or a vulture hedge fund, each as determined by Collateral Agent.

 

12.2                        Indemnification.  Borrower agrees to indemnify, defend and hold Collateral Agent and the Lenders and their respective directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Collateral Agent or the Lenders (each, an “Indemnified Person”) harmless against:  (a) all obligations, demands, claims, and liabilities (collectively, “Claims”) asserted by any other party in connection with; related to; following; or arising from, out of or under, the transactions contemplated by the Loan Documents; and (b) all losses or Lenders’ Expenses incurred, or paid by Indemnified Person in connection with; related to; following; or arising from, out of or under, the transactions contemplated by the Loan Documents between Collateral Agent, and/or the Lenders and Borrower (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s  gross negligence or willful misconduct.  Borrower hereby further indemnifies, defends and holds each Indemnified Person harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnified Person) in connection with any investigative, response, remedial, administrative or judicial matter or proceeding, whether or not such Indemnified Person shall be designated a party thereto and including any such proceeding initiated by or on behalf of Borrower, and the reasonable expenses of investigation by engineers, environmental consultants and similar technical personnel and any commission, fee or compensation claimed by any broker (other than any broker retained by Collateral Agent or Lenders) asserting any right to payment for the transactions contemplated hereby which may be imposed on, incurred by or asserted against such Indemnified Person as a result of or in connection with the transactions contemplated hereby and the use or intended use of the proceeds of the loan proceeds except for liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements directly caused by such Indemnified Person’s gross negligence or willful misconduct.

 

12.3                        Time of Essence.  Time is of the essence for the performance of all Obligations in this Agreement.

 

12.4                        Severability of Provisions.  Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

 

12.5                        Correction of Loan Documents.  Collateral Agent and the Lenders may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties so long as Collateral Agent provides Borrower with written notice of such correction and allows Borrower at least ten (10) days to object to such correction. In the event of such objection, such correction shall not be made except by an amendment signed by both Collateral Agent and Borrower.

 

12.6                        Amendments in Writing; Integration.  (a) No amendment, modification, termination or waiver of any provision of this Agreement or any other Loan Document, no approval or consent thereunder, or any consent to any departure by Borrower or any of its Subsidiaries therefrom, shall in any event be effective unless the same shall be in writing and signed by Borrower, Collateral Agent and the Required Lenders provided that:

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

(i)                                     no such amendment, waiver or other modification that would have the effect of increasing or reducing a Lender’s Term Loan Commitment or Commitment Percentage shall be effective as to such Lender without such Lender’s written consent;

 

(ii)                                  no such amendment, waiver or modification that would affect the rights and duties of Collateral Agent shall be effective without Collateral Agent’s written consent or signature;

 

(iii)                               no such amendment, waiver or other modification shall, unless signed by all the Lenders directly affected thereby, (A) reduce the principal of, rate of interest on or any fees with respect to any Term Loan or forgive any principal, interest (other than default interest) or fees (other than late charges) with respect to any Term Loan (B) postpone the date fixed for, or waive, any payment of principal of any Term Loan or of interest on any Term Loan (other than default interest) or any fees provided for hereunder (other than late charges or for any termination of any commitment); (C) change the definition of the term “Required Lenders” or the percentage of Lenders which shall be required for the Lenders to take any action hereunder; (D) release all or substantially all of any material portion of the Collateral, authorize Borrower to sell or otherwise dispose of all or substantially all or any material portion of the Collateral or release any Guarantor of all or any portion of the Obligations or its guaranty obligations with respect thereto, except, in each case with respect to this clause (D), as otherwise may be expressly permitted under this Agreement or the other Loan Documents (including in connection with any disposition permitted hereunder); (E) amend, waive or otherwise modify this Section 12.6 or the definitions of the terms used in this Section 12.6 insofar as the definitions affect the substance of this Section 12.6; (F) consent to the assignment, delegation or other transfer by Borrower of any of its rights and obligations under any Loan Document or release Borrower of its payment obligations under any Loan Document, except, in each case with respect to this clause (F), pursuant to a merger or consolidation permitted pursuant to this Agreement; (G) amend any of the provisions of Section 9.4 or amend any of the definitions of Pro Rata Share, Term Loan Commitment, Commitment Percentage or that provide for the Lenders to receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral hereunder; (H) subordinate the Liens granted in favor of Collateral Agent securing the Obligations; or (I) amend any of the provisions of Section 12.10.  It is hereby understood and agreed that all Lenders shall be deemed directly affected by an amendment, waiver or other modification of the type described in the preceding clauses (C), (D), (E), (F), (G) and (H) of the preceding sentence;

 

(iv)                              the provisions of the foregoing clauses (i), (ii) and (iii) are subject to the provisions of any interlender or agency agreement among the Lenders and Collateral Agent pursuant to which any Lender may agree to give its consent in connection with any amendment, waiver or modification of the Loan Documents only in the event of the unanimous agreement of all Lenders.

 

(b)                                 This Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.  All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan Documents.

 

12.7                        Counterparts.  This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.

 

12.8                        Survival.  All covenants, representations and warranties made in this Agreement continue in full force and effect until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been satisfied.  The obligation of Borrower in Section 12.2 to indemnify each Lender and Collateral Agent, as well as the confidentiality provisions in Section 12.9 below, shall survive until the statute of limitations with respect to such claim or cause of action shall have run.

 

12.9                        Confidentiality.  In handling any confidential information of Borrower, the Lenders and Collateral Agent shall exercise the same degree of care that it exercises for their own proprietary information, but disclosure of information may be made: (a) subject to the terms and conditions of this Agreement, to the Lenders’ and Collateral Agent’s Subsidiaries or Affiliates, or in connection with a Lender’s own financing or securitization transactions and upon the occurrence of a default, event of default or similar occurrence with respect to such 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

financing or securitization transaction; (b) to prospective transferees (other than those identified in (a) above) or purchasers of any interest in the Credit Extensions (provided, however, the Lenders and Collateral Agent shall, except upon the occurrence and during the continuation of an Event of Default, obtain such prospective transferee’s or purchaser’s agreement to the terms of this provision or to similar confidentiality terms); (c) as required by law, regulation, subpoena, or other order; (d) to Lenders’ or Collateral Agent’s regulators or as otherwise required in connection with an examination or audit; (e) as Collateral Agent reasonably considers appropriate in exercising remedies under the Loan Documents; and (f) to third party service providers of the Lenders and/or Collateral Agent so long as such service providers have executed a confidentiality agreement with the Lenders and Collateral Agent with terms no less restrictive than those contained herein. Confidential information does not include information that either: (i) is in the public domain or in the Lenders’ and/or Collateral Agent’s possession when disclosed to the Lenders and/or Collateral Agent, or becomes part of the public domain after disclosure to the Lenders and/or Collateral Agent; or (ii) is disclosed to the Lenders and/or Collateral Agent by a third party, if the Lenders and/or Collateral Agent does not know that the third party is prohibited from disclosing the information.  Collateral Agent and the Lenders may use confidential information for any purpose, including, without limitation, for the development of client databases, reporting purposes, and market analysis.  The provisions of the immediately preceding sentence shall survive the termination of this Agreement.  The agreements provided under this Section 12.9 supersede all prior agreements, understanding, representations, warranties, and negotiations between the parties about the subject matter of this Section 12.9.

 

12.10                 Right of Set Off.  Borrower hereby grants to Collateral Agent and to each Lender, a lien, security interest and right of set off as security for all Obligations to Collateral Agent and each Lender hereunder, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Collateral Agent or the Lenders or any entity under the control of Collateral Agent or the Lenders (including a Collateral Agent affiliate) or in transit to any of them.  At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Collateral Agent or the Lenders may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations.  ANY AND ALL RIGHTS TO REQUIRE COLLATERAL AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

12.11                 Cooperation of Borrower.  If necessary, Borrower agrees to (i) execute any documents (including new Secured Promissory Notes) reasonably required to effectuate and acknowledge each assignment of a Term Loan Commitment or Loan to an assignee in accordance with Section 12.1, (ii) make Borrower’s management available to meet with Collateral Agent and prospective participants and assignees of Term Loan Commitments or Credit Extensions (which meetings shall be conducted no more often than twice every twelve months unless an Event of Default has occurred and is continuing), and (iii) assist Collateral Agent or the Lenders in the preparation of information relating to the financial affairs of Borrower as any prospective participant or assignee of a Term Loan Commitment or Term Loan reasonably may request.

 

12.12                 Borrower Liability.  Any Borrower may, acting singly, request Credit Extensions hereunder provided that no Credit Extensions may occur hereunder to the extent that a violation of Section 7.12 hereof would occur as a result thereof.  Each Borrower hereby appoints the other as agent for the other for all purposes hereunder, including with respect to requesting Credit Extensions hereunder.  Each Borrower hereunder shall be jointly and severally obligated to repay all Credit Extensions made hereunder, regardless of which Borrower actually receives said Credit Extension, as if each Borrower hereunder directly received all Credit Extensions.  Each Borrower waives (a) any suretyship defenses available to it under the Code or any other applicable law, and (b) any right to require Collateral Agent or any Lender to: (i) proceed against any Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy.  Collateral Agent and or any Lender may exercise or not exercise any right or remedy it has against any Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrower’s liability.  Notwithstanding any other provision of this Agreement or other related document, each Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating Borrower to the rights of Collateral Agent and the Lenders under this Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise.  Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section shall be null and void.  If any payment is made to a Borrower in contravention of this Section, (x) such Borrower (other than Swedish Borrower) shall hold such payment in trust for Collateral Agent and the Lenders and such payment shall be promptly delivered to Collateral Agent for application to the Obligations, whether matured or unmatured, and (y) Swedish Borrower shall hold such payment as agent on behalf of the Collateral Agent and the Lenders and such payment shall be treated as “escrow funds” (redovisningsmedel) and held on a separate account in accordance with the Swedish Act of 1944 in respect of assets held on account (Lag (1944:181) om redovisningsmedel) and shall promptly pay or transfer the same to the Collateral Agent or as the Collateral Agent may direct for application to the Obligations, whether matured or unmatured.

 

13.                               DEFINITIONS

 

13.1                        Definitions.  As used in this Agreement, the following terms have the following meanings:

 

“Account” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower.

 

“Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.

 

“Affiliate” of any Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.

 

“Agreement” is defined in the preamble hereof.

 

“Amortization Date” is, (i) July 1, 2018, if Term C Loans are not made hereunder, and (ii) January 1, 2019, if Term C Loans are made hereunder.

 

“Annual Net Product Revenue Projections” is defined in Section 6.2(a).

 

“Annual Projections” is defined in Section 6.2(a).

 

“Anti-Terrorism Laws” are any laws relating to terrorism or money laundering, including Executive Order No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the laws comprising or implementing the Bank Secrecy Act, and the laws administered by OFAC.

 

“Approved Fund” is any (i) investment company, fund, trust, securitization vehicle or conduit that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business or (ii) any Person (other than a natural person) which temporarily warehouses loans for any Lender or any entity described in the preceding clause (i) and that, with respect to each of the preceding clauses (i) and (ii), is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) a Person (other than a natural person) or an Affiliate of a Person (other than a natural person) that administers or manages a Lender.

 

“Approved Lender” is defined in Section 12.1.

 

“Basic Rate” is with respect to the Term Loan, the per annum rate of interest (based on a year of three hundred sixty (360) days) equal to the sum of (a) the greater of (i) the thirty (30) day U.S. LIBOR rate reported in The Wall Street Journal on the last Business Day of the month that immediately precedes the month in which the interest will accrue and (ii) fifty three hundredths percent (0.53%), plus (b) Eight and twenty two hundredths percent 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

(8.22%).  Notwithstanding the foregoing, under no circumstances shall the Basic Rate for the Term Loans be less than Eight and seventy-five hundredths percent (8.75%).

 

“Blocked Person” is any Person:  (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (c) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, or (e) a Person that is named a “specially designated national” or “blocked person” on the most current list published by OFAC or other similar list.

 

“Borrower” is defined in the preamble hereof.

 

“Borrower’s Books” are Borrower’s or any of its Subsidiaries’ books and records including ledgers, federal, and state tax returns, records regarding Borrower’s or its Subsidiaries’ assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.

 

“Business Day” is any day that is not a Saturday, Sunday or a day on which Collateral Agent is closed.

 

“Cash Equivalents” are (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., and (c) certificates of deposit maturing no more than one (1) year after issue provided that the account in which any such certificate of deposit is maintained is subject to a Control Agreement in favor of Collateral Agent.  For the avoidance of doubt, the direct purchase by Borrower or any of its Subsidiaries of any Auction Rate Securities, or purchasing participations in, or entering into any type of swap or other derivative transaction, or otherwise holding or engaging in any ownership interest in any type of Auction Rate Security by Borrower or any of its Subsidiaries shall be conclusively determined by the Lenders as an ineligible Cash Equivalent, and any such transaction shall expressly violate each other provision of this Agreement governing Permitted Investments.  Notwithstanding the foregoing, Cash Equivalents does not include and Borrower, and each of its Subsidiaries, are prohibited from purchasing, purchasing participations in, entering into any type of swap or other equivalent derivative transaction, or otherwise holding or engaging in any ownership interest in any type of debt instrument, including, without limitation, any corporate or municipal bonds with a long-term nominal maturity for which the interest rate is reset through a dutch auction and more commonly referred to as an auction rate security (each, an “Auction Rate Security”).

 

“Cayman Collateral Accounts” means the Collateral Accounts maintained by Cayman Borrower in the Cayman Islands.

 

“Cayman Security Documents” means the debenture and related security documents entered into by the Cayman Borrower in furtherance hereof.

 

“Claims” are defined in Section 12.2.

 

“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of New York; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Collateral Agent’s Lien and each Lender’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit A, provided that to the extent that any property, assets and rights of Borrower in Ireland or Sweden to which a first position lien is created in favor of the Collateral Agent pursuant to the terms of the Irish Security Documents also constitutes Collateral for the purposes of this Agreement the terms of the Irish Security Documents shall prevail in determining the rights of the Collateral Agent and the Lenders with respect thereto.

 

“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account, or any other bank account maintained by Borrower or any of its Subsidiaries at any time.

 

“Collateral Agent” is defined in the preamble hereof.

 

“Commitment Percentage” is set forth in Schedule 1.1, as amended from time to time.

 

“Commodity Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.

 

“Compliance Certificate” is that certain certificate in the form attached hereto as Exhibit C.

 

“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business.  The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.

 

“Control Agreement” is any control agreement entered into among the depository institution at which Borrower or any of its Subsidiaries maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower or any of its Subsidiaries maintains a Securities Account or a Commodity Account, pursuant to which Collateral Agent obtains control (within the meaning of the Code) for the benefit of the Lenders over such Deposit Account, Securities Account, or Commodity Account.

 

“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.

 

“Credit Extension” is any Term Loan or any other extension of credit by Collateral Agent or Lenders for Borrower’s benefit.

 

“Default Rate” is defined in Section 2.3(b).

 

“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.

 

“Designated Deposit Account” is Borrower’s deposit account, account number 3302076072 maintained with Silicon Valley Bank.

 

“Disbursement Letter” is that certain form attached hereto as Exhibit B.

 

“Dollars,” “dollars” and “$” each mean lawful money of the United States.

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

“Effective Date” is defined in the preamble hereof.

 

“Eligible Assignee” is (i) a Lender, (ii) an Affiliate of a Lender, (iii) an Approved Fund and (iv) any commercial bank, savings and loan association or savings bank or any other entity which is an “accredited investor” (as defined in Regulation D under the Securities Act of 1933, as amended) and which extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance companies, in each case, which either (A) has a rating of BBB or higher from Standard & Poor’s Rating Group and a rating of Baa2 or higher from Moody’s Investors Service, Inc. at the date that it becomes a Lender or (B) has total assets in excess of Five Billion Dollars ($5,000,000,000.00), and in each case of clauses (i) through (iv), which, through its applicable lending office, is capable of lending to Borrower without the imposition of any withholding or similar taxes; provided that notwithstanding the foregoing, “Eligible Assignee” shall not include, unless an Event of Default has occurred and is continuing, (i) Borrower or any of Borrower’s Affiliates or Subsidiaries or (ii) a direct competitor of Borrower or a vulture hedge fund, each as determined by Collateral Agent.  Notwithstanding the foregoing, (x) in connection with assignments by a Lender due to a forced divestiture at the request of any regulatory agency, the restrictions set forth herein shall not apply and Eligible Assignee shall mean any Person or party and (y) in connection with a Lender’s own financing or securitization transactions, the restrictions set forth herein shall not apply and Eligible Assignee shall mean any Person or party providing such financing or formed to undertake such securitization transaction and any transferee of such Person or party upon the occurrence of a default, event of default or similar occurrence with respect to such financing or securitization transaction; provided that no such sale, transfer, pledge or assignment under this clause (y) shall release such Lender from any of its obligations hereunder or substitute any such Person or party for such Lender as a party hereto until Collateral Agent shall have received and accepted an effective assignment agreement from such Person or party in form satisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee as Collateral Agent reasonably shall require.

 

“Enforcement Order” shall have the meaning set forth in Section 4.1

 

“Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

 

“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and its regulations.

 

“Event of Default” is defined in Section 8.

 

“Final Payment” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) due on the earliest to occur of (a) the Maturity Date, or (b) the acceleration of any Term Loan, or (c) the prepayment of a Term Loan pursuant to Section 2.2(c) or (d), equal to the original principal amount of such Term Loan multiplied by the Final Payment Percentage, payable to Lenders in accordance with their respective Pro Rata Shares.

 

“Final Payment Percentage” is Eight percent (8.00%).

 

“First Equity Event” is the receipt by Irish Borrower on or after November 14, 2016 and on or prior to the Effective Date of unrestricted gross cash proceeds of not less than Twenty Million Dollars ($20,000,000.00) from the issuance and sale by Borrower of its equity securities.

 

“First Revenue Event” is the achievement by U.S. Borrower on or after the Effective Date for each of its months and or before October 31, 2017 (with respect to the six-month period then ending), of consolidated trailing six-month Keveyis Net Product Revenues of at least [****] Dollars ($[****]), as determined by Collateral Agent based upon written evidence satisfactory to Collateral Agent.

 

“Funding Date” is any date on which a Credit Extension is made to or on account of Borrower which shall be a Business Day.

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

“GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession in the United States, which are applicable to the circumstances as of the date of determination.

 

“General Intangibles” are all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, any trade secret rights, including any rights to unpatented inventions, payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income and other tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

 

“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.

 

“Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.

 

“Guarantor” is any Person providing a Guaranty in favor of Collateral Agent.

 

“Guaranty” is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwise supplemented.

 

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.

 

“Indemnified Person” is defined in Section 12.2.

 

“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other applicable bankruptcy or insolvency law relating to bankruptcy, suspension of payments, a moratorium of any indebtedness, administration, examinership, insolvency, liquidation, receivership, dissolution, winding up or relief of debtors including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization (including by way of a voluntary arrangement, scheme of arrangement or otherwise), arrangement, or other relief.

 

“Insolvent” means not Solvent.

 

“Intellectual Property” means all of Borrower’s or any Subsidiary’s right, title and interest in and to the following:

 

(a)                                 its Copyrights, Trademarks and Patents;

 

(b)                                 any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating manuals;

 

(c)                                  any and all source code;

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

(d)                                 any and all design rights which may be available to Borrower;

 

(e)                                  any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and

 

(f)                                   all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.

 

“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of any Person’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

 

“Investment” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance, payment or capital contribution to any Person.

 

“IP Agreement” is that certain Intellectual Property Security Agreement entered into by and between Borrower and Collateral Agent dated as of the Effective Date, as such may be amended from time to time.

 

“IRC” means the U.S. Internal Revenue Code of 1986, as amended.

 

“Irish Collateral Accounts” means the Collateral Accounts maintained by Irish Borrower in Ireland.

 

“Irish Companies Act” means the Companies Act 2014 of Ireland.

 

“Irish Security Documents” means, collectively, the all-asset debenture entered into by Irish Borrower in furtherance hereof, incorporating first ranking fixed and floating charges over all of its assets and undertaking, including, but not limited to, a fixed charge over the Irish Collateral Accounts and the Security Deed entered into by the Swedish Borrower in furtherance hereof, incorporating first ranking fixed and floating charges over certain of its assets and undertaking located in Ireland.

 

“Keveyis Acquisition Event” is the acquisition by Borrower of marketing rights in the United States to KeveyisTM (dichlorphenamide), as well as an exclusive license in the United States to the trademark KeveyisTM, in each case from an affiliate of Taro Pharmaceutical Industries Ltd.

 

“Keveyis Net Product Revenue” is calculated as gross product revenue of Keveyis® less (a) trade allowances, such as discounts for prompt payment, (b) estimated government rebates and chargebacks, (c) reserves for expected product returns, (d) estimated costs of any patient co-pay assistance program, and (e) any other revenue deductions in accordance with GAAP.

 

“Key Person” is each of Borrower’s (i) Chief Executive Officer, who is Matthew Pauls as of the Effective Date, (ii) Chief Financial Officer, who is A. Brian Davis as of the Effective Date and (iii) Senior Vice President, Global Research & Development, who is Fredric Cohen as of the Effective Date.

 

“Lender” is any one of the Lenders.

 

“Lenders” are the Persons identified on Schedule 1.1 hereto and each assignee that becomes a party to this Agreement pursuant to Section 12.1.

 

“Lenders’ Expenses” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses, as well as appraisal fees, fees incurred on account of lien searches, inspection fees, and filing fees) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred by Oxford in connection with the Loan Documents.

 

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest, or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.

 

“Loan Documents” are, collectively, this Agreement, the Officer’s Certificates, the Warrants, the Perfection Certificates, each Compliance Certificate, each Disbursement Letter, the IP Agreement, the Cayman Security Documents, the Swedish Security Document, the Irish Security Documents, any subordination agreements, any note, or notes or guaranties executed by Borrower or any other Person, and any other present or future agreement entered into by Borrower, any Guarantor or any other Person for the benefit of the Lenders and Collateral Agent in connection with this Agreement; all as amended, amended and restated, supplemented or otherwise modified.

 

“Material Adverse Change” is (a) a material impairment in the perfection or priority of Collateral Agent’s Lien or any Lender’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations or condition (financial or otherwise) of Borrower or any Subsidiary; or (c) a material impairment of the prospect of repayment of any portion of the Obligations.

 

“Maturity Date” is, for each Term Loan, December 1, 2020.

 

“Net Product Revenue” is gross product revenue of the Irish Borrower less (a) trade allowances, such as discounts for prompt payment, (b) estimated government rebates and chargebacks, (c) reserves for expected product returns, (d) estimated costs of any patient co-pay assistance program, and (e) any other revenue deductions in accordance with GAAP.

 

“Non-US Lender” shall have the meaning assigned to such term in Section 2.6(b).

 

“Obligations” are all of Borrower’s obligations to pay when due any debts, principal, interest, Lenders’ Expenses, the Prepayment Fee, the Final Payment, and other amounts Borrower owes the Lenders now or later, in connection with, related to, following, or arising from, out of or under, this Agreement or, the other Loan Documents (other than the Warrants), or otherwise, and including interest accruing after Insolvency Proceedings begin (whether or not allowed) and debts, liabilities, or obligations of Borrower assigned to the Lenders and/or Collateral Agent, and the performance of Borrower’s duties under the Loan Documents (other than the Warrants).

 

“OFAC” is the U.S. Department of Treasury Office of Foreign Assets Control.

 

“OFAC Lists” are, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders.

 

“Officer’s Certificates” are the corporate borrowing certificates for Borrower (which, in the case of Irish Borrower, shall be executed by a director and, in the case of Swedish Borrower, shall be executed by an authorized signatory) to be delivered as a condition precedent under Section 3.1(i).

 

“Operating Documents” are, for any Person, such Person’s constitutional documents, formation documents and/or certificate of incorporation (or equivalent thereof), as certified by the Secretary of State (or equivalent agency) of such Person’s jurisdiction of organization on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto or in all such cases, the equivalent thereof in any relevant jurisdiction.

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.

 

“Payment Date” is the first (1st) calendar day of each calendar month, commencing on February 1, 2017.

 

“Perfection Certificate” and “Perfection Certificates” is defined in Section 5.1.

 

“Permitted Bank of America Account” means a Deposit Account of Borrower held at Bank of America, N.A. for not more than 30 days from the Effective Date without a Control Agreement in favor of the Collateral Agent, for the ratable benefit of the Lenders, in an amount not to exceed at any time the lesser of (i) $5,000,000.00, or (ii) an amount of Borrower’s cash and Cash Equivalents in excess of an amount equal to 1.5 times the outstanding principal balance of the Term Loans.

 

“Permitted Indebtedness” is:

 

(a)                                 Borrower’s Indebtedness to the Lenders and Collateral Agent under this Agreement and the other Loan Documents;

 

(b)                                 Indebtedness existing on the Effective Date and disclosed on the Perfection Certificate(s);

 

(c)                                  Subordinated Debt;

 

(d)                                 unsecured Indebtedness to trade creditors incurred in the ordinary course of business and aged less than one hundred eighty (180) days;

 

(e)                                  Indebtedness consisting of capitalized lease obligations and purchase money Indebtedness, in each case incurred by Borrower or any of its Subsidiaries to finance the acquisition, repair, improvement or construction of fixed or capital assets of such person, provided that (i) the aggregate outstanding principal amount of all such Indebtedness does not exceed One Hundred Thousand Dollars ($100,000.00) at any time and (ii) the principal amount of such Indebtedness does not exceed the lower of the cost or fair market value of the property so acquired or built or of such repairs or improvements financed with such Indebtedness (each measured at the time of such acquisition, repair, improvement or construction is made);

 

(f)                                   Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of Borrower’s business;

 

(g)                                  Indebtedness not to exceed $100,000.00 in the aggregate at any one time outstanding owed to Bank of America, N.A. or any of its Affiliates under a corporate credit card program between the Borrower and such lender; and

 

(h)                                 extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (e)  and (g) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose materially more burdensome terms upon Borrower, or its Subsidiary, as the case may be.

 

“Permitted Investments” are:

 

(a)                                 Investments disclosed on the Perfection Certificate(s) and existing on the Effective Date;

 

(b)                                 (i) Investments consisting of cash and Cash Equivalents, and (ii) any other Investments permitted by Borrower’s investment policy, as amended from time to time, provided that such investment policy (and any such amendment thereto) has been approved in writing by Collateral Agent;

 

(c)                                  Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

(d)           Investments consisting of deposit accounts in which Collateral Agent has a perfected security interest;

 

(e)           Investments in connection with Transfers permitted by Section 7.1;

 

(f)            (i) Investments by a Borrower or a Guarantor in another Borrower or Guarantor, and (ii) other Investments by Borrower or Guarantor in Subsidiaries that are not a Borrower or a Guarantor (other than BioPancreate Inc.) not to exceed One Hundred Thousand Dollars ($100,000.00) in any given fiscal year, provided that in no event may any investment permitted hereunder result in a violation of Section 7.12 hereof;

 

(g)           Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) subject to an applicable Requirement of Law, loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors; not to exceed One Hundred Thousand Dollars ($100,000.00) in the aggregate for (i) and (ii) in any fiscal year;

 

(h)           Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;

 

(i)            Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (i) shall not apply to Investments of Borrower in any Subsidiary; and

 

(j)            non-cash Investments in joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support.

 

“Permitted Licenses” are (A) licenses granted in accordance with Section 4.1, (B) licenses of over-the-counter software that is commercially available to the public, and (C) non-exclusive and exclusive licenses for the use of the Intellectual Property of Borrower or any of its Subsidiaries entered into in the ordinary course of business, provided, that, with respect to each such license described in clause (C), (i) no Event of Default has occurred or is continuing at the time of such license; (ii) the license constitutes an arms-length transaction, the terms of which, on their face, do not provide for a sale or assignment of any Intellectual Property and do not restrict the ability of Borrower or any of its Subsidiaries, as applicable, to pledge, grant a security interest in or lien on, or assign or otherwise Transfer any Intellectual Property; (iii) in the case of any exclusive license, (x) Borrower delivers ten (10) days’ prior written notice and a brief summary of the terms of the proposed license to Collateral Agent and the Lenders and delivers to Collateral Agent and the Lenders copies of the final executed licensing documents in connection with the exclusive license promptly upon consummation thereof, and (y) any such license could not result in a legal transfer of title of the licensed property but may be exclusive in respects other than territory and may be exclusive as to territory only as to discrete geographical areas outside of the United States; and (iv) all upfront payments, royalties, milestone payments or other proceeds arising from the licensing agreement that are payable to Borrower or any of its Subsidiaries are paid to a Deposit Account that is governed by a Control Agreement.

 

“Permitted Liens” are:

 

(a)           Liens existing on the Effective Date and disclosed on the Perfection Certificates or  arising under this Agreement and the other Loan Documents;

 

(b)           Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

(c)           liens securing Indebtedness permitted under clause (e) of the definition of “Permitted Indebtedness,” provided that (i) such liens exist prior to the acquisition of, or attach substantially simultaneous with, or within twenty (20) days after the, acquisition, lease, repair, improvement or construction of, such property financed or leased by such Indebtedness and (ii) such liens do not extend to any property of Borrower other than the property (and proceeds thereof) acquired, leased or built, or the improvements or repairs, financed by such Indebtedness;

 

(d)           liens securing Indebtedness permitted under clause (g) of the definition of “Permitted Indebtedness” provided that such liens only attach to cash collateral located in an account of Borrower held at the lender of such Indebtedness in an amount not to exceed $100,000.00 at any one time;

 

(e)           Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed Twenty Five Thousand Dollars ($25,000.00), and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;

 

(f)            Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);

 

(g)           Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;

 

(h)           leases or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses do not prohibit granting Collateral Agent or any Lender a security interest therein;

 

(i)            banker’s liens, rights of setoff and Liens in favor of financial institutions incurred in the ordinary course of business arising in connection with Borrower’s deposit accounts or securities accounts held at such institutions solely to secure payment of fees and similar costs and expenses and provided such accounts are maintained in compliance with Section 6.6(b) hereof;

 

(j)            Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.4 or 8.7; and

 

(k)           Liens consisting of Permitted Licenses.

 

“Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.

 

“Positive Data Event” means Collateral Agent’s and Lenders’ receipt, on or before March 31, 2018, of the following, in such form and substance as are acceptable to Collateral Agent and Lenders in their respective discretion: (i) evidence of meeting of primary endpoint within the overall group of SONICS (COR-2012-01) as described in Protocol Amendment #6 to SONICS dated 25 October 2016, filed with the US Food and Drug Administration to IND #115,968 on 22 November 2016 (Serial #047) along with evidence from the same study that COR-003 has an acceptable safety profile, in the opinion of the study’s Independent Data Safety Monitoring Board (as reflected in meeting minutes), which combined evidence supports continued development of the drug, (ii) a Responsible Officer’s certificate certifying that the primary endpoint within the overall group of SONICS (COR-2012-01) as described in Protocol Amendment #6 to SONICS dated 25 October 2016, filed with the US Food and 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

Drug Administration to IND #115,968 on 22 November 2016 (Serial #047) has been met along with evidence from the same study that COR-003 has an acceptable safety profile, in the opinion of the study’s Independent Data Safety Monitoring Board (as reflected in meeting minutes), which combined evidence supports continued development of the drug and (iii) a copy of a press release issued by the Borrower announcing that the events described in clause (i) hereof have occurred.

 

“Prepayment Fee” is, with respect to any Term Loan subject to prepayment prior to the Maturity Date, whether by mandatory or voluntary prepayment, acceleration or otherwise, an additional fee payable to the Lenders in amount equal to:

 

(i)            for a prepayment made on or after the Funding Date of such Term Loan through and including the first anniversary of the Funding Date of such Term Loan, four percent (4.00%) of the outstanding principal amount of such Term Loan prepaid;

 

(ii)           for a prepayment made after the date which is after the first anniversary of the Funding Date of such Term Loan through and including the second anniversary of the Funding Date of such Term Loan, three percent (3.00%) of the outstanding principal amount of such Term Loan prepaid; and

 

(iii)          for a prepayment made after the date which is after the second anniversary of the Funding Date of such Term Loan and prior to the Maturity Date, two percent (2.00%) of the outstanding principal amount of such Term Loan prepaid.

 

“Pro Rata Share” is, as of any date of determination, with respect to each Lender, a percentage (expressed as a decimal, rounded to the ninth decimal place) determined by dividing the outstanding principal amount of Term Loans held by such Lender by the aggregate outstanding principal amount of all Term Loans.

 

“Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.

 

“Required Lenders” means (i) for so long as all of the Persons that are Lenders on the Effective Date (each an “Original Lender”) have not assigned or transferred any of their interests in their Term Loan, Lenders holding one hundred percent (100%) of the aggregate outstanding principal balance of the Term Loan, or (ii) at any time from and after any Original Lender has assigned or transferred any interest in its Term Loan, Lenders holding at least sixty six percent (66%) of the aggregate outstanding principal balance of the Term Loan and, in respect of this clause (ii), (A) each Original Lender that has not assigned or transferred any portion of its Term Loan, (B) each assignee or transferee of an Original Lender’s interest in the Term Loan, but only to the extent that such assignee or transferee is an Affiliate or Approved Fund of such Original Lender, and (C) any Person providing financing to any Person described in clauses (A) and (B) above; provided, however, that this clause (C) shall only apply upon the occurrence of a default, event of default or similar occurrence with respect to such financing.

 

“Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

 

“Responsible Officer” is any of the President, Chief Executive Officer, or Chief Financial Officer of Borrower acting alone (provided, in the case of Irish Borrower, such person is also a director) or in the case of Swedish Borrower, an authorized signatory.

 

“Second Draw Period” is the period commencing on the date that is the later of the (i) the date of the occurrence of the First Revenue Event, (ii) Positive Data Event and (iii) the date of the occurrence of the Second Equity Event and ending on the earliest of (i) the date that is thirty (30) days immediately following the date of on which the Second Draw Period commenced, (ii) April 30, 2018 and (iii) the occurrence of an Event of Default; provided, however, that the Second Draw Period shall not commence if on the date of the occurrence of the First Revenue Event, the date of occurrence of the Positive Data Event or the date of the occurrence of the Second Equity 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

Event, an Event of Default has occurred and is continuing; provided, further, that the Second Draw Period shall not commence until all of the First Revenue Event, Positive Data Event and the Second Equity Event have occurred.

 

“Second Equity Event” is the receipt by Irish Borrower on or after November 14, 2016 and on or prior to March 31, 2018 of unrestricted gross cash proceeds of not less than Thirty Million Dollars ($30,000,000.00), which amount shall include the proceeds received as part of the equity financing transaction constituting the First Equity Event, from the issuance and sale by Borrower of its equity securities.

 

“Second Revenue Event” is the achievement by U.S. Borrower on or after the Effective Date and on or before June 30, 2018 of consolidated trailing six-month Keveyis Net Product Revenues of at least [****] Dollars ($[****]), as determined by Collateral Agent based upon written evidence satisfactory to Collateral Agent.

 

“Secured Promissory Note” is defined in Section 2.4.

 

“Secured Promissory Note Record” is a record maintained by each Lender with respect to the outstanding Obligations owed by Borrower to Lender and credits made thereto.

 

“Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.

 

“Shares” is one hundred percent (100%) of the issued and outstanding capital stock, membership units or other securities owned or held of record by Borrower or Borrower’s Subsidiary, in any Subsidiary.

 

“Solvent” is, with respect to any Person: the fair salable value of such Person’s consolidated assets (including goodwill minus disposition costs) exceeds the fair value of such Person’s liabilities (or, in the case of Irish Borrower, the value of its assets is not less than its liabilities (taking into account contingent and prospective liabilities)); such Person is not left with unreasonably small capital after the transactions in this Agreement; and such Person is able to pay its debts (including trade debts) as they mature and is not deemed or declared to be unable to pay its debts under applicable law.

 

“Subordinated Debt” is indebtedness incurred by Borrower or any of its Subsidiaries party to a Loan Document subordinated to all Indebtedness of Borrower and/or its Subsidiaries party to a Loan Document to the Lenders (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Collateral Agent and the Lenders entered into between Collateral Agent, Borrower, and/or any of its Subsidiaries party to a Loan Document, and the other creditor), on terms acceptable to Collateral Agent and the Lenders.

 

“Subsidiary” is, with respect to any Person, any Person of which more than fifty percent (50%) of the voting stock or other equity interests (in the case of Persons other than corporations) is owned or controlled, directly or indirectly, by such Person or through one or more intermediaries.

 

“Swedish Collateral Accounts” means the Collateral Accounts maintained by the Swedish Borrower in Sweden.

 

“Swedish Security Document” means the all-asset debenture entered into by Swedish Borrower in furtherance hereof, incorporating first ranking fixed and floating charges over all of its assets and undertaking, including, but not limited to, a fixed charge over the Swedish Collateral Accounts.

 

“Swedish Share Pledge” means the Swedish law-governed share pledge entered into by Irish Borrower with respect to Shares in the Swedish Borrower.

 

“TCA” means the Irish Taxes Consolidation Act 1997.

 

“Term A Loan” is defined in Section 2.2(a)(i) hereof.

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

“Term B Loan” is defined in Section 2.2(a)(ii) hereof.

 

“Term C Loan” is defined in Section 2.2(a)(iii) hereof.

 

“Term Loan” is defined in Section 2.2(a)(iii) hereof.

 

“Term Loan Commitment” is, for any Lender, the obligation of such Lender to make a Term Loan, up to the principal amount shown on Schedule 1.1.  “Term Loan Commitments” means the aggregate amount of such commitments of all Lenders.

 

“Third Draw Period” is the period commencing on the date that is later of the (i) the date of the occurrence of the Second Revenue Event and (ii) the Funding Date of the Term B Loans and ending on the earliest of (i) the date that is thirty (30) days immediately following the date of on which the Third Draw Period commenced, (ii) June 30, 2018 and (iii) the occurrence of an Event of Default; provided, however, that the Third Draw Period shall not commence if on the date of the occurrence of the Second Revenue Event an Event of Default has occurred and is continuing; provided, further, that the Third Draw Period shall not commence until the Second Revenue Event and the funding of the Term B Loans have occurred.

 

“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.

 

“Transfer” is defined in Section 7.1.

 

“U.S. Collateral Account” means Borrower’s Collateral Account that is maintained in the United States and is subject to a Control Agreement in favor of Collateral Agent.

 

“Warrants” are those certain Warrants to Purchase Stock dated as of the Effective Date, or any date thereafter, issued by Irish Borrower in favor of each Lender or such Lender’s Affiliates.

 

[Balance of Page Intentionally Left Blank]

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed (in the case of Irish Borrower, as a deed) as of the Effective Date.

 

	
BORROWER:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
STRONGBRIDGE   BIOPHARMA PUBLIC LIMITED COMPANY
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
/s/   Stephen Long
    	
 
    	
 
    
	
Name:
    	
Stephen   Long
    	
 
    	
 
    
	
Title:
    	
Chief Legal Officer
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
CORTENDO   AB
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
/s/   Stephen Long
    	
 
    	
 
    
	
Name:
    	
Stephen   Long
    	
 
    	
 
    
	
Title:
    	
Authorized Officer
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
STRONGBRIDGE U.S. INC.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
/s/   Stephen Long
    	
 
    	
 
    
	
Name:
    	
Stephen   Long
    	
 
    	
 
    
	
Title:
    	
Chief Legal Officer
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
CORTENDO CAYMAN LTD.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
/s/   Stephen Long
    	
 
    	
 
    
	
Name:
    	
Stephen   Long
    	
 
    	
 
    
	
Title:
    	
Director
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
LENDER AND COLLATERAL AGENT:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
OXFORD FINANCE LLC
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
/s/ Mark Davis
    	
 
    	
 
    
	
Name:
    	
Mark Davis
    	
 
    	
 
    
	
Title:
    	
Vice President of Finance
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
LENDER:
    
	
 
    	
 
    	
 
    
	
HORIZON TECHNOLOGY   FINANCE CORPORATION
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By
    	
/s/ Robert D. Pomeroy,   Jr.
    
	
 
    	
 
    	
Name:
    	
Robert D. Pomeroy, Jr.
    
	
 
    	
 
    	
Title:
    	
Chief Executive Officer
    

 

[Signature Page to Loan and Security Agreement]

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

SCHEDULE 1.1

 

Lenders and Commitments

 

Term A Loans

 

	
Lender
    	
 
    	
Term Loan Commitment
    	
 
    	
Commitment Percentage
    	
 
    
	
OXFORD FINANCE LLC
    	
 
    	
$
    	
12,500,000.00
    	
 
    	
62.5
    	
%
    
	
HORIZON TECHNOLOGY FINANCE CORPORATION
    	
 
    	
$
    	
7,500,000.00
    	
 
    	
37.5
    	
%
    
	
TOTAL
    	
 
    	
$
    	
20,000,000.00
    	
 
    	
100.00
    	
%
    

 

Term B Loans

 

	
Lender
    	
 
    	
Term Loan Commitment
    	
 
    	
Commitment Percentage
    	
 
    
	
OXFORD FINANCE LLC
    	
 
    	
$
    	
6,250,000.00
    	
 
    	
62.5
    	
%
    
	
HORIZON TECHNOLOGY FINANCE CORPORATION
    	
 
    	
$
    	
3,750,000.00
    	
 
    	
37.5
    	
%
    
	
TOTAL
    	
 
    	
$
    	
10,000,000.00
    	
 
    	
100.00
    	
%
    

 

Term C Loans

 

	
Lender
    	
 
    	
Term Loan Commitment
    	
 
    	
Commitment Percentage
    	
 
    
	
OXFORD FINANCE LLC
    	
 
    	
$
    	
6,250,000.00
    	
 
    	
62.5
    	
%
    
	
HORIZON TECHNOLOGY FINANCE CORPORATION
    	
 
    	
$
    	
3,750,000.00
    	
 
    	
37.5
    	
%
    
	
TOTAL
    	
 
    	
$
    	
10,000,000.00
    	
 
    	
100.00
    	
%
    

 

Aggregate (all Term Loans)

 

	
Lender
    	
 
    	
Term Loan Commitment
    	
 
    	
Commitment Percentage
    	
 
    
	
OXFORD FINANCE LLC
    	
 
    	
$
    	
25,000,000.00
    	
 
    	
62.5
    	
%
    
	
HORIZON TECHNOLOGY FINANCE CORPORATION
    	
 
    	
$
    	
15,000,000.00
    	
 
    	
37.5
    	
%
    
	
TOTAL
    	
 
    	
$
    	
40,000,000.00
    	
 
    	
100.00
    	
%
    

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

EXHIBIT A

 

Description of Collateral

 

The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (including all Intellectual Property, commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts and other Collateral Accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other personal property, investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and

 

All Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

EXHIBIT B

 

Form of Disbursement Letter

 

[see attached]

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

DISBURSEMENT LETTER

 

[DATE]

 

The undersigned, being the duly elected and acting                                            of                              STRONGBRIDGE BIOPHARMA PUBLIC LIMITED COMPANY, a public limited company incorporated under the laws of Ireland with company number 562659 and having its registered office at Arthur Cox Building, Earlsfort Terrace, Dublin 2, Ireland, on behalf of itself and each other Borrower under the Loan Agreement (as defined below) (individually and collectively, jointly and severally, “Borrower”), does hereby certify to OXFORD FINANCE LLC (“Oxford” and “Lender”), as collateral agent (the “Collateral Agent”) and in connection with that certain Loan and Security Agreement dated as of December [_], 2016, by and among Borrower, Collateral Agent and the Lenders from time to time party thereto (the “Loan Agreement”; with other capitalized terms used below having the meanings ascribed thereto in the Loan Agreement) that:

 

1.             The representations and warranties made by Borrower in Section 5 of the Loan Agreement and in the other Loan Documents are true and correct in all material respects as of the date hereof.

 

2.             No event or condition has occurred that would constitute an Event of Default under the Loan Agreement or any other Loan Document.

 

3.             Borrower is in compliance with the covenants and requirements contained in Sections 4, 6 and 7 of the Loan Agreement.

 

4.             All conditions referred to in Section 3 of the Loan Agreement to the making of the Loan to be made on or about the date hereof have been satisfied or waived by Collateral Agent.

 

5.             No Material Adverse Change has occurred.

 

6.             The undersigned is a Responsible Officer.

 

[Balance of Page Intentionally Left Blank]

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

7.             The proceeds of the Term [A][B][C] Loan shall be disbursed to US Borrower as follows:

 

	
 
    	
Disbursement   from Oxford:
    	
 
    	
 
    	
 
    
	
 
    	
Loan Amount
    	
 
    	
$                       
    	
 
    
	
 
    	
Plus:
    	
 
    	
 
    	
 
    
	
 
    	
—Deposit   Received
    	
 
    	
$              
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Less:
    	
 
    	
 
    	
 
    
	
 
    	
—Facility Fee
    	
 
    	
($             
    	
)
    
	
 
    	
[—Interim   Interest
    	
 
    	
($               
    	
)]
    
	
 
    	
—Lender’s Legal   Fees
    	
 
    	
($             
    	
)*
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Net   Proceeds due from Oxford:
    	
 
    	
$                       
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Disbursement   from Horizon:
    	
 
    	
 
    	
 
    
	
 
    	
Loan Amount
    	
 
    	
$                       
    	
 
    
	
 
    	
Plus:
    	
 
    	
 
    	
 
    
	
 
    	
—Deposit   Received
    	
 
    	
$               
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Less:
    	
 
    	
 
    	
 
    
	
 
    	
—Facility Fee
    	
 
    	
($             
    	
)
    
	
 
    	
[—Interim Interest
    	
 
    	
($               
    	
)]
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Net   Proceeds due from Horizon:
    	
 
    	
$                       
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
TOTAL   TERM [A][B][C] LOAN NET PROCEEDS FROM LENDERS
    	
 
    	
$                       
    	
 
    

 

8.             The [initial][Term Loan][Term A Loan] shall amortize in accordance with the Amortization Table attached hereto.

 

9.             The aggregate net proceeds of the Term Loans shall be transferred to the Designated Deposit Account as follows:

 

	
 
    	
Account Name:
    	
 
    	
[BORROWER]
    	
 
    
	
 
    	
Bank Name:
    	
 
    	
[       ]
    	
 
    
	
 
    	
Bank Address:
    	
 
    	
[       ]
    	
 
    
	
 
    	
Account Number:
    	
 
    	
 
    	
 
    
	
 
    	
ABA Number:
    	
 
    	
[       ]
    	
 
    

 

[Balance of Page Intentionally Left Blank]

 

* Legal fees and costs are through the Effective Date.  Post-closing legal fees and costs, payable after the Effective Date, to be invoiced and paid post-closing.

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

Dated as of the date first set forth above.

 

	
BORROWER:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
STRONGBRIDGE   BIOPHARMA PUBLIC LIMITED   COMPANY, on behalf of itself and all other Borrowers
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
COLLATERAL AGENT AND LENDER:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
OXFORD FINANCE LLC
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
LENDER:
    	
 
    	
 
    
	
HORIZON TECHNOLOGY FINANCE CORPORATION
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    

 

[Signature Page to Disbursement Letter]

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

AMORTIZATION TABLE
  (Term [A][B][C] Loan)

 

[see attached]

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

EXHIBIT C

 

Compliance Certificate

 

	
TO:
    	
 
    	
OXFORD FINANCE LLC, as Collateral Agent and Lender
   HORIZON TECHNOLOGY FINANCE CORPORATION, as Lender
    
	
 
    	
 
    	
 
    
	
FROM:
    	
 
    	
STRONGBRIDGE BIOPHARMA PUBLIC LIMITED COMPANY,   on behalf of itself and all other Borrowers
    

 

The undersigned authorized officer (“Officer”) of STRONGBRIDGE BIOPHARMA PUBLIC LIMITED COMPANY, on behalf of itself and all other Borrowers under and as defined in the Loan Agreement (as defined herein below) (individually and collectively, jointly and severally, “Borrower”), hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement by and among Borrower, Collateral Agent, and the Lenders from time to time party thereto (the “Loan Agreement;” capitalized terms used but not otherwise defined herein shall have the meanings given them in the Loan Agreement),

 

(a)                                 Borrower is in complete compliance for the period ending                 with all required covenants except as noted below;

 

(b)                                 There are no Events of Default, except as noted below;

 

(c)                                  Except as noted below, all representations and warranties of Borrower stated in the Loan Documents are true and correct in all material respects on this date and for the period described in (a), above; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date.

 

(d)                                 Borrower, and each of Borrower’s Subsidiaries, has timely filed all required tax returns and reports, Borrower, and each of Borrower’s Subsidiaries, has timely paid all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower, or Subsidiary, except as otherwise permitted pursuant to the terms of Section 5.8 of the Loan Agreement;

 

(e)                                  No Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Collateral Agent and the Lenders.

 

Attached are the required documents, if any, supporting our certification(s).  The Officer, on behalf of Borrower, further certifies that the attached financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes and except, in the case of unaudited financial statements, for the absence of footnotes and subject to year-end audit adjustments as to the interim financial statements.

 

Please indicate compliance status since the last Compliance Certificate by circling Yes, No, or N/A under “Complies” column.

 

	
 
    	
 
    	
Reporting Covenant
    	
 
    	
Requirement
    	
 
    	
Actual
    	
 
    	
Complies
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1)
    	
 
    	
Financial statements
    	
 
    	
Monthly within 30 days
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2)
    	
 
    	
Annual (CPA Audited) statements
    	
 
    	
Within 120 days after FYE
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

	
3)
    	
 
    	
Annual Financial Projections/Budget (prepared on a   monthly basis)
    	
 
    	
Annually (within 30 days of FYE), and when revised
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
4)
    	
 
    	
A/R & A/P agings
    	
 
    	
If applicable
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
5)
    	
 
    	
8-K, 10-K and 10-Q Filings
    	
 
    	
If applicable, within 5 days of filing
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
6)
    	
 
    	
Compliance Certificate
    	
 
    	
Monthly within 30 days
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
7)
    	
 
    	
IP Report
    	
 
    	
When required
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
8)
    	
 
    	
Total amount of Borrower’s cash and cash equivalents   at the last day of the measurement period
    	
 
    	
 
    	
 
    	
$
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
9)
    	
 
    	
Total amount of Borrower’s Subsidiaries’ cash and   cash equivalents at the last day of the measurement period
    	
 
    	
 
    	
 
    	
$
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    

 

Deposit and Securities Accounts

(Please list all accounts; attach separate sheet if additional space needed)

 

	
 
    	
 
    	
Account
   Holder
    	
 
    	
Institution
   Name
    	
 
    	
Account
   Number
    	
 
    	
New
   Account?
    	
 
    	
Account Control Agreement in
   place?
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
3)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
4)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
Yes
    	
 
    	
No
    

 

Financial Covenants

 

	
 
    	
 
    	
Covenant
    	
 
    	
Requirement
    	
 
    	
Actual
    	
 
    	
Compliance
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1)
    	
 
    	
Minimum Product Revenues
   (trailing twelve months)]
    	
 
    	
As shown in the officer’s certificate referenced in   Section 6.2(a)(iii) or at least 80% of Annual Net Product Revenue   Projections
    	
 
    	
[      %]
    	
 
    	
Yes
    	
 
    	
No
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
[$         ]
    	
 
    	
[$            ]
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

Other Matters

 

	
1)
    	
 
    	
Have there been any changes in management since the   last Compliance Certificate?
    	
 
    	
Yes
    	
 
    	
No
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2)
    	
 
    	
Have there been any   transfers/sales/disposals/retirement of Collateral or IP prohibited by the   Loan Agreement?
    	
 
    	
Yes
    	
 
    	
No
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
3)
    	
 
    	
Have there been any new or pending claims or causes   of action against Borrower that involve more than One Hundred Thousand   Dollars ($100,000.00)?
    	
 
    	
Yes
    	
 
    	
No
    	
 
    

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

	
4)
    	
 
    	
Have there been any amendments of or other changes   to the capitalization table of Borrower and to the Operating Documents of   Borrower or any of its Subsidiaries?    If yes, provide copies of any such amendments or changes with this   Compliance Certificate.
    	
 
    	
Yes
    	
 
    	
No
    	
 
    

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

Exceptions

 

Please explain any exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions.”  Attach separate sheet if additional space needed.)

 

STRONGBRIDGE BIOPHARMA PUBLIC LIMITED COMPANY, on behalf of itself and all other Borrowers

 

	
By
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
 
    

 

	
 
    	
 
    
	
 
    	
LENDER   USE ONLY
    
	
 
    	
 
    
	
 
    	
Received   by:
    	
 
    	
Date:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Verified   by:
    	
 
    	
Date:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Compliance   Status:                 Yes                 No
    

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

EXHIBIT D

 

Form of Secured Promissory Note

 

[see attached]

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

SECURED PROMISSORY NOTE
 (Term [A][B][C] Loan)

 

	
$
    	
Dated: [DATE]
    

 

FOR VALUE RECEIVED, the undersigned, and STRONGBRIDGE BIOPHARMA PUBLIC LIMITED COMPANY, a public limited company incorporated under the laws of Ireland with company number 562659 and having its registered office at Arthur Cox Building, Earlsfort Terrace, Dublin 2 (“Irish Borrower”), CORTENDO CAYMAN LTD., an exempted company incorporated in the Cayman Islands with its registered office located at Maples Corporate Services PO Box 309 Ugland House Grand Cayman KY1-1104 (“Cayman Borrower”), CORTENDO AB (PUBL), a public limited company incorporate under the laws of Sweden with corporate identity number 556537-6554 and having its registered office at Box 47 433 21 Partille Gothenburg Sweden (“Swedish Borrower”) and STRONGBRIDGE U.S. INC., a Delaware corporation with an office located at 900 Northbrook Drive, Suite 200, Trevose, Pennsylvania 19053 (“US Borrower” and together with Irish Borrower, Cayman Borrower and Swedish Borrower, individually and collectively, jointly and severally, “Borrower”) HEREBY PROMISES TO PAY [OXFORD FINANCE LLC][ HORIZON TECHNOLOGY FINANCE CORPORATION] (“Lender”) the principal amount of [           ] MILLION DOLLARS ($              ) or such lesser amount as shall equal the outstanding principal balance of the Term [A][B][C] Loan made to Borrower by Lender, plus interest on the aggregate unpaid principal amount of such Term [A][B][C] Loan, at the rates and in accordance with the terms of the Loan and Security Agreement dated [DATE] by and among Borrower, Lender, Oxford Finance LLC, as Collateral Agent, and the other Lenders from time to time party thereto (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”).  If not sooner paid, the entire principal amount and all accrued and unpaid interest hereunder shall be due and payable on the Maturity Date as set forth in the Loan Agreement.  Any capitalized term not otherwise defined herein shall have the meaning attributed to such term in the Loan Agreement.

 

Principal, interest and all other amounts due with respect to the Term [A][B][C] Loan, are payable in lawful money of the United States of America to Lender as set forth in the Loan Agreement and this Secured Promissory Note (this “Note”).  The principal amount of this Note and the interest rate applicable thereto, and all payments made with respect thereto, shall be recorded by Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Note.

 

The Loan Agreement, among other things, (a) provides for the making of a secured Term [A][B][C] Loan by Lender to Borrower, and (b) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events.

 

This Note may not be prepaid except as set forth in Section 2.2 (c) and Section 2.2(d) of the Loan Agreement.

 

This Note and the obligation of Borrower to repay the unpaid principal amount of the Term [A][B][C] Loan, interest on the Term [A][B][C] Loan and all other amounts due Lender under the Loan Agreement is secured under the Loan Agreement.

 

Presentment for payment, demand, notice of protest and all other demands and notices of any kind in connection with the execution, delivery, performance and enforcement of this Note are hereby waived.

 

Borrower shall pay all reasonable fees and expenses, including, without limitation, reasonable attorneys’ fees and costs, incurred by Lender in the enforcement or attempt to enforce any of Borrower’s obligations hereunder not performed when due.

 

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

 

The ownership of an interest in this Note shall be registered on a record of ownership maintained by Lender or its agent.  Notwithstanding anything else in this Note to the contrary, the right to the principal of, and stated interest on, this Note may be transferred only if the transfer is registered on such record of ownership and the transferee is 

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

identified as the owner of an interest in the obligation.  Borrower shall be entitled to treat the registered holder of this Note (as recorded on such record of ownership) as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Note on the part of any other person or entity.

 

[Balance of Page Intentionally Left Blank]

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers thereunto duly authorized on the date hereof.

 

	
 
    	
BORROWER:
    
	
 
    	
 
    
	
 
    	
STRONGBRIDGE BIOPHARMA
    
	
 
    	
PUBLIC LIMITED COMPANY
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BORROWER:
    
	
 
    	
 
    
	
 
    	
CORTENDO   AB
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BORROWER:
    
	
 
    	
 
    
	
 
    	
STRONGBRIDGE U.S. INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BORROWER:
    
	
 
    	
 
    
	
 
    	
CORTENDO CAYMAN LTD.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL

 

	
Name of
   Borrower
   Receiving Term
   [A][B][C] Loan
    	
 
    	
Date
    	
 
    	
Principal
   Amount
    	
 
    	
Interest Rate
    	
 
    	
Scheduled
   Payment
   Amount
    	
 
    	
Notation By
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Strongbridge U.S. Inc.
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

CORPORATE BORROWING CERTIFICATE

 

	
BORROWER:
    	
[BORROWER]
    	
DATE:   [DATE]
    
	
LENDER[S]:
    	
OXFORD FINANCE LLC, as Collateral Agent and Lender
    	
 
    
	
 
    	
HORIZON   TECHNOLOGY FINANCE CORPORATION, as   Lender
    	
 
    

 

 

I hereby certify as follows, as of the date set forth above:

 

1.             I am the Secretary, Assistant Secretary or other officer of Borrower.  My title is as set forth below.

 

2.             Borrower’s exact legal name is set forth above.  Borrower is a [BORROWER ORGANIZATION] existing under the laws of the State of [BORROWER STATE].

 

3.             Attached hereto as Exhibit A and Exhibit B, respectively, are true, correct and complete copies of (i) Borrower’s Articles/Certificate of Incorporation (including amendments), as filed with the Secretary of State of the state in which Borrower is incorporated as set forth in paragraph 2 above; and (ii) Borrower’s Bylaws.  Neither such Articles/Certificate of Incorporation nor such Bylaws have been amended, annulled, rescinded, revoked or supplemented, and such Articles/Certificate of Incorporation and such Bylaws remain in full force and effect as of the date hereof.

 

4.             The resolutions attached hereto as Exhibit C were duly and validly adopted by Borrower’s Board of Directors at a duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action).  Such resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and the Lenders may rely on them until each Lender receives written notice of revocation from Borrower.

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

[Balance of Page Intentionally Left Blank]

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

5.             The persons listed below are Borrower’s officers or employees with their titles and signatures shown next to their names and are authorized to act on behalf of Borrower.

 

	
Name
    	
 
    	
Title
    	
 
    	
Signature
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    

 

*** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or director of Borrower.

 

I, the                                      of Borrower, hereby certify as to paragraphs 1 through 5 above, as of the date set forth above.

                       [print title]

 

	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

[Signature Page to Corporate Borrowing Certificate

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

EXHIBIT A

 

Articles/Certificate of Incorporation (including amendments)

 

[see attached]

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

EXHIBIT B

 

Bylaws

 

[see attached]

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

EXHIBIT C

 

Resolutions

 

[see attached]

 

 

CONFIDENTIAL TREATMENT REQUESTED UNDER
 C.F.R. SECTIONS 200.80(b)(4), 200.83 AND 230.406.
 [****] INDICATES OMITTED MATERIAL THAT IS
 THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST
 FILED SEPARATELY WITH THE COMMISSION.
 THE OMITTED MATERIAL HAS BEEN FILED
 SEPARATELY WITH THE COMMISSION.

 

	
DEBTOR:
    	
[BORROWER]
    
	
SECURED   PARTY:
    	
OXFORD   FINANCE LLC,
    
	
 
    	
as   Collateral Agent
    

 

EXHIBIT A TO UCC FINANCING STATEMENT

 

Description of Collateral

 

The Collateral consists of all of Debtor’s right, title and interest in and to the following personal property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (including all Intellectual Property, commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts and other Collateral Accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and

 

All Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

 

Capitalized terms used but not defined herein have the meanings ascribed in the Uniform Commercial Code in effect in the State of New York as in effect from time to time (the “Code”) or, if not defined in the Code, then in the Loan and Security Agreement by and between Debtor, Secured Party and the other Lenders party thereto (as modified, amended and/or restated from time to time).elite_ex1085.htm

EXHIBIT 10.85
  
SEPARATION AND SETTLEMENT AGREEMENT
(Rimlinger)
 
This SEPARATION AND SETTLEMENT AGREEMENT (this “Agreement”) is entered into on January 10, 2017 (the “Effective Date”) by and among ELITE DATA SERVICES INC., a Delaware corporation (the “Company”), and CHARLES RIMLINGER (“Rimlinger”). The Company and Rimlinger are collectively referred to herein as the “Parties” and each as a “Party.” 
 
RECITALS
 
WHEREAS, Company is a technology driven management company which owns and operates businesses in areas of online marketing and gaming operations from two (2) subsidiaries: Elite Data Marketing LLC, and Elite Gaming Ventures LLC, collectively hereinafter referred to as (the “Company”);
 
WHEREAS, Rimlinger is the former Chief Executive Officer and Director for the Company, originally appointed on or about December 7, 2014 and serving in such positions until his recent resignation as the Chief Executive Officer and Director for the Company; 
 
WHEREAS, the Parties wish to resolve all claims either one or more of the Parties may have against the other Parties under, including but not limited to, any promises or commitments, verbal or written during any and all business transactions with each other and otherwise resolve their respective disputes on an amicable basis.
 
AGREEMENTS
 
NOW, THEREFORE, in consideration of the foregoing premises, and the covenants, representations and warranties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and accepted, the Parties, intending to be legally bound, hereby agree as follows:
 
1. Recitals. The Parties each acknowledge that the Recitals set forth above are true and accurate. Each of the Recitals is incorporated into this Agreement by reference and is made a part hereof.
 
2. Consideration. In consideration of the terms, representations, promises, settlements, waivers and releases contained in herein, the Company shall, on the Effective Date, issue to Rimlinger a one year Convertible Redeemable Note (the "Rimlinger Note") in the principal amount of USD $40,000, at a rate of ten percent (10%) per annum commencing on date of issuance, convertible into shares of the Company's common stock at a conversion price equal to the lesser of $0.01 per share or a discount of fifty-eight percent (58%) of the lowest trading price for the ten (10) prior trading days, and other terms and conditions set forth therein, in the form attached hereto as Exhibit A.
 
3. Releases.
 
(a) Rimlinger and his respective heirs, personal representatives, successors, assigns and all others claiming through or under them, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, does hereby release, acquit, and forever discharge Company Releasees (as defined below) and their respective present and former employees, officers, directors, members, managers, shareholders, agents, consultants, counselor representatives, and its successors and assigns (collectively, the “Company Releasees”), and each of them, of and from any and all obligations, claims, debts, demands, covenants, contracts, promises, agreements, liabilities, controversies, costs, expenses, attorneys’ fees, actions or causes of action of any nature whatsoever, in law or in equity, whether known or unknown, foreseen or unforeseen, accrued or not accrued, direct or indirect, which the Rickett ever had, now have, or can, shall or may have, up to the Effective Date, against the Company Releasees, or any of them, either alone or in combination with others.
    	 
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(b) Company behalf of itself and its respective successors and assigns and all others claiming through or under them, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, does hereby release, acquit, and forever discharge the Rimlinger and his respective heirs, personal representatives, successors, assigns (collectively, the “Rimlinger Releasees”), and each of them, of and from any and all obligations, claims, debts, demands, covenants, contracts, promises, agreements, liabilities, controversies, costs, expenses, attorneys’ fees, actions or causes of action of any nature whatsoever, in law or in equity, whether known or unknown, foreseen or unforeseen, accrued or not accrued, direct or indirect, which the Company ever had, now have, or can, shall or may have, up to the Effective Date, against the Rimlinger Releasees, or any of them, either alone or in combination with others.
 
4. Representations of the Company. Company, severally and not jointly, represents and warrants to Rimlinger as follows:
 
(a) Authority. Company has all requisite authority and power (corporate and other), authorizations, consents and approvals to enter into and deliver this Agreement and any other certificate, agreement, document or instrument to be executed and delivered by the Company in connection with the transactions contemplated hereby and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Company and the performance by Company of its obligations hereunder and the consummation by Company of the transactions contemplated hereby have been duly authorized by all necessary action on the part of such Company. Company does not need to give any notice to, make any filing with, or obtain any authorization, consent or approval of any person or governmental authority in order for the Parties to execute, deliver or perform this Agreement or the transactions contemplated hereby.
 
(b) Binding Obligations. Assuming this Agreement has been duly and validly authorized, executed and delivered by the Parties other than Company, this Agreement is duly authorized, executed and delivered by Company and constitutes the legal, valid and binding obligations of Company enforceable against Company in accordance with its terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors rights generally.
 
(c) No Conflicts. Neither the execution nor the delivery by Company, nor the consummation or performance by Company of the transactions contemplated hereby or thereby will, directly or indirectly, (a) contravene, conflict with, or result in a violation of any provision of the Company’s certificate of incorporation, certificate or organization, bylaws, operating agreement or partnership agreement, as applicable, (b) contravene, conflict with or result in a violation of any law, order, charge or other restriction or decree applicable to Company, or by which Company or any of its assets and properties are bound or affected, (c) contravene, conflict with, result in any breach of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, impair the rights of Company under, or alter the obligations of any person under, or create in any person the right to terminate, amend, accelerate or cancel, or require any notice, report or other filing (whether with a governmental authority or any other person) pursuant to, or result in the creation of a lien on any of the assets or properties of Company under, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Company is a party or by which Company or any of its assets and properties are bound or affected; or (d) contravene, conflict with, or result in a violation of, the terms or requirements of, or give any governmental authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any licenses, permits, authorizations, approvals, franchises or other rights held by Company or that otherwise relate to the business of, or any of the properties or assets owned or used by Company, except, in the case of clauses (b), (c), or (d), for any such contraventions, conflicts, violations, or other occurrences as would not have a material adverse effect on Company.
    	 
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5. Representations of Rimlinger. Rimlinger, severally and not jointly, represents and warrants to the Company as follows:
 
(a) Authority. Rimlinger has all requisite authority and power, authorizations, consents and approvals to enter into and deliver this Agreement and any other certificate, agreement, document or instrument to be executed and delivered by Rimlinger in connection with the transactions contemplated hereby and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Rimlinger and the performance by such Rimlinger of its obligations hereunder and the consummation by Rimlinger of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Rimlinger. Rimlinger does not need to give any notice to, make any filing with, or obtain any authorization, consent or approval of any person or governmental authority in order for the Parties to execute, deliver or perform this Agreement or the transactions contemplated hereby.
 
(b) Binding Obligations. Assuming this Agreement has been duly and validly authorized, executed and delivered by the Parties other than Rimlinger, this Agreement is duly authorized, executed and delivered by Rimlinger and constitutes the legal, valid and binding obligations of Rimlinger enforceable against Rimlinger in accordance with its terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors rights generally.
 
(c) No Conflicts. Neither the execution nor the delivery by Rimlinger, nor the consummation or performance by Rimlinger of the transactions contemplated hereby or thereby will, directly or indirectly have a material adverse effect on Rimlinger.
 
6. Restrictive Covenants.
 
(a) Non-Disparagement. Following the date of the Effective Date, (i) Rimlinger will not make or cause to be made any statements or remarks (including, without limitation, the repetition or distribution of disparaging, derogatory or damaging rumors, allegations, negative reports or comments), whether written, electronic or oral, that are directly or indirectly disparaging, derogatory or damaging to the Company or any of its past, current or future affiliates, officers, directors, shareholders, employees, consultants, advisors, representatives, trustees, subsidiaries, divisions, parent companies, clients or customers or their policies and procedures, business, practices or financial condition; and (ii) the Company will not make or cause to be made any statements or remarks (including, without limitation, the repetition or distribution of disparaging, derogatory or damaging rumors, allegations, negative reports or comments), whether written, electronic or oral, that are directly or indirectly disparaging, derogatory or damaging to Rimlinger as a past officer, director, shareholder, employee, consultant, advisor, or representatives for the Company; provided, however, that the foregoing restrictions shall not apply to any statements by Rimlinger or by the Company that are made truthfully in response to a subpoena or as otherwise required by applicable law or other compulsory legal process.
    	 
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(b) Confidentiality. The Company has provided Rimlinger with access to, and has confided in him, information, business methods and systems, techniques and methods of operation developed at great expense by the Company and which are assets of the Company. Rimlinger recognizes and acknowledges that: (i) all Confidential Information (defined below) is the property of the Company and is unique, extremely valuable and developed and acquired by great expenditures of time, effort and cost; (ii) the misuse, misappropriation or unauthorized disclosure by Rimlinger of the Confidential Information would constitute a breach of trust and would cause serious irreparable injury to the Company; and (iii) it is essential to the protection of the Company’s goodwill and to the maintenance of the Company’s competitive position that the Confidential Information be kept secret and that Rimlinger not disclose the Confidential Information to others or use same to his own advantage or to the advantage of others. Accordingly, Rimlinger shall not, directly or indirectly, in any manner, utilize or disclose to any person, firm, corporation, association or other entity, or use on his own behalf, any confidential and proprietary information of the Company, including, but not limited to, information relating to its business methods, strategies, policies, procedures, techniques, research, historical or projected financial information, budgets, trade secrets, sales, costs, client lists, client preferences, client identities, marketing materials, investment strategies, systems, computer programs, or the business affairs and financial condition of the Company, or any of its clients, (collectively “Confidential Information”), except for (i) such disclosures where required by law, but only after written notice to the Company detailing the circumstances and legal requirement for the disclosure; or (ii) such disclosures where such information was at the time of disclosure to Rimlinger or thereafter became public acknowledge through no fault or omission of Rimlinger.
 
(c) Non-Interference. During the two (2) year period following the date of the Effective Date (the “Restricted Period”), for whatever reason, Rimlinger will not, directly or indirectly, for himself or on behalf of any third party, at any time or in any manner:
 
(i) persuade, induce, solicit, influence or attempt to influence, or cause any person who is an employee of the Company to terminate his or her relationship with the Company or refer any such employee to anyone, without prior written approval from the Company;
 
(ii) request or cause any of the Company’s clients or potential clients to cancel, modify or terminate any existing or continuing or, to Rimlinger’s knowledge, prospective business relationship with the Company;
 
(iii) engage in or participate in any effort or act to induce, or in any way cause, any client or, to Rimlinger’s knowledge, prospective client of the Company, to deal with Rimlinger or any other person or entity except in a capacity as representative of the Company, or otherwise take any action which might reasonably be expected to be disadvantageous to the Company;
 
(iv) persuade, induce, solicit, influence or attempt to influence, or cause any client or, to Rimlinger’s knowledge, prospective client of the Company to cease or refrain from doing business, or to decline to do business, or to change or alter any existing or prospective business relationship, with the Company;
 
(v) accept business from, or perform or provide any services for, any client, or to Rimlinger’s knowledge, prospective client of the Company;
 
(vi) contract with or communicate with, in either case in connection with services, any client or, to Rimlinger’s knowledge, prospective client of the Company; or
 
(vii) provide any third party with any information concerning any client, or to Rimlinger’s knowledge, prospective client of the Company, including but not limited to, the disclosure of any client name or data, in whatever form, to such third party.
    	 
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(d) Noncompetition. During the Restricted Period, Rimlinger shall not, directly or indirectly, engage or participate in, or become employed by, or affiliated with, or enter into or maintain a contractual relationship with, or render advisory or any other services to, any person or business entity or organization, of whatever form, that competes with the Company in the United States or any other location in which the Company conducts business as of the Effective Date.
 
(e) Injunctive Relief. Rimlinger acknowledges that his compliance with the covenants in Sections 9(b), 9(c) and 9(d) hereof is necessary to protect the good will, Confidential Information and other proprietary interests of the Company, that such covenants are supported by adequate and sufficient consideration, and that, in the event of any violation or threatened violation by Rimlinger of any such provision, the Company will sustain serious, irreparable and substantial harm to its business, the extent of which will be difficult to determine and impossible to remedy by an action at law for money damages. Accordingly, Rimlinger agrees that, in the event of such violation or threatened violation by him, the Company shall be entitled to an injunction before trial from any court of competent jurisdiction as a matter of course and upon the posting of not more than a nominal bond, in addition to all such other legal and equitable remedies as may be available to the Company. Rimlinger further acknowledges that he has carefully considered the nature and extent of the restrictions contained herein and the rights and remedies conferred upon the Company under this Agreement, and hereby acknowledges and agrees that the same are reasonable, are designed to protect the legitimate business interests of the Company, and do not confer benefits upon the Company disproportionate to the detriment upon him. In the event that Rimlinger violates any of the covenants in this Agreement and the Company commences legal action for injunctive or other relief, the Company shall have the benefit of the full period of the covenants, computed from the date Rimlinger ceased violation of the covenants, either by order of the court or otherwise. Rimlinger acknowledges that any claim or cause of action he may have against the Company shall not constitute a defense to the enforcement by the Company of the other covenants of the Rimlinger in this Agreement. Rimlinger also acknowledges that his experience and capabilities are such that he can obtain suitable employment otherwise than in violation of the covenants in this Agreement and that the enforcement of these covenants will not prevent the earning of a livelihood nor cause undue hardship.
 
(f) Remedies Cumulative and Concurrent. The rights and remedies of the Company as provided in this Section 9 shall be cumulative and concurrent and may be pursued separately, successively or together, at the sole discretion of the Company, and may be exercised as often as occasion therefor shall arise. The failure to exercise any right or remedy shall in no event be construed as a waiver or release thereof.
 
(g) Authorization. Rimlinger authorizes the Company to inform any third parties, including future employers, prospective employers and the Company’s clients or prospective clients, of the existence of this Agreement and his obligations under it.
 
(h) Definitions. For purposes of this Section 9, the term “Company” shall include the Company and each of their respective successors, assigns, subsidiaries or affiliates and the term “Rimlinger” shall include the Rimlinger and each of their respective heirs, successors, assigns, subsidiaries or affiliates (other than the Company Parties and any of their respective subsidiaries).
 
7. Miscellaneous.
 
(a) Expenses. Each Party will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated by this Agreement, including all fees and expenses of agents, representatives, counsel, and accountants.
    	 
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(b) Notices. All notices, demands, consents, requests, instructions and other communications to be given or delivered or permitted under or by reason of the provisions of this Agreement or in connection with the transactions contemplated hereby shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows: (i) if personally delivered, on the business day of such delivery (as evidenced by the receipt of the personal delivery service), (ii) if mailed certified or registered mail return receipt requested, two (2) business days after being mailed, (iii) if delivered by overnight courier (with all charges having been prepaid), on the business day of such delivery (as evidenced by the receipt of the overnight courier service of recognized standing), or (iv) if delivered by facsimile transmission or other electronic means, including email, on the business day of such delivery if sent by 6:00 p.m. in the time zone of the recipient, or if sent after that time, on the next succeeding business day. If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed address of which no notice was given (in accordance with this Section 7(b)), or the refusal to accept same, the notice, demand, consent, request, instruction or other communication shall be deemed received on the second business day the notice is sent (as evidenced by a sworn affidavit of the sender). All such notices, demands, consents, requests, instructions and other communications will be sent to the following addresses or facsimile numbers as applicable:
  
		If to the Company, to:
		4447 N. Central Exwy., 
Ste. 110-135
Dallas, TX 75205
Attn: Chief Executive Officer
Tel No.: (972) 885-3981
Email: corp@edscompanies.com

				
		If to the Rimlinger, to:
		_____________________
_____________________
_____________________
Tel. No.: ______________
Email: ________________

 
or such other addresses as shall be furnished in writing by any Party in the manner for giving notices hereunder.
 
(c) Further Assurances. The Parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other Parties may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.
 
(d) Waiver. The rights and remedies of the Parties are cumulative and not alternative. Neither the failure nor any delay by any Party in exercising any right, power, or privilege under this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (i) no claim or right arising out of this Agreement can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other Parties; (ii) no waiver that may be given by a Party will be applicable except in the specific instance for which it is given; and (iii) no notice to or demand on one Party will be deemed to be a waiver of any obligation of such Party or of the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Agreement.
     	 
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(e) Entire Agreement and Modification. This Agreement supersedes all prior agreements between the Parties with respect to its subject matter and constitutes a complete and exclusive statement of the terms of the agreement between the Parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the Party against whom the enforcement of such amendment is sought.
 
(f) Assignments, Successors, and No Third-Party Rights. No Party may assign any of its rights under this Agreement without the prior consent of the other Parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of and be enforceable by the respective successors and permitted assigns of the Parties. Except as set forth in Section 6 hereof, nothing expressed or referred to in this Agreement will be construed to give any person other than the Parties any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.
 
(g) Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.
 
(h) Section Headings. The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement, unless the context indicates otherwise.
 
(i) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Unless otherwise expressly provided, the word “including” shall mean including without limitation. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of such representation, warranty, or covenant. All words used in this Agreement will be construed to be of such gender or number as the circumstances require.
 
(j) Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
    	 
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(k) Specific Performance. Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter (subject to the provisions set forth in Section 7(l) below), in addition to any other remedy to which they may be entitled, at Law or in equity.
   
(l) Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and construed in accordance with the Laws of the State of Florida, without regard to conflicts of laws principles. Each of the Parties submits to the jurisdiction of any state or federal court sitting in the State of Florida, in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court. Each of the Parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto. Any Party may make service on any other Party by sending or delivering a copy of the process to the Party to be served at the address and in the manner provided for the giving of notices in Section 7(b) above. Nothing in this Section 7(l), however, shall affect the right of any Party to serve legal process in any other manner permitted by law or at equity. Each Party agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or at equity.
 
(m) Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY WANES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
 
[Signatures follow on next page]
    	 
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by their duly authorized respective officers, as of the date first above written.
 
	 
	COMPANY
	 

	 
	 
	 

		ELITE DATA SERVICES INC.
	
		A Florida Corporation
	
		 	 	
		By:
	/s/ Brenton Mix
	
			Brenton Mix
	
	 
	 
	Chief Executive Officer
	 

		 	 	
		RIMLINGER
	
		 	 	
		By:
	/s/ Charles Rimlinger
	
			Charles Rimlinger
	
	 
	 
	Individually
	 

    	 
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EXHIBIT A
 
CONVERTIBLE REDEEMABLE NOTE
(Rimlinger Note)
 
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT").
 
US $40,000.00
 
ELITE DATA SERVICES, INC.
CONVERTIBLE REDEEMABLE NOTE
 
FOR VALUE RECEIVED, ELITE DATA SERVICES, INC. (the "Company") promises to pay to the order of CHARLES RIMLINGER, an individual and its authorized successors and permitted assigns ("Holder"), the aggregate principal face amount of FORTY THOUSAND DOLLARS (U.S. $40,000.00), at ten percent (10%) interest per annum commencing on the date of execution (the "Effective Date"), due and payable to Holder by Company, plus accrued interest on the twelve month anniversary date following the execution of this Note (each a "Maturity Date"), pursuant to the terms of the Definitive Agreement dated even date herewith between Company and Holder, of which this Note is made apart. The Company will pay interest payment and the outstanding principal due upon this Note on the Maturity Date. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 3(f) herein.
 
This Note is subject to the following additional provisions:
 
1. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
 
2. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended ("Act"), and applicable state securities laws. Holder shall provide the Company with 3-day written notice of the Note's transfer and shall presume that any attempted transfer to a party is deemed qualified by the Holder. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 3(a) hereof, in addition to the requirements set forth in Section 3(b) and 3(c), and any prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted ("Notice of Conversion") in the form annexed hereto as Exhibit A-1. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
    	 
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3. Note Conversions; Interest Payments; Prepayments, Transfers, Etc.
 
(a) The Holder of this Note is entitled, at its option, beginning on the 181th day after Effective Date, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the " Common Stock ") at a price (" Conversion Price ") for each share of Common Stock equal to a discount of fifty percent (50%) of the lowest trading price of the Common Stock as reported on the OTCQB marketplace which the Company's shares are traded or any market upon which the Common Stock may be traded in the future (" Exchange "), for the ten (10) prior trading days including the day upon which a Notice of Conversion is received by the Company and its transfer agent (provided such Notice of Conversion is delivered by electronic method of communication to the Company or its transfer agent after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price) beginning on the 181st day after Effective Date.
 
(b) If the shares have not been delivered within three (3) business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the transfer agent of the Company delivering the shares of Common Stock to the Holder within three (3) business days of receipt by the Company of the Notice of Conversion. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company's Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this decrease.
 
(c) At any time or times on or after the Maturity Date, the Holder shall be entitled to convert all of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock in accordance with the stated Conversion Price. The Holder shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, (ii) any Common Stock issuable in connection with the unconverted portion of the Note, and (iii) the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the following, the Holder shall not be limited to aggregate conversions of 4.99% ("Conversion Limitation 1"). The Holder shall have the authority to determine whether the restriction contained in this Section 3(c) will limit any conversion hereunder. The Holder may waive the conversion limitation described in this Section 3(c), in whole or in part, upon and effective after 61-days prior written notice to the Company to increase such percentage to up to 9.99% ("Conversion Limitation 2").
 
(d) The Company shall not issue any fraction of a share of Common Stock upon any conversion; if such issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share except in the event that rounding up would violate the conversion limitation set forth in section 3(c) above.
    	 
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(e) If the Company, at any time after the Issuance Date, shall issue any securities convertible into or exchangeable for, directly or indirectly, Common Stock ("Convertible Securities"), other than the Note, or any rights or warrants or options to purchase any such Common Stock or Convertible Securities, shall be issued or sold (collectively, the "Common Stock Equivalents") and the aggregate of the price per share for which Additional Shares of Common Stock may be issuable thereafter pursuant to such Common Stock Equivalent, plus the consideration received by the Company for issuance of such Common Stock Equivalent divided by the number of shares of Common Stock issuable pursuant to such Common Stock Equivalent (the "Aggregate Per Common Share Price") shall be less than the applicable Conversion Price then in effect, or if, after any such issuance of Common Stock Equivalents, the price per share for which Additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall make the Aggregate Per Share Common Price be less than the applicable Conversion Price in effect at the time of such amendment or adjustment, then the applicable Conversion Price upon each such issuance or amendment shall be reduced to the lower of: (i) the Conversion Price; or (ii) a twenty-five percent (25%) discount to the lowest Aggregate Per Common Share Price (whether or not such Common Stock Equivalents are actually then exercisable, convertible or exchangeable in whole or in part) as of the earlier of (A) the date on which the Company shall enter into a firm contract for the issuance of such Common Stock Equivalent, or (B) the date of actual issuance of such Common Stock Equivalent. No adjustment of the applicable Conversion Price shall be made under this Section 6 upon the issuance of any Convertible Security which is outstanding on the day immediately preceding the Issuance Date. No adjustment shall be made to the Conversion Price upon the issuance of Common Stock pursuant to the exercise, conversion or exchange of any Convertible Security or Common Stock Equivalent where an adjustment to the Conversion Price was made as a result of the issuance or purchase of any Convertible Security or Common Stock Equivalent.
 
(f) Interest on any unpaid principal balance of this Note shall be paid at the rate of ten percent (10%) per annum with the first payment being made on the sixth-month anniversary of this Note. Interest shall be paid by the Company in Common Stock ("Interest Shares"). Holder may, at any time after six months, send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 3(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
 
(g) The Notes may be prepaid, in whole or in part, with the following penalties: (i) if the note is prepaid within 90 days of the issuance date, then at 120% of the face amount plus any accrued interest; (ii) if the note is prepaid within 91 days after the issuance date but less than 150 days after the issuance date, then at 130% of the face amount plus any accrued interest; (iii) if the note is prepaid within 150 days after the issuance date but less than 180 days after the issuance date, then at 140% of the face amount plus any accrued interest. This Note may not be prepaid after the 180th day without written permission from Holder. Such redemption must be closed and funded within three (3) days of giving notice of redemption of the right to redeem shall be null and void.
 
(h) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a "Sale Event"), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
    	 
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(i) In case of any Sale Event (not to include a sale of all or substantially all of the Company's assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
 
4. The Holder agrees that so long as this Note from the Holder and the Company remains outstanding, the Holder will not enter into or effect "short sales" of the Common Stock or hedging transaction which establishes a net short position with respect to the Common Stock of the Company. The Company acknowledges and agrees that upon delivery of a conversion notice by the Holder, the Holder immediately owns the shares of Common Stock described in the conversion notice and any sale of those shares issuable under such conversion notice would not be considered short sales.
 
5. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
 
6. The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
 
7. The Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.
 
8. If one or more of the following described "Events of Default" shall occur:
 
(a) The Company shall default in the payment of principal or interest on this Note to the Holder by the Company as of the Maturity Date; or
 
(b) Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note under which this note was issued shall be false or misleading in any respect; or
 
(c) The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or
    	 
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(d) The Company shall (1) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (2) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (3) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or
 
(e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or
 
(f) Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or
 
(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of thirty (30) days or in any event later than five (5) days prior to the date of any proposed sale thereunder with the exception of the current litigation that is already disclosed as reported on the Company's public filings; or
 
(h) The Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than ten (10) consecutive days;
 
(i) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within three (3) business days of its receipt of a Notice of Conversion (provided that a reasonable attorney opinion has been provided by Holder to the Company in which it deems it can reasonably rely); or
 
(j) The Company shall not be "current" in its filings with the Securities and Exchange Commission, and such shall not be cured within ten (10) business days; or
 
(k) The Company shall lose the "bid" price for its stock and a market (including the OTCBB marketplace or other exchange)
 
Then, or at any time thereafter, unless cured within five (5) business days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(i) the penalty shall be $50 per day the shares are not issued beginning on the 5th day after the conversion notice was delivered to the Company. This penalty shall increase to $100 per day beginning on the 10th day. The penalty for a breach of Section 8(k) shall be an increase of the outstanding principal amounts by 20%. In case of a breach of Section 8(h), the outstanding principal due under this Note shall increase by 50%. Further, if a breach of Section 8(m) occurs or is continuing after the 6-month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period (after cure period) as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50% the Holder may elect to convert future conversions at $0.001 per share. If this Note is not paid at maturity, the outstanding principal due under this Note shall increase by ten percent (10%).
    	 
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9. At the Holder's election, if the Company fails for any reason to deliver to the Holder the conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice and documentary evidence indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows: Failure to Deliver Loss = [(High trade price at any time on or after the day of exercise) x (Number of conversion shares)]. Such failure to deliver will be repayable in the Company's Common Stock.
 
10. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
 
11. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.
 
12. The Company represents that it is not a "shell" issuer and has never been a "shell" issuer or that if it previously has been a "shell" issuer that at least 12 months have passed since the Company has reported Form 10 type information indicating it is no longer a "shell issuer.
 
13. The Holder agrees that so long as this Note from the Holder and the Company remains outstanding, the Holder will not enter into or effect "short sales" of the Common Stock or hedging transaction which establishes a net short position with respect to the Common Stock of the Company. The Company acknowledges and agrees that upon delivery of a conversion notice by the Holder, the Holder immediately owns the shares of Common Stock described in the conversion notice and any sale of those shares issuable under such conversion notice would not be considered short sales.
 
14. The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
 
15. Any dispute or claim arising to or in any way related to this Note or the rights and obligations of each of the parties hereto may be settled by binding arbitration pursuant. All arbitration shall be conducted in accordance with the rules and regulations of the American Arbitration Association ("AAA"). AAA shall designate an arbitrator from an approved list of arbitrators following both parties' review and deletion of those arbitrators on the approved list having a conflict of interest with either party. The Company agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. The Company hereto knowingly and voluntarily waives any and all rights it may have to a trial by jury with respect to any litigation based on, or arising out of, under, or in connection with, this note.
 
16. This Note shall be governed by and construed in accordance with the laws of Florida applicable to contracts made and wholly to be performed within the State of Florida and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of Florida. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.
 
[SIGNATURES ON PAGE TO FOLLOW]
    	 
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized on the date referenced below.
    	 	ELITE DATA SERVICES, INC.
	
		 	 	 
	Date: January 10, 2017
	By:	/s/ Brenton Mix
	
	 
	 
	Brenton Mix
	 
	 	 	Chief Executive Officer
	 
	 	 		 

      	 
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EXHIBIT A-1
 
NOTICE OF CONVERSION
 
(To be Executed by the Registered Holder in order to Convert the Note)
 
The undersigned hereby irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of Elite Data Services, Inc. ("Shares"), according to the conditions set forth in such Note, as of the date written below.
 
If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
 
Date of Conversion: ________________________________________
 
Applicable Conversion Price: _________________________________
 
Signature: _______________________________________________
                                         [Print Name of Holder and Title of Signer]
 
Address: ________________________________________________
 
SSN or EIN: ______________________________________________
 
Shares are to be registered in the following name:
 
Name: ______________________________
 
Address: ____________________________
                 ____________________________
 
Tel: ________________________________
 
SSN or EIN:  _________________________
 
Shares are to be sent or delivered to the following account:
 
Account Name: _______________________
                            _______________________
 
Address: ____________________________
                 ____________________________
                 ____________________________
  
  
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