Document:

STOCK PURCHASE AGREEMENT

 

 

 

EXHIBIT 10.1

STOCK PURCHASE AGREEMENT

by and among

HEAT BIOLOGICS, INC.,

PELICAN THERAPEUTICS, INC.,

THE STOCKHOLDERS OF PELICAN THERAPEUTICS, INC.,

AND

JOSIAH HORNBLOWER, AS THE STOCKHOLDERS’ REPRESENTATIVE

 

Dated as of March 7, 2017

 

 

 

 

 

TABLE OF CONTENTS

			
	Article I .

	DESCRIPTION OF TRANSACTION

	1

	1.1

	Agreement to Purchase and Sell the Purchased Shares.

	1

	1.2

	Determination of Stockholder’s Pro Rata Portion of Purchased Shares.

	1

	1.3

	Payment of Escrowed Closing Consideration.

	1

	1.4

	Milestone Payments; Royalty Payments; and Non-Royalty Sublicense Revenues.

	2

	1.5

	Cancellation of Company Stock Options.

	4

	1.6

	Company Warrants.

	4

	1.7

	Post-Closing Escrow.

	4

	1.8

	Definitions.

	5

	 
	 
	 

	Article II .

	REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS

	5

	2.1

	Organization and Good Standing.

	5

	2.2

	Capitalization.

	6

	2.3

	Subsidiaries.

	8

	2.4

	Authority; No Conflict; Required Filings and Consents.

	8

	2.5

	Company Financial Statements; Books and Records.

	9

	2.6

	No Undisclosed Liabilities; Indebtedness.

	10

	2.7

	No Company Material Adverse Effect.

	10

	2.8

	Absence of Certain Changes or Events.

	10

	2.9

	Taxes.

	12

	2.10

	Real Property.

	15

	2.11

	Personal Property.

	15

	2.12

	Intellectual Property.

	16

	2.13

	Agreements.

	18

	2.14

	Litigation.

	21

	2.15

	Environmental Matters.

	22

	2.16

	Employee Matters.

	22

	2.17

	Employee Benefit Plans.

	24

	2.18

	Compliance With Laws; Governmental Authorizations.

	24

	2.19

	Insurance.

	25

	2.20

	Brokerage and Transaction Bonuses.

	26

	2.21

	Title to and Sufficiency of Assets.

	26

	2.22

	Inventory.

	26

	2.23

	Bank Accounts.

	27

	2.24

	Accounts Payable.

	27

	2.25

	Related Party Transactions.

	27

	2.26

	Customers and Suppliers.

	27

	2.27

	Certain Payments.

	27

	2.28

	Personal Information and Privacy.

	28

	2.29

	CPRIT.

	28

	2.30

	Regulatory Filings.

	28

	2.31

	Product Candidates.

	29

	2.32

	OFAC.

	30

	2.33

	Purchased Share Certificate.

	30

	 
	 
	 

	 
	 
	 

	 
	 
	 

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	Article III .

	REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER

	30

	3.1

	Authority, No Conflict; Required Filings and Consents.

	30

	3.2

	Ownership; Title to Company Common Stock.

	31

	3.3

	Litigation.

	31

	3.4

	Brokerage and Transaction Bonuses.

	31

	3.5

	Restricted Securities.

	32

	3.6

	Accredited Investor.

	32

	3.7

	No Bad Actor Disqualification Events.

	32

	3.8

	Investment Experience.

	32

	3.9

	Foreign Investors.

	32

	3.10

	No General Solicitation.

	32

	3.11

	Residence.

	32

	3.12

	Legends.

	33

	3.13

	Investment Purpose; Disclosure of Information.

	33

	 
	 
	 

	Article IV .

	REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

	33

	4.1

	Organization and Good Standing.

	33

	4.2

	Authority, No Conflict; Required Filings and Consents.

	33

	4.3

	SEC Filings; Financial Statements.

	34

	4.4

	Purchaser Stock Consideration.

	35

	 
	 
	 

	Article V .

	CERTAIN COVENANTS AND AGREEMENTS

	35

	5.1

	Due Diligence Access and Investigation.

	35

	5.2

	Operation of the Company’s Business.

	35

	5.3

	Notification.

	38

	5.4

	Interim Financials.

	38

	5.5

	Related Party Transactions.

	39

	5.6

	Public Announcements.

	39

	5.7

	Reasonable Efforts; Further Assurances; Cooperation.

	39

	5.8

	Tax Matters.

	40

	5.9

	Cooperation with Financial Reporting.

	41

	5.10

	Release.

	41

	5.11

	No Solicitation.

	42

	5.12

	Stockholder Approval and Waiver of Right of First Refusal.

	42

	 
	 
	 

	Article VI .

	CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER

	42

	6.1

	Accuracy of Representations.

	43

	6.2

	Performance of Covenants.

	43

	6.3

	Company Compliance Certificate.

	43

	6.4

	Consents.

	43

	6.5

	Secretary’s Certificate.

	43

	6.6

	Ancillary Agreements and Deliveries.

	43

	6.7

	Release of Liens.

	45

	6.8

	Certain Covenants and Agreements.

	45

	6.9

	No Material Adverse Effect.

	45

	6.10

	No Restraints.

	45

	6.11

	No Litigation.

	45

	6.12

	Company Options and Company Rights.

	46

	6.13

	CPRIT Agreement.

	46

	6.14

	No Indebtedness.

	46

	6.15

	No Negative FDA Correspondence.

	46

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	6.16

	Company Financial Statements

	46

	6.17

	Minimum Purchased Shares.

	46

	6.18

	Stockholders’ Agreement.

	46

	6.19

	Nasdaq Matters.

	46

	6.20

	Due Diligence Review.

	47

	6.21

	Company Stockholder Approval.

	47

	 
	 
	 

	Article VII .

	CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS

	47

	7.1

	Accuracy of Representations.

	47

	7.2

	Performance of Covenants.

	47

	7.3

	Purchaser Compliance Certificate.

	47

	7.4

	Ancillary Agreements and Deliveries.

	47

	7.5

	No Restraints.

	47

	7.6

	Consents.

	47

	7.7

	Nasdaq Matters.

	48

	7.8

	No Material Adverse Effect.

	48

	 
	 
	 

	Article VIII .

	CLOSING

	48

	8.1

	Closing.

	48

	8.2

	Stockholder and Company Closing Deliveries.

	48

	8.3

	Purchaser Closing Deliveries.

	48

	 
	 
	 

	Article IX .

	TERMINATION

	48

	9.1

	Termination Events.

	48

	 
	 
	 

	Article X .

	INDEMNIFICATION

	49

	10.1

	Indemnification Obligations of the Stockholders.

	49

	10.2

	Indemnification Procedure.

	51

	10.3

	Survival Period.

	52

	10.4

	Investigations.

	53

	10.5

	Offset Against Closing Shares and Future Product Payments.

	53

	10.6

	Set-Off.

	53

	10.7

	Characterization of Indemnification Payments.

	53

	 
	 
	 

	Article XI .

	STOCKHOLDERS’ REPRESENTATIVE

	54

	11.1

	Stockholders’ Representative.

	54

	 
	 
	 

	Article XII .

	MISCELLANEOUS PROVISIONS

	55

	12.1

	Further Assurances.

	55

	12.2

	Fees and Expenses.

	55

	12.3

	Waiver; Amendment.

	55

	12.4

	Entire Agreement.

	55

	12.5

	Execution of Agreement; Counterparts; Electronic Signatures.

	56

	12.6

	Governing Law; Exclusive Jurisdiction.

	56

	12.7

	WAIVER OF JURY TRIAL.

	56

	12.8

	Assignment and Successors.

	56

	12.9

	Parties in Interest.

	57

	12.10

	Notices.

	57

	12.11

	Construction; Usage.

	58

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	12.12

	Enforcement of Agreement.

	59

	12.13

	Severability.

	59

	12.14

	Time of Essence.

	59

	12.15

	Disclosure Schedule.

	59

	12.16

	Schedules and Exhibits.

	59

Exhibit A 

--

Definitions

Exhibit B 

--

Form of Escrow Agreement

Exhibit C 

--

Form of Joinder Agreement

Exhibit D 

--

Form of Spousal Consent

Exhibit E 

--

Form of Stockholders’ Agreement

Exhibit F 

--

Form of Promissory Note

iv

 

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT is made and entered into as of ______________, 2017, by and among Heat Biologics, Inc., a Delaware corporation (the “Purchaser”), Pelican Therapeutics, Inc., a Delaware corporation (the “Company”), each of the participating stockholders of the Company set forth on the signature pages to this Agreement and each of the stockholders of the Company who has delivered a Joinder Agreement in the form attached hereto as EXHIBIT C (the “Joinder Agreement”) agreeing to be bound by the terms of this Agreement (collectively, the “Stockholders” and each, individually, a “Stockholder”) and Josiah Hornblower, as representative of the Stockholders pursuant to ARTICLE XI (the “Stockholders’ Representative”).

RECITALS

WHEREAS, the Stockholders collectively desire to sell to the Purchaser, and the Purchaser desires to purchase from the Stockholders, the Purchased Shares; and

WHEREAS, upon the terms and conditions set forth in this Agreement, each Stockholder proposes to sell to the Purchaser and the Purchaser proposes to purchase from the Stockholders, up to the number of shares of Company Common Stock equal to such Stockholder’s pro rata portion of the Purchased Shares in exchange for the consideration set forth in this Agreement.

NOW, THEREFORE, in consideration of the respective covenants, agreements and representations and warranties set forth in this Agreement, the parties to this Agreement, intending to be legally bound, agree as follows:

ARTICLE I. DESCRIPTION OF TRANSACTION

1.1

Agreement to Purchase and Sell the Purchased Shares. Subject to the terms and conditions in this Agreement, at the Closing, the Stockholders shall sell, assign, transfer and deliver to the Purchaser free and clear of all Liens, and the Purchaser shall purchase and acquire from such Stockholders, such Stockholders’ right title and interest in and to the number of shares of Company Common Stock (rounded up to the nearest whole share) equal to eighty percent (80%) of the Fully Diluted Shares Outstanding as of the Closing Date (the “Purchased Shares”).  By executing this Agreement, each Stockholder agrees to sell to Purchaser a minimum of eighty percent (80%) of the Company Common Stock held by such Stockholder and a maximum of one hundred percent (100%) of the Company Common Stock held by such Stockholder, with the exact number of shares to be sold by each Stockholder to be fixed pursuant to the provisions of Section 1.2.

1.2

Determination of Stockholder’s Pro Rata Portion of Purchased Shares. The number of shares of Company Common Stock to be sold by each Stockholder to the Purchaser at the Closing shall be equal to the lesser of (a) all shares of Company Common Stock held by such Stockholder on the Closing Date and (b) that number of shares of Company Common Stock equal to (i) the number of shares of Company Common Stock held by such Stockholder on the Closing Date multiplied by (b) a fraction, the numerator of which shall be the Purchased Shares, and the denominator of which shall be the aggregate number of shares of Company Common Stock held by all of the Stockholders on the Closing Date.   

1.3

Payment of Escrowed Closing Consideration.

 

(a)

At the Closing, the Purchaser shall deliver to the Escrow Agent: (i) the Closing Cash Consideration; (ii) stock certificates representing shares of Purchaser Common Stock in the name of the Escrow Agent for the benefit of each Stockholder, in each case for such number of shares of Purchaser Common Stock (rounded down to the nearest whole share of Purchaser Common Stock) as is equal to the product of (A) the total number of Closing Shares to be issued by the Purchaser multiplied by (B) each Stockholder’s Consideration Percentage; provided that any such certificates representing the Closing Shares shall, in each case, represent only whole shares of Purchaser Common Stock; and (iii) in lieu of any fractional shares of Purchaser Common Stock that would have otherwise been issued to the Escrow Agent pursuant to subclause (ii), an amount in cash equal to the dollar amount (rounded to the nearest whole cent, with $0.005 or less being rounded down) determined by multiplying the VWAP Per Share Price by the fraction of a share of Purchaser Common Stock that would otherwise have been issued to the Escrow Agent pursuant to subclause (ii) (collectively, the “Escrowed Closing Consideration”).

(b)

At the Closing, the Stockholders shall transfer, grant, convey, sell and assign to the Purchaser all of the Purchased Shares. 

1.4

Milestone Payments; Royalty Payments; and Non-Royalty Sublicense Revenues.

(a)

Milestone Payments. The Purchaser shall provide the Stockholders’ Representative with written notice of the first occurrence of each milestone event set forth below with respect to a Product within forty five (45) days after such occurrence.  Within sixty (60) days of the first occurrence of each of the milestone events set forth below with respect to the applicable Product, the Purchaser shall cause the Company to make the following aggregate payments to the Stockholders’ Representative for the benefit of the Stockholders, whether such milestone is achieved by the Company, its Affiliate or any of their respective sublicensees:

		
	Milestone Payments for Oncology Product

	US$ Payment 

	First Patient Dosing in First Phase 1 Clinical Trial for an Oncology Indication

	$2,000,000

	First Patient Dosing in First Phase 2 Clinical Trial for an Oncology Indication 

	1,500,000

	Successful Outcome of First Phase 2 Clinical Trial for an Oncology Indication

	3,000,000

	First Patient Dosing in First Phase 3 Clinical Trial for an Oncology Indication

	6,000,000

	Successful Outcome of First Phase 3 Clinical Trial for an Oncology Indication

	7,500,000

	First Acceptance of BLA Submission for an Oncology Indication

	7,500,000

	First Product Approval in the U.S. or Europe for an Oncology Indication

	7,500,000

	Total 

	$35,000,000

	Milestone Payments for Non-Oncology Product

	US$ Payment 

	First Patient Dosing in First Phase 3 Clinical Trial for a Non-Oncology Indication

	$3,000,000

	Successful Outcome of First Phase 3 Clinical Trial for a Non-Oncology Indication

	3,000,000

	First Acceptance of BLA Submission for a Non-Oncology Indication

	3,000,000

	First Product Approval in the U.S. or Europe for an Non-Oncology Indication

	3,000,000

	Total 

	$12,000,000

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Each of the payments set forth above in this Section 1.4(a) (collectively, the “Milestone Payments” and each, a “Milestone Payment”) shall be paid only once for the applicable Product regardless of: (i) the number of Indications for which the Product is developed or approved, and (ii) the number of Products developed, so that the aggregate maximum Milestone Payments that may be made to the Stockholders’ Representative for the benefit of the Stockholders under this Section 1.4(a) is $47,000,000.  

(b)

Royalties.

(i)

For the First Oncology Royalty Product, the Company shall pay to the Stockholders’ Representative for the benefit of the Stockholders a royalty of three percent (3%) on the Net Sales of the  First Oncology Royalty Product for each country in the Territory for which there remains an Issued Patent Claim (the “Oncology Royalties”).

(ii)

Except for payments required (i) under license agreements to which the Company is a party on the date of this Agreement and (ii) pursuant to contracts with CPRIT, in the event the Company is required to make any payment to a third party to obtain a license for the manufacture, use, sale or import of the First Oncology Royalty Product or otherwise exploit the First Oncology Royalty Product, the Company shall be entitled to deduct up to fifty percent (50%) of such third party payments made in a particular calendar year against Oncology Royalties payable to the Stockholders’ Representative for the benefit of the Stockholders for that year; provided that, in no event may the Oncology Royalties paid to the Stockholders’ Representative for the benefit of the Stockholders for that year be less than one percent (1%) of the Net Sales of the First Oncology Royalty Product.

(iii)

For the First Non-Oncology Royalty Product, the Company shall pay to the Stockholders’ Representative for the benefit of the Stockholders a royalty equal to the greater of (A) two and half percent (2.5%) of the Net Sales of the First Non-Oncology Royalty Product for each country in the Territory for which there remains an Issued Patent Claim or (B) the lesser of (1) four percent (4%) of the Net Sales of the First Non-Oncology Royalty Product for each country in the Territory for which there remains an Issued Patent Claim and (2) fifty percent (50%) of the royalty paid to the Purchaser with respect to such First Non-Oncology Royalty Product (the “Non-Oncology Royalties” and together with the Oncology Royalties, the “Royalty Payments”). 

(iv)

Except for payments required (i) under license agreements to which the Company is a party on the date of this Agreement and (ii) pursuant to contracts with CPRIT, in the event the Company is required to make any payment to a third party to obtain a license for the manufacture, use, sale or import of the First Non-Oncology Royalty Product or otherwise exploit the First Non-Oncology Royalty Product, the Company shall be entitled to deduct up to fifty percent (50%) of such third party payments made in a particular calendar year against Non-Oncology Royalties payable to the Stockholders’ Representative for the benefit of the Stockholders for that year; provided that, in no event may the Non-Oncology Royalties paid to the Stockholders’ Representative for the benefit of the Stockholders for that year be less than one percent (1%) of the Net Sales of the First Non-Oncology Royalty Product.

(v)

Royalty Payments shall be calculated and reported by the Company for each calendar quarter.  Royalty Payments due to Stockholders’ Representative for the benefit of the Stockholders under this Agreement shall be paid within forty five (45) calendar days of the end of each calendar quarter. Each Royalty Payment shall be accompanied by a report of Net Sales of the applicable Product by the Company, its Affiliates and their respective sublicensees in sufficient detail to permit confirmation of the accuracy of the Royalty Payment made, including, the Net Sales of the applicable Product on a country by country, and the amount of the Royalty Payment.  The Company shall keep 

3

 

complete and accurate records pertaining to the sale or other disposition of each Product in sufficient detail to permit Stockholders’ Representative to confirm the accuracy of all such Royalty Payments.

(c)

Non-Royalty Sublicense Revenues. Non-Royalty Sublicense Revenues shall be calculated and reported by the Company for each calendar quarter. Within forty five (45) days of the end of each calendar quarter, the Company shall pay to the Stockholders’ Representative for the benefit of the Stockholders twenty percent (20%) of the Non-Royalty Sublicense Revenues (the “Non-Royalty Sublicense Payments” and together with the Milestone Payments and the Royalties, the “Future Product Payments”).  Each such payment shall be accompanied by a report of Non-Royalty Sublicense Revenues related to the applicable Product in sufficient detail to permit confirmation of the accuracy of the payment made. The Company shall keep complete and accurate records pertaining to Non-Royalty Sublicense Revenues in sufficient detail to permit Stockholders’ Representative to confirm the accuracy of all such payments.

1.5

Cancellation of Company Stock Options.

(a)

All unexercised Company Options outstanding as of immediately prior to the Closing shall, as of the Closing, be automatically cancelled and no longer represent the right to acquire Company Common Stock or any other securities of the Purchaser, the Company or any of their respective Affiliates, and all agreements between the Company and such Stockholder relating to such Company Options shall be deemed terminated in their entirety, void and of no further force or effect.

(b)

At or prior to the Closing, the Company shall terminate the Company Stock Option Plan and all other plans, programs or other arrangements pursuant to which any Company Options or other equity securities of the Company have been or may be granted and the provisions of the Company Stock Option Plan and any other such plans, programs or arrangements shall be canceled as of the Closing.  Prior to the Closing, the Company shall ensure that all Company Options shall be terminated as of the Closing and that following the Closing no participant in any Company Stock Option Plan or other plans, programs or arrangements shall have any right thereunder to acquire any equity securities of the Company.  The Company shall take all necessary actions to effectuate the provisions of this Section 1.5.

1.6

Company Warrants.  All Company Warrants outstanding as of immediately prior to the Closing shall remain unchanged and continue to remain outstanding immediately after the Closing.

1.7

Post-Closing Escrow. 

(a)

At the Closing, the Purchaser shall deliver the Escrowed Closing Consideration to an escrow agent agreed upon by the Purchaser and the Company (the “Escrow Agent”), to be held by the Escrow Agent on behalf of the Stockholders and as collateral to secure the rights of the Purchaser pursuant to this Section 1.7 and of the Indemnified Parties under ARTICLE X. The Escrowed Closing Consideration shall be held pursuant to the provisions of an escrow agreement to be entered into among the Purchaser, the Escrow Agent and the Stockholders’ Representative substantially in the form of EXHIBIT B hereto (the “Escrow Agreement”) or in such other form as agreed upon by the Purchaser and the Company.

(b)

Not later than two (2) Business Days prior to the expiration of the period beginning on the Closing Date and ending one hundred eighty (180) days after the Closing Date (the “Escrow Period”), the Company shall deliver to the Purchaser a statement setting forth the Specified Indebtedness Amount as of the expiration of the Escrow Period (the “Specified Indebtedness Statement”). If the Specified Indebtedness Amount as set forth in the Specified Indebtedness Statement 

4

 

exceeds $250,000, the Escrow Agent shall distribute to the Purchaser by wire transfer of immediately available funds on the one hundred eighth (180th) day following the Closing Date to an account designated by Purchaser, an amount in cash from the Escrowed Closing Consideration equal to the amount by which the Specified Indebtedness Amount exceeds $250,000.

(c)

Thereafter, any of the Escrowed Closing Consideration not previously released by the Escrow Agent as of the expiration of the Escrow Period shall be released by the Escrow Agent to the Stockholders’ Representative, in trust for the Stockholders; provided, however, that in the event Purchaser or any Indemnified Party has made one or more claim(s) under ARTICLE X prior to the end of the Escrow Period, then, in accordance with and subject to the terms and conditions of the Escrow Agreement, the Escrow Period shall continue (and the Escrow Agent will continue to hold the portion of the Escrowed Closing Consideration in escrow as is equal to the aggregate claimed amounts) until the full and final resolution of such claim(s).  For purposes of the escrow and the Escrow Agreement, the value of each Closing Share as of a particular date shall be deemed to be equal to the VWAP Per Share Price as of such date. By virtue of the execution of this Agreement or a Joinder Agreement by a Stockholder, without any further act of any Stockholder, such Stockholder shall be deemed to have consented to and approved (A) the use of the Escrowed Closing Consideration as collateral to secure the rights of the Purchaser pursuant to Section 1.7 in the manner set forth herein and in the Escrow Agreement, (B) the use of the Escrowed Closing Consideration as collateral to secure the rights of the Indemnified Parties under ARTICLE X in the manner set forth herein and in the Escrow Agreement, and (C) the appointment of the Stockholders’ Representative as the representative under the Escrow Agreement of the Stockholders under this Agreement and as the attorney-in-fact and agent for and on behalf of such Stockholder.

1.8

Definitions. Capitalized terms used in this Agreement but not otherwise defined in this Agreement shall have the meanings set forth in EXHIBIT A hereto.

Article II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS

Except as set forth on the Disclosure Schedule, the Company and the Stockholders hereby, jointly and severally, represent and warrant to the Purchaser and for the benefit of the Indemnified Parties, as of the date of this Agreement and as of the Closing Date, as set forth below.

2.1

Organization and Good Standing.

(a)

The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, has all requisite and necessary power and authority to own, lease, use and operate its properties and assets, to carry on and conduct its business as now being conducted and as proposed to be conducted by the Company as of the Closing Date and to perform its obligations under all Material Contracts, and is duly qualified or registered to do business and is in good standing as a foreign corporation (or equivalent status in the relevant jurisdiction) in each jurisdiction set forth on Section 2.1(a) of the Disclosure Schedule, which jurisdictions constitute as of the date of this Agreement the only jurisdictions in which the character of the properties it owns, operates or leases or the nature of its activities makes such qualification necessary or advisable. The Company has full corporate power and authority to do and perform all acts and things to be done by it under this Agreement.

(b)

Except as set forth on Section 2.1(b) of the Disclosure Schedule, the Company has not conducted any business under or otherwise used, for any purpose or in any jurisdiction, any fictitious name, assumed name, trade name or other name other than the name under which the Company is currently incorporated.

5

 

(c)

The Company has provided to the Purchaser true, correct and complete copies of: (i) the Organizational Documents of the Company, as in effect on the date of this Agreement, and such copies reflect all amendments made thereto at any time prior to the date of this Agreement, (ii) the stock records of the Company, (iii) the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the stockholders of the Company, the board of directors of the Company and all committees of the board of directors of the Company (clauses (i), (ii) and (iii), collectively, the “Company Constituent Documents”). There have been no formal meetings or other proceedings of the stockholders of the Company, the board of directors of the Company or any committee of the board of directors of the Company that are not fully reflected in the Company Constituent Documents. There has not been any violation of the Company Constituent Documents, and the Company has not taken any action that is inconsistent with the Company Constituent Documents. The Company is not in default under or in violation of any provision of its Organizational Documents. The books and records of the Company are up to date, true, correct and complete in all material respects. All the records of the Company have been maintained in accordance with applicable Laws and prudent business practices and are in the actual possession and direct control of the Company.

2.2

Capitalization.

(a)

The authorized capital stock of the Company consists of 100,000,000 shares of Company Common Stock, of which 5,968,254 shares have been issued and are outstanding as of the date of this Agreement and 10,000,000 shares of preferred stock, par value $0.0001 per share, of the Company, none of which are outstanding as of the date of this Agreement. All of the outstanding shares of Company Common Stock have been duly authorized and validly issued, and are fully paid and non-assessable. All of the outstanding shares of Company Common Stock have been issued and granted in compliance with (i) all applicable securities laws and other applicable Laws; and (ii) all requirements set forth in the Company Constituent Documents and applicable Contracts. None of the issued shares of Company Common Stock were issued in violation of any preemptive rights or other rights to subscribe for or purchase securities of the Company. Section 2.2(a) of the Disclosure Schedule accurately sets forth with respect to each Company Common Share outstanding as of the date of this Agreement, the name of the registered holder of Company Common Stock. The Stockholders are the registered owners of the Purchased Shares and the percentage of the outstanding capital stock of the Company owned of record by each Stockholder is as set forth on Section 2.2(a) of the Disclosure Schedule.

(b)

The Company has reserved 656,280 shares of Company Common Stock for issuance under the Company Stock Option Plan, of which options to purchase 626,491 shares of Company Common Stock are outstanding as of the date of this Agreement. Section 2.2(b) of the Disclosure Schedule accurately sets forth, with respect to each Company Option outstanding as of the date of this Agreement (whether vested or unvested): (i) the name of the holder of such Company Option; (ii) the total number of shares of Company Common Stock that are subject to such Company Option and the number of shares of Company Common Stock with respect to which such Company Option is immediately exercisable; and (iii) the exercise price per Company Common Share purchasable under such Company Option. The termination of each Company Option in accordance with the terms of this Agreement will not result in any liability to the Company or the Purchaser.

(c)

The Company has reserved 35,898 shares of Company Common Stock for issuance pursuant to Company Warrants that are outstanding as of the date of this Agreement. Section 2.2(c) of the Disclosure Schedule accurately sets forth, with respect to each Company Warrant outstanding as of the date of this Agreement (whether vested or unvested): (i) the name of the holder of such Company Warrant; (ii) the total number of shares of Company Common Stock that are subject to such Company Warrant and the number of shares of Company Common Stock with respect to which such Company Warrant is immediately exercisable; (iii) the date on which such Company Warrant was issued 

6

 

and the term of such Company Warrant; (iv) the vesting schedule for such Company Warrant; (v) the exercise price per Company Common Share purchasable under such Company Warrant; and (vi) whether (and to what extent) the vesting of such Company Warrant will be accelerated in any way by the transactions contemplated by this Agreement or by the termination of employment or engagement or change in position of any holder thereof following consummation of the transactions contemplated by this Agreement.

(d)

Except for Company Options granted pursuant to the Company Stock Option Plan and set forth on Section 2.2(b) of the Disclosure Schedule and the Company Warrants set forth on Section 2.2(c) of the Disclosure Schedule, there is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire, or that relates to, any capital stock or other securities of the Company; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any capital stock or other securities of the Company; (iii) Contract under which the Company is or may become obligated to sell or otherwise issue any of its capital stock or any other securities of the Company; or (iv) condition or circumstance that may give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any capital stock or other securities of the Company (clauses (i) through (iv), collectively, “Company Rights”). The Company does not have any outstanding stock appreciation rights, phantom stock, performance based stock or equity rights or similar stock or equity rights or obligations. The Company has not issued any debt securities which grant the holder thereof any right to vote on, or veto, any actions by the Company.

(e)

Except as set forth on Section 2.2(e) of the Disclosure Schedule, none of the issued and outstanding shares of Company Common Stock constitute restricted shares or are otherwise subject to a repurchase or redemption right or right of first refusal in favor of the Company.

(f)

Except as set forth on Section 2.2(f) of the Disclosure Schedule, the Company is not a party to or bound by any, and to the Knowledge of the Company, there are no, agreements or understandings with respect to the voting (including pooling agreements, voting trusts and proxies) or sale or transfer (including agreements imposing transfer restrictions) of any capital stock or other equity interests of the Company.

(g)

None of the outstanding capital stock of the Company is entitled or subject to any purchase option, call option, right of first refusal, preemptive right, right of participation, subscription right or any similar right (whether pursuant to the Company Constituent Documents or any Contract or any statute to which the Company is subject) and there is no Contract relating to information rights, financial statement requirements, the voting or registration of, or restricting any Person from purchasing, selling, pledging, transferring or otherwise disposing of (or granting any option or similar right with respect to), any of the Company’s capital stock. The Company is not under any obligation, or bound by any Contract pursuant to which it may become obligated (i) to repurchase, redeem or otherwise acquire any outstanding capital stock of the Company; or (ii) make any investment (in the form of a loan or capital contribution) in any other Entity.

(h)

The Company has never repurchased, redeemed or otherwise reacquired any of its capital stock or other securities.

(i)

The Company is not now, nor has it ever been, required to file any periodic or other reports, or any registration statement, with any applicable securities regulatory authority, including the United States Securities and Exchange Commission (the “SEC”), pursuant to any securities legislation, regulations or rules or policies promulgated thereunder, including the Securities Act and the 

7

 

rules and regulations promulgated thereunder, or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder.

2.3

Subsidiaries. The Company has no Subsidiaries and has never had any Subsidiaries. The Company does not own, and has never owned, beneficially or otherwise, any shares or other securities of, or any direct or indirect equity or other financial interest in, any other Entity. The Company has not agreed and is not obligated to make any future investment in or capital contribution to any Entity. The Company has not guaranteed and is not responsible or liable for any obligation of any other Entity. Neither the Company nor any of its stockholders has ever approved or commenced any proceeding, or made any election contemplating, the dissolution or liquidation of the business or affairs of the Company. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights or other Contracts or commitments that could require the Company to issue, sell or otherwise cause to become outstanding any of its capital stock or other equity interests or that otherwise could affect rights or obligations of the holders of the capital stock or other equity interests of the Company.

2.4

Authority; No Conflict; Required Filings and Consents.

(a)

The Company has all requisite corporate power and authority to enter into this Agreement and any Stockholder Related Agreement to which it is a party, perform its obligations under this Agreement and any Stockholder Related Agreement to which it is a party and to consummate the transactions contemplated by this Agreement and any Stockholder Related Agreement to which it is a party.

(b)

The execution, delivery and performance of this Agreement and any Stockholder Related Agreement to which it is a party and the consummation of the transactions contemplated by this Agreement and any Stockholder Related Agreement to which it is a party by the Company have been duly authorized by all necessary corporate action on the part of the Company, and, other than obtaining the Company Stockholder Approval, no other corporate action or proceeding on the part of the Company or its board of directors is necessary to authorize the execution, delivery or performance of this Agreement, any Stockholder Related Agreement to which it is a party or the consummation of the transactions contemplated by this Agreement or any such Stockholder Related Agreement. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to creditors’ rights generally; and (ii) the availability of injunctive relief and other equitable remedies.

(c)

Neither the execution, delivery or performance by the Company of this Agreement or any of the Stockholder Related Agreements, nor the consummation of the transactions contemplated by this Agreement or any of the Stockholder Related Agreements, will directly or indirectly (with or without notice or lapse of time, or both): (i) contravene, conflict with, or result in any violation or breach of, any Company Constituent Document; (ii) contravene, conflict with, or result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of modification, termination, cancellation or acceleration of any obligation or loss of any material benefit) under, require notice to any Person or a consent or waiver under, constitute a change in control under, require the payment of a fee or penalty under or result in the creation or imposition of any Lien upon or with respect to any asset owned or used by the Company under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, Contract or other agreement, instrument or obligation to which the Company is a party or by which it or any of its properties or assets may be bound; (iii) contravene, conflict with or violate, or give any Person the right to challenge any of the transactions 

8

 

contemplated by this Agreement or any of the Stockholder Related Agreements or to exercise any remedy or obtain any relief under, any Law or any order, writ, injunction, judgment or decree to which the Company or any of its assets is subject; or (iv) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by the Company or that otherwise relates to the business of the Company or to any of the assets owned, used or controlled by the Company.

(d)

No Governmental Authorization, or registration, declaration, notice or filing with, any Governmental Body is required by or with respect to the Company: (i) in connection with the execution and delivery of this Agreement or any of the Stockholder Related Agreements by the Company or the consummation by the Company of the transactions contemplated by this Agreement or any of the Stockholder Related Agreements; or (ii) necessary for the Company to operate its business immediately after the Closing in the same manner as operated immediately prior to the Closing after giving effect to the consummation of the transactions contemplated by this Agreement and the Stockholder Related Agreements.

2.5

Company Financial Statements; Books and Records.

(a)

Section 2.5(a) of the Disclosure Schedule sets forth true, correct and complete copies of the following financial statements and notes thereto (collectively, the “Company Financial Statements”):

(i)

The audited consolidated balance sheets and statements of operations, stockholders’ equity and cash flows of the Company as of December 31, 2016 (the “Audited Balance Sheet”).

(b)

Each Company Financial Statement: (i) is true, correct and complete in all respects and has been prepared in conformity with (A) the books and records of the Company, which, in turn, are true, correct and complete, and (B) GAAP consistently applied throughout the periods covered thereby (except as may be indicated in the notes to such Company Financial Statement); (ii) fairly presents the consolidated financial position of the Company as of such dates and the consolidated results of operations, changes in stockholders’ equity and cash flow of the Company for the periods then ended, subject in the case of unaudited financial statements to (y) normal recurring year-end audit adjustments, none of which would individually or in the aggregate be material, and (z) the absence of footnote disclosures, none of which would, alone or in the aggregate, be materially adverse to the business, operations, assets, liabilities, financial condition, operating results, value, cash flow or net worth of the Company; and (iii) contains and reflects adequate reserves, in accordance with GAAP, for all reasonably anticipated losses, costs and expenses. No financial statement of any Person (other than the Company) is required by GAAP to be included in the Company Financial Statements.

(c)

The Company Financial Statements were prepared from the books, records and accounts of the Company, which books, records and accounts have been maintained in accordance with all applicable Laws and (i) reflect all items of income and expense and all assets and liabilities required to be reflected in the Company Financial Statements in accordance with GAAP, and (ii) are true, correct and complete in all respects. The Company maintains accurate books and records reflecting its assets and liabilities and maintain proper and adequate internal accounting controls which provide assurance that (A) transactions are executed in accordance with management’s authorization; (B) transactions are recorded as necessary to permit preparation of the financial statements in conformity with GAAP and to maintain accountability for the Company’s assets; (C) access to the Company’s assets is permitted only in accordance with management’s authorization; (D) the reporting of Company’s assets is compared with 

9

 

existing assets at regular intervals; and (E) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. The Company has delivered to the Purchaser copies of, all written descriptions of, and all policies, manuals and other documents promulgating, such internal accounting controls, as applicable.

2.6

No Undisclosed Liabilities; Indebtedness.

(a)

Except as set forth on Section 2.6(a) of the Disclosure Schedule, the Company has no obligations or liabilities (whether or not absolute, accrued, contingent, determined, determinable, unliquidated or otherwise, whether known or unknown, whether due or to become due, whether or not required to be reflected in financial statements in accordance with GAAP and regardless of when or by whom asserted), and there is no existing condition, situation or set of circumstances that could reasonably be expected to result in such an obligation or liability, except for: (i) liabilities that are fully reflected or provided for in the Company Financial Statements; and (ii) liabilities incurred in the ordinary course of business consistent with past practice since the date of the Audited Balance Sheet and of a type reflected or provided for in the Audited Balance Sheet (none of which is a liability for breach of contract, breach of warranty, tort, infringement, violation of law, claim or lawsuit), which in the aggregate are not in excess of $25,000 and which will be satisfied and discharged by the Company as of immediately prior to the Closing.

(b)

Section 2.6(b) of the Disclosure Schedule sets forth a true, correct and complete list of all loan or credit agreements, notes, bonds, mortgages, indentures and other agreements and instruments pursuant to which any Indebtedness is outstanding or may be incurred and the respective principal amounts outstanding thereunder as of the date of this Agreement. All of the outstanding Indebtedness may be prepaid by the Company at any time without the consent or approval of, or prior notice to, any other Person, and without payment of any premium or penalty.

(c)

Section 2.6(c) of the Disclosure Schedule sets forth the Specified Indebtedness Amount as of the date of this Agreement.

2.7

No Company Material Adverse Effect. Since December 31, 2016, the Company has conducted its business only in the ordinary course of business consistent with past practice and, since such date, there has not been (a) any event, occurrence, development or state of circumstances or facts that has had, or could reasonably be expected to result in, a Company Material Adverse Effect, or (b) any event, occurrence, development or state of circumstances or facts that has, or could reasonably be expected to have, the effect of preventing, delaying, making illegal or otherwise interfering with the transactions contemplated by this Agreement.

2.8

Absence of Certain Changes or Events. Except as set forth on Section 2.8 of the Disclosure Schedule, since December 31, 2016, the Company has not:

(a)

issued (i) any notes, bonds or other debt securities, (ii) any capital stock or other equity securities or any securities or rights convertible into or exchangeable or exercisable for any capital stock or other equity securities (except for Company Common Stock issued upon the exercise of Company Options or Company Warrants), or (iii) any Company Rights (except for Company Options set forth on Section 2.2(b) of the Disclosure Schedule or Company Warrants set forth on Section 2.2(c) of the Disclosure Schedule);

(b)

amended or waived any of its rights under, or permitted the acceleration of vesting under, (i) any provision of the Company Stock Option Plan; (ii) any provision of any agreement 

10

 

evidencing any outstanding Company Option; (iii) any provision of any Company Warrant; or (iv) any restricted stock purchase agreement; 

(c)

borrowed any amount or incurred or become subject to any liabilities, except current liabilities incurred in the ordinary course of business consistent with past practice, which in the aggregate are not in excess of $25,000 and which will be satisfied and discharged by the Company as of immediately prior to the Closing;

(d)

discharged or satisfied any Lien or paid any obligation or liability, other than current liabilities paid in the ordinary course of business consistent with past practice;

(e)

declared, accrued, set aside or made any payment or distribution of cash or other property to any of its equity holders or its other Affiliates with respect to such equity holders’ equity securities or otherwise, or purchased, redeemed or otherwise acquired any shares of its capital stock or other equity securities (including any warrants, options or other rights to acquire its capital stock or other equity);

(f)

mortgaged or pledged any of its properties or assets or subjected them to any Lien, except for Permitted Liens;

(g)

(i) acquired, leased or licensed any right or other asset from any Person; (ii) sold, assigned, transferred, leased or licensed to any Person, or otherwise encumbered, any of its assets, except in each case, in the ordinary course of business consistent with past practice; or (iii) canceled any debts or claims;

(h)

sold, assigned, transferred, leased, licensed or otherwise encumbered any Intellectual Property Rights, disclosed any Confidential Information to any Person (other than to the Purchaser and its Affiliates and other than disclosures made in the ordinary course of business consistent with past practice in circumstances in which it has imposed reasonable confidentiality restrictions), or abandoned or permitted to lapse any Intellectual Property Rights;

(i)

(i) granted any severance or termination pay to (or amended any existing arrangement with) any current or former director, officer or employee; (ii) increased, or accelerated the payment of, the compensation or benefits payable under any existing severance or termination pay policies or employment agreements; (iii) entered into any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director, officer or employee; (iv) established, adopted or amended (except as required by applicable Laws) any Employee Plan or any collective bargaining, works council, stock option, restricted stock, bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, or any other benefit plan, agreement or arrangement covering any employees, officers, consultants or directors of the Company; or (v) increased, or accelerated the payment of, the compensation, bonus or other benefits payable to any employees, officers, consultants or directors of the Company other than in the case of this clause (v) in accordance with the Company’s ordinary course of business and consistent with past practice;

(j)

suffered any extraordinary losses or waived any rights of value (whether or not in the ordinary course of business or consistent with past practice) in excess of $25,000 in the aggregate;

(k)

made capital expenditures or commitments therefor that exceed $25,000 individually or $50,000 in the aggregate;

11

 

(l)

delayed or postponed the payment of any accounts payable or commissions or any other liability or obligation or agreed or negotiated with any party to extend the payment date of any accounts payable or commissions or any other material liability or obligation or accelerated the collection of (or discounted) any accounts or notes receivable outside the ordinary course of business consistent with past practice in amounts that do not exceed $10,000 in the aggregate;

(m)

made any loans or advances to, guaranties for the benefit of, or any investments in, any Person (other than advances to the employees of the Company in the ordinary course of business consistent with past practice);

(n)

suffered any damage, destruction or casualty loss exceeding in the aggregate $25,000, whether or not covered by insurance;

(o)

made or changed any Tax election, changed any annual tax accounting period, changed or adopted any method of tax accounting, filed any amended Tax Returns or claims for Tax refunds, entered into any closing agreement, settled any Tax claim, audit or assessment, consented to any extension or waiver of the limitation period applicable to any claim or assessment of Taxes, or surrendered any right to claim a Tax refund, offset or other reduction;

(p)

threatened, commenced or settled any Legal Proceeding;

(q)

made any investment in or taken any steps to incorporate or form any Subsidiary or to acquire any equity interest or other interest in any other Entity;

(r)

amended any of its Organizational Documents or effected or been a party to any Acquisition Transaction, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;

(s)

entered into any agreement or arrangement prohibiting or restricting it from freely engaging in any business, from competing with any Person in any line of business that is material to the Company or otherwise restricting the conduct of its business anywhere in the world;

(t)

entered into, amended or terminated any material Contract other than in the ordinary course of business consistent with past practice;

(u)

received notice, whether written or oral, from any party to a Company Contract of such party’s intention not to renew, not to extend, to cancel or otherwise terminate or materially modify its business relationship with the Company;

(v)

entered into any transaction with any of its Affiliates;

(w)

entered into any other material transaction (other than the entry into this Agreement and the Stockholder Related Agreements and the agreements and transactions contemplated by this Agreement and the Stockholder Related Agreements), whether or not in the ordinary course of business consistent with past practice, or materially changed any business practice; or

(x)

agreed, whether orally or in writing, to do any of the foregoing.

2.9

Taxes.

12

 

(a)

All Tax Returns required to have been filed by or on behalf of, or with respect to the assets of, the Company through the date of this Agreement have been timely filed in accordance with all applicable Laws (pursuant to an extension of time or otherwise) and are true, correct and complete in all respects. The Company has provided to the Purchaser true, correct and complete copies of all Tax Returns.

(b)

Section 2.9(b) of the Disclosure Schedule sets forth a true, correct and complete list of all jurisdictions (whether foreign or domestic) in which the Company is required to file Tax Returns. No claim has ever been made by a Governmental Body in a jurisdiction where the Company does not file Tax Returns that it is or may be subject to taxation or to a requirement to file Tax Returns in that jurisdiction.

(c)

All Taxes, estimated Taxes, deposits and other payments due and owing by or on behalf of the Company (whether or not shown on any Tax Return) have been or will be timely paid in full through the date of this Agreement.

(d)

The Company has accrued on the Company Financial Statements in accordance with GAAP all liabilities for unpaid Taxes through the date of this Agreement.

(e)

The amounts so paid, together with all amounts accrued as liabilities for Taxes (including Taxes accrued as currently payable but excluding any accrual to reflect timing differences between book and Tax income) on the books of the Company, shall be adequate based on the tax rates and applicable Laws in effect to satisfy all liabilities for Taxes of the Company in any jurisdiction through the Closing Date, including Taxes accruable upon income earned through the Closing Date.

(f)

The Company has withheld all amounts of Taxes required to be withheld from its employees, agents, contractors, creditors, stockholders, members or other equityholders and third parties and timely remitted such amounts to the proper Governmental Body and filed all federal, state, local and foreign Tax Returns and reports with respect to employee income Tax withholding, social security, unemployment, and other similar Taxes, all in compliance with the withholding provisions of the Code, or any prior provision of the Code and other applicable Laws.

(g)

The Company has collected all material sales, value-added and use Taxes required to be collected, and have remitted, or will remit on a timely basis, such amounts to the appropriate Governmental Body (or have been furnished properly completed exemption certificates and have maintained all such records and supporting documents in the manner required by all applicable sales and use Tax statutes and regulations).

(h)

No claims have been asserted and no proposals or deficiencies for any Taxes of the Company are being asserted, proposed or, to the Knowledge of the Company, threatened, and no Legal Proceeding, audit, examination or investigation of any Tax Return of the Company is currently underway, pending or, to the Knowledge of the Company, threatened. There have been no examinations or audits of any Tax Return of the Company. The Company has provided to the Purchaser true, correct and complete copies of all audit reports, correspondence with Tax authorities and similar documents (to which the Company has access) relating to the Tax Returns of the Company.

(i)

All Tax deficiencies asserted by a Governmental Body against the Company have been paid in full, accrued on the books of the Company, as applicable, or finally settled, and no indication of a Tax increase or other issue has been raised in any such examination that, by application of the same or similar principles, could reasonably be expected to result in a proposed Tax deficiency for any other period not so examined.

13

 

(j)

There are no outstanding waivers or agreements between any Governmental Body and the Company for the extension of time for the assessment of any Taxes or deficiency thereof, nor are there any requests for rulings, outstanding subpoenas or requests for information, notices of proposed reassessment of any property owned or leased by the Company or any other matter pending between the Company and any Governmental Body.

(k)

There are no Liens for Taxes with respect to the Company or the assets or properties of the Company, nor is there any Lien that is pending or, to the Knowledge of the Company, threatened.

(l)

The Company has not been a member of an “affiliated group” of companies (within the meaning of Section 1504 of the Code) filing a consolidated federal income tax return (other than a group, the common parent of which was the Company).

(m)

The Company has no liability for the Taxes of any Person (other than for itself) under Treasury Regulation Section 1.1502-6 (or any similar provision of national, provincial, territorial, state, local or foreign Law), as a transferee or successor, by Contract or otherwise.

(n)

The Company is not a party to or bound by any Tax allocation, Tax indemnification or Tax sharing agreement.

(o)

The Company has not made any payments, is not obligated to make any payments and is not a party to any Contract that would obligate it to make any payments that will not be deductible under Section 280G of the Code (or any similar provision of national, provincial, territorial, state, local or foreign Law).

(p)

The Company has not constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying for tax free treatment under Section 355 of the Code (i) in the two years prior to the date of this Agreement; or (ii) in a distribution which would otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in connection with the transactions contemplated by this Agreement.

(q)

The Company has no net operating losses or other tax attributes presently subject to limitation under Sections 382, 383, 384 of the Code or the federal consolidated return regulations (or any corresponding or similar provision of state, local or foreign income Tax law).

(r)

The Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any Tax period after the date of this Agreement as a result of any (i) adjustment in taxable income for any tax period (or portion thereof) pursuant to Section 481 or 263A of the Code or any comparable provision under state or foreign tax Laws; (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of national, provincial, territorial, state, local or foreign income Tax Law) executed on or prior to the date of this Agreement; (iii) installment sale or open transaction disposition made on or prior to the date of this Agreement; (iv) prepaid amount received on or prior to the date of this Agreement; (v) reserve claimed in respect of a taxation year ending prior to the date of this Agreement; (vi) any election (including a protective election) pursuant to Section 108(i) of the Code; or (vii) change in method of accounting for a Tax period ending on or prior to the Closing Date.

(s)

The Company has not, directly or indirectly, transferred property to or acquired property from a Person with whom it was not dealing at arm’s length for consideration other than consideration equal to the fair market value of the property at the time of the disposition or acquisition 

14

 

thereof and has complied with all material transfer pricing rules and requirements, including any disclosure, reporting and other similar requirements under Section 482 of the Code (or any corresponding provision of any state, local or foreign Tax Law).

(t)

The Company has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

(u)

The Company (i) does not have a permanent establishment, office or other fixed place of business, and (ii) has never filed or had any obligation to file, and does not have any obligation to file, any Tax Return based on income or otherwise, in each case in any jurisdiction other than the United States.

(v)

None of the Tax Returns described in Section 2.9(a) contains any position which is or would be subject to penalties under Section 6662 of the Code (or any similar provision of national, provincial, territorial, state, local or foreign law) and the Treasury Regulations issued thereunder.

(w)

The Company is, and has at all times been, in compliance with the provisions of Sections 6011, 6111 and 6112 of the Code relating to tax shelter disclosure, registration and list maintenance and with the Treasury Regulations thereunder.

(x)

The Company has not at any time engaged in or entered into a “listed transaction” within the meaning of Treasury Regulation Sections 1.6011-4(b)(2), 301.6111-2(b)(2) or 301.6112-1(b)(2)(A), and no IRS Form 8886 has been filed with respect to the Company, nor has the Company entered into any tax shelter or listed transaction with the sole or dominant purpose of the avoidance or reduction of a Tax liability with respect to which there is a significant risk of challenge of such transaction by a Governmental Body.

2.10

Real Property.

(a)

The Company does not own, and has never owned, any real property, and the Company is not obligated and does not have an option to acquire an ownership interest in any real property.

(b)

The Company operates as a virtual company and, except as set forth on Section 2.10 of the Disclosure Schedule, does not have, lease or use any Leased Real Property. 

2.11

Personal Property.

(a)

All items of equipment and other tangible personal property and assets owned by or leased to the Company: (i) are reasonably adequate for the uses to which they are being put; (ii) are structurally sound, free of defects and deficiencies and in good operating condition, maintenance and repair, subject to ordinary wear and tear; (iii) comply in all material respects with, and are being operated and otherwise used in compliance with, all applicable Laws; (iv) were acquired and are usable in the ordinary course of business consistent with past practice; and (v) are adequate for the conduct of the business of the Company in the manner in which such business is being conducted and as proposed to be conducted by the Company as of the Closing Date. All of the tangible personal property and assets of the Company are located at the Leased Real Property.

(b)

No Person other than the Company owns any equipment or other tangible personal property or asset that is necessary to the operation of the Company’s business. 

15

 

2.12

Intellectual Property.

(a)

Section 2.12(a) of the Disclosure Schedule sets forth all Company Registrations, in each case enumerating specifically the applicable filing or registration number, title, jurisdiction in which filing was made or from which registration was issued, date of filing or issuance, and names of all current applicant(s) and registered owners(s), as applicable. All assignments of Company Registrations to the Company have been properly executed and recorded. Except as set forth on Section 2.12(a) of the Disclosure Schedule, all issued Company Registrations are valid and enforceable, and all issuance, renewal, maintenance and other payments and fees that are or have become due with respect thereto have been timely paid by or on behalf of the Company. Except as set forth on Section 2.12(a) of the Disclosure Schedule, no application for a patent, copyright or trademark registration or any other type of Company Registrations filed by or on behalf of the Company has been abandoned, allowed to lapse or rejected, and there is no basis for a claim that any Intellectual Property Rights embodied in any Company Registrations is invalid or unenforceable.

(b)

There are no inventorship challenges, opposition or nullity proceedings or interferences declared or commenced or, to the Knowledge of the Company, threatened, and there is no fact that is reasonably likely to result in an inventorship challenge, opposition or nullity proceeding or interference, with respect to any Patent Rights included in the Company Registrations. The Company has complied with its duty of candor and disclosure to the United States Patent and Trademark Office and any relevant foreign patent office with respect to all patent and trademark applications filed by or on behalf of the Company and has made no misrepresentation in such applications.

(c)

The Company exclusively owns all right, title and interest in and to the Company Owned Intellectual Property, free and clear of any Liens other than Permitted Liens. The Company Intellectual Property constitutes all Intellectual Property Rights pertaining or relating to the Pipeline Technologies that are used in or necessary to the conduct of the Company’s business as now conducted and as contemplated to be conducted by the Company as of the Closing Date, free and clear of any Liens other than Permitted Liens.

(d)

The Company has taken all commercially reasonable steps necessary to maintain and protect the proprietary nature of each item of Company Intellectual Property, and to maintain in confidence all trade secrets and Confidential Information comprising a part thereof. No complaint relating to an improper use or disclosure of, or a breach in the security of, any such information has been made or, to the Knowledge of the Company, threatened against the Company. To the Knowledge of the Company, there has been no: (i) unauthorized disclosure of any third-party proprietary or Confidential Information in the possession, custody or control of the Company; or (ii) breach of the Company’s security procedures wherein Confidential Information has been disclosed to a third Person.

(e)

No product, product candidate or service marketed or sold (or proposed to be marketed or sold) by the Company or the conduct of the business of the Company, as it is currently conducted and as it is contemplated to be conducted by the Company as of the Closing Date, infringes, violates or constitutes a misappropriation, or will infringe, violate or constitute a misappropriation, of any Intellectual Property Rights of any third-party. The Company has not received any complaint, claim or notice (i) alleging any such infringement, violation or misappropriation, or that, by conducting its business, the Company would infringe, violate or misappropriate any Intellectual Property Rights of any other Person; or (ii) advising that such Person is challenging or threatening to challenge the ownership, use, legality, validity or enforceability of any Company Intellectual Property.

(f)

To the Knowledge of the Company, no Person (including any current or former employee or consultant of the Company) has infringed, violated or misappropriated, or is infringing, 

16

 

violating or misappropriating, any of the Company Intellectual Property and, to the Knowledge of the Company, there are no facts or circumstances that could reasonably be expected to result in any of the foregoing or of any current or anticipated claims against a third Person relating to the foregoing.

(g)

Section 2.12(g) of the Disclosure Schedule sets forth each license, covenant or other agreement pursuant to which the Company has (x) assigned or transferred to any Person, or (y) licensed or otherwise granted any right to any Person, or covenanted not to assert any right, in each such instance of (x) or (y), with respect to any Company Intellectual Property. The Company has not agreed to indemnify any Person against any infringement, violation or misappropriation of any Intellectual Property Rights with respect to any third-party Intellectual Property Rights. The Company is not a member of or party to any patent pool, industry standards body, trade association or other organization pursuant to the rules of which it is obligated to license any existing or future Intellectual Property Rights to any Person, and, except as set forth on Section 2.12(g) of the Disclosure Schedule, none of the Company Owned Intellectual Property was developed in whole or in part using any governmental funding or using any funding, facilities, or resources of any university or research institution.

(h)

Section 2.12(h) of the Disclosure Schedule sets forth (i) each item of Company Licensed Intellectual Property and the license or agreement pursuant to which the Company Exploits it (excluding currently-available, off the shelf software programs that are licensed by the Company pursuant to “shrink wrap” licenses, the total fees associated with which are less than $10,000), and (ii) each agreement, assignment or other instrument pursuant to which the Company has obtained any joint or sole ownership interest in or to each item of Company Owned Intellectual Property.

(i)

The Company is not subject to any proceeding or outstanding decree, order, judgment, agreement or stipulation (i) restricting in any manner the use, transfer or licensing by the Company of any of the Company Intellectual Property; or (ii) that may affect the validity, use or enforceability of the Company Intellectual Property or any product, product candidate or service of the Company related thereto.

(j)

Each current and former employee of the Company and each current and former independent contractor of or consultant to the Company has executed a valid and binding written agreement, substantially in the form or forms provided to the Purchaser (each, an “Assignment Agreement”), expressly assigning to the Company all right, title and interest in any inventions and works of authorship pertaining to the Pipeline Technologies, whether or not patentable, invented, created, developed, conceived and/or reduced to practice by the employee, independent contractor or consultant for the Company, and all Intellectual Property Rights therein, and has waived all moral rights therein to the extent legally permissible. All Company Owned Intellectual Property was developed by (i) an employee of the Company working within the scope of his or her employment at the time of such development; or (ii) agents, consultants, contractors, or other Persons who have executed appropriate Assignment Agreements. To the extent that any Company Intellectual Property has been developed or created by a third party for the Company, the Company has a written agreement with such third party with respect thereto and the Company thereby either (A) has obtained ownership of and is the exclusive owner of; or (B) has obtained a license (sufficient for the conduct of its business as currently conducted and as proposed to be conducted by the Company as of the Closing Date) to, all of such third party’s Intellectual Property in such work, material or invention by operation of law or by valid assignment.

(k)

The execution and delivery of this Agreement by the Company and the Stockholders, the consummation by the Company and the Stockholders of the transactions contemplated by this Agreement and the Stockholder Related Agreements and the Company continuing to operate its business immediately after the Closing in the same manner as operated immediately prior to the Closing 

17

 

after giving effect to the consummation of the transactions contemplated by this Agreement and the Stockholder Related Agreements will not result in the breach of, or create on behalf of any third-party the right to terminate or modify, (i) any license, sublicense or other agreement relating to any Company Intellectual Property; or (ii) any license, sublicense and other agreement to which the Company is a party and pursuant to which the Company is authorized to use any third-party Intellectual Property Rights that are useful to the business of the Company, as it is currently conducted and as it is contemplated to be conducted by the Company as of the Closing Date.

(l)

To the Knowledge of the Company, no current or former director, officer, employee, independent contractor, or consultant of the Company (i) is in violation of any provision or covenant of any employment agreement, invention assignment agreement, nondisclosure agreement, non-competition agreement or any other Contract with any other Person by virtue of such director’s, officer’s, employee’s, independent contractor’s, or consultant’s being employed by, performing services for or serving on the board of directors of the Company; (ii) is using or has used any trade secrets or Confidential Information of any third Person in connection with performing any services for the Company or the development or creation of any Company Intellectual Property without the permission of the Company and such third Person; or (iii) has developed or created any Company Intellectual Property that is subject to any agreement under which such director, officer, employee, independent contractor, or consultant has assigned or otherwise granted any third party any rights in or to such Company Intellectual Property. To the Knowledge of the Company, no director, agent, employee, independent contractor, or consultant of the Company is a party to, or is otherwise bound by, any Contract, including any confidentiality, non-competition or proprietary rights agreement, with any other Person that in any way adversely affects or will affect his or her ability to assign to the Company rights to any invention, improvement, discovery or information relating to Company Intellectual Property or affecting the Company’s ability to exploit any Company Intellectual Property.

2.13

Agreements.

(a)

Except as set forth on Section 2.13 of the Disclosure Schedule, the Company is not a party to or bound by any written or oral:

(i)

pension, profit sharing, stock option, employee stock purchase, bonus or other plan or arrangement providing for deferred or other compensation to employees, former employees or consultants, or any other employee benefit plan or arrangement, or any collective bargaining agreement or any other Contract with any labor union, or severance agreements, programs, policies or arrangements;

(ii)

Contract for the employment of, or receipt of services from, any officer, individual employee or other Person on a full-time, part-time, consulting or other basis or relating to loans to officers, directors, managers or Affiliates;

(iii)

Contract providing for indemnification of any officer, director, employee or agent;

(iv)

Contract under which the Company has advanced or loaned any other Person amounts in the aggregate exceeding $25,000;

(v)

agreement or indenture relating to borrowed money or other Indebtedness or the mortgaging, pledging or otherwise placing or creating of a Lien on any asset or group of assets of the Company;

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(vi)

guaranty, pledge, performance or completion bond, surety or similar agreement or arrangement;

(vii)

Contract creating or relating to any partnership or joint venture or any sharing of revenues, profits, losses, costs or liabilities;

(viii)

lease or agreement under which the Company is lessee of or holds or operates any property, real or personal, owned by any other party, except for any lease of real or personal property under which the aggregate annual rental payments do not exceed $25,000;

(ix)

lease or agreement under which the Company is lessor of or permits any third party to hold or operate any property, real or personal, owned or controlled by the Company;

(x)

Contract or group of related Contracts with the same party or group of affiliated parties, the performance of which involves consideration in the aggregate in excess of $50,000, other than purchase and sales orders incurred in the ordinary course of business consistent with past practice;

(xi)

(1) assignment, (2) license, or (3) indemnification (other than agreements including indemnification obligations incidental to the subject matter of such agreement), in each of (1) - (3), with respect to any intangible property (including any Intellectual Property Rights);

(xii)

Contract relating to the (1) acquisition, (2) transfer, (3) licensing or use, or (4) development, in each of (1) - (4), of any technology or any Intellectual Property Rights, except for licenses to use shrink-wrap or off-the-shelf software with a cost to the Company of less than $10,000 per user or per copy, as applicable;

(xiii)

Contract relating to the purchase or sale of any product, product candidate or other asset by or to, or the performance of any services by or for, any Related Party;

(xiv)

Contract under which it has granted any Person any registration rights (including demand or piggyback registration rights);

(xv)

sales, distribution, supply or franchise agreement or other agreement involving an agency relationship;

(xvi)

advertising, vendor rebate or product purchase or sale discount agreement;

(xvii)

Contract for capital expenditures or the acquisition or construction of fixed assets requiring the payment by the Company of an amount in excess of $25,000;

(xviii)

Contract constituting or relating to a Government Contract or Government Bid;

(xix)

Contract providing for an “earn out”, “performance guarantee” or other similar contingent payments by or to the Company;

(xx)

Contracts for the cleanup, abatement or other actions in connection with any Materials of Environmental Concern, the remediation of any existing environmental condition or relating to the performance of any environmental audit or study;

19

 

(xxi)

Contract granting any Person an option or a right of first refusal, first-offer or similar preferential right to purchase or acquire any assets of the Company;

(xxii)

Contract for the granting or receiving of a license, sublicense or franchise or under which any Person is obligated to pay or has the right to receive a royalty, license fee, franchise fee or similar payment, except for Contracts relating to the use of shrink-wrap or off-the-shelf software with a cost to the Company of less than $10,000 per user or per copy, as applicable;

(xxiii)

outstanding power of attorney empowering any Person to act on behalf of the Company;

(xxiv)

any tax-sharing Contracts;

(xxv)

Contract that was entered into outside the ordinary course of business or was inconsistent with the Company’s past practices;

(xxvi)

agreement with a term of more than 60 days which is not terminable by the Company upon less than 30 days’ notice without penalty and involves a consideration in excess of $50,000 annually;

(xxvii)

Contract regarding voting, transfer, issuance or other arrangements related to the Company’s capital stock or warrants, options or other rights to acquire, or that relates to, the Company’s capital stock; or

(xxviii)

Contract that (A) limits the ability of the Company, or any officers or directors, employees, stockholders, members or other equityholders, agents or Representatives of the Company (in their capacities as such) to compete in any line of business or with any Person or in any geographic area or during any period of time; (B) contains any so called “most favored nation” provisions or any similar provision requiring the Company to offer a third party terms or concessions (including levels of service or content offerings) at least as favorable as offered to one or more other parties; or (C) provides for “exclusivity,” preferred treatment or any similar requirement or under which the Company is restricted, or which after the Closing would restrict the Purchaser or any of its Affiliates, with respect to distribution, licensing, marketing, co-marketing or development.

(b)

All of the Contracts, leases, agreements and instruments set forth or required to be set forth on Section 2.13(a) of the Disclosure Schedule (the “Material Contracts”) are in full force and effect and are valid, binding and enforceable in accordance with their respective terms and will be in full force and effect, valid, binding and enforceable on identical terms without penalty in accordance with their terms upon consummation of the transactions contemplated by this Agreement. Except as set forth on Section 2.13(b) of the Disclosure Schedule: (i) the Company has performed all material obligations required to be performed by it and is not in default under or in breach of nor in receipt of any claim of default or breach under any Material Contract; (ii) no event has occurred which (with or without the passage of time or the giving of notice or both) would, or could reasonably be expected to, (A) result in a default, breach or event of noncompliance by the Company under any Material Contract; (B) give any Person the right to declare a default or exercise any remedy under any Material Contract; (C) give any Person the right to accelerate the maturity or performance of any Material Contract; or (D) give any Person the right to cancel, terminate or modify any Material Contract; (iii) the Company has no present expectation or intention of not fully performing all such obligations; and (iv) there is no breach or anticipated breach by the other parties to any Material Contract. The consummation of the transactions contemplated by this Agreement and the Stockholder Related Agreements shall not (either alone or upon the occurrence of additional acts or events) result in any payment or payments becoming due from the 

20

 

Company or the Purchaser or any of its Affiliates to any Person or give any Person the right to terminate or alter the provisions of any Material Contract.

(c)

The Company has not received any notice or other communication regarding any actual or possible violation or breach of, or default under, any Material Contract;

(d)

The Company has not waived any of its rights under any Material Contract;

(e)

The Company is not a party to any Contract, agreement or commitment the performance of which could reasonably be expected to have a Company Material Adverse Effect.

(f)

There is no term, obligation, understanding or agreement that would modify any term of a written Material Contract or any right or obligation of a party thereunder which is not reflected on the face of such Material Contract.

(g)

No Person is renegotiating, or has a right pursuant to the terms of any Material Contract to renegotiate, any amount paid or payable to the Company under any Material Contract or any other material term or provision of any Material Contract. The Company is not a party to any Contract that obligates the Company to provide products or services below the Company’s cost of such product or service.

(h)

The Company has provided to the Purchaser a true, correct and complete copy of each of the written Material Contracts and a written summary description of each of the oral Material Contracts, together with all amendments, waivers or other changes thereto.

2.14

Litigation.

(a)

There are no Legal Proceedings pending or, to the Knowledge of the Company, threatened (i) against or affecting the Company or any of the assets owned, used or controlled by the Company or any Person whose liability the Company has or may have retained or assumed, either contractually or by operation of law (or pending or, to the Knowledge of the Company, threatened against or affecting any of the Stockholders or the officers, directors, managers or employees of the Company with respect to its business or proposed business activities), or pending or threatened by the Company against any Person, at law or in equity, or before or by any Governmental Body (including any Legal Proceedings with respect to the transactions contemplated by this Agreement), or (ii) that relate to the ownership of any capital stock of the Company, or any option or other right to the capital stock of the Company, or any right to receive consideration as a result of this Agreement.

(b)

The Company is not subject to any Legal Proceedings under collective bargaining agreements or otherwise or any governmental investigations or inquiries.

(c)

There is no reasonable basis for any of the foregoing. The Company is fully insured with respect to each of the matters set forth on Section 2.14 of the Disclosure Schedule. The Company is not subject to any judgment, order or decree of any court or other Governmental Body, and the Company has not received any notice from legal counsel to the effect that it is exposed, from a legal standpoint, to any material liabilities. There are no actions, suits, proceedings (including any arbitration proceedings), orders, investigations or claims pending or, to the Knowledge of the Company, threatened against or affecting any Stockholder in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with the transactions contemplated by this Agreement. The Company has provided to the Purchaser true, correct and complete copies of all pleadings, correspondence and other 

21

 

written materials to which the Company has access and that relate to any Legal Proceeding set forth on Section 2.14 of the Disclosure Schedule.

2.15

Environmental Matters.

(a)

The Company is, and has for the past three years has been, in compliance with all applicable Environmental Laws, which compliance includes the possession by the Company of all Governmental Authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof. All Governmental Authorizations currently held by the Company pursuant to Environmental Laws are set forth on Section 2.15(a) of the Disclosure Schedule.

(b)

The Company has not received any notice or other communication (in writing or otherwise), whether from a Governmental Body, citizens group, employee or otherwise, that alleges that the Company is not in compliance with, or has liability under, any Environmental Law, and to the Knowledge of the Company, there are no circumstances that could reasonably be expected to prevent or interfere with the Company’s compliance with, or give rise to liability under, any Environmental Law in the future.

(c)

The Company has not at any time been subject to any administrative or judicial proceeding pursuant to, or paid any fines or penalties pursuant to, applicable Environmental Laws. The Company has not entered into or agreed to enter into, or has any present intent to enter into, any consent decree or order, and the Company is not subject to any judgment, decree or judicial or administrative order relating to compliance with, or the cleanup of Materials of Environmental Concern under, any applicable Environmental Law.

(d)

To the Knowledge of the Company, there has been no Release of Materials of Environmental Concern at any plant, facility, site, area or property at which the Company currently operates or previously operated.

(e)

To the Knowledge of the Company, no current or prior owner of any property leased or controlled by the Company has received any notice or other communication (in writing or otherwise), whether from a Governmental Body, citizens group, employee (current or former) or otherwise, that alleges that such current or prior owner or the Company is not in compliance with, or has liability under, any Environmental Law.

(f)

To the Knowledge of the Company, no improvement or equipment included in the property or assets of the Company contains any asbestos, polychlorinated biphenyls, underground storage tanks, open or closed pits, sumps or other containers on or under any property or asset.

(g)

To the Knowledge of the Company, the Company has not imported, received, manufactured, produced, processed, labeled or shipped, stored, used, operated, transported, treated or disposed of any Materials of Environmental Concern other than in compliance with all Environmental Laws.

(h)

The Company has provided to the Purchaser true, correct and complete copies of all environmental reports, investigations and/or audits relating to facilities at which the Company currently operates or previously operated (whether conducted by or on behalf of the Company or a third party) of which the Company has possession or control.

2.16

Employee Matters. 

22

 

(a)

The Company currently has no employees.  The Company’s records accurately reflect the employment or service histories of its employees, independent contractors, contingent workers and leased employees, including their hours of service. The employment of each of the employees is terminable at will. The Company has provided to the Purchaser true, correct and complete copies of all employee manuals and handbooks, disclosure materials, policy statements, releases and other materials relating to the employment of the current and former employees of the Company. 

(b)

Section 2.16(b) of the Disclosure Schedule sets forth a true, correct and complete list of all consultants and independent contractors used by the Company as of the date of this Agreement, specifying the name of the consultant or independent contractor, type of services provided, fees paid to such consultant or independent contractor for calendar year 2016, work location and address, and accurately reflects any compensation payable to them, their dates of service, their positions or titles and a true, correct and complete description of the Company’s obligations to each such consultant and independent contractor. Each consultant or independent contractor set forth on Section 2.16(b) of the Disclosure Schedule has the requisite Governmental Authorizations required to provide the services such consultant or independent contractor provides the Company, as applicable. The Company has provided to the Purchaser a true, correct and complete copy of each written agreement with each consultant and independent contractor set forth on Section 2.16(b) of the Disclosure Schedule. Each of the consultant and independent contractor relationships with the Persons set forth on Section 2.16(b) of the Disclosure Schedule is terminable without notice and without pay. 

(c)

To the Knowledge of the Company, each prior employee has, at all times, properly been classified and treated as an employee for all purposes including, but not limited to, the Employee Plans and Tax purposes. Each prior employee has at all times properly been classified as subject to or exempt from overtime requirements. The Company has never had any temporary or leased employees that were not treated and accounted for in all respects as employees of the Company.

(d)

To the Knowledge of the Company, the Company is, and has at all times been, in compliance with all applicable Laws and in particular, all Labor Laws applicable to its employees. To the Knowledge of the Company, the Company is not subject to or liable for any arrears of wages, penalties, fines, orders to pay, assessments, charges, damages or taxes for failure to comply with the Labor Laws and the Company is in compliance with all Laws (including all Labor Laws) and contracts relating to employment, employment practices, wages, hours, equal opportunity, affirmative action, harassment, occupational health and safety, disability, workers compensation, unemployment, insurance, benefits, taxes, bonuses and terms and conditions of employment.

(e)

There are no claims pending, or, to the Knowledge of the Company, threatened or capable of arising, against the Company, by an employee or workman or third party, in respect of any accident or injury, which are not fully covered by insurance or under applicable workers compensation legislation. No levies, assessments or penalties have been made against the Company pursuant to Applicable Benefit Laws.

(f)

No notice has been received by the Company of any employment related claims commenced by any employee against the Company, including claims that the Company has violated Labor Laws or the common law with respect to an employee’s employment, and, to the Knowledge of the Company, no such claims are threatened.

(g)

The Company has not made any written or verbal commitments to any officer, employee, former employee, consultant or independent contractor of the Company with respect to compensation, promotion, retention, termination, severance or any similar matter in connection with the transactions contemplated by this Agreement or otherwise.

23

 

(h)

To the Knowledge of the Company, each Person classified as an independent contractor or other non-employee service provider of the Company has, at all times, properly been classified and treated as an independent contractor or other non-employee service provider for all purposes including, but not limited to, Tax purposes. To the Knowledge of the Company, the Company is, and has at all times been, in compliance with all applicable Laws and contracts relating to its independent contractors and other non-employee service providers. No independent contractor, consultant or other non-employee service provider of the Company is eligible to participate in any Employee Plan. There are no claims pending or, to the Knowledge of the Company, threatened against the Company, by any independent contractor, other non-employee service provider or third party, in respect of any accident or injury, which are not fully covered by insurance.

(i)

All amounts due in relation to employees (whether arising under common law, statute, equity or otherwise) have been paid, including all remuneration, expenses, social insurance, pension contributions, liability to taxation, levies and other amounts (other than amounts owing with respect to the current salary or work period which are not yet due).

(j)

Except as set forth on Section 2.16(j) of the Disclosure Schedule, all amounts due in relation to any independent contractors or other non-employee service providers of the Company have been paid.

(k)

To the Knowledge of the Company, no Employee, since becoming an employee, has been, or currently is, represented by a labor organization or group that was either certified or voluntarily recognized by any labor relations board (including the NLRB) or certified or voluntarily recognized by any other Governmental Body. The Company is not and has never been a signatory to a collective bargaining agreement with any trade union, labor organization or group. No representation election petition or application for certification has been filed by employees or is pending with the NLRB or any other Governmental Body and no union organizing campaign or other attempt to organize or establish a labor union, employee organization or labor organization or group involving employees has occurred, is in progress or, to the Knowledge of the Company, is threatened. No labor strike, work stoppage, slowdown, picketing, lockout or other material labor dispute has occurred, and none is underway or, to the Knowledge of the Company, threatened.

(l)

The Company is not a federal or state contractor.

(m)

No wrongful discharge, retaliation, libel, slander or other claim, complaint, charge or investigation that arises out of the employment relationship between the Company and any of its Employees has been filed or is pending or, to the Knowledge of the Company, threatened against the Company under any applicable Law.

2.17

Employee Benefit Plans. The Company does not have an Employee Plan. 

2.18

Compliance With Laws; Governmental Authorizations.

(a)

The Company is, and has at all times been, in compliance with all applicable Laws, except where non-compliance could not reasonably be expected to result in a Company Material Adverse Effect. The Company has never received any notice or other communication from any Governmental Body or any other Person regarding (i) any actual, alleged, possible or potential material violation of, or failure to materially comply with, any Law; or (ii) any actual, alleged, possible or potential obligation on the part of the Company to undertake, or to bear all or any portion of the cost of, any cleanup or any remedial, corrective or response action of any nature under any applicable Law. The Company has provided to the Purchaser a true, correct and complete copy of each report, study, survey or 

24

 

other document to which the Company has access that addresses or otherwise relates to the compliance of the Company with, or the applicability to the Company of, any Laws. To the Knowledge of the Company, no Governmental Body has proposed or is considering any Law that, if adopted or otherwise put into effect, (A) may have an adverse effect on the business, condition, assets, liabilities, operations, financial performance, net income or prospects of the Company or on the ability the Company to comply with or perform any covenant or obligation under any of the Stockholder Related Agreements; or (B) may have the effect of preventing, delaying, making illegal or otherwise interfering with the transactions contemplated by this Agreement.

(b)

Section 2.18(b) of the Disclosure Schedule sets forth each Governmental Authorization held by the Company, and the Company has provided to the Purchaser true, correct and complete copies of all such Governmental Authorizations. The Governmental Authorizations held by the Company are valid and in full force and effect, and collectively constitute all Governmental Authorizations necessary (i) to enable the Company to conduct its business in the manner in which its business is currently being conducted and as contemplated to be conducted by the Company as of the Closing Date; and (ii) to permit the Company to own and use its assets in the manner in which it is currently owned and used. The Company is, and at all times since its incorporation has been, in compliance with the terms and requirements of the Governmental Authorizations held by the Company. The Company has not received any notice or other communication from any Governmental Body regarding (A) any actual or possible violation of or failure to comply with any term or requirement of any Governmental Authorization; or (B) any actual or possible revocation, withdrawal, suspension, cancellation, termination or modification of any Governmental Authorization. All of Governmental Authorizations set forth or required to be set forth on Section 2.18(b) of the Disclosure Schedule will be available for use by the Company immediately after the Closing. In respect of approvals, licenses or permits requisite for the conduct of any part of the business of the Company which are subject to periodic renewal, the Company has no reason to believe that such renewals will not be timely granted by the relevant Governmental Body.

(c)

(i) The Company has at all times been, in full compliance with all of the terms and requirements of each Governmental Authorization set forth or required to be set forth on Section 2.18(b) of the Disclosure Schedule; (ii) to the Knowledge of the Company, no event has occurred, and no condition or circumstance exists, that might (with or without notice or lapse of time or both) (A) constitute or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any Governmental Authorization set forth or required to be set forth on Section 2.18(b) of the Disclosure Schedule; or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation, termination or modification of any Governmental Authorization set forth or required to be set forth on Section 2.18(b) of the Disclosure Schedule; (iii) the Company has never received, and, to the Knowledge of the Company, no employee has ever received, any notice or other communication from any Governmental Body or any other Person regarding (x) any actual, alleged, possible or potential violation of or failure to comply with any term or requirement of any Governmental Authorization; or (y) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination or modification of any Governmental Authorization; and (iv) all applications required to have been filed for the renewal of the Governmental Authorizations required to be set forth on Section 2.18(b) of the Disclosure Schedule have been duly filed on a timely basis with the appropriate Governmental Bodies, and each other notice or filing required to have been given or made with respect to such Governmental Authorizations has been duly given or made on a timely basis with the appropriate Governmental Body.

2.19

Insurance. Section 2.19 of the Disclosure Schedule sets forth a true, correct and complete list of all insurance policies and fidelity bonds maintained by, at the expense of or for the benefit of the Company and its Employees, officers and directors for the current policy year, and the Company has provided to the Purchaser true, correct and complete copies of the insurance policies set forth on 

25

 

Section 2.19 of the Disclosure Schedule. The Company has not reached or exceeded its policy limits for any insurance policy in effect at any time during the past three (3) years. During the past three (3) years, the Company has not received any notice or other communication regarding any actual or possible (a) cancellation or invalidation of any insurance policy; (b) refusal of any coverage or rejection of any claim under any insurance policy; or (c) material adjustment in the amount of the premiums payable with respect to any insurance policy. All premiums required to be paid with respect thereto covering all periods up to and including the Closing Date have been or will be paid in a timely fashion and there has been no lapse in coverage under such policies or failure of payment that will cause coverage to lapse during any period for which the Company has conducted its operations. The Company does not have any obligation for retrospective premiums for any period prior to the Closing Date. All such policies are in full force and effect and will remain in full force and effect up to and including the Closing Date, unless replaced with comparable insurance policies having comparable or more favorable terms and conditions. No insurer has provided the Company with notice that coverage will be denied with respect to any claim submitted to such insurer by the Company. Section 2.19 of the Disclosure Schedule sets forth all claims by the Company pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds or in respect of which such underwriters have reserved their rights.

2.20

Brokerage and Transaction Bonuses. Except as set forth on Section 2.20 of the Disclosure Schedule, there are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon the Company or any Stockholder.  There are no special bonuses or other similar compensation payable to any employee of the Company in connection with the transactions contemplated by this Agreement and the Stockholder Related Agreements. The Stockholders shall pay, and hold the Company, the Purchaser and its Affiliates harmless against, any liability, loss or expense (including reasonable attorneys’ fees and out of pocket expenses) arising in connection with any such claim, brokerage commission, finders’ fee or special bonus or other similar compensation.

2.21

Title to and Sufficiency of Assets.

(a)

Except as set forth on Section 2.21(a) of the Disclosure Schedule, the Company owns, and has good, valid, transferable and marketable title to, or a valid leasehold interest in (i) all properties and assets used by it, located on its premises, shown on the Audited Balance Sheet or acquired after the date thereof, free and clear of all Liens (other than properties and assets disposed of in the ordinary course of business consistent with past practice since the date of the Audited Balance Sheet and except for Permitted Liens); (ii) all of its rights under the Material Contracts; and (iii) all other material assets used by the Company or reflected in the books and records of the Company as being owned by the Company.

(b)

All facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by the Company are in good operating condition and repair and are reasonably fit and usable for the purposes for which they are being used. The Company is in compliance with all material terms of each lease to which it is a party or is otherwise bound. The Company owns, has a valid leasehold interest in or has the valid and enforceable right to use all assets, tangible or intangible, necessary for the conduct of its business as currently conducted and as proposed to be conducted by the Company as of the Closing Date.

2.22

Inventory. All of the inventory of the Company: (a) was acquired and is sufficient for the operation of its business in the ordinary course of business consistent with the Company’s past practice; (b) is of a quality and quantity usable or saleable in the ordinary course of business consistent with the Company’s past practice; (c) is valued on the books and records of the Company at the lower of cost or 

26

 

market with the cost determined under the first-in-first-out inventory valuation method consistent with the Company’s past practice; and (d) is free of any material defect or deficiency. The inventory levels maintained by the Company are adequate for the conduct of the operations of the Company in the ordinary course of business and consistent with the Company’s past practice.

2.23

Bank Accounts. Section 2.23 of the Disclosure Schedule sets forth true, correct and complete information with respect to each account maintained by or for the benefit of the Company at any bank or other financial institution, including the name of the bank or financial institution, the account number, the balance as of the date of this Agreement (and whether any cash comprising such balances is “restricted cash”) and the names of all individuals authorized to draw on or make withdrawals from such accounts (and no changes to such information shall have occurred as of the Closing Date).

2.24

Accounts Payable.

(a)

Section 2.24(a) of the Disclosure Schedule sets forth a true, correct and complete breakdown and aging of the accounts payable of the Company as of March 6, 2017. All accounts payable were incurred in the ordinary course of business consistent with past practice, are valid payables for products or services purchased by the Company and except as set forth on the Disclosure Schedule are not past due and in no event are any payables more than 90 days past the invoice date.

2.25

Related Party Transactions. Except as set forth on Section 2.25 of the Disclosure Schedule, no Related Party has, or has at any time had, any direct or indirect interest in any asset used in or otherwise relating to the business of the Company. No Related Party is, or has been, indebted to the Company. No Related Party has entered into, or has had any direct or indirect financial interest in, any Material Contract, transaction or business dealing involving the Company. No Related Party is competing, or has at any time competed, directly or indirectly, with the Company. No Related Party has any claim or right against the Company (other than claims or rights to receive compensation for services performed as an employee or as a director).

2.26

Customers and Suppliers. Section 2.26 of the Disclosure Schedule sets forth a true, correct and complete list of the names and addresses of the Suppliers. No Supplier (or former Supplier) during the prior 12 months has canceled, terminated or, to the Knowledge of the Company, made any threat to cancel or otherwise terminate any of such Supplier’s Contracts with the Company or to decrease such Supplier’s supply of services or products to the Company. The Company has provided to the Purchaser true, correct and complete copies of all of such Supplier Contracts, and all such Contracts are in full force and effect, have not been withdrawn, amended, modified or terminated and are enforceable by the Company, as applicable. The Company has not received any notice and the Company does not have any Knowledge to the effect that any current customer or supplier may withdraw, terminate or materially alter, amend or modify its business relations with the Company, either as a result of the transactions contemplated by this Agreement or otherwise.

2.27

Certain Payments. Neither the Company nor, to the Knowledge of the Company, any manager, officer, employee, agent, consultant or other Person associated with or acting for or on behalf of the Company, has at any time, directly or indirectly: (a) used any corporate funds (i) to make any unlawful political contribution or gift or for any other unlawful purpose relating to any political activity; (ii) to make any unlawful payment to any governmental official or employee, including without limitation any payments made in violation of the FCPA or the UK Bribery Act; or (iii) to establish or maintain any unlawful or unrecorded fund or account of any nature; (b) made any false or fictitious entry, or failed to make any entry that should have been made, in any of the books of account or other records of the Company; (c) made any payoff, influence payment, bribe, rebate, kickback or unlawful payment to any Person; (d) performed any favor or given any gift which was not deductible for federal income tax 

27

 

purposes; (e) made any payment (whether or not lawful) to any Person, or provided (whether lawfully or unlawfully) any favor or anything of value (whether in the form of property or services, or in any other form) to any Person, for the purpose of obtaining or paying for (i) favorable treatment in securing business, or (ii) any other special concession; or (f) agreed, committed, offered or attempted to take any of the actions described in clauses (a) through (e) above.

2.28

Personal Information and Privacy.

(a)

The Company is in compliance with the requirements of all Privacy Laws applicable to it which govern the collection, use and disclosure of Personal Information.

(b)

Section 2.28(b) of the Disclosure Schedule sets forth and describes each distinct electronic or other database containing (in whole or in part) Personal Information maintained by or for the Company at any time (each, a “Company Database”), the types of Personal Information in each such database, the means by which the Personal Information was collected, and the security policies that have been adopted and maintained with respect to each such database.

(c)

Section 2.28(c) of the Disclosure Schedule sets forth each privacy policy of the Company and any other industry privacy code or privacy procedures to which the Company subscribes or is bound which governs its collection, use and disclosure of Personal Information (each, a “Privacy Policy”) and identifies, with respect to each Privacy Policy, (i) the period of time during which such privacy policy was or has been in effect; (ii) whether the terms of a later Privacy Policy apply to the data or information collected under such Privacy Policy; and (iii) if applicable, the mechanism (such as opt-in, opt-out, or notice only) used to apply a later Privacy Policy to data or information previously collected under such Privacy Policy.

(d)

There is no complaint to or audit, proceeding, investigation or claim against, or to the Knowledge of the Company, threatened against, the Company by any Governmental Body, or by any Person in respect of the collection, use or disclosure of Personal Information by any Person in connection with the business of the Company.

(e)

(i) no breach or violation of any Privacy Policy has occurred or, to the Knowledge of the Company, is threatened; and (ii) there has been no unauthorized or illegal uses of or access to any of the data or information in any of the Company Databases.

(f)

The Company is in compliance with all of the Privacy Policies and all applicable Laws pertaining to privacy, User Data or Personal Information.

(g)

None of (i) the execution, delivery, or performance of this Agreement or the Stockholder Related Agreements (or any of the other ancillary agreements); (ii) the consummation of the transactions contemplated by this Agreement or the Stockholder Related Agreements (or any of the other ancillary agreements); or (iii) to the Knowledge of the Company, the Purchaser’s possession or use of the User Data or any data or information in any of the Company Databases, will result in any breach or violation of any Privacy Policy or any Laws pertaining to privacy, User Data or Personal Information.

2.29

CPRIT. The Company has been awarded the CPRIT Grant.  The CPRIT Grant is available to the Company, subject only to the Company obtaining matching funding.  The Company has not been notified by the CPRIT that the CPRIT Grant is no longer available to the Company. 

2.30

Regulatory Filings. The Company has made all required registrations and filings with and submissions to all applicable Governmental Bodies relating to the operation of the business of the 

28

 

Company. There is no false or misleading information or significant omission in any product application or other submission to the FDA or any other comparable Governmental Body. All such registrations, filings and submissions were in compliance in all material respects with all Laws and other requirements when filed. No material deficiencies have been asserted by any such applicable Governmental Bodies with respect to such registrations, filings or submissions and no facts or circumstances exist which would indicate that a material deficiency may be asserted by any such authority with respect to any such registration, filing or submission. The Company has delivered to the Purchaser copies of (a) all material reports of inspection observations; (b) all material establishment inspection reports; (c) all material warning letters; and (d) any other material documents received by the Company from the FDA or any other Governmental Body relating to the business of the Company that assert ongoing material lack of compliance with any laws (including regulations promulgated by the FDA and any other Governmental Body) by the Company. The Company has not received any Negative FDA Correspondence.

2.31

Product Candidates.

(a)

The Pipeline Technologies comprise all Company products or product candidates. Each of the Company’s products and product candidates is being, and at all times has been, developed, tested, manufactured, processed, labeled, stored, transported and distributed, as applicable, in compliance in all material respects with all applicable Laws, including those requirements relating to current good manufacturing practices, good laboratory practices and good clinical practices. The Company has all FDA Registrations and all other such permits, licenses, clearances, registrations, exemptions, patents, franchises, certificates of need and other approvals, consents and other authorizations issued by the appropriate domestic or foreign regional, federal, state, or local regulatory agencies or bodies necessary to conduct the business of the Company. The Company has not received any notice of proceedings relating to the revocation, termination, modification or impairment of rights of any of the FDA Registrations that, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to result in a Company Material Adverse Effect; the Company has not failed to submit to the FDA any filings necessary to conduct the business of the Company, any such filings that were required to be made were in material compliance with applicable laws when filed, and no material deficiencies have been asserted by the FDA with respect to any such filings or submissions that were made.

(b)

The pre-clinical trials conducted by or on behalf of the Company were, and if still pending, are, being conducted in all material respects in accordance with all clinical protocols, and applicable Laws. The Company has not been notified by the FDA or any other Governmental Body of any restriction on the pre-clinical trials conducted or currently being conducted by or on behalf of the Company. The descriptions of, protocols for, and data and other results of, the pre-clinical trials conducted or currently being conducted by or on behalf of the Company that have been provided to the Purchaser are true, correct and complete.

(c)

To the Knowledge of the Company, any third-party that is a supplier, manufacturer, or contractor for the Company is in compliance with all FDA Registrations and the authorizations, approvals, licenses, permits, certificates, or exemptions (including, without limitation, pre-market approval applications, pre-market notifications, investigational new drug applications,  biologic license applications, manufacturing approvals and authorizations, pricing and reimbursement approvals, labeling approvals or their foreign equivalent) held by the Company that are required for, among other things, the research, development, manufacture, processing, labeling, distribution, marketing, storage, transportation, use, sale and provision of the products and services of the Company, of any comparable Governmental Body.

29

 

(d)

Section 2.31(d) of the Disclosure Schedule sets forth a true, correct and complete list of all of the Company’s products and product candidates, noting, where applicable, (i) the phase of clinical trial or development each product or product candidate is in; and (ii) those products or product candidates where FDA and/or other regulatory approval, including foreign approvals, has been applied for and/or received, and listing the application made and/or the approval or decision thereon obtained. The Company has provided to the Purchaser true, correct and complete copies of, without limitation, (A) any investigational new drug applications or new drug applications submitted to the FDA or any other Governmental Body by or on behalf of the Company, including any supplements thereto; (B) all final study results and/or reports relating to products or product candidates; (C) all material correspondence to or from the FDA or other Governmental Bodies, including meeting minutes and records of material contacts; (D) all documents in the Company’s possession related to inspections by the FDA or other Governmental Bodies; and (E) all information relating to adverse drug experiences obtained or otherwise received by the Company from any source with respect to the products or product candidates.

2.32

OFAC. Neither the Company nor Representative of the Company, nor, to the Knowledge of the Company, any other Person acting for or on behalf of the Company has: (a) been or is currently subject to any United States sanctions administered by the Office of Foreign Assets Control of the United States Treasury Department (“OFAC”); or (b) engaged or is currently engaging in any business or other dealings with, in, involving, or relating to (i) any country subject to a comprehensive embargo under the sanctions administered by OFAC; or (ii) any Person subject to sanctions administered by OFAC.

2.33

Purchased Share Certificate. All of the information contained in the Purchased Share Certificate will be complete and accurate immediately prior to the Closing.

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER

Except as set forth on the Disclosure Schedule, each Stockholder hereby represents and warrants to the Purchaser, severally and not jointly, as of the date of this Agreement and as of the Closing Date, as set forth below.

3.1

Authority, No Conflict; Required Filings and Consents.

(a)

The Stockholder has full power and authority to do and perform all acts and things to be done by him under this Agreement. The Stockholder has all requisite power and authority to enter into this Agreement and any Stockholder Related Agreement to which he is a party, perform his obligations under this Agreement and any Stockholder Related Agreement to which he is a party and to consummate the transactions contemplated by this Agreement and any Stockholder Related Agreement to which he is a party. This Agreement has been duly executed and delivered by the Stockholder and constitutes the legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to creditors’ rights generally; and (ii) the availability of injunctive relief and other equitable remedies.

(b)

Neither the execution, delivery or performance by the Stockholder of this Agreement or any of the Stockholder Related Agreements, nor the consummation of the transactions contemplated by this Agreement or any of the Stockholder Related Agreements, will directly or indirectly (with or without notice or lapse of time, or both): (i) contravene, conflict with, or result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of modification, termination, cancellation or acceleration of any obligation or loss of any material benefit) under, require notice to any Person or a consent or waiver under, constitute a change in control under, require the payment of a fee or penalty under or result in the creation or imposition of any Lien upon or 

30

 

with respect to any asset owned or used by the Stockholder under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, Contract or other agreement, instrument or obligation to which the Stockholder is a party or by which he or any of his properties or assets may be bound; (ii) contravene, conflict with or violate, or give any Person the right to challenge any of the transactions contemplated by this Agreement or any of the Stockholder Related Agreements or to exercise any remedy or obtain any relief under, any Law or any order, writ, injunction, judgment or decree to which the Stockholder is subject; or (iii) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by the Stockholder or that otherwise relates to the business of the Stockholder or to any of the assets owned, used or controlled by the Stockholder.

3.2

Ownership; Title to Company Common Stock.

(a)

The Stockholder is the record and beneficial owner of the shares of Company Common Stock shown as owned by the Stockholder on Section 3.2 of the Disclosure Schedule, and the Stockholder has sole voting and dispositive power over such shares of Company Common Stock. The Stockholder has, and immediately prior to the Closing, will have, good and valid title to the shares of Company Common Stock to be sold by the Stockholder pursuant to this Agreement, free and clear of all Liens.

(b)

Upon (i) receipt by the Escrow Agent of the Stockholder’s portion of the Escrowed Closing Consideration, and (ii) transfer of the Purchased Shares owned by the Stockholder to the Purchaser in accordance with the terms of this Agreement, the Purchaser will receive good and valid title to such Purchased Shares, free and clear of all Liens.

(c)

There are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which the Stockholder is a party or by which the Stockholder is bound obligating the Stockholder to exchange, transfer, deliver or sell, or cause to be exchanged, transferred, delivered or sold, the shares of Company Common Stock or other equity interests of the Company owned by the Stockholder or any security or rights convertible into or exchangeable or exercisable for any such Company Common Stock or other equity interests. The Stockholder is not a party to or bound by any agreements or understandings with respect to the voting (including pooling agreements, voting trusts and proxies) or sale or transfer (including agreements imposing transfer restrictions) of any of the Company Common Stock or other equity interests of the Company owned by the Stockholder.

3.3

Litigation. There are no Legal Proceedings pending or, to the Knowledge of the Stockholder, threatened that relate to such Stockholder’s ownership of any capital stock of the Company, or any option or other right of such Stockholder to the capital stock of the Company, or any right of such Stockholder to receive consideration as a result of this Agreement, and there is no reasonable basis for any of the foregoing. There are no actions, suits, proceedings (including any arbitration proceedings), orders, investigations or claims pending or, to the Knowledge of the Stockholder, threatened against or affecting the Stockholder in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with the transactions contemplated by this Agreement.

3.4

Brokerage and Transaction Bonuses. There are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon the Stockholder. There are no special bonuses or other similar compensation payable to any employee of the Stockholder in connection with the transactions contemplated by this Agreement and the Stockholder Related Agreements. The Stockholder shall pay, and hold the Company, the Purchaser and its Affiliates harmless against, any liability, loss or 

31

 

expense (including reasonable attorneys’ fees and out of pocket expenses) arising in connection with any such claim, brokerage commission, finders’ fee or special bonus or other similar compensation.

3.5

Restricted Securities. The Stockholder understands that the shares of Purchaser Common Stock have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Stockholder’s representations as expressed herein. The Stockholder understands that the shares of Purchaser Common Stock are “restricted securities” under applicable United States federal and state securities laws and that, pursuant to these laws, the Stockholder must hold the shares of Purchaser Common Stock indefinitely unless they are registered with the SEC and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Stockholder further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Purchaser Common Stock, and on requirements relating to the Purchaser which are outside of the Stockholder’s control, and which the Purchaser is under no obligation and may not be able to satisfy.

3.6

Accredited Investor. The Stockholder is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

3.7

No Bad Actor Disqualification Events. The Stockholder is not subject to any “bad actor” disqualifying event described in Rule 506(d)(1)(i)-(viii) of the Securities Act.

3.8

Investment Experience. The Stockholder represents that he is a sophisticated investor experienced in evaluating and investing in private placement transactions of securities of companies in similar stage of development as the Purchaser and acknowledges that the Stockholder can bear the economic risk of his investment for an indefinite period of time, and has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the investment in the Purchaser Common Stock.

3.9

Foreign Investors. If the Stockholder is not a United States person (as defined by Section 7701(a)(30) of the Code), the Stockholder hereby represents that he has satisfied himself as to the full observance of the laws of his jurisdiction in connection with any invitation to subscribe for the Purchaser Common Stock or any use of this Agreement, including (a) the legal requirements within his jurisdiction for the purchase of the Purchaser Common Stock; (b) any foreign exchange restrictions applicable to such purchase; (c) any governmental or other consents that may need to be obtained; and (d) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of the Purchaser Common Stock. The Stockholder’s beneficial ownership of the Purchaser Common Stock will not violate any applicable securities or other laws of the Stockholder’s jurisdiction.

3.10

No General Solicitation. Neither the Stockholder, nor any of his officers, managers, employees, agents, members or partners has either directly or indirectly, including through a broker or finder (a) engaged in any general solicitation; or (b) published any advertisement in connection with the offer and sale of the Purchaser Common Stock.

3.11

Residence. The Stockholder resides in the state or province identified in the address of the Stockholder set forth on the signature page hereto or the Joinder Agreement, as applicable.

3.12

Legends. The Stockholder understands that the Purchaser Common Stock acquired hereunder and any securities issued in respect of or exchange therefor may bear any one or more of the 

32

 

following legends: (a) any legend required by the securities laws of any state to the extent such laws are applicable to the Purchaser Common Stock represented by the certificate so legended; and (b) customary legends to the effect that the Purchaser Common Stock has not been registered under the Securities Act and that the transfer thereof may be accordingly restricted; provided, however, that such legends shall be removed by the Purchaser from any certificate or book-entry security entitlement evidencing the Purchaser Common Stock upon delivery by a Stockholder to the Purchaser of a written request to that effect if at the time of such written request a registration statement under the Securities Act is at that time in effect with respect to the legended security and such Stockholder is not an affiliate of the Purchaser.

3.13

Investment Purpose; Disclosure of Information.

(a)

The Stockholder has requested, received, reviewed and considered all the information the Stockholder deems necessary, appropriate or relevant as a prudent and knowledgeable investor in evaluating the investment in Purchaser Common Stock, including, without limitation, the Purchaser SEC Documents. The Stockholder further represents that the Stockholder has had an opportunity to ask questions of and receive answers from the Purchaser regarding the terms and conditions of the offering of the shares of Purchaser Common Stock and the business, prospects and financial condition of the Purchaser necessary to verify the accuracy of any information furnished to the Stockholder or to which the Stockholder had access.

(b)

The Stockholder is acquiring the shares of Purchaser Common Stock pursuant to this Agreement for the Stockholder’s own account for investment purposes only and with no present intention of distributing any Purchaser Common Stock, and no arrangement or understanding exists with any other persons regarding the distribution of Purchaser Common Stock.

ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser represents and warrants to the Company and each of the Stockholders, as of the date of this Agreement and as of the Closing Date, as set forth below.

4.1

Organization and Good Standing. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has all requisite and necessary power and authority to own, lease, use and operate its properties and assets and to carry on and conduct its business as now being conducted and as proposed to be conducted as of the Closing Date and is in good standing as a foreign corporation (or equivalent status in the relevant jurisdiction) in each jurisdiction in which the character of the properties it owns, operates or leases or the nature of its activities makes such qualification necessary or advisable. The Purchaser has full corporate power and authority to do and perform all acts and things to be done by it under this Agreement.

4.2

Authority, No Conflict; Required Filings and Consents.

(a)

The Purchaser has all requisite corporate power and authority to enter into this Agreement and any Purchaser Related Agreement to which it is a party, perform its obligations under this Agreement and any Purchaser Related Agreement to which it is a party and to consummate the transactions contemplated by this Agreement and any Purchaser Related Agreement to which it is a party. The execution and delivery of this Agreement and any Purchaser Related Agreement to which the Purchaser is a party and the consummation of the transactions contemplated by this Agreement and any Purchaser Related Agreement to which the Purchaser is a party have been duly authorized by all necessary corporate action on the part of the Purchaser, and no other corporate action or proceeding on the part of the Purchaser or its boards of directors is necessary to authorize the execution, delivery or performance of this Agreement, any Purchaser Related Agreement to which the Purchaser is a party or the 

33

 

consummation of the transactions contemplated by this Agreement or any Purchaser Related Agreement to which the Purchaser is a party. This Agreement has been duly executed and delivered by the Purchaser and constitutes the legal, valid and binding obligations of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to creditors’ rights generally; and (ii) the availability of injunctive relief and other equitable remedies.

(b)

Neither the execution, delivery or performance by the Purchaser of this Agreement or any of the Purchaser Related Agreements, nor the consummation of the transactions contemplated by this Agreement or any of the Purchaser Related Agreements, will directly or indirectly (with or without notice or lapse of time, or both): (i) contravene, conflict with, or result in any violation or breach of, any of the Organizational Documents of the Purchaser; (ii) contravene, conflict with, or result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of modification, termination, cancellation or acceleration of any obligation or loss of any material benefit) under, require notice to any Person or a consent or waiver under, constitute a change in control under, require the payment of a fee or penalty under or result in the creation or imposition of any Lien upon or with respect to any asset owned or used by the Purchaser under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, Contract or other agreement, instrument or obligation to which the Purchaser is a party or by which it or any of its properties or assets may be bound; (iii) contravene, conflict with or violate, or give any Person the right to challenge any of the transactions contemplated by this Agreement or any of the Purchaser Related Agreements or to exercise any remedy or obtain any relief under, any Law or any order, writ, injunction, judgment or decree to which the Purchaser is subject; or (iv) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by the Purchaser or that otherwise relates to the business of the Purchaser or to any of the assets owned, used or controlled by the Purchaser.

(c)

No Governmental Authorization, or registration, declaration, notice or filing with, any Governmental Body is required by or with respect to the Purchaser: (i) in connection with the execution and delivery of this Agreement or any of the Purchaser Related Agreements by the Purchaser or the consummation by the Purchaser of the transactions contemplated by this Agreement or any of the Purchaser Related Agreements; or (ii) necessary for the Purchaser to operate its business immediately after the Closing in the same manner as operated immediately prior to the Closing after giving effect to the consummation of the transactions contemplated by this Agreement and the Purchaser Related Agreements.

4.3

SEC Filings; Financial Statements.

(a)

Since January 1, 2016, the Purchaser has filed with the SEC all required reports and filings (the “Purchaser SEC Documents”). As of the time of filing with the SEC (or, if amended or superseded by a filing prior to the date hereof, then on the date of such filing): (i) each of the Purchaser SEC Documents complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be); and (ii) none of the Purchaser SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Purchaser is in compliance, in all material respects, with the applicable listing rules of NASDAQ and has not since May 2, 2016 received any written notice from NASDAQ asserting any non-compliance with such rules.

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(b)

The consolidated financial statements contained in the Purchaser SEC Documents: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with United States generally accepted accounting principles as in effect from time to time, applied on a consistent basis throughout the periods covered, except as may be indicated in the notes to such consolidated financial statements and (in the case of unaudited statements) as permitted by Form 10-Q of the SEC, and except that unaudited financial statements may not contain footnotes and are subject to year-end audit adjustments; and (iii) fairly present, in all material respects, the consolidated financial position of the Purchaser as of the respective dates thereof and the consolidated results of operations of the Purchaser for the periods covered thereby.

4.4

Purchaser Stock Consideration. The Closing Shares will be, prior to the issuance, duly authorized, and when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable.

ARTICLE V. CERTAIN COVENANTS AND AGREEMENTS

5.1

Due Diligence Access and Investigation. During the period from the date of this Agreement to the earlier of the termination of this Agreement pursuant to ARTICLE IX and the Closing Date (the “Pre-Closing Period”), the Company and the Stockholders agree that the Purchaser shall be entitled, through its officers, employees and representatives (including, without limitation, its legal advisors and accountants), to make such investigation of the properties, businesses and operations of the Company and such examination of the books, records and financial condition of the Company as it reasonably requests and to make extracts and copies of such books and records. No investigation by the Purchaser prior to or after the date of this Agreement shall diminish or obviate any of the representations, warranties, covenants or agreements of the Company or any Stockholder contained in this Agreement or the Related Stockholder Documents.  In order that the Purchaser may have full opportunity to make such physical, business, accounting and legal review, examination or investigation as it may reasonably request of the affairs of the Company, the Company and the Stockholders shall cause the officers, employees, consultants, agents, accountants, attorneys and other representatives of the Company to cooperate fully with such representatives in connection with such review and examination.

5.2

Operation of the Company’s Business.

(a)

During the Pre-Closing Period, the Company shall: (i) ensure that the Company conducts its business and operations (A) in the ordinary course of business consistent with past practice, and (B) in compliance with all applicable Laws and the requirements of all Material Contracts and Governmental Authorizations held by the Company; (ii) use best efforts to ensure that the Company preserves intact its current business organization, keep available the services of its current officers, directors, employees and consultants and maintain its relations and goodwill with all suppliers, customers, landlords, creditors, licensors, licensees, employees, consultants and other Persons having business relationships with the Company; (iii) maintain the books, records and financial statements of the Company in accordance with GAAP and consistent with past practice; (iv) provide all notices, assurances and support required by any Company Contract in order to ensure that no condition under such Company Contract occurs which could result in, or could increase the likelihood of any transfer or disclosure by the Company of any Intellectual Property Rights; (v) maintain the CPRIT Grant; and (vi) keep in full force and effect (with the same scope and limits of coverage) all insurance policies in effect as of the date of this Agreement covering all material assets of the Company.

(b)

Without limiting the foregoing, except as expressly contemplated by the terms of this Agreement, during the Pre-Closing Period the Company shall not (without the prior written consent of the Purchaser):

35

 

(i)

(A) declare, accrue, set aside or pay any dividends on, or make any other distributions (whether in cash, stock, shares or property) in respect of, any of its capital stock or other equity or voting interests; (B) authorize for issuance or issue and deliver any additional shares of its capital stock or securities convertible into or exchangeable for shares of its capital stock, or grant any right, option or other commitment for the issuance of shares of its capital stock or of such securities (except that the Company shall be permitted to issue shares of Company Common Stock upon the valid exercise of Company Options and Company Warrants outstanding as of the date of this Agreement and set forth in Section 2.2(b) and Section 2.2(c) of the Disclosure Schedule, respectively); (C) split, combine or reclassify any of its shares of capital stock or other equity or voting interests, or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or other equity or voting interests; (D) purchase, redeem or otherwise acquire any of its capital stock or any other securities of the Company, any Company Option, any Company Warrant or any Company Rights; or (E) take any action that would result in any change of any term (including any conversion price thereof) of any debt security of the Company; 

(ii)

amend or waive any of its rights under, or accelerate the vesting under, any provision of the Company Stock Option Plan, any provision of any Contract related to any Company Option, any Company Warrant or any restricted stock purchase agreement as in effect as of the date of this Agreement, or otherwise modify any of the terms of any Company Option, Company Warrant or any related Contract as in effect as of the date of this Agreement, other than as required to terminate all outstanding Company Options as of the Closing in accordance with Section 1.5;

(iii)

amend or permit the adoption of any amendment to the Organizational Documents of the Company, or effect, become a party to or authorize any Acquisition Transaction, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;

(iv)

adopt a plan of complete or partial liquidation or dissolution or resolutions providing for or authorizing such a liquidation or a dissolution;

(v)

form any Subsidiary or acquire any equity interest or other interest in any other Entity;

(vi)

make any capital expenditure outside the ordinary course of business or make any single capital expenditure in excess of $25,000; provided, however, that the maximum amount of all capital expenditures made on behalf of the Company, taken as a whole, during the Pre-Closing Period shall not exceed $50,000 in the aggregate;

(vii)

enter into or become bound by, or permit any of the assets owned or used by it to become bound by, any Material Contract or any Contract, lease, agreement or instrument that would be required to be set forth on Section 2.13(a) of the Disclosure Schedule if it were entered into on or prior to the date of this Agreement, or amend or terminate, or waive or exercise any material right or remedy under, any Material Contract or any Contract, lease, agreement or instrument that would be required to be set forth on Section 2.13(a) of the Disclosure Schedule if it were entered into on or prior to the date of this Agreement;

(viii)

acquire, lease or license any right or other asset from any other Person or sell or otherwise dispose of, or lease, license or encumber, any right or other asset to any other Person (except in each case for assets acquired, leased, non-exclusively licensed, encumbered or disposed of by the Company in the ordinary course of business consistent with past practice and not having a value, or not requiring payments to be made or received, in excess of $25,000 individually, or $50,000 in the aggregate), or waive or relinquish any claim or right;

36

 

(ix)

repurchase, repay or prepay any Indebtedness, or incur any Indebtedness in excess of $25,000, or guarantee any Indebtedness of another Person, guarantee any debt securities of another Person, enter into any “keep well” or other agreement to maintain any financial statement condition of another Person or enter into any arrangement having the economic effect of any of the foregoing;

(x)

grant, create, incur or suffer to exist any Lien on the assets of the Company that did not exist on the date of this Agreement or write down the value of any asset or investment on the books or records of the Company, except for depreciation and amortization in the ordinary course of business consistent with the Company’s past practice;

(xi)

make any loans, advances or capital contributions to, or investments in, any other Person;

(xii)

increase in any manner the compensation or benefits of, or pay any bonus to, any officer, director or independent contractor of the Company or hire any employees, except for (A) increases in the ordinary course of business consistent with the Company’s past practice in base compensation for any employee or independent contractor of the Company (other than executive officers or directors of the Company whose annualized compensation is $125,000 or more or whose annual compensation for the 12-month period following the Expiration Date is expected to be $125,000 or more) that were communicated to such employee or independent contractor prior to the date of this Agreement; or (B) as required by Applicable Benefit Laws;

(xiii)

hire any new Employee at the level of vice president or above or with an annual base salary in excess of $75,000, dismiss any Employee, promote any Employee except in order to fill a position vacated after the date of this Agreement, or engage any independent contractor whose relationship may not be terminated by the Company on seven days’ notice or less;

(xiv)

except as required by GAAP or applicable Laws, make or change any Tax election, change its fiscal year, revalue any of its material assets or adopt or make any changes in financial or Tax accounting methods, principles or practices;

(xv)

enter into any closing agreement or Tax ruling, settle or compromise any Tax claim or assessment, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment, or file any Tax Return (including any amended Tax Return) unless such Tax Return has been provided to the Purchaser for review within a reasonable period prior to the due date for filing and the Purchaser has consented to such filing;

(xvi)

commence, settle or compromise any Legal Proceedings;

(xvii)

(A) dispose of or permit to lapse any ownership and/or right to the use of, or fail to protect, defend and maintain the ownership, validity and registration of, the Company Intellectual Property, or (B) dispose of or disclose to any Person, any Confidential Information;

(xviii)

take or omit to take any action that could, or is reasonably likely to, (A) result in any of its representations and warranties set forth in this Agreement or any Stockholder Related Agreement to which it is a party being or becoming untrue in any material respect at any time at or prior to the Closing; (B) result in any of the conditions to the consummation of the transactions contemplated by this Agreement not being satisfied; (C) cause the Company to be unable to conduct its business after the Closing in accordance with its past practice and as contemplated to be conducted by the 

37

 

Company as of the Closing after giving effect to the transactions contemplated by this Agreement; or (D) constitute or result in a breach of any of the provisions of this Agreement; 

(xix)

take any action that will jeopardize the Company’s ability to receive or maintain the CPRIT Grant or that could cause CPRIT to revoke the CPRIT Grant; or

(xx)

authorize, agree, commit or enter into any Contract to take any of the actions described in clauses (i) through (xix) of this Section 5.2(b).

5.3

Notification. During the Pre-Closing Period, the Company and the Stockholder Representative shall immediately notify the Purchaser in writing of:

(a)

the discovery by the Company or any Stockholder of any event, condition, fact or circumstance that occurred or existed on or prior to the date of this Agreement and that caused or constitutes an inaccuracy in or breach of any representation or warranty made by the Company or the Stockholders in this Agreement, any Stockholder Related Agreement or any agreements contemplated by this Agreement or the Stockholder Related Agreements;

(b)

any event, condition, fact or circumstance that occurs, arises or exists after the date of this Agreement and that would cause or constitute an inaccuracy in or breach of any representation or warranty made by the Company or any Stockholder in this Agreement if (i) such representation or warranty had been made as of the time of the occurrence, existence or discovery of such event, condition, fact or circumstance; or (ii) such event, condition, fact or circumstance had occurred, arisen or existed on or prior to the date of this Agreement;

(c)

any breach of any covenant or obligation of the Company or any Stockholder under this Agreement, any Stockholder Related Agreement or any agreements contemplated by this Agreement or the Stockholder Related Agreements;

(d)

any event, condition, fact or circumstance that has made, could reasonably be expected to make, or is likely to make, the timely satisfaction of any condition set forth in this Agreement impossible or unlikely or that has had or could reasonably be expected to have a Company Material Adverse Effect;

(e)

receipt of any Negative FDA Correspondence; 

(f)

receipt of any material communication from CPRIT; and

(g)

(i) any notice or other communication from any Person alleging that the consent or approval of such Person is or may be required in connection with the transactions contemplated by this Agreement; and (ii) any Legal Proceeding or claim threatened, commenced or asserted against or with respect to the Company or the transactions contemplated by this Agreement.

No notification given to the Purchaser pursuant to this Section 5.3 shall limit or otherwise affect any of the representations, warranties, covenants or obligations of the Company or the Stockholders, or any of the rights of the Purchaser, contained in this Agreement.

5.4

Interim Financials. As promptly as practicable following each calendar month prior to the Closing Date, the Company shall deliver to the Purchaser periodic financial reports in the form that it customarily prepares for its internal purposes and, if available, unaudited statements of the financial position of the Company as of the last day of such calendar month and statements of income and changes 

38

 

in financial position of the Company for the calendar month then ended (the “Monthly Financial Statements”). In addition, as promptly as practicable following each calendar quarter prior to the Closing Date, the Company shall deliver to the Purchaser periodic financial reports in the form that it customarily prepares for its internal purposes, including an unaudited consolidated balance sheet of the Company as of the end of such quarter and the related unaudited consolidated statements of income, stockholders’ equity and cash flow for the three, six, nine or twelve months then ended, as applicable (the “Quarterly Financial Statements”). The Company shall support the Purchaser in any and all financial reporting as required by governing bodies, including, but not limited to providing historical audited financial statements as further detailed in Section 6.16. The Company covenants that the Monthly Financial Statements and the Quarterly Financial Statements (a) shall present fairly the financial condition of the Company as of their respective dates and the related results of its operations for the respective calendar month then ended; and (b) shall be prepared on a basis consistent with prior interim periods.

5.5

Related Party Transactions. Other than in respect of the agreements and other obligations described in Section 5.5 of the Disclosure Schedule: (a) the Company shall, at or prior to the Closing, cause to be paid to the Company all amounts owed to the Company by any Stockholder, any holder of a Company Option, a Company Warrant or a Company Right or any Related Party and (b) at and as of the Closing Date, any debts of the Company owed to any of the Stockholders or any holders of a Company Option, a Company Warrant or a Company Right or any Related Party shall be canceled.

5.6

Public Announcements. During the Pre-Closing Period, the Company and the Stockholders shall not (and the Company shall not permit any of its Representatives to) issue any press release or make any public statement regarding this Agreement or any of the transactions contemplated by this Agreement without the Purchaser’s prior written consent; provided, further, that without the prior written consent of the Purchaser, neither the Company nor any Stockholder shall at any time disclose to any Person the fact that this Agreement has been entered into or any of the terms of this Agreement other than to such parties’ advisors who the Company or any Stockholder, as applicable, reasonably determines needs to know such information for the purpose of advising the Company or such Stockholder with respect to the matters set forth herein, it being understood that such advisor will be informed of the confidential nature of this Agreement and the terms of this Agreement and will be directed to treat such information as confidential in accordance with the terms of this Agreement. During the Pre-Closing Period, in connection with any press release or other public statement or disclosure regarding this Agreement or any of the transactions contemplated by this Agreement to be issued by the Purchaser, the Purchaser shall consult in good faith with the Company with respect to the form and substance of such release or other statement or disclosure and shall consider reasonable changes requested by the Company prior to release of the statement or disclosure.

5.7

Reasonable Efforts; Further Assurances; Cooperation. Subject to the other provisions of this Agreement, each party shall use its reasonable, good faith efforts to perform its obligations under this Agreement and to take, or cause to be taken, and do, or cause to be done, all things necessary, proper or advisable under applicable Law to cause the transactions contemplated by this Agreement to be effected as soon as practicable, but in any event on or prior to the Expiration Date, in accordance with the terms of this Agreement, and shall cooperate fully with each other party and its Representatives in connection with any step required to be taken as a part of its obligations under this Agreement, including the following:

(a)

Each party shall promptly make its filings and submissions and shall take all actions necessary, proper or advisable under applicable Laws to obtain any required approval of any Governmental Body with jurisdiction over the transactions contemplated by this Agreement (except that the Purchaser shall have no obligation to take or consent to the taking of any action required by any such Governmental Body that could adversely affect the business or assets of the Purchaser or the transactions contemplated by this Agreement or the Purchaser Related Agreements). The Company shall provide to 

39

 

the Purchaser all information required for any application or other filing to be made by the Company pursuant to any applicable Law in connection with the transactions contemplated by this Agreement;

(b)

Each party shall promptly notify the other parties of (and provide written copies of) any communications from or with any Governmental Body in connection with the transactions contemplated by this Agreement;

(c)

In the event any claim, action, suit, investigation or other proceeding by any Governmental Body or other Person is commenced that questions the validity or legality of the transactions contemplated by this Agreement or seeks damages in connection therewith, the parties shall (i) cooperate and use all reasonable efforts to defend against such claim, action, suit, investigation or other proceeding, (ii) in the event an injunction or other order is issued in any such action, suit or other proceeding, use all reasonable efforts to have such injunction or other order lifted, and (iii) cooperate reasonably regarding any other impediment to the consummation of the transactions contemplated by this Agreement; and

(d)

The Company shall, at the Company’s sole cost and expense, give all notices to third parties and use its best efforts (in consultation with the Purchaser) to obtain all third-party consents (i) necessary, proper or advisable to consummate the transactions contemplated by this Agreement; (ii) required to be given or obtained; or (iii) required to prevent a Company Material Adverse Effect, whether prior to, on or following the Closing Date.

5.8

Tax Matters.

(a)

Tax Periods Ending on or Before the Closing Date. The Company shall prepare or cause to be prepared and timely file or cause to be timely filed all Tax Returns for the Company for all Tax periods ending on or prior to the Closing Date that are due after the Closing Date.

(b)

Tax Periods Beginning Before and Ending After the Closing Date. The Company shall prepare or cause to be prepared and timely file or cause to be timely filed any Tax Returns of the Company for Tax periods that begin on or before the Closing Date and end after the Closing Date.

(c)

Cooperation on Tax Matters. The Purchaser, the Company and the Stockholders shall cooperate as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns pursuant to this Section 5.8 and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information that are reasonably relevant to any such audit, litigation or other proceeding and making employees or agents available on a mutually convenient basis to provide additional information and explanation of any material provided under this Section 5.8(c).

(d)

Transfer Taxes. Any transfer, documentary, stamp or other similar Taxes or recording fees payable as a result of the purchase and sale of the Company Common Stock and the transfer of the certificates representing the same (other than any federal, state, local or foreign Taxes measured by or based upon income or gains imposed upon the Purchaser) shall be paid by the Stockholders (severally but not jointly). The parties shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications and other documents regarding any such transfer, documentary, stamp or other similar Taxes and recording fees that become payable in connection with the transactions contemplated by this Agreement that are required or permitted to be filed at or prior to the Closing. For the avoidance of doubt, the sole transfer, documentary, stamp and other Taxes and recording fees within the purview of this Section 5.8(d) are those specifically relating to the transfer of the Purchased Shares and the certificates representing the same, and any other transfer or recording fees 

40

 

arising out of the transactions (such as fees in connection with applications or re-applications for state licenses as a result of a change in control, and in connection with any applications for transfers of Company registrations with the USPTO), are expressly excluded from this Section 5.8(d).

(e)

Termination of Tax Allocation, Indemnity or Sharing Agreements. Any Tax allocation, indemnity or sharing agreement between the Company and any other Person shall be terminated as to the Company on or prior to the Closing Date, and after the Closing Date neither the Company nor the Purchaser shall have any liability thereunder.

5.9

Cooperation with Financial Reporting. The Stockholders shall cooperate to the extent reasonably requested by the Purchaser after the Closing, in connection with the preparation and auditing of financials for the Company. The Stockholders’ Representative shall provide all of the financial records and supporting documentation of the Company within ten (10) days following the Closing and shall make employees or agents available on a mutually convenient basis to provide additional information and explanation of any information provided under this Section 5.9.

5.10

Release.

(a)

In consideration for the Escrowed Closing Consideration, and by executing this Agreement, as of and following the Closing Date, each Stockholder knowingly, voluntarily and unconditionally releases, forever discharges, and covenants not to sue the Company or the Purchaser from or for any and all claims, causes of action, demands, suits, debts, obligations, liabilities, damages, losses, costs and expenses (including attorneys’ fees) of every kind or nature whatsoever, known or unknown, actual or potential, suspected or unsuspected, fixed or contingent, that such Stockholder has or may have, now or in the future, arising out of, relating to, or resulting from any act or omission, error, negligence, breach of contract, tort, violation of law, matter or cause whatsoever from the beginning of time to the Closing Date, including without limitation any claim related to Company Options, Company Warrants or Company Rights held by such Stockholder that are terminated as of the Closing; provided, however, that the foregoing release shall not apply to any claims arising out of this Agreement, the Stockholder Related Agreements, or claims as an employee or otherwise unrelated to a Stockholder’s status as an equity holder of the Company.

(b)

Section 1542 of the California Civil Code provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

Each Stockholder acknowledges that any claims such Stockholder may have against the Company or the Purchaser are fully settled and compromised by this Agreement, and such Stockholder expressly waives all rights under Section 1542 of the California Civil Code or any other similar provision of law insofar as it would otherwise apply to the specific release given in this Section 5.10. Such Stockholder thus acknowledges that he may discover facts in addition to or different from those that he now knows or believes to be true with respect to the subject matter of this release, but that it is his intention to fully and finally settle and release any and all claims released hereby, known or unknown, suspected or unsuspected, which now exist, or heretofore existed, or may hereafter exist, and without regard to subsequent discovery or existence of such additional or different facts. Such Stockholder acknowledges that the release of unknown claims was separately bargained for, constitutes separate consideration for, 

41

 

and was a key element of the Agreement and was relied upon by the Purchaser in entering into the Agreement.

5.11

No Solicitation. 

(a)

Until the earlier of the Closing or the termination of this Agreement pursuant to ARTICLE IX, neither the Company nor any of the Stockholders shall directly or indirectly, and shall not authorize or permit their respective Affiliates and Representatives to, directly or indirectly, (i) solicit, initiate, encourage, induce or facilitate the making, submission or announcement of any inquiries or the making of any proposal or offer contemplating or otherwise relating to an Acquisition Transaction (an “Acquisition Proposal”) or take any action that could reasonably be expected to lead to an Acquisition Proposal, (ii) furnish any information regarding the Company to any Person in connection with or in response to an Acquisition Proposal or an inquiry or indication of interest that could reasonably be expected to lead to an Acquisition Proposal, (iii) engage in discussions or negotiations with any Person with respect to a potential Acquisition Transaction or an Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or Acquisition Transaction, or (v) enter into any letter of intent or similar document or any Contract contemplating or otherwise relating to any Acquisition Proposal or Acquisition Transaction. Without limiting the generality of the foregoing, the Company and the Stockholders acknowledge and agree that any violation of or the taking of any action inconsistent with any of the restrictions set forth in the preceding sentence by any Affiliate or Representative of the Company or the Stockholders, as applicable, whether or not such Affiliate or Representative is purporting to act on behalf of the Company or any Stockholder, as applicable, shall be deemed to constitute a breach of this Section 5.11 by the Company.

(b)

The Company and the Stockholders shall promptly (and in no event later than 24 hours after receipt of any Acquisition Proposal, any inquiry or indication of interest that could lead to an Acquisition Proposal or any request for nonpublic information) advise the Purchaser orally and in writing of any Acquisition Proposal, any inquiry or indication of interest that could lead to an Acquisition Proposal or any request for nonpublic information relating to the Company (including the identity of the Person making or submitting such Acquisition Proposal, inquiry, indication of interest or request, and the terms thereof) that is made or submitted by any Person during the Pre-Closing Period. The Company and the Stockholders shall keep the Purchaser fully informed with respect to the status of any such Acquisition Proposal, inquiry, indication of interest or request and any modification or proposed modification thereto.

(c)

The Company and the Stockholders shall, and shall cause each of their respective Affiliates and Representatives to, immediately cease and cause to be terminated any existing discussions with any Person (other than the Purchaser) that relate to any Acquisition Proposal. The Company shall promptly request each Person that has executed, within 12 months prior to the date of this Agreement, a confidentiality, standstill or similar agreement in connection with its consideration of a possible Acquisition Transaction to return or certify the destruction of all Confidential Information previously furnished to such Person by or on behalf of the Company.

5.12

Stockholder Approval and Waiver of Right of First Refusal. By execution and delivery of this Agreement or a Joinder Agreement, each Stockholder (i) consents, ratifies and approves the transactions contemplated by this Agreement for purposes of Section 3.3 of Part B of Article FOURTH of the Amended and Restated Certificate of Incorporation of the Company (the “Company Stockholder Approval”), and (ii) waives the provisions of Section 6.3(b) of the Bylaws of the Company with respect to the transfer of the Purchased Shares contemplated by this Agreement.

ARTICLE VI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER

42

 

The obligations of the Purchaser to consummate the transactions contemplated by this Agreement are subject to the satisfaction (or written waiver by the Purchaser), at or prior to the Closing, of each of the following conditions:

6.1

Accuracy of Representations. Each of the representations and warranties of the Company and the Stockholders contained in this Agreement and the Stockholder Related Agreements that are qualified as to materiality shall be true and correct in all respects, and each of the representations and warranties of the Company and each of the Stockholders contained in this Agreement and the Stockholder Related Agreements that are not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date with the same force and effect as though made as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of a specific date, in which case the accuracy of such representation and warranty shall be determined as of such date).

6.2

Performance of Covenants. Each of the covenants and obligations set forth in this Agreement that the Company and each of the Stockholders is required to comply with or perform at or prior to the Closing shall have been complied with or performed in all material respects.

6.3

Company Compliance Certificate. The Company shall have delivered, or caused to be delivered, to the Purchaser a certificate executed by the Chief Executive Officer or Chief Financial Officer of the Company as to compliance with the conditions set forth in Section 6.1, Section 6.2, Section 6.9 and Section 6.14 (the “Company Compliance Certificate”).

6.4

Consents. All consents, approvals, orders or authorizations of, or registrations, declarations or filings with, any Person required in connection with the execution, delivery or performance of this Agreement or any of the Stockholder Related Agreements shall have been obtained by the Company, or made by or on behalf of the Company (with the Purchaser advancing to the Company any funds required for any payments to be made in connection therewith), and shall be in full force and effect, in each case in form and substance reasonably satisfactory to the Purchaser.

6.5

Secretary’s Certificate. The Company shall have delivered a certificate, dated as of the Closing Date, signed by the Secretary of the Company, (a) attaching copies of the Organizational Documents, and any amendments thereto, of the Company; (b) attaching a true, correct and complete copy of the stock ledger of the Company from the date of its incorporation or organization through the Closing Date; (c) certifying that attached thereto are true, correct and complete copies of actions by written consent or resolutions duly adopted by the board of directors of the Company which authorize and approve the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement; (d) certifying the good standing (or equivalent status in the relevant jurisdiction) of the Company in its jurisdiction of incorporation or organization and in each other jurisdiction where it is qualified to do business (or equivalent status in the relevant jurisdiction) and that there are no proceedings for the dissolution or liquidation of the Company; and (e) certifying the incumbency, signature and authority of the officers of the Company authorized to execute, deliver and perform this Agreement and all other documents, instruments or agreements related thereto executed or to be executed by the Company.

6.6

Ancillary Agreements and Deliveries. The Company and the Stockholders shall have delivered, or caused to be delivered, to the Purchaser the following agreements and documents, each of which shall be in full force and effect as of the Closing and shall not have been amended or modified as of the Closing:

43

 

(a)

certificates representing the Purchased Shares, duly endorsed in blank or accompanied by duly executed stock powers or other instruments of assignment requested by and in form and substance reasonably satisfactory to the Purchaser;

(b)

the consents, in substantially the form of EXHIBIT D hereto, executed by the spouse of each of the Stockholders that is married; 

(c)

the organizational record books and minute books of the Company;

(d)

written resignations of the directors and officers of the Company, effective as of the Closing Date;

(e)

a certificate (the “Purchased Share Certificate”), duly executed on behalf of the Company by the Chief Executive Officer or Chief Financial Officer of the Company, containing the following information and the representation and warranty of the Company that all of such information is true and accurate as of the Closing:

(i)

the name and address of record of each Stockholder;

(ii)

the number and class of securities of the Company held by each Stockholder immediately prior to the Closing;

(iii)

the number of Purchased Shares being sold by each Stockholder pursuant to this Agreement; and

(iv)

each Stockholder’s Consideration Percentage.

(f)

a certificate in such form as may be reasonably requested by counsel to the Purchaser that complies with Treasury Regulation Section 1.1445-2(c)(3), accompanied by any appropriate notice to the Internal Revenue Service pursuant to Treasury Regulations Section 1.897-2(h);

(g)

evidence, in form and substance reasonably satisfactory to the Purchaser, that each consent, approval, order or authorization of, or registration, declaration or filing with any Person required in connection with the execution, delivery or performance of this Agreement has been obtained or made and is in full force and effect;

(h)

true, correct and complete copies, certified by the Chief Executive Officer and the Chief Financial Officer of the Company, of the Company Financial Statements and any Quarterly Financial Statements required to be delivered pursuant to Section 5.4;

(i)

written evidence, reasonably satisfactory to the Purchaser, that the Company shall have complied with the covenants and agreements set forth in Section 5.5;

(j)

(i) a true, correct and complete copy of resolutions adopted by the board of directors of the Company providing for the termination of each of the Company Options, and Company Rights in order to give effect to the transactions contemplated by this Agreement, and (ii) evidence satisfactory to the Purchaser to ensure that no holder of Company Options or Company Rights has any right to acquire Company Common Stock and that all liabilities of the Company under the Company Options or Company Rights are fully extinguished at no cost, and with no liability, to the Company;

44

 

(k)

an accredited investor questionnaire, in form reasonably satisfactory to the Purchaser, executed by each Stockholder that is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act;

(l)

a “bad actor” questionnaire relating to Rule 506(d) of the Securities Act, in form reasonably satisfactory to the Purchaser, executed by each Stockholder that is an officer, director or promoter of the Company or a beneficial owner of 20% or more of the shares of Company Common Stock;

(m)

a purchaser representative questionnaire, in form reasonably satisfactory to the Purchaser, executed by each Stockholder that is not an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act;

(n)

Joinder Agreements executed by each stockholder of the Company selling the Purchased Shares to the Purchaser pursuant to this Agreement that is not a party to this Agreement as a Stockholder as of the date hereof; and

(o)

all other documents required to be entered into by the Company and the Stockholders pursuant to this Agreement or reasonably requested by the Purchaser to convey the Purchased Shares to the Purchaser or to otherwise consummate the transactions contemplated by this Agreement or any Stockholder Related Agreement.

6.7

Release of Liens. The Company shall have delivered, or caused to be delivered, to the Purchaser evidence reasonably satisfactory to the Purchaser that all Liens (other than Permitted Liens) affecting any of the assets of the Company have been released.

6.8

Certain Covenants and Agreements. The Company shall have delivered, or caused to be delivered, to the Purchaser evidence, reasonably satisfactory to the Purchaser, that the Company shall have complied with the covenants and agreements set forth in Section 5.4.

6.9

No Material Adverse Effect. There shall not have occurred a Company Material Adverse Effect, and no event shall have occurred or circumstance exist that, in combination with any other events or circumstances, could reasonably be expected to have a Company Material Adverse Effect.

6.10

No Restraints. No temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the transactions contemplated by this Agreement shall have been issued by any Governmental Body, and there shall not be any Law enacted or deemed applicable to the transactions contemplated by this Agreement that makes the transactions contemplated by this Agreement illegal or unduly burdensome to the Purchaser or would subject the Purchaser or the Company to sanctions if the transactions contemplated by this Agreement are consummated.

6.11

No Litigation. There shall not be pending or threatened any Legal Proceeding by or before any Governmental Body or any other Person against the Purchaser, a Stockholder or the Company (a) seeking to restrain or prohibit the consummation of the transactions contemplated by this Agreement or any agreement entered into in connection with this Agreement; (b) seeking to restrain or prohibit the Purchaser’s direct or indirect ownership or operation of all or a significant portion of the business and assets of the Company, or to compel the Purchaser or any of its Subsidiaries or Affiliates to dispose of or hold separate any significant portion of the business or assets of the Company; (c) seeking to restrain or prohibit or make materially more costly the consummation of the transactions contemplated by this Agreement, or seeking to obtain from the Purchaser or the Company any damages in excess of $25,000; (d) seeking to impose limitations on the ability of the Purchaser to acquire or hold, or exercise full rights 

45

 

of ownership of the Company Common Stock; or (e) which otherwise could reasonably be expected to have a Company Material Adverse Effect.

6.12

Company Options and Company Rights. All Company Options and Company Rights shall have been exercised for Company Common Stock or shall have been cancelled with no liability to the Purchaser, the Company or their Affiliates, and the Purchaser shall have received evidence satisfactory to it of such exercise or cancellation.

6.13

CPRIT Agreement.  Provided that the Purchaser has made a funding commitment to Pelican in respect of the CPRIT Grant in an amount of not less than $910,231 by March 31, 2017, the Company shall have delivered to the Purchaser a fully executed agreement with CPRIT with respect to the CPRIT Grant (the “CPRIT Agreement”) and the CPRIT Agreement shall be in full force and effect as of the Closing Date and shall not have been amended or modified as of the Closing Date.  The funding commitment by CPRIT with respect to the CPRIT Grant under the CPRIT Agreement shall not have been amended, modified or rescinded as of the Closing. 

6.14

No Indebtedness. Other than as disclosed on Section 2.6(b) of the Disclosure Schedule, the Company shall have no outstanding Indebtedness.

6.15

No Negative FDA Correspondence. The Company shall not have received any Negative FDA Correspondence.

6.16

Company Financial Statements The Company and the Stockholders hereby covenant with and undertake to the Purchaser that, subject to the Purchaser providing funds to satisfy all obligations to BDO USA LLP they shall use their best efforts to cause BDO USA LLP, the Company’s independent registered public accounting firm, to: deliver to the Purchaser any consent that the Purchaser is obligated to file with the SEC with respect to the Company Financial Statements, any Quarterly Financial Statements required to be delivered pursuant to Section 5.4 and the reference to them as “experts” in any filing of the Purchaser with the SEC that includes the Company Financial Statements and any Quarterly Financial Statements required to be delivered pursuant to Section 5.4. The Company and the Stockholders hereby covenant with and undertake to the Purchaser that they shall use their best efforts to cooperate with the Purchaser to permit the Purchaser to prepare and file, in compliance with SEC reporting requirements (Rule 3-05 Regulation S-X of the Exchange Act), a Current Report on Form 8-K with respect to the transactions contemplated by this Agreement. In addition, the Company and the Stockholders hereby covenant with and undertake to the Purchaser that they shall use their best efforts to cooperate with the Purchaser to provide the information necessary for the Purchaser’s preparation of pro forma financial statements specified and described in Article 11 of Regulation S-X of the Exchange Act.

6.17

Minimum Purchased Shares. The aggregate number of Purchased Shares shall constitute at least eighty percent (80%) of the total number of shares of Fully Diluted Shares Outstanding as of immediately prior to the Closing.

6.18

Stockholders’ Agreement. The Company and each Stockholder shall have delivered to the Purchaser the Stockholders’ Agreement in substantially the form of EXHIBIT E hereto (the “Stockholders’ Agreement”), executed by the Company and each Stockholder, and the Stockholders’ Agreement shall be in full force and effect as of the Closing and shall not have been amended or modified as of the Closing.

6.19

Nasdaq Matters. The Purchaser shall have received from The Nasdaq Stock Market LLC (“Nasdaq”) written confirmation that Nasdaq has completed its review of the Listing of Additional Shares 

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Notification Form submitted by the Purchaser to Nasdaq in connection with the proposed issuance of shares of Purchaser Common Stock pursuant to this Agreement.

6.20

Due Diligence Review. The Purchaser shall have completed the due diligence review of the business, results of operations, condition (financial and otherwise), prospects, assets and liabilities of the Company and its business and the results of such due diligence shall be satisfactory to the Purchaser in its sole and absolute discretion.

6.21

Company Stockholder Approval. The Company Stockholder Approval shall have been obtained. 

ARTICLE VII. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS

The obligations of the Company and the Stockholders to consummate the transactions contemplated by this Agreement are subject to the satisfaction (or written waiver by the Stockholders’ Representative), at or prior to the Closing, of the following conditions:

7.1

Accuracy of Representations. Each of the representations and warranties of the Purchaser contained in this Agreement that are qualified as to materiality shall be true and correct in all respects, and each of the representations and warranties of the Purchaser contained in this Agreement that are not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date with the same force and effect as though made as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of a specific date, in which case the accuracy of such representation and warranty shall be determined as of such date).

7.2

Performance of Covenants. Each of the covenants and obligations set forth in this Agreement that the Purchaser is required to comply with or perform at or prior to the Closing shall have been complied with or performed in all material respects.

7.3

Purchaser Compliance Certificate. The Purchaser shall have delivered, or caused to be delivered, to the Company, a certificate executed by the Chief Executive Officer or Chief Financial Officer of the Purchaser as to compliance with the conditions set forth in Section 7.1 and Section 7.2.

7.4

Ancillary Agreements and Deliveries. The Purchaser shall have delivered, or caused to be delivered, to the Stockholders’ Representative, all other documents required to be entered into or delivered by the Purchaser at or prior to the Closing pursuant to this Agreement, each of which shall be in full force and effect as of the Closing and shall not have been amended or modified as of the Closing.

7.5

No Restraints. No temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the transactions contemplated by this Agreement shall have been issued by any Governmental Body, and there shall not be any Law enacted or deemed applicable to the transactions contemplated by this Agreement that makes the transactions contemplated by this Agreement illegal or unduly burdensome to the Purchaser or would subject the Purchaser or the Company to sanctions if the transactions contemplated by this Agreement are consummated.

7.6

Consents. All consents approvals, orders or authorizations of, or registrations, declarations or filings with, any Governmental Body shall have been obtained.

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7.7

Nasdaq Matters. The Purchaser shall have delivered to the Company written evidence that Nasdaq has completed its review of the Listing of Additional Shares Notification Form submitted by the Purchaser to Nasdaq in connection with the proposed issuance of shares of Purchaser Common Stock pursuant to this Agreement.

7.8

No Material Adverse Effect.  There shall not have occurred a Purchaser Material Adverse Effect.

ARTICLE VIII. CLOSING

8.1

Closing. Unless otherwise mutually agreed in writing between the Purchaser and the Stockholders’ Representative, the Closing shall take place at the offices of Gracin & Marlow, LLP, at 9:00 A.M. (Eastern Time) on the 2nd Business Day following the day on which the last to be satisfied or waived of the conditions set forth in ARTICLE VI and ARTICLE VII shall be satisfied or waived in accordance with this Agreement (other than those conditions that by their terms are to be satisfied at the Closing, it being understood that the occurrence of the Closing shall remain subject to the satisfaction or waiver of such conditions at the Closing). The date on which the Closing actually takes place is referred to in this Agreement as the “Closing Date”.

8.2

Stockholder and Company Closing Deliveries. At the Closing, the Stockholders and the Company, as applicable, shall deliver, or cause to be delivered, to the Purchaser, the deliverables, agreements and documents required pursuant to Section 6.6, each of which shall be in full force and effect.

8.3

Purchaser Closing Deliveries. At the Closing, the Purchaser shall deliver, or cause to be delivered, to the Stockholders’ Representative the deliverables, agreements and documents required by Section 7.4, each of which shall be in full force and effect.

ARTICLE IX. TERMINATION

9.1

Termination Events.

(a)

This Agreement may be terminated prior to the Closing:

(i)

by mutual written consent of the Purchaser and the Stockholders’ Representative;

(ii)

by written notice from the Purchaser to the Stockholders’ Representative, if there has been a breach of any representation, warranty, covenant or agreement by the Company or the Stockholders, or any such representation or warranty shall become untrue after the date of this Agreement, such that the conditions in Section 6.1 or Section 6.2 would not be satisfied and such breach is not curable or, if curable, is not cured within the earlier of (A) ten (10) days after written notice thereof is given by the Purchaser to the Stockholders’ Representative, and (B) the Expiration Date;

(iii)

by written notice from the Stockholders’ Representative to the Purchaser, if there has been a breach of any representation, warranty, covenant or agreement by the Purchaser, or any such representation or warranty shall become untrue after the date of this Agreement, such that the conditions in Section 7.1 or Section 7.2 would not be satisfied and such breach is not curable or, if curable, is not cured within the earlier of (A) ten (10) days after written notice thereof is given by the Stockholders’ Representative to the Purchaser; and (B) the Expiration Date; or

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(iv)

by five (5) days’ prior written notice by the Stockholders’ Representative to the Purchaser or the Purchaser to the Stockholders’ Representative, as the case may be, in the event the Closing has not occurred on or prior to April 30, 2017 (the “Expiration Date”) for any reason other than delay or nonperformance of or breach by the party seeking such termination; provided that the parties may mutually agree, in writing, to extend the Expiration Date.

(b)

In the event of termination of this Agreement pursuant to this ARTICLE IX, this Agreement shall forthwith become void and there shall be no liability on the part of any party to this Agreement or its partners, officers, directors, stockholders, members or other equity holders, except for obligations under Section 5.6 (Public Announcements), Section 12.2 (Fees and Expenses), Section 12.3 (Waiver; Amendment), Section 12.4 (Entire Agreement), Section 12.5 (Execution of Agreement; Counterparts; Electronic Signatures), Section 12.6 (Governing Law; Exclusive Jurisdiction), Section 12.7 (WAIVER OF JURY TRIAL), Section 12.8 (Assignment and Successors), Section 12.10 (Notices), Section 12.11 (Construction; Usage), Section 12.12 (Enforcement of Agreement), Section 12.13 (Severability), Section 12.16 (Schedules and Exhibits) and this Section 9.1, and the definitions used in each of the foregoing sections, including those set forth in EXHIBIT A hereto, all of which shall survive such termination and the Termination Date. Notwithstanding the foregoing, nothing contained in this Agreement shall relieve any party from liability for any breach of this Agreement. 

ARTICLE X. INDEMNIFICATION

10.1

Indemnification Obligations of the Stockholders.

(a)

The Stockholders (collectively, the “Indemnifying Parties”), shall, jointly and severally, indemnify the Purchaser (including the Company after the Closing), the officers and directors of the Purchaser, and their respective successors and assigns (other than Persons who were officers, directors, managers, employees, agents, partners, Representatives, successors and assigns of the Company immediately prior to the Closing) (collectively, the “Indemnified Parties”) and save and hold each of them harmless against and pay on behalf of or reimburse such Indemnified Parties as and when incurred for any loss, liability, demand, claim, action, cause of action, cost, damage, deficiency, Tax, penalty, fine or expense, whether or not arising out of third-party claims (including interest, penalties, reasonable attorneys’ fees and expenses and all amounts paid in investigation, defense or settlement of any of the foregoing) (collectively, “Losses”), which any such Indemnified Party may suffer, sustain or become subject to, as a result of, in connection with, arising out of, relating or incidental to or by virtue of:

(i)

any inaccuracy in or breach of any representation or warranty of the Company or the Stockholders set forth in ARTICLE II or any of the Schedules or Exhibits attached to this Agreement, the Company Compliance Certificate or any other Stockholder Related Agreement, whether such representation or warranty is made as of the date of this Agreement or as of the Closing Date (without giving effect to any materiality, Company Material Adverse Effect or other similar qualification contained in such representation or warranty);

(ii)

any non-fulfillment or breach of any covenant, agreement or undertaking made by the Company in this Agreement or any of the Schedules or Exhibits attached to this Agreement;

(iii)

(A) any provision of any Environmental Law and arising out of, or relating to, (x) any act or omission of the Company or any of or its employees, agents or representatives on or prior to the Closing Date, or (y) the ownership, use, control or operation on or prior to the Closing Date of any real property, plant, facility, site, area or property used in the business of the Company (whether currently or previously owned or leased by the Company) arising from any Release of any Materials of Environmental Concern or off-site shipment of any Materials of Environmental Concern at 

49

 

or from such real property, plant, facility, site, area or property; or (B) mold or any other environmental matter or condition arising on or prior to the Closing Date;

(iv)

any fraud or intentional misrepresentation of the Company with respect to any representation, warranty or covenant of the Company contained in this Agreement, the Company Compliance Certificate or any other Stockholder Related Agreement;

(v)

any inaccuracy in or breach of any representation or warranty set forth in the Purchased Share Certificate;

(vi)

any liability or obligation of the Company for (i) any Taxes incurred in any Tax period beginning after the Closing Date but arising from the settlement or other resolution with any Governmental Body of an asserted Tax liability which relates to any Tax period or portion thereof ending on or before the Closing Date, or (ii) the unpaid Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any similar provision of other federal, provincial, state, local or foreign Law), as a transferee or successor, by Contract or otherwise, in each case whether or not disclosed to the Purchaser in any Exhibits or Schedules attached to this Agreement, the Company Financial Statements or otherwise;

(vii)

any Legal Proceeding brought by one or more stockholders of the Company (individually or derivatively on behalf of the Company) against the Company, any directors or officers of the Company or the Purchaser pertaining to the transactions contemplated by this Agreement or to claims arising out of factual circumstances that existed prior to the Closing; or

(viii)

any Legal Proceedings directly or indirectly relating to any breach, alleged breach, liability or other matter of the type referred to in clauses (i) through (vii) above (including any Legal Proceeding commenced by any Indemnified Party for the purpose of enforcing any of its rights under this Section 10.1).

(b)

Each Stockholder shall, severally and not jointly, indemnify the Indemnified Parties and save and hold each of them harmless against and pay on behalf of or reimburse such Indemnified Parties as and when incurred for any Losses which any such Indemnified Party may suffer, sustain or become subject to, as a result of, in connection with, arising out of, relating or incidental to or by virtue of:

(i)

any inaccuracy in or breach of any representation or warranty of such Stockholder set forth in ARTICLE III, whether such representation or warranty is made as of the date of this Agreement or as of the Closing Date; and

(ii)

any non-fulfillment or breach of any covenant, agreement or undertaking made by such Stockholder in this Agreement or any of the Schedules or Exhibits attached to this Agreement, or in any Stockholder Related Agreement to which such Stockholder is a party.

(c)

In the event that the Company suffers, incurs or otherwise becomes subject to any Losses as a result of or in connection with any inaccuracy in or breach or alleged breach of any representation, warranty, covenant or obligation of the Company or the Stockholders or other matter referred to in Section 10.1(a) or Section 10.1(b), then (without limiting any of the rights of the Purchaser as an Indemnified Party) the Purchaser shall also be deemed, by virtue of their ownership of the Company Common Stock, to have suffered, incurred or otherwise become subject to Losses as a result of and in connection with such inaccuracy, breach, alleged breach or other matter.

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(d)

The current or former stockholders of the Company shall not have and shall not exercise or assert (or attempt to exercise or assert), any right of contribution, right of indemnity or other right or remedy against the Company in connection with any indemnification obligation or any liability to which such current or former stockholders of the Company may become subject under or in connection with this Agreement or any other agreement or document delivered to the Purchaser in connection with this Agreement.

10.2

Indemnification Procedure.

(a)

Promptly following receipt by an Indemnified Party of notice by a third-party (including any Governmental Body) of any complaint, dispute or claim or the commencement of any audit, investigation, action or proceeding with respect to which such Indemnified Party may be entitled to indemnification pursuant to this Agreement (a “Third-Party Claim”), or upon realization of a Loss by an Indemnified Party for which the Indemnified Party is entitled to indemnification under this ARTICLE X, such Indemnified Party shall provide written notice thereof to the Stockholders’ Representative; provided, however, that the failure to so notify the Stockholders’ Representative shall relieve the Indemnifying Party from liability under this ARTICLE X with respect to such Third-Party Claim only if, and only to the extent that, such failure to so notify the Stockholders’ Representative materially prejudices the rights and defenses otherwise available to the Indemnifying Party with respect to such Third-Party Claim. The Indemnifying Party shall have the right, upon written notice from the Stockholders’ Representative delivered to the Indemnified Party within ten (10) Business Days thereafter assuming full responsibility for any Losses resulting from such Third-Party Claim, to assume the defense of such Third-Party Claim, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of the fees and disbursements of such counsel; provided, however, that the Indemnifying Party shall not have the right to assume the defense of any Third-Party Claim that (i) affects any Intellectual Property Rights that the Company owns or has a right to use in the conduct of its business as currently conducted and as proposed to be conducted by the Company as of the Closing Date, (ii) is asserted directly by or on behalf of any Person that is a supplier or a customer of the Company, the Indemnified Party or their Affiliates, (iii) seeks an injunction or other equitable relief against the Indemnified Party or its Affiliates, (iv) involves a finding of any violation of Law or other wrongdoing by the Indemnified Party, the Company or their Affiliates, (v) relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation, or (vi) does not seek only monetary damages and, in the case of this clause (vi), the Indemnified Party reasonably believes an adverse determination with respect to the Third-Party Claim would be detrimental to or materially injure the reputation or future business prospects of the Indemnified Party. In the event, however, that the Indemnifying Party declines or fails to assume the defense of such Third-Party Claim on the terms of this Section 10.2(a) or to employ counsel reasonably satisfactory to the Indemnified Party, in either case within such ten (10) Business Day period, or thereafter defaults in continuing to defend the Indemnified Party, then any Losses shall include the reasonable fees and disbursements of counsel for the Indemnified Party as incurred. In addition, Losses shall include, as incurred, the reasonable fees and disbursements of counsel for the Indemnified Party: (A) that are incurred prior to the date the Indemnifying Party effectively assumes control of such defense, (B) if the Indemnified Party employs separate counsel due to the Indemnified Party being advised by counsel that a reasonable likelihood exists of a conflict of interest between the Indemnified Party and the Indemnifying Party, (C) if the Indemnified Party employs separate counsel because there are one or more legal or equitable defenses available to the Indemnified Party that are different from or in addition to those available to the Indemnifying Party, or (D) if the Indemnified Party employs separate counsel because such audit, investigation, action or proceeding involves, or could have a material effect on, any matter beyond the scope of the indemnification or defense obligations of the Indemnifying Party.

(b)

In any Third-Party Claim for which indemnification is being sought under this ARTICLE X, the Indemnified Party or the Indemnifying Party, whichever is not assuming the defense of 

51

 

such Third-Party Claim, shall have the right to participate in such matter and to retain its own counsel at such party’s own expense. The Indemnifying Party or the Indemnified Party (as the case may be) shall at all times use reasonable efforts to keep the Stockholders’ Representative or Indemnified Party (as the case may be) reasonably apprised of the status of the defense of any matter, the defense of which it is maintaining, and to cooperate in good faith with the other party with respect to the defense of any such matter.

(c)

No Indemnified Party may settle or compromise any Third-Party Claim or consent to the entry of any judgment with respect to which indemnification is being sought under this ARTICLE X without the prior written consent of the Stockholders’ Representative (which may not be unreasonably withheld, conditioned or delayed), unless (i) the Indemnifying Party fails to assume and maintain diligently the defense of such Third-Party Claim pursuant to Section 10.2(a) or fails to reimburse the Indemnified Party within 30 days for expenses incurred by the Indemnified Party in defending itself against any Third-Party Claim in the circumstance where the Indemnifying Party fails to assume the defense of the Indemnified Party or as required under the last sentence of Section 10.2(a) or, having assumed the defense, thereafter defaults in pursuing such defense, or (ii) such settlement, compromise or consent includes an unconditional release of the Indemnifying Party and its officers, directors, employees and Affiliates from all liability arising out of, or related to, such Third-Party Claim without further actual or potential monetary liability to the Indemnifying Party. An Indemnifying Party may not, without the prior written consent of the Indemnified Party, settle or compromise any Third-Party Claim or consent to the entry of any judgment with respect to which indemnification is being sought under this ARTICLE X unless such settlement, compromise or consent (A) includes an unconditional release of the Indemnified Party and its officers, directors, employees and Affiliates from all liability arising out of, or related to, such Third-Party Claim, (B) does not contain any admission or statement suggesting any wrongdoing or liability on behalf of the Indemnified Party, and (C) does not contain any equitable order, judgment or term that in any manner affects, restrains or interferes with the business of the Indemnified Party or any of the Indemnified Party’s Affiliates.

(d)

In the event an Indemnified Party claims a right to payment pursuant to this Agreement with respect to any Loss or other matter not involving a Third-Party Claim (a “Direct Claim”), such Indemnified Party shall send written notice of such claim to the Stockholders’ Representative (a “Notice of Claim”). Such Notice of Claim shall specify the basis for such Direct Claim. The failure by any Indemnified Party to so notify the Stockholders’ Representative shall not relieve the Indemnifying Party from any liability that it may have to such Indemnified Party with respect to any Direct Claim made pursuant to this Section 10.2(d), it being understood that Notices of Claim in respect of a breach of a representation or warranty must be delivered prior to the expiration of the survival period for such representation or warranty under Section 10.3. In the event the Stockholders’ Representative does not notify the Indemnified Party within ten (10) Business Days following its receipt of such Notice of Claim that the Stockholders’ Representative disputes the Indemnifying Parties’ liability to the Indemnified Party under this ARTICLE X or the amount thereof, the Direct Claim specified by the Indemnified Party in such Notice of Claim shall be conclusively deemed a liability of the Indemnifying Party under this ARTICLE X. In the event the Stockholders’ Representative has timely disputed its liability with respect to such Direct Claim as provided in this Section 10.2(d), as promptly as reasonably practicable, such Indemnified Party and the Stockholders’ Representative shall establish the merits and amount of such Direct Claim (by mutual agreement, litigation or otherwise) and, within five (5) Business Days following the final determination of the merits and amount of such Direct Claim, the Indemnifying Party shall pay to the Indemnified Party in accordance with the offset mechanism pursuant to Section 10.5 an amount equal to such Direct Claim as determined pursuant to this Section 10.2(d). 

10.3

Survival Period. The representations, warranties and covenants made by the Company and the Stockholders in this Agreement and the Purchased Share Certificate shall not be extinguished by 

52

 

the Closing, but shall survive the Closing for, and all claims for indemnification in connection therewith shall be asserted not later than, twelve (12) months following the Closing Date; provided, however, that (a) each of the Fundamental Representations shall survive the Closing without limitation as to time, and the period during which a claim for indemnification may be asserted in connection therewith shall continue indefinitely; (b) each of the representations and warranties contained in Section 2.12 (Intellectual Property) and Section 2.15 (Environmental Matters), shall survive the Closing until, and all claims for indemnification in connection therewith shall be asserted not later than 60 days following, the expiration of any statute of limitations applicable to the rights of any Person to bring any claim with respect to such matters; and (c) each of the representations and warranties contained in Section 2.9 (Taxes) shall survive until, and all claims for indemnification in connection therewith shall be asserted not later than the later to occur of: (i) the 180th day following the end of the period, if any, during which an assessment, reassessment or other form of document assessing liability for Taxes in respect of any taxation year to which these representations and warranties extend could be issued to the Company, and (ii) 60 days following the expiration of any statute of limitations applicable to the rights of any Person to bring any claim with respect to such matters. Notwithstanding the foregoing, if, prior to the close of business on the last day a claim for indemnification may be asserted under this ARTICLE X, the Stockholders’ Representative shall have been properly notified of a claim for indemnity under this ARTICLE X and such claim shall not have been finally resolved or disposed of as of such date, such claim shall continue to survive and shall remain a basis for indemnity under this ARTICLE X until such claim is finally resolved or disposed of in accordance with the terms of this Agreement. All representations, warranties and covenants made by the Purchaser shall continue in accordance with their respective terms. Subject at all times to the limitations set forth in this ARTICLE X, the covenants and agreements of the parties pursuant to this ARTICLE X shall survive without limitation as to time, and the period during which a claim for indemnification may be asserted in connection therewith shall continue indefinitely, subject to applicable statutes of limitations.

10.4

Investigations. The respective representations and warranties of the parties contained in this Agreement or any certificate or other document delivered by any party at or prior to the Closing and the rights to indemnification set forth in this ARTICLE X shall not be deemed waived or otherwise affected by any investigation made, or Knowledge acquired, by any Person.

10.5

Offset Against Closing Shares and Future Product Payments. Notwithstanding anything in this Agreement to the contrary, in the event any Indemnified Party shall suffer any Losses for which such Indemnified Party is entitled to indemnification under this ARTICLE X, such Indemnified Party shall be entitled to recover such Losses by offsetting such Losses against the Escrowed Closing Consideration up until it is released pursuant to Section 1.7(c) and the Escrow Agreement or until the Escrowed Closing Consideration is wholly exhausted and, thereafter, any remaining portion of such Losses shall be satisfied by the Indemnifying Party solely by offsetting such Losses against any Future Product Payments that have yet to be paid and are otherwise payable by the Purchaser or the Company to the Indemnifying Party. In no event shall the aggregate amount of the indemnification obligation of the Indemnifying Parties pursuant to this ARTICLE X exceed the sum of the Escrowed Closing Consideration and the Future Product Payments.

10.6

Set-Off. The Purchaser shall be entitled to set-off any amount or right it may be entitled to pursuant to this Agreement against any amount, right or obligations owed to any Stockholder under this Agreement or any Stockholder Related Agreement.

10.7

Characterization of Indemnification Payments. The Purchaser and the Stockholders agree to treat any payment made under this ARTICLE X as an adjustment to the Escrowed Closing Consideration.

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ARTICLE XI. STOCKHOLDERS’ REPRESENTATIVE

11.1

Stockholders’ Representative.

(a)

Each of the Stockholders, by such Stockholder’s execution of this Agreement or a Joinder Agreement, hereby irrevocably appoints the Stockholders’ Representative as agent and attorney in fact for the Company and such Stockholder, and authorizes the Stockholders’ Representative (i) to take all action necessary to consummate the transactions contemplated by this Agreement and the Escrow Agreement, or the defense and/or settlement of any claims for which such Stockholder may be required to indemnify the Purchaser or any other Indemnified Party pursuant to ARTICLE X, (ii) to give and receive all notices required to be given under this Agreement, the Escrow Agreement or the Stockholder Related Agreements, (iii) to authorize delivery to the Purchaser of the Escrowed Closing Consideration or the Future Product Payments to the extent necessary for the Purchaser to exercise its rights under Section 1.7 or ARTICLE X, (iv) to make decisions on behalf of the Company and such Stockholder and take any and all additional action as is contemplated to be taken by or on behalf of such Stockholder by the terms of this Agreement or the Escrow Agreement, including, without limitation regarding (A) indemnification claims, Direct Claims, Third-Party Claims and Notices of Claims, (B) amendments to this Agreement, the Escrow Agreement or the Stockholder Related Agreements, and (C) the Future Product Payments.

(b)

All decisions and actions by the Stockholders’ Representative, including without limitation (i) any agreement between the Stockholders’ Representative and the Purchaser relating to the defense or settlement of any claims for which the Stockholders may be required to indemnify the Purchaser pursuant to ARTICLE X, and (ii) any agreement between the Stockholders’ Representative and the Purchaser relating to the Escrow Agreement or the determination of the Specified Indebtedness Amount under Section 1.7 or any other matter relating to ARTICLE I or the Future Product Payments, shall be binding upon all of the Stockholders, and no Stockholder shall have the right to object, dissent, protest or otherwise contest the same.

(c)

The Stockholders’ Representative shall not have any liability to any of the parties to this Agreement or to the Stockholders for any act done or omitted pursuant to this Agreement as the Stockholders’ Representative while acting in good faith, and any act done or omitted pursuant to the advice of counsel shall be conclusive evidence of such good faith. The Stockholders shall severally indemnify the Stockholders’ Representative and hold the Stockholders’ Representative harmless against any loss, liability or expense incurred without fraud or bad faith on the part of the Stockholders’ Representative and arising out of or in connection with the acceptance or administration of the Stockholders’ Representative’s duties under this Agreement.

(d)

The Stockholders’ Representative shall have full power and authority on behalf of each Stockholder to take any and all actions on behalf of, execute any and all instruments on behalf of, and execute or waive any and all rights of, the Stockholders under this Agreement, the Escrow Agreement and the Stockholder Related Agreements.

(e)

Each of the Stockholders, by such Stockholder’s execution of this Agreement or a Joinder Agreement, agrees, in addition to the foregoing, that:

(i)

the Purchaser shall be entitled to rely conclusively on the instructions and decisions of the Stockholders’ Representative as to (A) the settlement of any claims for indemnification by the Purchaser pursuant to ARTICLE X, (B) actions taken in respect of indemnification claims, Direct Claims, Third-Party Claims, Notices of Claims, the Specified Indebtedness Amount, and the Future Product Payments, and (C) any other actions required or permitted to be taken by the Stockholders’ Representative under this Agreement, the Escrow Agreement and any Stockholder 

54

 

Related Agreement, and no Stockholder shall have any cause of action against the Purchaser for any action taken by the Purchaser in reliance upon the instructions or decisions of the Stockholders’ Representative;

(ii)

all actions, decisions and instructions of the Stockholders’ Representative shall be conclusive and binding upon the Company and all of the Stockholders and no Stockholder shall have any cause of action against the Stockholders’ Representative for any action taken, decision made or instruction given by the Stockholders’ Representative under this Agreement or the Escrow Agreement except for fraud or willful misconduct by the Stockholders’ Representative in connection with the matters described in this ARTICLE XI; and

(iii)

the provisions of this ARTICLE XI are independent and severable, are irrevocable and coupled with an interest and shall be enforceable notwithstanding any rights or remedies that any Stockholder may have in connection with the transactions contemplated by this Agreement, the Escrow Agreement and the Stockholder Related Agreements.

(f)

The provisions of this ARTICLE XI shall be binding upon the executors, heirs, legal Representatives, personal Representatives, successor trustees and successors of each Stockholder, and any reference in this Agreement or the Escrow Agreement to a Stockholder or the Stockholders shall mean and include the successors to the rights of the Stockholders under this Agreement, whether pursuant to testamentary disposition, the laws of descent and distribution or otherwise.

ARTICLE XII. MISCELLANEOUS PROVISIONS

12.1

Further Assurances. Each party to this Agreement shall execute and cause to be delivered to each other party to this Agreement such instruments and other documents, and shall take such other actions, as such other parties may reasonably request (prior to, at or after the Closing) for the purpose of carrying out or evidencing any of the transactions contemplated by this Agreement.

12.2

Fees and Expenses. Each party to this Agreement shall bear and pay all fees, costs and expenses (including legal fees and accounting fees) that have been incurred or that are incurred by such party in connection with the transactions contemplated by this Agreement; provided, however, that the Purchaser shall be required to provide the Company with sufficient funds at Closing to pay all Transaction Expenses, which such funds will be evidenced by a promissory note in substantially the form attached hereto as EXHIBIT F.

12.3

Waiver; Amendment. Any agreement on the part of a party to this Agreement to any extension or waiver of any provision of this Agreement shall be valid only if set forth in an instrument in writing signed on behalf of such party. A waiver by a party to this Agreement of the performance of any covenant, agreement, obligation, condition, representation or warranty shall not be construed as a waiver of any other covenant, agreement, obligation, condition, representation or warranty. A waiver by any party to this Agreement of the performance of any act shall not constitute a waiver of the performance of any other act or an identical act required to be performed at a later time. Prior to the Closing, this Agreement may not be amended, modified or supplemented except by written agreement among the Purchaser, the Company and the Stockholders’ Representative. Following the Closing, this Agreement may not be amended, modified, altered or supplemented except by written agreement between the Purchaser and the Stockholders’ Representative. 

12.4

Entire Agreement. This Agreement and the other agreements referred to in this Agreement constitute the entire agreement among the parties to this Agreement and supersede all other prior agreements and understandings, both written and oral, among or between any of the parties with 

55

 

respect to the subject matter of this Agreement and thereof; provided, however, that the confidentiality agreement between the Purchaser and the Company (the “Confidentiality Agreement”) shall not be superseded by this Agreement and shall remain in effect in accordance with its terms until the earlier of: (a) the Closing Date, or (b) the date on which the Confidentiality Agreement is terminated in accordance with its terms.

12.5

Execution of Agreement; Counterparts; Electronic Signatures.

(a)

This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument, and shall become effective when counterparts have been signed by each of the parties to this Agreement and delivered to the other parties to this Agreement; it being understood that all parties to this Agreement need not sign the same counterparts.

(b)

This Agreement and any amendments to this Agreement may be executed in one or more counterparts, each of which shall be enforceable against the parties to this Agreement that execute such counterparts, and all of which together shall constitute one and the same instrument. Facsimile and “.pdf” copies of signed signature pages shall be deemed binding originals and no party to this Agreement shall raise the use of facsimile machine or electronic transmission in “.pdf” as a defense to the formation of a contract.

12.6

Governing Law; Exclusive Jurisdiction.

(a)

This Agreement and the relationship of the parties hereto shall be governed by and construed in accordance with the internal laws (and not the law of conflicts) of the State of Delaware.

(b)

Each of the parties hereto agrees that any suit, action, or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement shall be brought solely in the Court of Chancery of the State of Delaware or, if such court lacks jurisdiction, any state or federal court sitting in the State of Delaware. Each of the parties hereto consents to the jurisdiction of such court (and of the appropriate appellate courts therefrom) in any such suit, action, or proceeding and irrevocably agrees not to commence any litigation relating thereto except in such court, and each further waives any objection to the laying of venue of any such litigation in such court and agrees not to plead or claim in such court that such litigation brought therein has been brought in an inconvenient forum.  Any party hereto may make service on another 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 12.10. Nothing in this Section 12.6, however, shall affect the right of any Person to serve legal process in any other manner permitted by law.

12.7

WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDINGS OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

12.8

Assignment and Successors. No party to this Agreement may assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other parties to this Agreement. Subject to the preceding sentence, this Agreement shall apply to, be binding in all respects upon and inure to the benefit of the successors and permitted assigns of the parties to this Agreement.  Any Stockholder Entity may dissolve after execution of this Agreement and assign its rights and obligations under this Agreement to its partners, members or stockholders; provided, however, that no 

56

 

such dissolution shall be permitted unless each proposed assignee (i) executes and delivers a Joinder Agreement and becomes a party to this Agreement, and (ii) executes and delivers all documents required by the Stockholders under this Agreement, including the Stockholders’ Agreement and any Stockholder Related Agreements.

12.9

Parties in Interest. Except for the provisions of ARTICLE X, none of the provisions of this Agreement is intended to provide any rights or remedies to any Person other than the parties to this Agreement and their respective successors and assigns (if any). Each of the Indemnified Parties is an express third party beneficiary of ARTICLE X.

12.10

Notices. All notices, requests, claims, demands, consents, waivers and other communications required or permitted by this Agreement shall be in writing and shall be deemed given to a party to this Agreement when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid), or (b) sent e-mail with confirmation of transmission by the transmitting equipment confirmed with a copy delivered as provided in clause (a), in each case to the following addresses, facsimile numbers or e-mail addresses and marked to the attention of the Person (by name or title) designated below (or to such other address, facsimile number, e-mail address or Person as a party may designate by notice to the other parties to this Agreement):

If to the Company (before the Closing):

Pelican Therapeutics, Inc.

PMB #520 – 3112 Windsor Road, Suite A

Austin, Texas 78703

Attention: Josiah Hornblower 

Email: jhornblower@gmail.com

with a mandatory copy to (which copy shall not constitute notice):

Pillsbury Winthrop Shaw Pittman LLP

Two Houston Center, 909 Fannin, Suite 2000

Houston, TX 77010-1028

Attention: Andrew L. Strong, Esq.

Email: andrew.strong@pillsburylaw.com

If to the Stockholders’ Representative (on its own behalf and for the benefit of the Stockholders):

Josiah Hornblower 

PMB #520 – 3112 Windsor Road, Suite A

Austin, Texas 78703

Email: jhornblower@gmail.com

If to the Purchaser:

Heat Biologics, Inc.

801 Capitola Drive

Durham, North Carolina 27713

Attention: Jeff Wolf

Email: Jwolf@heatbio.com

57

 

with a mandatory copy to (which copy shall not constitute notice):

Gracin & Marlow, LLP

The Chrysler Building

405 Lexington Avenue, 26th Flr.

New York, New York 10174

Attention: Leslie Marlow, Esq.

Email: Lmarlow@gracinmarlow.com

12.11

Construction; Usage.

(a)

Interpretation. In this Agreement, unless a clear contrary intention appears:

(i)

the singular number includes the plural number and vice versa;

(ii)

reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

(iii)

reference to any gender includes each other gender;

(iv)

reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;

(v)

reference to any Law means such Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Law means that provision of such Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

(vi)

“hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision of this Agreement;

(vii)

“including” means including without limiting the generality of any description preceding such term;

(viii)

references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto; and

(ix)

reference to a “Section” or “Article” in this Agreement shall mean a Section or Article, respectively, of this Agreement unless otherwise provided.

(b)

Legal Representation of the Parties. This Agreement was negotiated by the parties to this Agreement with the benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party to this Agreement shall not apply to any construction or interpretation of this Agreement.

58

 

(c)

Headings. The headings contained in this Agreement are for the convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

(d)

Accounting Terms. All accounting terms not specifically defined in this Agreement shall be construed in accordance with GAAP.

(e)

Dollar Amounts. All references to “$” contained in this Agreement shall refer to United States Dollars unless otherwise stated.

12.12

Enforcement of Agreement. The parties to this Agreement acknowledge and agree that the Purchaser, the Company, the Stockholders’ Representative and the Stockholders may be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any breach of this Agreement by the Purchaser, the Company, the Stockholders’ Representative or the Stockholders may not be adequately compensated in all cases by monetary damages alone. Accordingly, in addition to any other right or remedy to which the Purchaser, the Company, the Stockholders’ Representative and the Stockholders may be entitled, at law or in equity, each of the Purchaser, the Company and, on its own behalf and on behalf of the Stockholders, the Stockholders’ Representative, shall be entitled to enforce any provision of this Agreement by a decree of specific performance and temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking. The rights and remedies of the parties to this Agreement shall be cumulative (and not alternative).

12.13

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

12.14

Time of Essence. With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence.

12.15

Disclosure Schedule. Except as set forth in the Disclosure Schedule, nothing in the Disclosure Schedule shall be adequate to disclose an exception to a representation or warranty made in this Agreement except to the extent the Section thereof identifies the exception and describes the facts. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be adequate to disclose an exception to a representation or warranty made in this Agreement unless the representation or warranty has to do with the existence of the document or other item itself. No exceptions to any representations or warranties disclosed on one Section of the Disclosure Schedule shall constitute an exception to any other representations or warranties made in this Agreement except to the extent the disclosure is clear in its disclosure or cross-referenced in such other applicable Section.

12.16

Schedules and Exhibits. The Schedules and Exhibits attached to this Agreement (including the Disclosure Schedule) are hereby incorporated into this Agreement and are hereby made a part of this Agreement as if set out in full in this Agreement.

[Signature page follows]

59

 

60

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed, as of the date first above written.

 

					
	 
	 
	 
	 
	 

	THE PURCHASER:

	 

	 

	 

	HEAT BIOLOGICS, INC.

 

	 
	 

	By:

	 

	/s/ Jeff Wolf

	 
	 

	Name:

	 

	Jeff Wolf

	 
	 

	Title:

	 

	Chief Executive Officer

	 

	THE COMPANY:

	 

	PELICAN THERAPEUTICS, INC.

	 
	

 

	By:

	 

	/s/ Josiah Hornblower

	 
	 

	Name:

	 

	Josiah Hornblower

	 
	 

	Title:

	 

	Chief Executive Officer

	 

	STOCKHOLDERS’ REPRESENTATIVE:

	

 

	 

	 
	 

	By:

	 

	/s/ Josiah Hornblower

	 
	 

	Name:

	 

	Josiah Hornblower

	 
	 

	Title:

	 

	Stockholders’ Representative

 

[Signature Page to the Stock Purchase Agreement]

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed, as of the date first above written.

 

STOCKHOLDER:

For individuals:

Signature:_____________________________________

Name:________________________________________

For entities:

Signature:     /s/ Jeff Wolf                                                 

By: Blue River Ventures, LLC

Name: Jeff Wolf

Title: Manager

Address for notices:

3606 Henningson Way

Durham, NC 27705

Tax ID Number:

45-5551891

[Signature Page to the Stock Purchase Agreement]

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed, as of the date first above written.

 

STOCKHOLDER:

For individuals:

Signature:_____________________________________

Name:________________________________________

For entities:

Signature:     /s/ Edward B. Smith                                    

By: Aristor Ventures, III, LLC

Name: Edward B. Smith

Title: Manager

Address for notices:

Aristar Capital

1120 Avenue of the Americas, #1514

New York, NY 10036

Tax ID Number:

27-2499702

 

[Signature Page to the Stock Purchase Agreement]

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed, as of the date first above written.

 

STOCKHOLDER:

For individuals:

Signature:     /s/ Edward B. Smith                                    

Name:          Edward B. Smith                                        

For entities:

Signature:_____________________________________

By:__________________________________________

Name:________________________________________

Title:________________________________________

Address for notices:

c/o Aristar Capital

1120 Avenue of the Americas, #1514

New York, NY 10036

Tax ID Number:

###-##-####

 

[Signature Page to the Stock Purchase Agreement]

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed, as of the date first above written.

 

STOCKHOLDER:

For individuals:

Signature:_____________________________________

Name:________________________________________

For entities:

Signature:      /s/ Taylor Schreiber                                    

By: Taylor Schreiber

Name: Houghton Capital Holdings, LLC

Title: Principal 

Address for notices:

3611 Rugby Road

Durham, NC 27707

Tax ID Number:

45-2481133

 

[Signature Page to the Stock Purchase Agreement]

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed, as of the date first above written.

 

STOCKHOLDER:

For individuals:

Signature:_____________________________________

Name:________________________________________

For entities:

Signature:     /s/ Robert W. Hortsman                             

By: Robert W. Hortsman

Name: Hunter Family Trust, LLC

Title: Trustee of Managing Members

Address for notices:

80 S. 8th Street, Suite 4924

Minneapolis, MN 55402

Tax ID Number:

80-0320321

 

[Signature Page to the Stock Purchase Agreement]

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed, as of the date first above written.

 

STOCKHOLDER:

For individuals:

Signature:_____________________________________

Name:________________________________________

For entities:

Signature:     /s/ David B. Moore                                    

By: David B. Moore

Name: Marathon Capital Holdings, Inc.

Title: Managing Principal

Address for notices:

848 N. Rainbow Blvd., Suite 4438

Las Vegas, NV 89107

Tax ID Number:

48-1286633

 

[Signature Page to the Stock Purchase Agreement]

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed, as of the date first above written.

 

STOCKHOLDER:

For individuals:

Signature:_____________________________________

Name:________________________________________

For entities:

Signature:     /s/ Josiah Hornblower                                   

By: Stone Dock Investors

Name: Josiah Hornblower

Title: Managing Partner

Address for notices:

3317 Dowman Avenue

Austin, TX 78703

Tax ID Number:

_____________________________________________

 

[Signature Page to the Stock Purchase Agreement]

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed, as of the date first above written.

 

STOCKHOLDER:

For individuals:

Signature:_____________________________________

Name:     /s/ Rahul R. Jasuja                                             

For entities:

Signature:_____________________________________

By:__________________________________________

Name:________________________________________

Title:________________________________________

Address for notices:

220 SE Miznar Blvd., Suite 207

Boca Raton, FL 33432

Tax ID Number:

_____________________________________________

 

[Signature Page to the Stock Purchase Agreement]

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed, as of the date first above written.

 

STOCKHOLDER:

For individuals:

Signature:_____________________________________

Name:________________________________________

For entities:

Signature:_____________________________________

By:     /s/ Josiah Hornblower                                             

Name: Hornblower Capital Holdings, LLC

Title: Managing Partner

Address for notices:

3317 Bowman Avenue

Austin, TX 78703

Tax ID Number:

_____________________________________________

 

[Signature Page to the Stock Purchase Agreement]

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed, as of the date first above written.

 

STOCKHOLDER:

For individuals:

Signature:_____________________________________

Name:    /s/ Josiah Hornblower                                        

For entities:

Signature: _____________________________________

By:__________________________________________

Name:________________________________________

Title:________________________________________

Address for notices:

3317 Bowman Avenue

Austin, TX 78703

Tax ID Number:

_____________________________________________

 

[Signature Page to the Stock Purchase Agreement]

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed, as of the date first above written.

 

STOCKHOLDER:

For individuals:

Signature:_____________________________________

Name:________________________________________

For entities:

Signature:_____________________________________

By:__________________________________________

Name:________________________________________

Title:________________________________________

Address for notices:

_____________________________________________

_____________________________________________

_____________________________________________

Tax ID Number:

_____________________________________________

 

[Signature Page to the Stock Purchase Agreement]

 

INDEX OF DEFINED TERMS

			
	 

	 
	 

	 
	  

	Section

	 
	 

	Acquisition Proposal

	  

	5.11(a)

	Assignment Agreement

	  

	2.12(j)

	Audited Balance Sheet

	  

	2.5(a)(i)

	Closing Date

	  

	8.1

	Company

	  

	Preamble

	Company Compliance Certificate

	  

	6.3

	Company Constituent Documents

	  

	2.1(c)

	Company Database

	  

	2.28(b)

	Company Financial Statements

	  

	2.5(a)

	Company Rights

	  

	2.2(d)

	Company Stockholder Approval

	 
	5.12

	Confidentiality Agreement

	  

	12.4

	CPRIT Agreement

	 
	6.13

	Direct Claim

	  

	10.2(d)

	Escrow Agent

	  

	1.7(a)

	Escrow Agreement

	  

	1.7(a)

	Escrowed Closing Consideration

	 
	1.3(a)

	Escrow Period

	  

	1.7(b)

	Exchange Act

	 
	2.2(i)

	Expiration Date

	  

	9.1(a)(iv)

	Future Product Payments

	 
	1.4(c)

	Indemnified Parties

	  

	10.1(a)

	Indemnifying Parties

	  

	10.1(a)

	Joinder Agreement

	  

	Preamble

	Losses

	  

	10.1(a)

	Material Contracts

	  

	2.13(b)

	Milestone Payment

	 
	1.4(a)

	Monthly Financial Statements

	  

	5.4

	Nasdaq

	  

	6.19

	Non-Oncology Royalties

	 
	1.4(b)(iii)

	Non-Royalty Sublicense Payments

	 
	1.4(c)

	Notice of Claim

	  

	10.2(d)

	OFAC

	  

	2.32

	Oncology Royalties

	 
	1.4(b)(i)

	Pre-Closing Period

	 
	5.1

	Privacy Policy

	 
	2.28(c)

	Purchased Share Certificate

	  

	6.6(e)

	Purchaser

	 
	Preamble

	Purchaser SEC Documents

	 
	4.3(a)

	Quarterly Financial Statements

	 
	5.4

	Royalty Payments

	 
	1.4(b)(iii)

	SEC

	 
	2.2(i)

	Specified Indebtedness Statement

	 
	1.7(b)

	Stockholders

	 
	Preamble

	Stockholders’ Agreement

	 
	6.18

	Stockholders’ Representative

	 
	Preamble

	Third-Party Claim

	 
	10.2

 

			

EXHIBIT A

DEFINITIONS

For purposes of the Agreement (including this EXHIBIT A):

“Acceptance of BLA Submission” means acceptance by the Regulatory Authority of a BLA Submission. 

“Acquisition Transaction” means any transaction or series of transactions involving:

(a) any merger, consolidation, share exchange, business combination, issuance of securities, direct or indirect acquisition of securities, recapitalization, tender offer, exchange offer or other similar transaction involving the Company;

(b) any acquisition or purchase of all or any portion of the capital stock of the Company;

(c) any direct or indirect sale, lease, exchange, transfer, license, acquisition or disposition of all or any portion of the business or assets of the Company; or

(d) any liquidation, dissolution or winding up of the Company.

 “Affiliate” means, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person, including, without limitation, any general partner, limited partner, member, officer, director or manager of such Person and any venture capital or private equity fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person. For purposes of this definition, the terms “controls,” “controlled by,” or “under common control with” means the possession, direct or indirect, of power to direct or cause the direction of management or policies (whether through ownership of voting securities, by contract or otherwise).

“Agreement” means the Stock Purchase Agreement of which this EXHIBIT A is a part, as amended or restated from time to time.

“Applicable Benefit Laws” means all Laws, including those of a jurisdiction outside of the United States, applicable to any Employee Plan.

“BLA” means a Biologics License Application. 

“BLA Submission” means an application and all amendments and supplements thereto filed with the Regulatory Authority, including all documents, data, and other information concerning a pharmaceutical product which are necessary for gaining Regulatory Approval to market and sell such pharmaceutical product.

“Business Day” means a weekday on which banks are open for general banking business in Durham, North Carolina.

“Closing” means the consummation of the purchase and sale of the Purchased Shares as set forth in Section 8.1 of the Agreement.

“Closing Cash Consideration” means an amount in cash equal to $500,000.

 

“Closing Shares” means such number of shares of Purchaser Common Stock as is equal to 4.99% of the outstanding shares of Purchaser Common Stock on the date of this Agreement (as adjusted as appropriate to reflect any stock splits, stock dividends, reverse stock splits, combinations, reorganizations, reclassifications or similar events affecting the Purchaser Common Stock after the date of this Agreement), rounded down to the nearest whole share.

“Code” means the United States Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“Company Common Stock” means the shares of common stock, par value $0.0001 per share, of the Company.

“Company Contract” means any Contract, including any amendment or supplement thereto: (a) to which the Company is a party, (b) by which the Company or any of its assets is or may become bound or under which the Company has, or may become subject to, any obligation, or (c) under which the Company has or may acquire any right or interest.

“Company Intellectual Property” means the Company Owned Intellectual Property and the Company Licensed Intellectual Property.

“Company Licensed Intellectual Property” means all Intellectual Property Rights that are licensed to the Company by any other third-party.

“Company Material Adverse Effect” means any state of facts, change, event, effect, occurrence or circumstance that, individually or in the aggregate (considered together with all other state of facts, change, event, effect, occurrence or circumstance) has, has had or could reasonably be expected to have or give rise to a material adverse effect on (a) the business, condition (financial or otherwise), results of operations, prospects, capitalization, assets, liabilities, operations or financial performance of the Company, (b) the ability of the Company to consummate the transactions contemplated by the Agreement or to perform any of its obligations under the Agreement prior to the Termination Date, or (c) the Purchaser’s ability to vote, receive dividends with respect to or otherwise exercise ownership rights with respect to the shares of the Company.

“Company Options” means all options to purchase Company Common Stock, as listed on Section 2.2(b) of the Disclosure Schedule.

“Company Owned Intellectual Property” means all Intellectual Property Rights that derive from Pipeline Technologies and are owned or purported to be owned by the Company, in whole or in part.

“Company Registrations” means Patent Rights, registered trademarks and service marks, registered copyrights and designs, domain name registrations and applications (including intent to use applications) for each of the foregoing that are registered or filed or recorded with any Person in the name of or licensed by the Company, alone or jointly with others.

“Company Stock Option Plan” means the Company’s 2012 Equity Incentive Plan.

“Company Warrants” means all warrants to purchase Company Common Stock, as listed on Section 2.2(c) of the Disclosure Schedule.

“Confidential Information” means any data or information concerning the Company (including trade secrets), without regard to form, regarding (for example and including) (a) business process models, 

 

(b) proprietary software, (c) research, development, products, services, marketing, selling, business plans, budgets, unpublished financial statements, licenses, prices, costs, contracts, suppliers, customers, and customer lists, (d) the identity, skills and compensation of employees, contractors, and consultants, (e) specialized training, or (f) discoveries, developments, trade secrets, processes, formulas, data, lists, and all other works of authorship, mask works, ideas, concepts, know-how, designs, and techniques, whether or not any of the foregoing is or are patentable, copyrightable, or registrable under any intellectual property Laws or industrial property Laws in the United States or elsewhere. Notwithstanding the foregoing, no data or information constitutes “Confidential Information” if such data or information is publicly known and in the public domain through means that do not involve a breach by the Company or a Stockholder of any covenant or obligation set forth in the Agreement.

“Consideration Percentage” means the quotient obtained by dividing (i) the number of shares of Company Common Stock to be sold to the Purchaser by the Stockholder (as calculated pursuant to Section 1.2) by (ii) the Purchased Shares. 

“Contract” means any written, oral or other agreement, contract, subcontract, lease, understanding, instrument, note, warranty, license, sublicense, insurance policy, benefit plan or legally binding commitment or undertaking of any nature, whether express or implied.

“CPRIT” means the Cancer Prevention & research Institute of Texas.

“CPRIT Grant” means the grant to the Company of an award from CPRIT in the maximum amount of $15,245,222.

“Disclosure Schedule” means the disclosure schedule (dated as of the date of the Agreement) delivered to the Purchaser on behalf of the Company and the Stockholders on the date of the Agreement. The representations and warranties contained in ARTICLE II and ARTICLE III of this Agreement are subject to the qualifications and exceptions set forth in the Disclosure Schedule.

“EMA” means the European Medicines Agency or any successor agency thereto. 

“Employee” means each of the employees of the Company.

“Employee Plan” means any employee benefit plan including: (i) any (a) nonqualified deferred compensation or retirement plan or arrangement or superannuation plan; (b) qualified defined contribution retirement plan or arrangement; or (c) qualified defined benefit retirement plan or arrangement, which is an “employee pension benefit plan”; (ii) any “employee welfare benefit plan” or material fringe benefit plan or program; or (iii) any stock purchase, stock option, profit sharing, deferred compensation, welfare, pension, retirement, severance pay, employment, change-in-control, vacation pay, company awards, salary continuation, sick leave, excess benefit, bonus or other incentive compensation, life insurance, or other employee benefit plan, contract, program, policy or other arrangement.

“Entity” means any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.

“Environmental Law” means any national, provincial, territorial, federal, state, local or foreign Law relating to pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface or subsurface strata), including any law, regulation, permit or certificate of approval relating to emissions, discharges, releases or threatened releases of Materials of 

 

Environmental Concern, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern.

“ERISA” means the United States Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

“Exploit” means develop, design, test, modify, make, use, sell, have made, used and sold, import, reproduce, market, distribute, commercialize, support, maintain, correct and create derivative works of.

“Fair Market Value” means: (a) if the sublicensee’s common stock is publicly traded on an exchange, the value of such equity using a per share price equal to the average of the reported closing prices of such stock on such exchange for the twenty (20) trading days prior to such purchase; or (b) if the sublicensee’s common stock is not publicly traded, the value of such equity determined by the sublicensee’s Board of Directors in good faith based on the per share purchase price of the sublicensee’s most recent equity financing as of a date which is within thirty (30) days of the date as of which the determination is to be made. 

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

“FDA” means the United States Food and Drug Administration or any successor thereto.

“FDA Registrations” means authorizations, approvals, licenses, permits, certificates, or exemptions issued by the FDA (including, without limitation, pre-market approval applications, pre-market notifications, investigational new drug applications, new drug applications, biologic license applications, manufacturing approvals and authorizations, pricing and reimbursement approvals, labeling approvals or their foreign equivalent) held by the Company that are required for, among other things, the research, development, manufacture, processing, labeling, distribution, marketing, storage, transportation, use, sale and provision of the products and services of the Company.

“First Non-Oncology Product Approval” means, based on an application filed with a Regulatory Authority for marketing approval of the Non-Oncology Product for a non-oncology Indication in any Territory, the written approval from a Regulatory Authority to market and sell the Non-Oncology Product for a non-oncology Indication or any written successor approvals based on successor applications or procedures, and all supplements and amendments that may be filed with respect to the foregoing.

“First Oncology Product Approval” means, based on an application filed with a Regulatory Authority for marketing approval of the Oncology Product for an oncology Indication in any Territory, the written approval from a Regulatory Authority to market and sell the Oncology Product for an oncology Indication or any written successor approvals based on successor applications or procedures, and all supplements and amendments that may be filed with respect to the foregoing.

“First Non-Oncology Royalty Product” means the Non-Oncology Product as used for any and all non-oncology Indications following the First Non-Oncology Product Approval.

“First Oncology Royalty Product” means the Oncology Product as used for any and all oncology Indications following the First Oncology Product Approval. 

“Fully Diluted Shares Outstanding” means the aggregate number of shares of Company Common Stock outstanding, plus the aggregate number of shares of Company Common Stock issuable upon the exercise or conversion of or otherwise pursuant to any and all options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, 

 

or exercisable or exchangeable for, Company Common Stock, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional Company Common Stock or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, Company Common Stock, in each case other than pursuant to this Agreement. 

“Fundamental Representations” means each of the representations and warranties contained in Section 2.1 (Organization and Good Standing), Section 2.2 (Capitalization), Section 2.4 (Authority; No Conflict; Required Filings and Consents), Section 2.20 (Brokerage and Transaction Bonuses), Section 2.25 (Related Party Transactions), Section 3.1 (Authority, No Conflict; Required Filings and Consents), Section 3.2 (Ownership; Title to Company Common Stock) and Section 3.4 (Brokerage and Transaction Bonuses) and the representations and warranties contained in the Purchased Share Certificate.

“GAAP” means United States generally accepted accounting principles as in effect from time to time.

“Government Bid” means any quotation, bid or proposal submitted to any Governmental Body or any proposed prime contractor or higher-tier subcontractor of any Governmental Body.

“Government Contract” means any prime contract, subcontract, letter contract, purchase order or delivery order executed or submitted to or on behalf of any Governmental Body or any prime contractor or higher-tier subcontractor, or under which any Governmental Body or any such prime contractor or subcontractor otherwise has or may acquire any right or interest.

“Governmental Authorization” means any (a) approval, permit, license, certificate, certificate of approval, franchise, permission, clearance, registration, qualification or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Law, or (b) right under any Contract with any Governmental Body.

“Governmental Body” means any domestic or foreign multinational, federal, state, provincial, municipal or local government (or any political subdivision thereof) or any domestic or foreign governmental, regulatory or administrative authority or any department, commission, board, agency, court, tribunal, judicial body or instrumentality thereof, or any other body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature (including any arbitral body).

“Indebtedness” means, without duplication, the aggregate of the following: (a) all obligations for borrowed money (including the current portion thereof and all sums due on early termination and repayment or redemption calculated to the Closing Date), whether or not contingent, or issued or incurred in substitution or exchange for any such liability for borrowed money, or extensions of credit (including under credit cards, bank overdrafts and advances), (b) all obligations evidenced by bonds, debentures, notes or other similar instruments (and including all sums due on early termination and repayment or redemption calculated to the Closing Date), (c) all obligations to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business consistent with past practice, (d) all obligations as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases in respect of which the Company is liable as a lessee, (e) all obligations of others secured by a Lien on any asset of the Company (including accounts and contract rights), whether or not such obligations are assumed, (f) all obligations, contingent or otherwise, directly or indirectly guaranteeing any obligations of any other Person, all obligations to reimburse the issuer in respect of letters of credit or under performance or surety bonds, or other similar obligations; all obligations under which the Company has agreed (contingently or otherwise) to purchase or otherwise 

 

acquire the liability of any other Person or in respect of which the Company has otherwise assured a creditor against loss, (g) all obligations in respect of bankers’ acceptances, note purchases or similar facilities and under reverse repurchase agreements, (h) all obligations in respect of futures contracts, other financial contracts and other similar obligations (determined on a net basis as if such contract or obligation was being terminated early on such date), (i) the amount of any termination payments in connection with the payment in full of any obligations for borrowed money, (j) accrued employment obligations, including without limitation, accrued salary, accrued vacation and accrued bonuses, (k) deferred revenue, (l) all obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by the Company (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (m) all obligations to purchase, redeem, retire or otherwise acquire for value any ownership interests or capital stock of the Company or any rights to acquire any ownership interests or capital stock of the Company, valued, in the case of redeemable ownership interests or capital stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (n) any obligations under any interest rate, foreign exchange, currency, commodity, credit or equity swap, cap, collar, floor, option, forward or other hedging agreement or derivative contract, net of any obligations to the Company thereunder, and (o) amounts due to the Purchaser or its subsidiaries and other. For purposes of the Agreement, “Indebtedness” includes (i) any and all accrued interest, fees, change of control payments, prepayment premiums, make whole premiums or penalties and fees or expenses actually incurred (including attorneys’ fees) associated with the repayment of any Indebtedness, and (ii) any and all amounts of the nature described in clauses (a) through (o) above owed by the Company to any of its Affiliates, including any of the Stockholders.

“Indication” means a separate and distinct disease, disorder or medical condition, in humans, that a Product is intended to treat, prevent and/or ameliorate.

“Intellectual Property Rights” means all (a) foreign and domestic patents, patent applications, patent disclosures and inventions, (b) Internet domain names, trademarks, service marks, trade dress, trade names, logos and corporate or company names (both foreign and domestic) and registrations and applications for registration thereof together with all of the goodwill associated therewith, (c) copyrights (registered or unregistered) and copyrightable works (both foreign and domestic) and registrations and applications for registration thereof, (d) mask works and registrations and applications for registration thereof, (e) computer software, data, data bases and documentation thereof, including rights to third party software used in the business, (f) trade secrets and other Confidential Information (including ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial and marketing plans and customer and supplier lists and information), (g) other intellectual property rights, and (h) copies and tangible embodiments thereof (in whatever form or medium).

“Issued Patent Claim” means, on a country by country basis, a claim of an issued patent that covers a Product, respectively, and that has not:

(a)

lapsed, expired, been formally disclaimed by written submission to any United States or foreign patent office, withdrawn, cancelled or abandoned; or

(b)

been held revoked, invalid or unenforceable in an unappealable or unappealed decision of a court or other body of competent jurisdiction. 

 

If there should be two or more decisions within the same country which are conflicting with respect to the invalidity or unenforceability of the same claim, the unappealed or unappealable decision of the highest tribunal shall thereafter control. 

“Knowledge” An individual shall be deemed to have “Knowledge” of a particular fact or other matter if:

a) such individual is actually aware of such fact or other matter after due inquiry and investigation of the matter; or

(b) such individual would have had knowledge of such fact following a reasonable investigation, if under the circumstances a reasonable person would have determined such investigation was required or appropriate in the normal course of fulfillment of such individual’s duties.

The Company shall be deemed to have “Knowledge” of a particular fact or other matter if Jeff Wolf, Josiah Hornblower, Rahul Jasuja or Taylor Schreiber has Knowledge of such fact or other matter.

“Labor Laws” means all Laws governing or concerning labor relations, unions and collective bargaining, conditions of employment, termination of employment, employee classification, background checks, employment discrimination and harassment, wages, hours, meal and rest periods, accrual and payment of vacation pay and paid time off, or occupational safety and health and the payment and withholding of Taxes and other sums as required by the appropriate Governmental Body.

“Law” means any federal, national, state, provincial, territorial, local, municipal, foreign or international, multinational other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body.

“Leased Real Property” means the parcels of real property of which the Company is the lessee or sublessee (together with all fixtures and improvements thereon).

“Legal Proceeding” means any ongoing or threatened action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, order, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Body or any arbitrator or arbitration panel.

“Lien” means any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim, infringement, interference, option, right of first refusal, preemptive right, community property interest or restriction of any nature affecting property, real or personal, tangible or intangible, including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset, any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset, any lease in the nature thereof and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statute of any jurisdiction).

“Materials of Environmental Concern” means any chemicals, pollutants, contaminants, wastes, toxic substances, petroleum, petroleum products, petroleum by-products, asbestos-containing material, lead-containing paint, pipes or plumbing, polychlorinated biphenyls, radioactive materials or radon, infectious, biological or medical waste, including biohazards, radioactive materials and blood-borne 

 

pathogens and any other substances that are now or hereafter: (a) listed, classified, regulated or fall within the definition of a “hazardous substance,” “hazardous waste” or “hazardous material” pursuant to any Environmental Law, (b) a danger to health, or (c) the subject of regulatory action by any Governmental Body pursuant to any Environmental Law.

“Negative FDA Correspondence” means any oral or written communication from FDA that it has not approved a protocol submitted for any proposed clinical trial of any Company product or that any product will not in the future entertain further submissions in support of approval of such product.

“Net Sales” shall be calculated in the same manner as the Purchaser calculates Net Sales reported to its stockholders and shall mean all revenues, recognized in accordance with GAAP, from the sale of a  Product(s) by the Company or its Affiliates or its sublicensees, less the following deductions which are actually incurred, allowed, paid, accrued or specifically allocated:

(a)

credits or allowances actually granted for damaged Product(s), returns or rejections of Product(s), price adjustments and billing errors;

(b)

governmental and other rebates (or equivalents thereof) granted to managed health care organizations, pharmacy benefit managers (or equivalents thereof), federal, state, provincial, local and other governments, their agencies and purchasers and reimbursers or to trade customers;

(c)

normal and customary trade, cash and quantity discounts, allowances and credits actually allowed or paid;

(d)

commissions allowed or paid to third party distributors, brokers or agents other than sales personnel, sales representatives and sales agents employed by the Company or its Affilaites;

(e)

transportation costs, including insurance, for outbound freight related to delivery of a Product to the extent included in the gross amount invoiced; 

(f)

sales taxes, VAT taxes and other taxes directly linked to the sales of Product(s) or non-exclusive licensed Product to the extent included in the gross amount invoiced; and 

(g)

any other items that reduce gross sales amounts as required by GAAP applied on a consistent basis.

Net Sales shall not include sales at the Company’s cost price to Affiliates or to contractors or sublicensees engaged by or partnered with the Purchaser to develop, promote, co-promote, market, sell or otherwise distribute a Product.  However, subsequent sales of a Product by the Company, its Affiliates, contractors, or sublicensees shall be included in the Net Sales when sold in the market for end-user use.   

For Net Sales of a  Product sold or supplied as a “Combination” where “Combination” means a pharmaceutical product containing, in addition to the Product, one or more biologically active pharmaceutical(s) in addition to the Product, the Net Sales of such a Combination in a country will be determined by multiplying the Net Sales of such Combination by the fraction of A/A+B, where A is the average unit selling price of the Product sold separately in that country and B is the total average unit selling price of the other biologically active pharmaceutical(s), when sold separately in that country.  If neither the Product nor the other biologically active pharmaceutical(s) of the Combination are sold separately, then the parties shall negotiate in good faith the value of the other biologically active pharmaceutical(s) of the Combination that are to be deducted from the Net Sales of the Combination in determining the Net Sales of the Product contained in the Combination.

 

Monetary conversion from the currency of a country outside the U.S. in which Product is sold into U.S. dollars shall be calculated at the rates of exchange used by the Purchaser in producing its quarterly and annual reports to its stockholders, as confirmed by the Purchaser’s independent registered public accountants. 

“NLRB” means the United States National Labor Relations Board.

“Non-Oncology Product” means PTX-15, TL1A-lg fusion protein.

“Non-Royalty Sublicense Revenues” shall mean, but is not limited to, upfront fees, license maintenance fees, and milestone payments, or other payments, including the Fair Market Value of any non-cash consideration, received by the Company in consideration for any rights granted under a sublicense agreement, including but not limited to upfront and milestone payments, license maintenance fees and the Fair Market Value of any non-cash consideration, excluding: (a) sales-based royalties; and (b) reimbursements for customary patent expenses with respect to patent rights. “Non-Royalty Sublicense Revenues” shall not include payments received by the Company for debt or equity investments, payment or reimbursement of expenses of development costs related to a Product, payments for goods or services, payments reasonably allocable to rights or assets other than a Product in connection with any transaction related to the product and any other Product, assets or rights.

“Oncology Product” means PTX-25, humanized agonist mAb against TNFRSF25. 

“Organizational Documents” means, with respect to any Entity, the constitution, certificate of incorporation, articles of incorporation, by-laws, articles of organization, articles of association, partnership agreement, limited liability company agreement, trust deed, formation agreement, joint venture agreement or other similar organizational documents of such Entity (in each case, as amended through the date of the Agreement).

“Patent Rights” means all patents, patent applications, utility models, design registrations and certificates of invention and other governmental grants for the protection of inventions or industrial designs (including all related continuations, continuations-in-part, divisionals, reissues and reexaminations).

“Permitted Lien” means any (a) Lien for Taxes not yet due and payable (excluding Liens arising under ERISA or the Code), (b) Liens of carriers, warehousemen, mechanics, materialmen and repairmen incurred in the ordinary course of business consistent with past practice and not yet delinquent, and (c) in the case of real property, zoning, building, occupancy or other restrictions, variances, covenants, rights of way, encumbrances, easements and other minor irregularities in title, none of which, individually or in the aggregate, (i) interfere in any material respect with the present use of or occupancy of the affected parcel by the Company, (ii) have more than an immaterial effect on the value thereof or its use, or (iii) would impair the ability of such parcel to be sold for its present use.

“Person” means any individual, Entity, trust, Governmental Body or other organization.

“Personal Information” means any “personal information” (as defined in the Privacy Laws) about an identifiable individual in the possession, custody or control of the Company.

“Phase 1 Clinical Trial” means a human clinical trial that satisfies the requirements for a Phase 1 study as defined in 21 C.F.R. Part 312.21(a) (or its successor regulation) or the equivalent human clinical trial outside the United States.

 

“Phase 2 Clinical Trial” means a human clinical trial that satisfies the requirements for a Phase 2 study as defined in 21 C.F.R. Part 312.21(b) (or its successor regulation) or the equivalent human clinical trial outside the United States.

“Phase 3 Clinical Trial” means a human clinical trial that satisfies the requirements for a Phase 3 study as defined in 21 C.F.R. Part 312.21(c) (or its successor regulation) or the equivalent human clinical trial outside the United States. 

“Pipeline Technologies” means, collectively, the Non-Oncology Product, the Oncology Product and Anti-TL1A mAb.

“Privacy Laws” means any national, provincial, territorial, state, local or foreign Law now in force or that may in the future come into force governing individual privacy and/or access to Personal Information, or the collection, use, disclosure, access and management of Personal Information, including without limitation, the Health Insurance Portability and Accountability Act of 1996, as amended, the Health Information Technology for Economic and Clinical Health Act, state data breach notification Laws, state social security number protection Laws, the Federal Trade Commission Act, the Financial Services Modernization Act of 1999, the Fair Credit Reporting Act, the Fair and Accurate Credit Transactions Act and state consumer protection Laws.

“Purchaser Common Stock” means the shares of common stock, par value $0.0002 per share, of the Purchaser.

“Purchaser Material Adverse Effect” means any state of facts, change, event, effect, occurrence or circumstance that, individually or in the aggregate (considered together with all other state of facts, change, event, effect, occurrence or circumstance) has, has had or could reasonably be expected to have or give rise to a material adverse effect on (a) the business, condition (financial or otherwise), results of operations, prospects, capitalization, assets, liabilities, operations or financial performance of the Purchaser, (b) the ability of the Purchaser to consummate the transactions contemplated by the Agreement or to perform any of its obligations under the Agreement prior to the Termination Date, or (c) the Stockholders’ ability to vote, receive dividends with respect to or otherwise exercise ownership rights with respect to the shares of Purchaser Common Stock issuable pursuant to this Agreement.

“Purchaser Related Agreement” means any certificate, agreement, document or other instrument, other than the Agreement, to be executed and delivered by the Purchaser in connection with the transactions contemplated by the Agreement.

“Product” means either the Non-Oncology Product or the Oncology Product.

“Regulatory Approval” means any approvals (including price and reimbursement approvals), licenses, registrations, or authorizations of a Regulatory Authority that is necessary for the manufacture, use, storage, import, transport and/or sale of a Product in such jurisdiction.

“Regulatory Authority” means the FDA or EMA, or a regulatory authority in other jurisdictions with equivalent authority. 

 “Related Party” means (a) each individual who is, or who has at any time been, an officer or director of the Company; (b) each member of the immediate family of each of the individuals referred to in clause (a) above; and (c) any trust or other Entity (other than the Company) in which any one of the individuals referred to in clauses (a) and (b) above holds (or in which more than one of such individuals 

 

collectively hold), beneficially or otherwise, a material voting, proprietary, equity or other financial interest.

“Release” or “Released” means with respect to any Materials of Environmental Concern, any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, migrating, dumping or disposing into any surface or ground water, drinking water supply, soil, surface or subsurface strata or medium or the ambient air. For purposes of the Agreement, the term “Release” shall also mean any threatened release.

“Representatives” means, with respect to a Person, the officers, directors, employees, agents, attorneys, accountants, advisors and representatives of such Person.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Specified Indebtedness Amount” means, with respect to the liabilities of the Company set forth on Section 2.6(c) of the Disclosure Schedule, (a) if paid or otherwise satisfactorily resolved with the specified creditor of the Company prior to the expiration of the Escrow Period, the amount paid by the Company to resolve such liability, and (b) if unpaid, the amount of such liabilities as carried on the Company’s books and records as of the Closing Date plus any additional amount attributable to interest or penalties, as applicable, accrued with respect to such liabilities during the Escrow Period.

“Stockholder Entity” means any Stockholder that is not a natural person.  

“Stockholder Related Agreement” means any certificate, agreement, document or other instrument, other than the Agreement, to be executed and delivered by the Company or a Stockholder in connection with the transactions contemplated the Agreement, including without limitation the certificates, agreements, documents and other instruments set forth in Section 6.6 of the Agreement.

“Subsidiary” means, with respect to any party, any corporation, partnership, trust, limited liability company or other non-corporate business enterprise in which such party (or another Subsidiary of such party) holds stock or other ownership interests representing (a) 25% or more of the voting power of all outstanding stock or ownership interests of such Entity, or (b) the right to receive 25% or more of the net assets of such Entity available for distribution to the holders of outstanding stock or ownership interests upon a liquidation or dissolution of such Entity.

“Successful Outcome of 1st Phase 2 Trial” means the earlier occurrence of (i) achieving statistical significance for the first primary endpoint for the first Phase 2 Clinical Trial and (ii) a determination by the Board of Directors of the Company to commence a Phase 3 Clinical Trial.

“Successful Outcome of 1st Phase 3 Trial” means achieving statistical significance for the first primary endpoint for the first Phase 3 Clinical Trial. 

“Supplier” means any supplier of goods or services to which the Company paid more than $25,000 in the aggregate during the 12-month period ended December 31, 2016.

“Taxes” means (a) any and all taxes, charges, fees, levies or other similar assessments or liabilities in the nature of a tax, including income, gross receipts, ad valorem, premium, value-added, net worth, capital stock, capital gains, documentary, recapture, alternative or add-on minimum, disability, estimated, registration, recording, excise, escheat, real property, personal property, sales, use, license, lease, service, service use, transfer, withholding, employment, unemployment, insurance, employment 

 

insurance, social security, business license, business organization, environmental, worker’s compensation, pension, payroll, profits, severance, stamp, occupation, windfall profits, customs, franchise and other taxes of any kind whatsoever imposed by the United States, or any state, provincial, local or foreign government, or any agency or political subdivision thereof, (b) any interest, penalties or additions to tax imposed with respect to such items or any contest or dispute thereof or in connection with the failure to timely or properly file any Tax Return; (c) any liability for payment of amounts described in clause (a) or (b) whether as a result of transferee liability, of being a member of an affiliated, consolidated, combined or unitary group for any period or otherwise through operation of law; and (d) any liability for the payment of amounts described in clauses (a), (b) or (c) as a result of any tax sharing, tax indemnity or tax allocation agreement or any other express or implied agreement to indemnify any other Person.

“Tax Returns” means any and all reports, returns, or declarations relating to Taxes filed or required to be filed with any Governmental Body, including any schedule or attachment thereto, including any amendment thereof.

“Termination Date” means the date prior to the Closing on which the Agreement is terminated in accordance with ARTICLE IX of the Agreement.

“Territory” means worldwide. 

“Transaction Expenses ” means the sum of all fees, costs and expenses that are incurred by the Company for the benefit of the Company or the Stockholders in connection with the transactions contemplated by the Agreement that are identified on Section 12.2 of the Disclosure Schedule.

“Treasury Regulations” means the temporary and final income Tax regulations promulgated under the Code.

“User Data” means any Personal Information or other data or information collected by or on behalf of the Company from users of the Company’s products or of any website or service operated or maintained by the Company.

“VWAP Per Share Price” means the average of the daily volume weighted average price of the Purchaser Common Stock for the twenty (20) trading days then preceding the determination date, as reported by Bloomberg L.P. on the determination date. 

 

 

EXHIBIT B

FORM OF ESCROW AGREEMENT

This Escrow Agreement (this “Agreement”) is made and entered into as of March 7, 2017, by and among Heat Biologics, Inc., a Delaware corporation (the “Purchaser”), Josiah Hornblower, as the representative (the “Stockholders’ Representative”) of the stockholders of the Company (as defined below) identified on EXHIBIT A hereto (each, a “Stockholder” and collectively, the “Stockholders”), and _______________ (the “Escrow Agent”). The Purchaser and the Stockholders’ Representative are each sometimes referred to herein individually as “Party” and collectively as the “Parties.” Capitalized terms used in this Agreement and not otherwise defined shall have the meanings given to them in the Stock Purchase Agreement (as defined below). All capitalized terms with respect to the duties and obligations of the Escrow Agent shall be defined herein.

Recitals

Whereas, the Purchaser, Pelican Therapeutics, Inc., a Delaware corporation (the “Company”), the Stockholders and the Stockholders’ Representative, have entered into a Stock Purchase Agreement, dated as of [·], 2017 (as amended or restated from time to time, the “Stock Purchase Agreement”), pursuant to which, among other things, the Purchaser acquired the Purchased Shares;

Whereas, the Stockholders have appointed the Stockholders’ Representative as their representative for purposes of this Agreement and as attorney-in-fact and agent for and on behalf of each Stockholder with respect to the subject matter of this Agreement (provided, however, that such Stockholders are not, and are not intended to be, parties to this Agreement) and the taking by the Stockholders’ Representative of any and all actions and the making of any decision required or permitted to be taken or made by them under this Agreement; and

Whereas, the Stock Purchase Agreement contemplates the execution and delivery of this Agreement and the deposit by the Purchaser with the Escrow Agent of [·] shares of Purchaser Common Stock (the “Escrow Shares”), $500,000 in cash (the “Closing Cash Consideration”), and $[·] in cash in lieu of fractional shares of Purchaser Common Stock that the Stockholders would otherwise be entitled to receive (the “Fractional Share Consideration” and together with the Escrow Shares, the Closing Cash Consideration and any Additional Property (as defined in Section 2(f)) and interest from time to time earned thereon or reduced by any subsequent disbursements, amounts withdrawn or losses on investments, the “Escrow Fund”) to secure: (i) rights of the Purchaser pursuant to Section 1.7 of the Stock Purchase Agreement, and (ii) rights of indemnification, compensation, reimbursement and payment of the Indemnified Parties under Article X of the Stock Purchase Agreement.

Now, Therefore, in consideration of the respective covenants, agreements and representations and warranties set forth herein, the Parties and the Escrow Agent, intending to be legally bound, hereby agree as follows:

1. 

Certain Defined Terms. For purposes of this Agreement, the following terms shall have the following meanings:

“Affiliate” means, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person, including, without limitation, any general partner, limited partner, member, officer, director or manager of such Person and any venture capital or private equity fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person. For purposes of this definition, the terms “controls,” “controlled by,” or “under common control with” means the possession, direct or indirect, of power to direct or cause the direction of management or policies (whether through ownership of voting securities, by contract or otherwise).

“Business Day” means a weekday on which banks are open for general banking business in Durham, North Carolina.

“Closing” means the closing of the purchase and sale of the Purchased Shares pursuant to the Stock Purchase Agreement.

 

“Escrowed Closing Consideration” means, collectively, the Escrowed Shares, the Closing Cash Consideration and the Fractional Share Consideration.

“Governmental Body” means any domestic or foreign multinational, federal, state, provincial, municipal or local government (or any political subdivision thereof) or any domestic or foreign governmental, regulatory or administrative authority or any department, commission, board, agency, court, tribunal, judicial body or instrumentality thereof, or any other body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature (including any arbitral body).

“Person” means any individual, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity, trust, Governmental Body or other organization.

“Purchaser Common Stock” means the common stock, par value $0.0002 per share, of the Purchaser.

“Representatives” means, with respect to a Person, the officers, directors, employees, agents, attorneys, accountants, advisors and representatives of such Person.

2. 

Establishment of Escrow Fund.

(a) 

Deposit of Escrowed Closing Consideration. Simultaneously with the execution hereof, in accordance with the terms of the Stock Purchase Agreement, the Purchaser shall deposit with the Escrow Agent for the benefit of the Stockholders the Escrowed Closing Consideration in the name of the Escrow Agent fbo [Heat Therapeutics, Inc. and Stockholders’ Representative, LLC Escrow Fund] in physical form. Within one (1) Business Day of deposit, the Escrow Agent shall acknowledge receipt of the Escrowed Closing Consideration.

(b) 

Escrow Fund.  The Escrow Fund shall be held and released by the Escrow Agent in accordance with the terms of this Agreement. Subject to Section 2(d), as between the Purchaser and the Stockholders’ Representative, the Purchaser and the Stockholders’ Representative hereby agree that in the event of any conflict between this Agreement and the Stock Purchase Agreement, the terms of the Stock Purchase Agreement shall control.

(c) 

Investments.

(i) 

The Escrow Agent shall invest any cash in the Escrow Fund, including any and all interest and investment income, in accordance with the joint written instructions provided to the Escrow Agent and signed by the Purchaser and the Stockholders’ Representative.  In the absence of joint written investment instructions from the Purchaser and the Stockholders’ Representative, the Escrow Agent shall deposit and invest any cash in the Escrow Fund, including any and all interest and investment income, in the [______ Deposit Account], which is further described herein on Exhibit B hereto.  Any such investment earnings and income shall become part of the Escrow Fund, and shall be disbursed in accordance with Section 4 or Section 6.

(ii) 

The Escrow Agent is hereby authorized and directed to sell or redeem any such investments as it deems necessary to make any payments or distributions required under this Agreement.  The Escrow Agent shall have no responsibility or liability for any loss which may result from any investment or sale of investment made pursuant to this Agreement.  The Escrow Agent is hereby authorized, in making or disposing of any investment permitted by this Agreement, to deal with itself (in its individual capacity) or with any one or more of its affiliates, whether it or any such affiliate is acting as agent of the Escrow Agent or for any third person or dealing as principal for its own account.  The Parties acknowledge that the Escrow Agent is not providing investment supervision, recommendations or advice.

(d) 

Appointment of the Escrow Agent. The Purchaser and the Stockholders’ Representative (acting on behalf of the Stockholders) hereby appoint and designate the Escrow Agent to serve as escrow agent to receive, hold, invest and disburse the Escrow Fund for the benefit of the Stockholders in accordance with the terms of this Agreement. The Escrow Agent hereby agrees to act as escrow agent and to accept delivery of, and hold, safeguard and disburse the Escrow Fund pursuant to the terms and conditions hereof. The Escrow Agent shall have only those duties as are specifically and expressly provided herein, which shall be deemed purely ministerial in nature, and no other duties, including, but not limited to, any fiduciary duty, shall be implied. The Escrow Agent shall have no 

 

interest in the Escrowed Closing Consideration other than the possession or control of the Escrowed Closing Consideration. The Escrow Agent has no knowledge of, nor any requirement to comply with, the terms and conditions of any other agreement (including the Stock Purchase Agreement) between the Parties, nor shall the Escrow Agent be required to determine if any Party has complied with any other agreement. Notwithstanding the terms of any other agreement between the Parties, the terms and conditions of this Agreement shall control the actions of the Escrow Agent. The Escrow Agent shall have no duty to solicit any payments which may be due to it or the Escrow Fund, including, without limitation, the Escrowed Closing Consideration, nor shall the Escrow Agent have any duty or obligation (but, for the avoidance of doubt, subject to the final sentence of Section 2(a), and Section 2(h) hereof) to confirm or verify the accuracy or correctness of any amounts deposited with it hereunder.

(e) 

Transferability. The interests of the Stockholders in the Escrow Fund shall not be assignable or transferable, other than by operation of law (in which case, the portion of the Escrow Fund so assigned or transferred shall continue to be bound by the terms of this Agreement). No assignment or transfer of any of such interests by operation of law shall be recognized or given effect until the Purchaser, the Escrow Agent and the Stockholders’ Representative shall have received written notice of such assignment or transfer and such assignment or transfer shall also be subject to the consent of the Escrow Agent after conducting an identity verification review and other procedures required by the United States Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”).

(f) 

Distribution or Capital Transaction. Any securities comprising the Escrow Fund, including  any cash or securities distributable or issuable in respect of or in exchange for any Escrow Shares (any such distribution shall be referred to herein as “Additional Property”) as a result of a stock split, stock dividend, cash dividend, recapitalization, merger, asset purchase, sale of assets or similar transaction shall not be distributed to the Stockholders, but rather shall be distributed to and held by the Escrow Agent as part of the Escrow Fund and any such Additional Property shall become part of the Escrow Fund for purposes of this Agreement. At any time any Escrow Shares are required to be released from the Escrow Fund to the Stockholders pursuant to this Agreement, any Additional Property previously received by the Escrow Agent in respect of or in exchange for such Escrow Shares shall be released from the Escrow Fund as directed by the Stockholders’ Representative, using the delivery instructions in Section 13(b).

(g) 

Escrow Account. The Escrow Agent has established at the request of the Purchaser an escrow account with escrow account number [·], in the name of the Stockholders’ Representative. The Escrow Fund shall not be pledged as collateral or security by any Stockholder or any of his, her or its Affiliates. The Escrow Agent shall hold and safeguard the Escrow Fund until all amounts and property held therein have been released pursuant to Section 6. In the event that a legal garnishment, attachment, levy restraining notice or court order is served with respect to any of the Escrow Fund, or the delivery of the Escrow Fund shall be stayed or enjoined by an order of a court, the Escrow Agent is hereby expressly authorized, in its sole discretion, to obey and comply with all such orders so entered or issued, which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction, and  the Escrow Agent shall on a best efforts basis notify the Parties when any such order is received by the Escrow Agent. In the event the Escrow Agent obeys or complies with any such order it shall not be liable to any of the Parties or to any other person by reason of such compliance notwithstanding if such order is subsequently reversed, modified, annulled, set aside or vacated.

(h) 

Monthly Accounting. The Escrow Agent shall furnish the Purchaser and the Stockholders’ Representative with a monthly statement of the activity of, and balance with respect to, the Escrow Fund, within 15 days after the end of such month.

(i) 

Voting of Escrow Shares. Until the disbursement of the Escrowed Shares in accordance with this Agreement, the Escrow Agent hereby irrevocably appoints Stockholders’ Representative as the Escrow Agent’s duly appointed proxy and power of attorney with respect to the Escrow Shares, with full power of substitution and re-substitution, to vote and exercise all voting, consent and related rights (including, without limitation, all rights to provide instructions or directions as to the exercise of voting or consent rights) with respect to the Escrow Shares.  The Escrow Agent shall distribute all proxy materials and other documents relating to the Escrow Shares received by the Escrow Agent to the Stockholders’ Representative, if any.

3. 

Disbursement of Escrow Shares. The Escrow Agent is not the stock transfer agent for the Escrow Shares.  Accordingly, whenever a distribution of a number of shares is to be made, the Escrow Agent must requisition the appropriate number of shares from the Transfer Agent (as defined below), delivering to it the appropriate stock 

 

certificate(s) and stock power.  For purposes of this Agreement, the Escrow Agent shall be deemed to have delivered Escrow Shares to the Person entitled to them when the Escrow Agent has delivered such certificates to the Transfer Agent with instructions to deliver: (a) a certificate representing the appropriate number of shares to the appropriate Person, and (b) a certificate representing the residual shares comprising the remaining Escrow Shares to be returned to the Escrow Agent.  Following the Escrow Agent’s delivery of such certificates to the Transfer Agent, any Person entitled to Escrow Shares shall consult directly with the Transfer Agent regarding any delay or problem with delivery of any Escrow Shares to such Person.  Distributions of Escrow Shares shall be made to the holders of Escrow Shares using the delivery instructions in Section 13(b).  Whenever a distribution unrelated to a Claim Notice is to be made, pro rata distributions shall be made to each holder of Escrow Shares based on the percentage interests in the Escrow Fund using the delivery instructions in Section 13(b).

4. 

Administration of Escrow Fund. Except as otherwise provided herein, the Escrow Agent shall administer the Escrow Fund as follows:

(a) 

Upon joint written notice signed by the Purchaser and the Stockholders’ Representative that the Specified Indebtedness has been determined in accordance with Section 1.7(g) of the Stock Purchase Agreement, the Escrow Agent shall, within two (2) Business Days after the receipt of such notice (and in any event prior to the Escrow Fund Release Date), deliver to the Purchaser, using the delivery instructions in Section 13(b), an amount in cash out of the Closing Cash Consideration from the Escrow Fund equal to the amount by which the Specified Indebtedness exceeds $250,000 (if any).  The Escrow Agent will receive joint written direction as to the amount to be disbursed and will not be responsible for any calculations.

(b) 

If any Indemnified Party has or claims to have incurred or suffered any loss, liability, demand, claim, action, cause of action, cost, damage, deficiency, tax, penalty, fine or expense, whether or not arising out of third-party claims (including interest, penalties, reasonable attorneys’ fees and expenses and all amounts paid in investigation, defense or settlement of any of the foregoing) (collectively, “Losses”), for which it is or may be entitled to indemnification or reimbursement under the Stock Purchase Agreement, an Authorized Representative of the Purchaser shall, on behalf of such Indemnified Party, deliver a written claim notice (a “Claim Notice”) to the Escrow Agent, with a copy to the Stockholders’ Representative, no later than 11:59 p.m. Eastern Time on [●], 2017 (the “Escrow Fund Release Date”).  Each Claim Notice shall state or provide (i) that such Indemnified Party believes that it is entitled to indemnification or reimbursement pursuant to Article X of the Stock Purchase Agreement, (ii) a description in reasonable detail of the circumstances supporting the basis for such Indemnified Party’s belief that it is entitled to indemnification or reimbursement under Article X of the Stock Purchase Agreement, and (iii) a non-binding, preliminary, good faith estimate of the aggregate United States dollar amount of the actual and potential Losses incurred or reasonably expected to be incurred by such Indemnified Party (the “Claimed Amount”).

(c) 

By 5:00 p.m. Eastern Time on the tenth day, or if such day is not a Business Day, by 10:00 a.m. Eastern Time on the first Business Day following the tenth day, after the Escrow Agent’s receipt of a Claim Notice, an Authorized Representative of the Stockholders’ Representative shall deliver to the Escrow Agent, with a copy to the Purchaser, a written response (the “Response Notice”) in which the Stockholders’ Representative: (i) agrees that an amount equal to the full Claimed Amount may be released from the Escrow Fund to the Indemnified Party; (ii) agrees that an amount equal to part, but not all, of the Claimed Amount may be released from the Escrow Fund to the Indemnified Party; or (iii) indicates that no part of the Escrow Fund may be released from the Escrow Fund to the Indemnified Party in respect of the Claimed Amount. Any part of the Claimed Amount that is not agreed to be released to the Indemnified Party pursuant to the Response Notice, which determination shall be made in good faith by the Stockholders’ Representative, shall be the “Contested Amount.” If a Response Notice is not received by 5:00 p.m. Eastern Time on the last day of such 10-day period, or if such day is not a Business Day, by 10:00 a.m. Eastern Time on the first Business Day following the tenth day, then the Stockholders’ Representative shall be conclusively deemed to have agreed that an amount equal to the full Claimed Amount (plus a pro rata portion of the interest and investment income deposited in the Escrow Fund from the date hereof which is attributable to such Claimed Amount, if any) shall be released to the Purchaser from the Escrow Fund, using the delivery instructions in Section 13(b).

(d) 

If the Stockholders’ Representative delivers a Response Notice agreeing that an amount equal to the full Claimed Amount may be released from the Escrow Fund to the Purchaser, or if the Stockholders’ Representative does not deliver a Response Notice on a timely basis in accordance with Section 4(c), the Escrow 

 

Agent shall within five (5) Business Days following the receipt of such Response Notice (or, if the Escrow Agent has not received a Response Notice within the required 10-day period, within five (5) Business Days following the expiration of the ten (10)-day period referred to in Section 4(c)), deliver to the Purchaser an amount equal to the full Claimed Amount (plus a pro rata portion of the interest and investment income deposited in the Escrow Fund from the date hereof which is attributable to the full Claimed Amount, if any), using the delivery instructions in Section 13(b).

(e) 

If an Authorized Representative of the Stockholders’ Representative delivers a timely Response Notice agreeing that an amount equal to less than the full Claimed Amount may be released from the Escrow Fund to the Purchaser (the “Agreed Amount”), the Escrow Agent shall, within five (5) Business Days following the receipt of such Response Notice, deliver to the Purchaser an amount equal to the Agreed Amount (plus a pro rata portion of the interest and investment income deposited in the Escrow Fund from the date hereof which is attributable to such Agreed Amount, if any), using the delivery instructions in Section 13(b). Such delivery shall not be deemed to be made in full satisfaction of the claim described in such Claim Notice and the remaining amount (not taking into account any interest or earnings earned on the Agreed Amount and distributed to the Indemnified Party pursuant to the preceding sentence, if any) shall be the Contested Amount as provided in Section 4(c).

(f) 

If an Authorized Representative of the Stockholders’ Representative delivers a timely Response Notice indicating that there is a Contested Amount, without limiting the Escrow Agent’s obligations under Section 4(e), the Stockholders’ Representative and the Purchaser shall attempt in good faith to resolve the dispute related to the Contested Amount within ten (10) Business Days of the Purchaser’s receipt of such Response Notice (the “Negotiation Period”). If the Purchaser and the Stockholders’ Representative resolve such dispute, such written resolution shall be binding on the Stockholders’ Representative, each of the Stockholders and the Indemnified Party, and a settlement agreement shall be signed by an Authorized Representative of the Purchaser (on behalf of such Indemnified Party) and the Stockholders’ Representative and sent to the Escrow Agent, which shall, within three Business Days of receipt thereof, if applicable, release an amount of Escrowed Closing Consideration in accordance with such settlement agreement (plus a pro rata portion of the interest and investment income deposited in the Escrow Fund from the date hereof which is attributable to such amount, if any, to be released pursuant to such settlement agreement, if any), using the delivery instructions in Section 13(b). Unless and until the Escrow Agent receives joint written notice that any such dispute has been resolved by the Purchaser and the Stockholders’ Representative, the Escrow Agent may assume without inquiry that such dispute has not been resolved. If the Purchaser and the Stockholders’ Representative fail to reach agreement by the end of the Negotiation Period, each Party shall be entitled to its legal remedies in accordance with this Agreement and the Stock Purchase Agreement and the Escrow Agent shall continue to hold such Contested Amount in escrow in accordance with the terms of this Agreement.

(g) 

The Escrow Agent shall deliver to the applicable Party an amount of Escrowed Closing Consideration from the Escrow Fund in connection with any Contested Amount within five (5) Business Days after the delivery to it of: (i) a copy of a settlement agreement executed by an Authorized Representative of the Purchaser and the Stockholders’ Representative setting forth instructions to the Escrow Agent as to the amount of Escrowed Closing Consideration, if any, to be released from the Escrow Fund with respect to such Contested Amount; or (ii) a certified copy of a final and non-appealable binding order, decree or judgment issued or rendered by a court of competent jurisdiction or a certified copy of a final, non-appealable arbitration award from the prevailing Party along with a certification from its counsel attesting to the finality and binding nature of the final order or arbitration award, that instructs the Escrow Agent as to the resulting disbursement of the Escrow Fund specified therein, in each case, plus any interest or earnings earned on any portion of the amount to be distributed, if any, using the delivery instructions in Section 13(b). The Escrow Agent shall be entitled conclusively to rely upon any such certification and instruction and shall have no responsibility to review the order, decree or judgment to which such certification and instruction refers or to make any determination as to whether such order, decree or judgment is final.

(h) 

At any time that a payment, distribution or holdback is required to be made pursuant to this Agreement and written instructions have been provided to the Escrow Agent, such payment, distribution or holdback shall be made as directed by the Stockholders’ Representative from the Escrow Fund with an aggregate value equal to the amount of such payment, distribution or holdback (it being understood that the Stockholders’ Representative may direct that such amount be released to the Transfer Agent for disbursement to the Stockholders in accordance with the payment instructions provided by the Stockholders’ Representative, and the Purchaser agrees to assist the Stockholders’ Representative in coordinating such disbursement with the Transfer Agent). For purposes of the 

 

Stockholders’ Representative, the respective interests of the Stockholders are set forth on Exhibit A hereto, and, as to each Stockholder, the respective Consideration Percentage for such Stockholder are set forth in Exhibit A hereto. Each Stockholder shall be entitled to that portion of the Escrow Fund as is equal to the total value of the Escrow Fund multiplied by such Stockholder’s Consideration Percentage.  For purposes of determining the value of each Escrow Share as of a particular date, each Escrow Share shall be valued at the average of the daily volume weighted average price of the Purchaser Common Stock for the twenty (20) trading days then preceding the determination date, as reported by Bloomberg L.P. on the determination date (the “VWAP Per Share Price”). The Escrow Agent shall not be responsible for any calculations or valuations.

(i) 

Notwithstanding anything to the contrary herein, any release of funds by the Escrow Agent to an Indemnified Party pursuant to this Section 4 shall be made to the Purchaser (for distribution to the Indemnified Party).

(j) 

The Escrow Agent may rely conclusively on any Claim Notice it receives hereunder. The Escrow Agent shall have no responsibility to determine whether any Claim Notice satisfies the conditions set forth in the Stock Purchase Agreement for making an indemnification claim, including whether there is a basis for making a claim, whether the claim is set forth in sufficient detail, or that a copy of the Claim Notice was sent to or received by the Stockholders’ Representative, or that a Response Notice was sent to or received by the Purchaser or any Indemnified Party.

(k) 

The Purchaser and the Stockholders’ Representative each agree to deliver Claim Notices and Response Notices to the other Party in the same manner and at the same time as delivery to the Escrow Agent.

(l) 

Each of the parties to this Agreement acknowledges and agrees that, after the Closing, the Purchaser shall have authority to settle all claims under this Agreement and the Stock Purchase Agreement on behalf of the Company or any of its Affiliates.

5. 

Form of Notices and Instructions.

(a) 

Any instructions setting forth, claiming, containing, objecting to, or in any way related to the transfer or distribution of the Escrow Fund (including without limitation, Claim Notices and Response Notices), must be in writing or set forth in a Portable Document Format (“PDF”), executed by the appropriate Party as evidenced by the signatures of the persons or person signing this Agreement or one of their designated persons as set forth in Exhibit C-1 hereto or Exhibit C-2 hereto (each an “Authorized Representative”), and delivered to the Escrow Agent only by confirmed facsimile or attached to an email and only to the fax number or email address set forth in Section 13(b). The Escrow Agent shall not be liable to any Party or other Person for refraining from acting upon any instruction for or related to the transfer or distribution of the Escrow Fund if not delivered to the fax number or email address set forth in Section 13(b).

(b) 

All re-registrations of Escrow Shares must be delivered by the Escrow Agent to the Purchaser’s transfer agent (the “Transfer Agent”) with detailed instructions. Currently, _____________________________________, is the Transfer Agent for the Purchaser. The Purchaser will notify the Escrow Agent if the Transfer Agent changes during the term of this Agreement.

(c) 

The Parties acknowledge that there are certain security, corruption, transmission error and access availability risks associated with using open networks such as the Internet and the Parties hereby expressly assume such risks.

(d) 

The Escrow Agent may conclusively rely upon any written notice, document, instruction or request delivered by the Parties believed by it to be genuine and to have been signed by an Authorized Representative(s), as applicable, without inquiry and without requiring substantiating evidence of any kind and the Escrow Agent shall be under no duty to inquire into or investigate the validity, accuracy or content of any such document, notice, instruction or request.

6. 

Release of Escrow Fund.

(a) 

Except as otherwise provided herein, but in any event subject to Section 3, within five (5) Business Days following the Escrow Fund Release Date, the Escrow Agent shall distribute as jointly directed by the Purchaser and the Stockholders’ Representative the Escrowed Closing Consideration held in the Escrow Fund, 

 

including any Additional Property and any interest earned thereon, not otherwise distributed to the Purchaser or the Indemnified Parties pursuant to Section 4 or retained in the Escrow Fund, using the delivery instructions in Section 13(b) (it being understood that the Purchaser and the Stockholders’ Representative may jointly direct that such amount be released to the Transfer Agent for disbursement to the Stockholders in accordance with the payment instructions provided in such direction, and the Purchaser agrees to assist the Stockholders’ Representative in coordinating such disbursement with the Transfer Agent). Notwithstanding the foregoing, if on or prior to 11:59 p.m. Eastern Time on the Escrow Fund Release Date, the Purchaser has given a Claim Notice on behalf of any Indemnified Party containing a claim which has not been resolved in full prior to such date in accordance with Section 4, the Escrow Agent shall retain and safeguard in the Escrow Fund after the Escrow Fund Release Date an amount of Escrowed Closing Consideration equal to the amount described in each such Claim Notice, up to the full Escrow Fund.

7. 

Covenant of the Escrow Agent. The Escrow Agent hereby agrees and covenants with the Parties that it will perform all of its obligations under this Agreement and will not deliver custody or possession of any of the Escrow Fund to anyone except pursuant to the express terms of this Agreement.

8. 

Fees and Expenses of the Escrow Agent. The Escrow Agent shall be entitled to receive from time to time fees in accordance with Exhibit D hereto. In accordance with Exhibit D hereto, the Escrow Agent will also be entitled to reimbursement for reasonable and documented out-of-pocket expenses incurred by the Escrow Agent in the performance of its duties hereunder and the execution and delivery of this Agreement. All such fees and expenses shall be deducted from the Escrow Fund.

9. 

Limitation of the Escrow Agent’s Liability.

(a) 

The Purchaser and the Stockholders’ Representative (solely in its representative capacity on behalf of the Stockholders) agree jointly and severally to indemnify, defend, hold harmless, pay or reimburse the Escrow Agent and its affiliates and their respective successors, assigns, directors, agents and employees (the “Escrow Agent Indemnitees”) from and against any and all losses and any other expenses, fees or charges of any character or nature, including, without limitation, attorney’s fees and expenses, which any Escrow Agent Indemnitee may incur or with which it may be threatened by reason of acting as or on behalf of Escrow Agent under this Agreement or arising out of or in connection with (i) the Escrow Agent’s performance of this Agreement, except to the extent that such losses are determined by a court of competent jurisdiction through a final order to have been caused by the gross negligence or willful misconduct of such Escrow Agent Indemnitee; and (ii) the Escrow Agent having followed any instructions or directions, whether joint or singular, from the Stockholders’ Representative or the Purchaser received in accordance with this Agreement. The Purchaser and the Stockholders’ Representative hereby grant the Escrow Agent a lien on, right of set-off against and security interest in the Escrow Fund for the payment of any claim for indemnification, fees, expenses and amounts due to the Escrow Agent or an Escrow Agent Indemnitee. In furtherance of the foregoing, the Escrow Agent is expressly authorized and directed, but shall not be obligated, to charge against and withdraw from the Escrow Fund for its own account or for the account of an Escrow Agent Indemnitee any amounts due to the Escrow Agent or to an Escrow Agent Indemnitee under Section 8 or this Section 9. The obligations set forth in this Section 9 shall survive the resignation, replacement or removal of the Escrow Agent or the termination of this Agreement.

(b) 

The Escrow Agent shall not be liable for any action taken, suffered or omitted to be taken by it in good faith except to the extent that the Escrow Agent’s gross negligence or willful misconduct are determined by a court of competent jurisdiction through a final order to have been the cause of any direct loss to either Party. The Escrow Agent may execute any of its powers and perform any of its duties hereunder directly or through its agents, representatives, attorneys, custodians and/or nominees. In the event the Escrow Agent shall be uncertain, or believes there is some ambiguity, as to its duties or rights hereunder, or receives instructions, claims or demands from any Party which, in the Escrow Agent’s judgment, conflict with the provisions of this Agreement, or if the Escrow Agent receives conflicting instructions from the Parties, the Escrow Agent shall be entitled either to (i) refrain from taking any action until it shall be given either (A) a joint written direction executed by Authorized Representatives of the Parties which eliminates such conflict, or (B) a court order issued by a court of competent jurisdiction (it being understood that the Escrow Agent shall be entitled conclusively to rely and act upon any such court order and shall have no obligation to determine whether any such court order is final) or by a final court order, or (ii) file an action in interpleader. Anything in this Agreement to the contrary notwithstanding, in no event shall the Escrow Agent be liable for special, incidental, punitive, indirect or consequential loss or damage of any kind whatsoever (including 

 

but not limited to lost profits), even if the Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.

(c) 

The Parties hereby acknowledge and agree that the value of the Escrow Shares as set forth in Section 4(h) has been negotiated and agreed between the Parties and that the Escrow Agent shall not be liable or responsible for any diminution in value, or fluctuation in value, with respect to the Escrow Shares due to any decrease or increase (or any subsequent decrease or increase) in the fair market value of the Purchaser Common Stock following the date of this Agreement.

10. 

Termination. The terms of this Agreement shall terminate upon the release by the Escrow Agent of the entire Escrow Fund in accordance with this Agreement; provided, however, that if on or prior to the Escrow Fund Release Date, the Escrow Agent has received from the Purchaser a Claim Notice in accordance with the terms and requirements set forth in Section 4 and elsewhere in this Agreement, setting forth a claim that has not been fully resolved by the Escrow Fund Release Date, then this Agreement shall continue in full force and effect with respect to that portion of the Escrow Fund necessary to resolve each such unresolved claim for the purpose of resolving such unresolved claim until such claim has been fully resolved and the retained amount released in accordance with this Agreement. Notwithstanding the foregoing, in no event shall this Agreement cease to remain in full force and effect until such time as all assets deposited hereunder have been distributed by the Escrow Agent per the terms of this Agreement.

11. 

Successor Escrow Agent. In the event the Escrow Agent becomes unavailable or unwilling to continue as escrow agent under this Agreement, the Escrow Agent may resign and be discharged from its duties and obligations hereunder by giving its written resignation to the Parties upon 30 days’ prior written notice to the Parties. In addition, the Escrow Agent may be removed at any time, with or without cause, upon 30 days’ prior written notice delivered to the Escrow Agent and executed by both the Purchaser and the Stockholders’ Representative. Such resignation or removal shall take effect not less than 30 days after notice is given to all Parties and the Escrow Agent. In such event, the Purchaser may appoint, with the consent of the Stockholders’ Representative, which consent shall not be unreasonably withheld, conditioned or delayed, a successor Escrow Agent, which shall be a commercial bank, trust company or other financial institution with a combined capital and surplus in excess of $100,000,000 (unless otherwise agreed by the Parties in writing), that will be an unrelated third party with respect to each of the Purchaser and the Stockholders’ Representative. If the Purchaser fails to appoint a successor Escrow Agent within 15 days after receiving the Escrow Agent’s written resignation, the Escrow Agent shall have the right to apply to a court of competent jurisdiction for the appointment of a successor Escrow Agent or appoint a successor Escrow Agent of its own choice. Any appointment of a successor Escrow Agent shall be binding upon the Purchaser, each of the Stockholders and the Stockholders’ Representative, and no appointed successor Escrow Agent shall be deemed to be an agent of the Escrow Agent. The successor Escrow Agent shall execute and deliver to the Escrow Agent an instrument accepting such appointment on the terms and conditions contained in this Agreement, and the successor Escrow Agent shall, without further acts, be vested with all the estates, property rights, powers and duties of the predecessor Escrow Agent as if originally named as the Escrow Agent herein. The Escrow Agent shall act in accordance with written instructions from the Purchaser and the Stockholders’ Representative as to the transfer of the Escrow Fund to a successor Escrow Agent, at which time the Escrow Agent’s obligations under this Agreement shall cease and terminate. Any entity into which the Escrow Agent may be merged or converted or with which it may be consolidated, or any entity to which all or substantially all the escrow business may be transferred, shall be the Escrow Agent under this Agreement without further act.

12. 

Stockholders’ Representative.

(a) 

Appointment. As between the Parties, each Stockholder has approved the indemnification and escrow terms set forth in the Stock Purchase Agreement and the appointment of the Stockholders’ Representative to give and receive notices and communications, to authorize delivery to the Purchaser of Escrowed Closing Consideration or Additional Property or to object to such deliveries, to agree to, negotiate, enter into settlements and compromises of and demand arbitration, and comply with orders of courts and awards of arbitrator(s) with respect to claims of the Indemnified Parties hereunder, and to take all actions necessary or appropriate in the reasonable judgment of the Stockholders’ Representative for the accomplishment of the foregoing.

(b) 

Successor Stockholders’ Representative. If the Stockholders’ Representative or any successors thereto shall be dissolved or otherwise be unable to fulfill such Stockholders’ Representative’s responsibilities as the agent of the stockholders of the Company, then the Stockholders’ Representative shall, within 10 calendar days after 

 

such event, appoint a successor representative reasonably satisfactory to the Purchaser, subject to such successor representative’s compliance with Patriot Act requirements and the consent of the Escrow Agent. Unless and until the Purchaser and the Escrow Agent shall have received written notice of the appointment of a successor Stockholders’ Representative, the Purchaser and the Escrow Agent shall be entitled to rely on, and shall be fully protected in relying on, the power and authority of the Stockholders’ Representative to act on behalf of the Stockholders.

13. 

Miscellaneous.

(a) 

Waiver and Amendment. Any agreement on the part of a Party or the Escrow Agent to any extension or waiver of any provision hereof shall be valid only if set forth in an instrument in writing signed on behalf of such Party and the Escrow Agent. A waiver by a Party or the Escrow Agent of the performance of any covenant, agreement, obligation, condition, representation or warranty shall not be construed as a waiver of any other covenant, agreement, obligation, condition, representation or warranty. A waiver by any Party or the Escrow Agent of the performance of any act shall not constitute a waiver of the performance of any other act or an identical act required to be performed at a later time. This Agreement may not be amended, modified, altered or supplemented except by written agreement of the Parties and the Escrow Agent.

(b) 

Notices. All notices, requests, claims, demands, consents, waivers and other communications required or permitted by this Agreement shall be in writing, and all instructions to the Escrow Agent shall be executed by an Authorized Representative of the Parties, and shall be deemed given to a Party when (a) delivered to the appropriate address by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile with confirmation of transmission in each case to the following addresses, or facsimile numbers and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number, or person as a Party may designate by notice to the other Parties); or (c) sent by a PDF attached to an email to the email address set forth in this Section 13(b):

if to the Purchaser:

Heat Biologics, Inc.

801 Capitola Drive

Durham, North Carolina 27713

Attention: Jeff Wolf

Email: Jwolf@heatbio.com

with a mandatory copy to (which copy shall not constitute notice):

Gracin & Marlow, LLP

The Chrysler Building

405 Lexington Avenue, 26th Flr.

New York, New York 10174

Attention: Leslie Marlow, Esq.

Email: Lmarlow@gracinmarlow.com

if to the Stockholders’ Representative:

Josiah Hornblower

PMB #520 – 3112 Windsor Road, Suite A

Austin, Texas 78703

Email: jhornblower@gmail.com

Notwithstanding anything to the contrary in this Agreement, any instructions setting forth, claiming, containing, objecting to, or in any way related to the transfer or distribution of the Escrow Fund, must be in writing executed by the appropriate Party or Parties and delivered to the Escrow Agent only by confirmed facsimile or as a PDF attached to an email and only to the fax number or email address set forth above. No instruction for or related to the transfer or distribution of the Escrow Fund shall be deemed delivered and effective unless the Escrow Agent actually shall have received it on a Business Day by facsimile or as a PDF attached to an email to the fax number or email address set forth above and as evidenced by a confirmed transmittal to the Party’s or Parties’ transmitting fax 

 

number or email address and the Escrow Agent has been able to satisfy any applicable security procedures as may be required hereunder. The Escrow Agent shall not be liable to any Party or other person for refraining from acting upon any instruction for or related to the transfer or distribution of the Escrow Fund if delivered to any other fax number or email address, including but not limited to a valid email address of any employee of Escrow Agent. The Parties each acknowledge that the Escrow Agent is authorized to use the following funds transfer instructions to disburse any release of Escrowed Closing Consideration, without a verifying call-back as set forth below; provided, however, that Escrow Closing Consideration shall be deemed delivered when delivered to the Transfer Agent as provided in Section 3.

Purchaser – Escrowed Closing Consideration Delivery Instructions:

Stockholders’ Representative – Escrowed Closing Consideration Delivery Instructions:

As directed by the Stockholders’ Representative in connection with any such delivery.

Security Procedure for Funds Transfer.  Concurrent with the execution of this Escrow Agreement, the Parties shall deliver to the Escrow Agent authorized signers’ forms in the form of Exhibit C-1 hereto and Exhibit C-2 hereto.  The Escrow Agent shall confirm each funds transfer instruction received in the name of Parties by confirming with an authorized individual as evidenced in Exhibit C-1 hereto and Exhibit C-2 hereto.  Once delivered to the Escrow Agent, Exhibit C-1 hereto or Exhibit C-2 hereto may be revised or rescinded only in writing signed by an authorized representative of the Party.  Such revisions or rescissions shall be effective only after actual receipt and following such period of time as may be necessary to afford the Escrow Agent a reasonable opportunity to act on it.  If a revised Exhibit C-1 hereto or Exhibit C-2 hereto or a rescission of an existing Exhibit C-1 hereto or Exhibit C-2 hereto is delivered to the Escrow Agent by an entity that is a successor-in-interest to either party, such document shall be accompanied by additional documentation satisfactory to the Escrow Agent showing that such entity has succeeded to the rights and responsibilities of the Parties.  The Parties understand that the Escrow Agent’s inability to receive or confirm funds transfer instructions may result in a delay in accomplishing such funds transfer, and agree that the Escrow Agent shall not be liable for any loss caused by any such delay.

The Parties represent, warrant and covenant that each document, notice, instruction or request provided by such Party to the Escrow Agent shall comply with applicable laws and regulations.

(c) 

Construction. All section and exhibit references herein are to this Agreement unless otherwise specified. All schedules and exhibits attached to this Agreement constitute a part of this Agreement and are incorporated into this Agreement and are made a part hereof as if set out in full herein. Unless the context of this Agreement clearly requires otherwise: (a) the singular number includes the plural number and vice versa; (b) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (c) reference to any gender includes each other gender; (d) reference to any agreement, document or instrument means such agreement, document or instrument, as well as all addenda, exhibits, schedules or amendments thereto, in each case as amended, modified or restated and in effect from time to time in accordance with the terms thereof; (e) reference to any law means such law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any law means that provision of such law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (f) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision hereof; and (g) “including” means including without limiting the generality of any description preceding such term. This Agreement was negotiated by the Parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any Party and the Escrow Agent shall not apply to any construction or interpretation hereof. The headings contained in this Agreement are for the convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in 

 

connection with the construction or interpretation of this Agreement. All references to “$” contained herein shall refer to United States Dollars unless otherwise stated.

(d) 

Counterparts. This Agreement, and any joint instructions from the Parties, may be executed in several counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument, and shall become effective when counterparts have been signed by each of the parties to this Agreement and delivered to the other parties to this Agreement, it being understood that all parties to this Agreement need not sign the same counterparts. The exchange of copies of this Agreement and of signature pages by facsimile transmission, by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, or by combination of such means, shall constitute effective execution and delivery of this Agreement as to the parties to this Agreement and may be used in lieu of the original Agreement for all purposes. Signatures of the parties to this Agreement transmitted by facsimile or other electronic means shall be deemed to be their original signatures for all purposes.

(e) 

Entire Agreement. This Agreement and the other agreements referred to in this Agreement constitute the entire agreement between the Parties and supersede all other prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter hereof and thereof. This Agreement constitutes the entire agreement between the Parties, on the one hand, and the Escrow Agent, on the other hand, and supersedes all other prior agreements and understandings, both written and oral, between the Parties, on the one hand, and the Escrow Agent, on the other hand, with respect to the subject matter hereof.

(f) 

No Third-Party Beneficiaries. Except as expressly provided herein, neither this Agreement nor any document delivered in connection with this Agreement, confers upon any Person who is not a party to this Agreement any rights or remedies hereunder.

(g) 

Severability. In the event that any provision of this Agreement, or the application of any such provision to any Person or set of circumstances, shall be determined to be invalid, unlawful, void or unenforceable to any extent, the remainder of this Agreement, and the application of such provision to Persons or circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, shall not be impaired or otherwise affected and shall continue to be valid and enforceable to the fullest extent permitted by law.

(h) 

Governing Law; Venue. This Agreement and the relationship of the parties to this Agreement shall be construed in accordance with, and governed in all respects by, the internal laws of the State of Delaware (without giving effect to principles of conflicts of laws). Each party to this Agreement:

(i) 

expressly and irrevocably consents and submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware or, if such court lacks jurisdiction, any state or federal court sitting in the State of Delaware (and each appellate court located in the State of Delaware), in connection with any legal proceeding;

(ii) 

agrees that service of any process, summons, notice or document by U.S. mail addressed to him, her or it at the address set forth in Section 13(b) shall constitute effective service of such process, summons, notice or document for purposes of any such legal proceeding;

(iii) 

agrees that each state and federal court located in the County of New Castle, State of Delaware, shall be deemed to be a convenient forum; and

(iv) 

agrees not to assert (by way of motion, as a defense or otherwise), in any such legal proceeding commenced in any state or federal court located in the County of New Castle, State of Delaware, any claim by any party to this Agreement that it is not subject personally to the jurisdiction of such court, that such legal proceeding has been brought in an inconvenient forum, that the venue of such proceeding is improper or that this Agreement or the subject matter of this Agreement may not be enforced in or by such court.

(i) 

Waiver of Immunity. To the extent that in any jurisdiction any party to this Agreement may now or hereafter be entitled to claim, for itself or its assets, immunity from suit, execution, attachment (before or after judgment) or other legal process, such party to this Agreement shall not claim, and hereby irrevocably waives, such immunity.

 

(j) 

WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING AMONG OR BETWEEN THE PARTIES TO THIS AGREEMENT ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

(k) 

Attorneys’ Fees. If any legal action or other legal proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any party to this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled).

(l) 

Force Majeure. No party to this Agreement is liable to any other party for losses due to, or if it is unable to perform its obligations under the terms of this Agreement because of, acts of God, fire, war, terrorism, floods, strikes, electrical outages, equipment or transmission failure, or other causes reasonably beyond its control.

(m) 

Assignment and Successors. No party to this Agreement may assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other parties, subject to such assignee’s compliance with Patriot Act requirements and the consent of the Escrow Agent. Subject to the preceding sentence, this Agreement shall apply to, be binding in all respects upon and inure to the benefit of the successors and permitted assigns of the parties to this Agreement.

(n) 

Tax Reporting Information and Certification of Tax Identification Numbers. The Parties agree that, for tax reporting purposes, all interest on or other income, if any, attributable to any cash held in the Escrow Fund or any other cash amount held in escrow by the Escrow Agent pursuant to this Agreement shall be allocable and reportable to the Stockholders’ Representative, as income earned from the Escrow Fund by the Stockholders’ Representative whether or not said income has been distributed during such year. The Parties agree to provide the Escrow Agent with certified tax identification numbers by completing, signing and returning a Form W-9 or Form W-8BEN, as applicable, and any other forms and documents that the Escrow Agent may reasonably request (collectively, “Tax Reporting Documentation”) to the Escrow Agent prior to the execution of this Agreement. The Parties understand that, if such Tax Reporting Documentation is not so furnished to the Escrow Agent, the Escrow Agent shall be required by the Internal Revenue Code of 1986, as amended, to withhold a portion of any interest or other income earned on the investment of monies or other property held by the Escrow Agent pursuant to this Agreement, and to immediately remit such withholding to the Internal Revenue Service. The sole tax reporting obligation of the Escrow Agent shall be to file a Form 1099 INT or 1042S (as applicable) with the Internal Revenue Service with respect to interest earnings on cash amounts to the Stockholders’ Representative. The Parties hereby represent to the Escrow Agent that no other tax reporting of any kind is required given the underlying transaction giving rise to this Agreement.

(o) 

Further Assurances. Each party to this Agreement shall execute and cause to be delivered to each other party such instruments and other documents, and shall take such other actions, as such other parties may reasonably request for the purpose of carrying out or evidencing any of the transactions contemplated by this Agreement.

[Signature Page Follows]

 

In Witness Whereof, the parties have duly caused this Escrow Agreement to be executed as of the day and year first above written.

		
	“Purchaser”

	“Stockholders’ Representative”

	Heat Biologics, Inc.,

a Delaware corporation

	

 

By: __________________________________

Name:  Josiah Hornblower

Title: Stockholders’ Representative

	 

	By:__________________________________

Name.

Title: Chief Executive Officer

	 

	 

	“Escrow Agent”

	 

	 

	 

	 

By:__________________________________

Name:

Title:

	 

	 

	 

 

Exhibit A

Stockholders

		
	Stockholder

	Consideration Percentage

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	TOTAL

	100.00%

 

Exhibit B

Agency for Custody Account Direction for Cash Balances

_______________________ Deposit Accounts

Direction to use the following ______________ (also known as ___________) Deposit Account for Cash Balances for the escrow account or accounts (the “Account”) established under the Escrow Agreement to which this Exhibit B is attached.

You are hereby directed to deposit, as indicated below, or as I shall direct further in writing from time to time, all cash in the Account in the following deposit account of _________:

I acknowledge that amounts on deposit in the _____________ Deposit Account are insured, subject to the applicable rules and regulations of the Federal Deposit Insurance Corporation (FDIC), in the basic FDIC insurance amount of $250,000 per depositor, per issued bank. This includes principal and accrued interest up to a total of $250,000.

I acknowledge that I have full power to direct investments of the Account.

I understand that I may change this direction at any time and that it shall continue in effect until revoked or modified by me by written notice to you.

 

Exhibit C-1

Certificate as to Authorized Representatives of Purchaser

Heat Biologics, Inc. (the “Purchaser”) hereby designates each of the following persons as its Authorized Representatives for purposes of this Agreement, and confirms that the title, contact information and specimen signature of each such person as set forth below is true and correct.  Each such Authorized Representative is authorized to initiate and approve transactions of all types for the Escrow Account established under the Agreement to which this Exhibit C-1 is attached, on behalf of the Purchaser.

		
	Name (print):

	 

	Specimen Signature:

	 

	Title:

	President & Chief Executive Officer

	Telephone Number (required):

 If more than one, list all applicable telephone numbers.

	 

	E-mail (required):

If more than one, list all applicable email addresses.

	 

		
	Name (print):

	 

	Specimen Signature:

	 

	Title:

	 

	Telephone Number (required):

 If more than one, list all applicable telephone numbers.

	 

	E-mail (required):

If more than one, list all applicable email addresses.

	 

		
	Name (print):

	 

	Specimen Signature:

	 

	Title:

	 

	Telephone Number (required):

 If more than one, list all applicable telephone numbers.

	 

	E-mail (required):

If more than one, list all applicable email addresses.

	 

Additional Email Addresses:

The following additional email addresses also may be used by Escrow Agent to verify the email address used to send any Payment Notice to Escrow Agent:

Email 1: 

Email 2: 

Email 3: 

 

COMPLETE BELOW TO UPDATE EXHIBIT C-1

If the Purchaser wishes to update this Exhibit C-1, the Purchaser must complete, sign and send to Escrow Agent an updated copy of this Exhibit C-1 with such changes.  Any updated Exhibit C-1 shall be effective once signed by the Purchaser and Escrow Agent and shall entirely supersede and replace any prior Exhibit C-1 to this Agreement.

HEAT, INC.

By:_________________________

Name:

Title: President and Chief Executive Officer

Date:

 (as Escrow Agent)

By:_________________________

Name:

Title:

Date:

Purchaser Remittance Instructions:

[●]

 

Exhibit C-2

Certificate as to Authorized Representatives of Stockholders’ Representative

Josiah Hornblower (the “Stockholders’ Representative”) designates each of the following persons as its Authorized Representatives for purposes of this Agreement, and confirms that the title, contact information and specimen signature of each such person as set forth below is true and correct.  Each such Authorized Representative is authorized to initiate and approve transactions of all types for the Escrow Account established under the Agreement to which this Exhibit C-2 is attached, on behalf of the Stockholders’ Representative.

		
	Name (print):

	 

	Specimen Signature:

	 

	Title:

	 

	Telephone Number (required):

 If more than one, list all applicable telephone numbers.

	 

	E-mail (required):

If more than one, list all applicable email addresses.

	Email 1:

Email 2:

		
	Name (print):

	 

	Specimen Signature:

	 

	Title:

	 

	Telephone Number (required):

 If more than one, list all applicable telephone numbers.

	 

	E-mail (required):

If more than one, list all applicable email addresses.

	 

The following additional email addresses also may be used by Escrow Agent to verify the email address used to send any Payment Order Notice to Escrow Agent:

Email 1: 

Email 2: 

Email 3: 

 

COMPLETE BELOW TO UPDATE EXHIBIT C-2

If the Stockholders’ Representative wishes to update this Exhibit C-2, the Stockholders’ Representative must complete, sign and send to Escrow Agent an updated copy of this Exhibit C-2 with such changes.  Any updated Exhibit C-2 shall be effective once signed by the Stockholders’ Representative and Escrow Agent and shall entirely supersede and replace any prior Exhibit C-2 to this Agreement.

_________________________

Name: Josiah Hornblower

Title: Stockholders’ Representative

Date:

_____________ (as Escrow Agent)

By:_________________________

Name:

Title:

Date:

Stockholders’ Representative Remittance Instructions: [●]

 

Exhibit D

Escrow Agent Schedule of Fees

 

EXHIBIT C

JOINDER TO STOCK PURCHASE AGREEMENT

This Joinder to Stock Purchase Agreement (this “Joinder”) effecting a joinder to that certain Stock Purchase Agreement, dated March 7, 2017 (as may be amended or restated from time to time, the “Stock Purchase Agreement”), by and among Heat Biologics, Inc., a Delaware corporation (the “Purchaser”), Pelican Therapeutics, Inc., a Delaware corporation (the “Company”), the stockholders of the Company set forth on the signature pages to the Stock Purchase Agreement (collectively, the “Stockholders” and, individually, a “Stockholder”) and Josiah Hornblower, as Stockholders’ representative of the Stockholders pursuant to ARTICLE XI thereof (the “Stockholders’ Representative”), is made and entered into as of this ___ day of _________________, 2017 by and between the undersigned stockholder of the Company (the “Additional Stockholder”), the Purchaser and the Company.  Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Stock Purchase Agreement.

The Additional Stockholder hereby acknowledges, agrees and confirms that, by the Additional Stockholder’s execution of this Joinder, the Additional Stockholder shall be deemed to be a party to the Stock Purchase Agreement as a “Stockholder,” effective as of the date hereof, and shall have all of the obligations of a Stockholder thereunder as if the Additional Stockholder had executed the Stock Purchase Agreement. Effective as of the date hereof, the Additional Stockholder hereby ratifies and agrees to be bound as a “Stockholder” by all of the terms, provisions and conditions contained in the Stock Purchase Agreement and any other agreements executed in connection therewith. 

The Additional Stockholder acknowledges receipt of a copy of the Stock Purchase Agreement. The Additional Stockholder acknowledges that the Additional Stockholder has read the Stock Purchase Agreement and understands that by signing this Joinder, the Additional Stockholder shall thereby assume all of the duties and obligations, and make the representations and warranties, of a Stockholder under the Stock Purchase Agreement.

This Joinder and the relationship of the parties hereto shall be governed by and construed in accordance with the internal laws (and not the law of conflicts) of the State of Delaware.

[Signature page follows]

 

IN WITNESS WHEREOF, this Joinder to Stock Purchase Agreement has been duly executed and delivered by the Additional Stockholder as of the date first written above.

For individuals:

Signature:_____________________________________

Name:________________________________________

For entities:

Signature:_____________________________________

By:__________________________________________

Name:________________________________________

Title:________________________________________

Address for notices:

_____________________________________________

_____________________________________________

_____________________________________________

Tax ID Number:

_____________________________________________

 

EXHIBIT D

CONSENT OF SPOUSE

I, the undersigned spouse of __________________, acknowledge that I have read the proposed Stock Purchase Agreement (the “SPA”) to be entered into by and among Heat Biologics, Inc., a Delaware corporation (the “Purchaser”), Pelican Therapeutics, Inc., a Delaware corporation (the “Company”), the stockholders of the Company set forth therein (collectively, the “Stockholders”) and Josiah Hornblower, as the Stockholders’ representative.  Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the SPA.

I am aware that by the terms of the SPA, the Stockholders propose to transfer the Purchased Shares to the Purchaser in exchange for the consideration described in the SPA, subject to the terms and conditions set forth therein.  Following my complete review of the SPA, I hereby approve of the SPA and consent to the proposed sale of the Purchased Shares thereunder, including the Purchased Shares held by my spouse and any community property interest or quasi-community property interest I may have in such Purchased Shares and agree not to take any action at any time that might interfere with the transactions contemplated by the SPA.  In giving this consent I hereby waive any right I may have under any provision of applicable law that would permit me to challenge or undo the sale of the Purchased Shares for any reason.  

Prior to giving this consent, I was given the opportunity to seek legal representation of my own in evaluating this consent.  This consent is given of my own will, free from duress or the imposition of any other person’s will upon me.

			
	Dated:  __________, 2017

	 
	 

	 
	 
	Print Name:

 

EXHIBIT E

PELICAN THERAPEUTICS, INC.

STOCKHOLDERS’ AGREEMENT

This STOCKHOLDERS’ AGREEMENT (this “Agreement”) is entered into as of [•], 2017, by and among Pelican Therapeutics, Inc., a Delaware corporation (the “Company”), the stockholders of the Company listed on the signature pages hereto (the “Signing Stockholders”), the stockholder of the Company executing a joinder to this Agreement in the form set forth on Exhibit A hereto (the “Joinder Stockholders” and together with the Signing Stockholder, the “Stockholders”), and Heat Biologics, Inc., a Delaware corporation (“Heat”). 

Recitals

Whereas, Heat has entered into that certain Stock Purchase Agreement, dated March 7, 2017, by and among the Company, Heat, the Stockholders and Josiah Hornblower, as representative of the Stockholders (as may be amended or restated from time to time, the “Purchase Agreement”) pursuant to which Heat has agreed, subject to the terms of the Purchase Agreement, to purchase shares of common stock, par value $0.0001 per share, of the Company (the “Common Stock”);

Whereas, the Stockholders desire to sell a portion of their shares of Common Stock to Heat pursuant to the Purchase Agreement; and

Whereas, the consummation of the transactions contemplated by the Purchase Agreement is conditioned upon the execution and delivery of this Agreement by the Company and by Stockholders selling, in the aggregate, 80% of the fully diluted shares of Common Stock. 

Now, Therefore, in consideration of these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

SECTION 1.

GENERAL.  

1.1

Definitions.  As used in this Agreement the following terms shall have the following respective meanings:

(a)

“Acquisition” shall mean (i) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, other than any such consolidation, merger, or reorganization in which the shares of capital stock of the Company immediately prior to such consolidation, merger, or reorganization, continue to represent a majority of the voting power of the surviving entity (or, if the surviving entity is a wholly-owned subsidiary, its parent) immediately after such consolidation, merger, or reorganization; (ii) any transaction or series of related transactions in which in excess of fifty percent (50%) of the voting rights attached to the Company’s then-outstanding securities is transferred; or (iii) any sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company, in any case that occurs after the Closing Date (as defined in the Purchase Agreement); provided that an Acquisition shall not include any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof.

(b)

“Affiliate” shall mean, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person, including, without limitation, any general partner, limited partner, member, officer, director or manager of such Person and any venture capital or private equity fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person. For purposes of this definition, the terms “controls,” “controlled by,” or “under common control with” shall mean the possession, directly or indirectly, of (i) the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise, or (ii) the power to elect or 

 

appoint at least 50% of the directors, managers, general partners, or persons exercising similar authority with respect to such Person.

(c)

“Board” shall mean the Board of Directors of the Company.

(d)

“Business Day” shall mean any day other than a day on which banks in the State of New York are authorized or obligated to be closed.

(e)

“Commission” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

(f)

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules and regulations promulgated thereunder, all as the same shall be in effect from time to time.

(g)

“Initial Offering” shall mean the Company’s first firm commitment underwritten public offering of Common Stock registered under the Securities Act.

(h)

“Liquidation Event” shall mean: (i) an Acquisition, or (ii) any liquidation or winding up of the Company.

(i)

“Person” shall mean any individual, firm, corporation, partnership, association, limited liability company, trust or any other entity.

(j)

“Rule 144” shall mean Rule 144 as promulgated by the Commission under the Securities Act, as such rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

(k)

“Securities Act” shall mean the Securities Act of 1933, as amended, or any similar successor federal statute and the rules and regulations promulgated thereunder, all as the same shall be in effect from time to time.

SECTION 2.

RESTRICTIONS ON TRANSFER.

2.1

“Market Stand-Off” Agreement.  Each Stockholder hereby agrees, if requested by the underwriters, that such Stockholder shall not sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale of, any shares of capital stock (or other securities) of the Company held by such Stockholder (other than those included in the registration) during the 180-day period following the effective date of the Initial Offering (or such longer period, not to exceed 34 days after the expiration of the 180-day period, as the underwriters or the Company shall request in order to facilitate compliance with NASD Rule 2711 or NYSE Member Rule 472 or any successor or similar rule or regulation); provided that all officers and directors of the Company and holders of at least 1% of the Company’s voting securities are bound by and have entered into similar agreements.  The obligations described in this Section 2.1 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future.

2.2

Restrictions on Transfer.  

(a)

Each Stockholder agrees that such Stockholder shall not, directly or indirectly (by merger, operation of law or otherwise), transfer, sell, assign, dispose, donate, pledge, bequest, hypothecate, convey, encumber or otherwise dispose of (and will not permit any such transfer, sale, assignment, disposition, donation, pledge, bequest, hypothecation, conveyance, encumbrance or other disposition of) all or any portion of their shares of capital stock of the Company or any interest therein by any means whatsoever (any of the foregoing, a “Transfer”) without Heat’s prior written consent.  Except as provided for in Section 4 below, any Transfer not made in accordance with the terms of this Section 2.2(a) shall be null and void ab initio.

 

(b)

Each certificate representing shares of capital stock of the Company held by a Stockholder shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws):

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

THE SALE, PLEDGE, HYPOTHECATION, OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO, AND IN SOME CASES PROHIBITED BY, THE TERMS AND CONDITIONS OF A STOCKHOLDERS’ AGREEMENT BY AND AMONG THE STOCKHOLDER, THE CORPORATION AND CERTAIN HOLDERS OF STOCK OF THE CORPORATION, AS AMENDED AND/OR RESTATED FROM TIME TO TIME.  COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.

THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN STOCKHOLDERS’ AGREEMENT, AS AMENDED AND/OR RESTATED FROM TIME TO TIME, WHICH PLACES CERTAIN RESTRICTIONS ON THE VOTING OF THE SECURITIES REPRESENTED HEREBY.  ANY PERSON ACCEPTING ANY INTEREST IN SUCH SECURITIES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SUCH AGREEMENT.  COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.

(c)

If, at any time or from time to time, any Stockholder holds any certificate representing shares of the Company’s capital stock not bearing the aforementioned legend, such Stockholder agrees to deliver such certificate to the Company promptly to have such legend placed on such certificate.

SECTION 3.

DRAG-ALONG RIGHTS.

3.1

Approved Sale.  For the purposes of this Section 3, an “Approved Sale” shall mean an Acquisition that is approved by (a) the Board and (b) Heat.

3.2

Actions to be Taken.  In the event of an Approved Sale, each of the Stockholders hereby agrees: 

(a)

if such transaction requires stockholder approval, with respect to all shares of capital stock of the Company that such Stockholder owns or over which such Stockholder otherwise exercises voting control, to vote (in person, by proxy or by action by written consent, as applicable) all shares of capital stock of the Company in favor of, and adopt, such Approved Sale (together with any related transaction agreement for such Approved Sale and any amendment to the Company’s Certificate of Incorporation, as may be amended or restated from time to time, to be made in connection with such Approved Sale) and to vote in opposition to, and withhold consent from, any and all other proposals that could reasonably be expected to delay or impair the ability of the Company to consummate such Approved Sale;

(b)

if such transaction is an acquisition of at least a majority of the total outstanding shares of capital stock of the Company (other than for bona fide equity financing purposes) by an unrelated Person, to sell the same proportion of shares of capital stock of the Company beneficially held by such Stockholder as is being sold by Heat to the Person to whom Heat propose to sell its shares of capital stock of the Company on the same terms and conditions as Heat;

 

(c)

to execute and deliver all related documentation and take such other action in support of the Approved Sale in order to carry out the terms and provisions of this Section 3, including, without limitation, (i) executing and delivering instruments of conveyance and transfer, and any purchase agreement, merger agreement, indemnity agreement, escrow agreement, consent, waiver, governmental filing, stock certificates duly endorsed for transfer (free and clear of impermissible liens, claims and encumbrances) and any similar or related documents related to the Approved Sale, (ii) making the same representations, warranties, covenants, indemnities and agreements as made by Heat in connection with the Approved Sale, and (iii) agreeing to the same terms and conditions to the Approved Sale as those to which Heat agrees;

(d)

not to deposit, and to cause its Affiliates not to deposit, except as provided in this Agreement, any shares of capital stock of the Company owned by such party or Affiliate in a voting trust or subject any such shares of capital stock of the Company to any arrangement or agreement with respect to the voting of such shares of capital stock of the Company, unless specifically requested to do so by Heat in connection with an Approved Sale; 

(e)

to affirmatively waive, and otherwise refrain from exercising, any dissenters’ rights or rights of appraisal under applicable law at any time with respect to such Approved Sale; and

(f)

if the consideration to be paid in exchange for the shares of capital stock of the Company in an Approved Sale pursuant to this Section 3 includes any securities and due receipt thereof by any Stockholder would require under applicable law (i) the registration or qualification of such securities or of any Person as a broker or dealer or agent with respect to such securities, or (ii) the provision to any Stockholder of any information other than such information as a prudent issuer would generally furnish in an offering made solely to “accredited investors” as defined in Regulation D promulgated under the Securities Act, the Company may cause to be paid to such Stockholder in lieu thereof, against surrender of the shares of capital stock of the Company which would have otherwise been sold by such Stockholder, an amount in cash equal to the fair value (as determined in good faith by the Board) of the securities which such Stockholder would otherwise receive as of the date of the issuance of such securities in exchange for the shares of capital stock of the Company.

3.3

Irrevocable Proxy.  To secure the Stockholders’ obligations to vote (or provide consent with respect to) or take any other action (including the actions set forth in Section 3.2) with respect to their shares of capital stock of the Company in accordance with this Agreement, each Stockholder hereby appoints the Chairperson of the Board of Directors of Heat, the Chief Executive Officer of Heat or any other Person authorized by the Board of Directors of Heat, or any of them from time to time, as such Stockholder’s true and lawful proxy and attorney, with the power to act alone and with full power of substitution, to vote (or provide consent with respect to) or take any other action (including the actions set forth in Section 3.2) with respect to all of such Stockholder’s shares of capital stock of the Company subject to this Agreement and to execute all appropriate documents, certificates, agreements and other instruments consistent with this Agreement on behalf of such Stockholder if, and only if, such Stockholder fails to vote (or provide consent with respect to) or take any such action (including the actions set forth in Section 3.2) with respect to all of such Stockholder’s shares of capital stock of the Company or execute such other documents, certificates, agreements and other instruments in accordance with the provisions of this Agreement within three (3) Business Days of the Company’s, Heat’s or any other party’s written request for such Stockholder’s vote, written consent or signature.  The proxy and power of attorney granted by each Stockholder pursuant to this Section 3.3 is coupled with an interest and are given to secure the performance of such party’s duties under this Agreement.  Each such proxy and power will be irrevocable for the term of this Agreement and it is expressly acknowledged and agreed that the term of such proxy and power may exceed three (3) years.  The proxy and power, so long as any party hereto is an individual, will survive the death, incompetency, and disability of such party or any other individual Stockholder, and, so long as any party hereto is an entity, will survive the merger or reorganization of such party or any other entity holding any shares of capital stock of the Company.

3.4

Exceptions.  Notwithstanding anything in this Agreement to the contrary, a Stockholder will not be required to comply with Section 3.2 in connection with any proposed Approved Sale unless:

(a)

the Stockholder shall not be liable for the inaccuracy of any representation or warranty made by any other Person in connection with the Approved Sale, other than the Company (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the 

 

Company as well as breach by any stockholder of any identical representations, warranties and covenants provided by all stockholders); and

(b)

the liability for indemnification, if any, of such Stockholder in the Approved Sale and for the inaccuracy of any representations and warranties made by the Company or the Stockholders in connection with such Approved Sale, is several and not joint with any other Person (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any identical representations, warranties and covenants provided by all stockholders), and is pro rata in proportion to, and does not exceed, the amount of consideration paid to such Stockholder in connection with such Approved Sale in its capacity as a holder of shares of capital stock of the Company.

SECTION 4.

CO-SALE RIGHTS.

4.1

Notice of Transfer.

(a)

Other than in connection with a Transfer (as defined below) excluded by Section 4.2, if Heat proposes to Transfer any shares of Common Stock, then Heat shall promptly give written notice (the “Co-Sale Notice”) simultaneously to the Company and to each of the Stockholders at least 30 days prior to the closing of such Transfer.  The Notice shall describe in reasonable detail the proposed Transfer, including, without limitation, the number of shares of Common Stock to be transferred, the nature of such Transfer, the consideration to be paid, the proposed closing date of such Transfer, the other material terms and conditions upon which the proposed Transfer is to be made and the name and address of each prospective purchaser or transferee. If the consideration proposed to be paid for the Common Stock in the proposed Transfer is other than cash, the fair market value of the consideration shall be determined in good faith by the Board.  The notice shall also state that each Stockholder shall have the right, exercisable upon written notice to Heat with a copy to the Company within 10 days after receipt of the Co-Sale Notice (the “Co-Sale Period”), to participate in such Transfer of Common Stock on the same terms and conditions.  Such Co-Sale Notice shall indicate the number of shares of Common Stock, up to that number of shares determined under Section 4.1(c), that such Stockholder wishes to sell under his, her or its right to participate.  To the extent one or more of the Stockholders exercise such right of participation in accordance with the terms and conditions set forth below, the number of shares of Common Stock that Heat may sell in the transaction shall be correspondingly reduced.

(b)

For purposes of this Section 4, the term “Transfer” shall include any sale, assignment, encumbrance, hypothecation, pledge, conveyance in trust, gift, transfer by request, devise, or descent, or other transfer or disposition of any kind, including, but not limited to, transfers to receivers, levying creditors, trustees, or receivers in bankruptcy proceedings or general assignees for the benefit of creditors, whether voluntary or by operation of law, directly or indirectly, of any Common Stock. 

(c)

Each Stockholder may sell all or any part of that number of shares equal to the product obtained by multiplying (i) the aggregate number of shares of Common Stock covered by the Co-Sale Notice, by (ii) a fraction, the numerator of which is the number of shares of Common Stock held by such Stockholder at the time of the Co-Sale Notice, and the denominator of which is the total number of shares of Common Stock held by Heat plus the number of shares of Common Stock held by all Stockholders at the time of the Co-Sale Notice.  

(d)

Each Stockholder who elects to participate in the Transfer pursuant to this Section 4 (a “Co-Sale Participant”) shall effect its participation in the Transfer by promptly delivering to Heat for transfer to the prospective purchaser one or more certificates, properly endorsed for transfer, which represent the number of shares of Common Stock which such Co-Sale Participant elects to sell.

(e)

The stock certificate or certificates that the Co-Sale Participant delivers to Heat pursuant to Section 4.1(d) shall be transferred to the prospective purchaser in consummation of the sale of the Common Stock pursuant to the terms and conditions specified in the Co-Sale Notice, and Heat shall concurrently therewith remit to such Co-Sale Participant that portion of the sale proceeds to which such Co-Sale Participant is entitled by reason of its participation in such sale.  To the extent that any prospective purchaser or purchasers prohibits such assignment or otherwise refuses to purchase shares or other securities from a Co-Sale Participant exercising its rights of co-sale hereunder, Heat shall not sell to such prospective purchaser or purchasers any Common Stock unless and until, 

 

simultaneously with such sale, Heat shall purchase such shares or other securities from such Co-Sale Participant on the same terms and conditions specified in the Co-Sale Notice.

(f)

The exercise or non-exercise of the rights of any Stockholder hereunder to participate in one or more Transfers of Common Stock made by Heat shall not adversely affect such Stockholder’s right to participate in subsequent Transfers of Common Stock subject to this Section 4.

(g)

To the extent that the Stockholders do not elect to participate in the sale of the Common Stock subject to the Co-Sale Notice, Heat may, not later than 90 days following delivery to the Stockholders of the Co-Sale Notice, enter into an agreement providing for the closing of the Transfer of such Common Stock covered by the Co-Sale Notice within 30 days of such agreement on terms and conditions not materially more favorable to Heat than those described in the Co-Sale Notice.  Any proposed Transfer on terms and conditions materially more favorable to Heat than those described in the Co-Sale Notice, as well as any subsequent proposed Transfer of any of the Common Stock by Heat, shall again be subject to the co-sale rights of the Stockholders and shall require compliance by Heat with the procedures described in this Section 4.

4.2

Exempt Transfers.  Notwithstanding the foregoing, the provisions of this Section 4 shall not apply to any Transfer of shares of Common Stock: (i) to the public pursuant to a registration statement filed with, and declared effective by, the Securities and Exchange Commission under the Securities Act, (ii) pursuant to a Liquidation Event, or (iii) to an Affiliate of Heat.

4.3

Termination of Co-Sale Rights.  The provisions of this Section 4 shall expire and terminate as to each Stockholder upon the earlier of immediately prior to (a) the closing of the Initial Offering, (b) a Liquidation Event, or (c) the date the Company first becomes subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the Exchange Act.

SECTION 5.

MISCELLANEOUS.  

5.1

Governing Law.  This Agreement and the relationship of the parties hereto shall be governed by and construed under the laws of the State of Delaware in all respects as such laws are applied to agreements among Delaware residents entered into and performed entirely within Delaware, without giving effect to conflicts of law principles thereof.

5.2

Successors and Assigns.  Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon the parties hereto and their respective successors, assigns, heirs, executors, and administrators and other legal representatives and shall inure to the benefit of and be enforceable by each Person who shall be a Stockholder from time to time.

5.3

Entire Agreement.  This Agreement, the exhibit hereto and the other documents delivered pursuant hereto and thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and no party shall be liable for or bound to any other in any manner by any oral or written representations, warranties, covenants, and agreements except as specifically set forth herein and therein.  

5.4

Severability.  In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

5.5

Amendment and Waiver.  Except as otherwise expressly provided, this Agreement may be amended or modified, and the obligations of the Company and the rights of Heat and the Stockholders under this Agreement may be waived, only upon the written consent of the Company, Heat and the Stockholders holding a majority of the outstanding shares of Common Stock held by the Stockholders. Any such amendment, waiver or modification effected in accordance with this Section 5.5 shall be binding upon Heat, each Stockholder and the Company.  By signing this Agreement, each Stockholder acknowledges and agrees that this Agreement may be 

 

amended or modified, and the obligations of the Company and the rights of Heat and the Stockholder under this Agreement may be waived without such Stockholder’s written consent. 

5.6

Delays or Omissions.  It is agreed that no delay or omission to exercise any right, power, or remedy accruing to any party, upon any breach, default, or noncompliance by another party under this Agreement, shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach, default, or noncompliance, or any acquiescence therein, or of or in any similar breach, default, or noncompliance thereafter occurring.  It is further agreed that any waiver, permit, consent, or approval of any kind or character on any party’s part of any breach, default, or noncompliance under this Agreement or any waiver on such party’s part of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Agreement, by law, or otherwise afforded to any party, shall be cumulative and not alternative.

5.7

Notices.  All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed electronic mail if sent during normal business hours of the recipient; if not, then on the next Business Day; (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one day after deposit with a nationally-recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to Heat, the Company and to each Stockholder at his, her, or its address as set forth on the signature pages hereto, or at such other address or electronic mail address as Heat, the Company or such Stockholder may designate by written notice to the other parties hereto.

5.8

Titles and Subtitles.  The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

5.9

Pronouns.  All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine, or neutral, singular or plural, as the identity of the parties hereto may require. 

5.10

Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

5.11

Termination.  This Agreement shall terminate in its entirety upon the earlier to occur of immediately prior to (a) the closing of an Initial Offering; and (b) a Liquidation Event.  Upon such termination, this Agreement shall forthwith become void and there shall be no liability on the part of any party to this Agreement, except for obligations under Section 2.1 (“Market Stand-Off” Agreement), which shall survive such termination. Notwithstanding the foregoing, nothing contained in this Agreement shall relieve any party from liability for any breach of this Agreement. 

5.12

Exclusive Jurisdiction.  Each of the parties hereto agrees that any suit, action, or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement shall be brought solely in the Court of Chancery of the State of Delaware or, if such court lacks jurisdiction, any state or federal court sitting in the State of Delaware.  Each of the parties hereto consents to the jurisdiction of such court (and of the appropriate appellate courts therefrom) in any such suit, action, or proceeding and irrevocably agrees not to commence any litigation relating thereto except in such court, and each further waives any objection to the laying of venue of any such litigation in such court and agrees not to plead or claim in such court that such litigation brought therein has been brought in an inconvenient forum.  Any party hereto may make service on another 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 5.7.  Nothing in this Section 5.12, however, shall affect the right of any Person to serve legal process in any other manner permitted by law.

5.13

Specific Performance.  Each of the parties hereto agrees and acknowledges that Heat would be irreparably harmed in the event of a breach by any Stockholder of such Stockholder’s obligations hereunder, that monetary damages may not be an adequate remedy for such breach and that Heat shall be entitled to specific 

 

performance or injunctive relief, without the need to post a bond or other security, in addition to any other remedy that Heat may have at law or in equity, in the event of such breach.  

5.14

Waiver of Jury Trial.  EACH OF THE PARTIES OF THIS AGREEMENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDINGS OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

[Signature Pages Follow]

 

In Witness Whereof, the parties hereto have executed this STOCKHOLDERS’ AGREEMENT as of the date set forth in the first paragraph hereof.

COMPANY:

Pelican Therapeutics Inc.

By:

Name:  Josiah Hornblower

Title:  Chief Executive Officer

Address:  PMB #520 – 3112 Windsor Road, Suite A

  Austin, Texas 78703

[Signature Page to Stockholders’ Agreement]

 

In Witness Whereof, the parties hereto have executed this STOCKHOLDERS’ AGREEMENT as of the date set forth in the first paragraph hereof.

STOCKHOLDERS:

[Stockholder Name]

By: 

Name:

Title:

Address: 

[Signature Page to Stockholders’ Agreement]

 

In Witness Whereof, the parties hereto have executed this STOCKHOLDERS’ AGREEMENT as of the date set forth in the first paragraph hereof.

HEAT:

Heat Biologics, Inc.

By:

Name:  Jeff Wolf

Title:  President and Chief Executive Officer

Address:  801 Capitola Drive

  Durham, North Carolina 27713

[Signature Page to Stockholders’ Agreement]

 

Exhibit A

Form of Joinder Agreement

This Joinder to STOCKHOLDERS’ Agreement (this “Joinder”) effecting a joinder to that certain Stockholders  Agreement (as may be amended or restated from time to time, the “Stockholders’ Agreement”), dated [●], 2017, by and among Pelican Therapeutics Inc., a Delaware corporation (the “Company”), the stockholders of the Company party thereto (the “Stockholders”), and Heat Biologics, Inc., a Delaware corporation (“Heat”), is made and entered into as of this ___ day of _________________, 20__ by and among  _____________________ (the “Additional Holder”), the Company, the Stockholders and Heat.  Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Stockholders’ Agreement.

The Additional Holder hereby acknowledges, agrees and confirms that, by the Additional Holder’s execution of this Joinder, the Additional Holder shall be deemed to be a party to the Stockholders’ Agreement as a “Stockholder,” effective as of the date hereof, and shall have all of the obligations of a Stockholder thereunder as if the Additional Holder had executed the Stockholders’ Agreement. Effective as of the date hereof, the Additional Holder hereby ratifies and agrees to be bound as a “Stockholder” by all of the terms, provisions and conditions contained in the Stockholders’ Agreement and any other agreements executed in connection therewith. 

The Additional Holder acknowledges receipt of a copy of the Agreement. The Additional Holder acknowledges that the Additional Holder has read the Agreement and understands that by signing this Joinder, the Additional Holder shall thereby assume all of the duties and obligations, and make the representations and warranties, of a Stockholder under the Stockholders’ Agreement.

This Joinder and the relationship of the parties hereto shall be governed by and construed under the laws of the State of Delaware in all respects as such laws are applied to agreements among Delaware residents entered into and performed entirely within Delaware, without giving effect to conflicts of law principles thereof.

[Signature page follows]

 

IN WITNESS WHEREOF, this Joinder to Stockholders Agreement has been duly executed and delivered by the Additional Holder as of the date first written above.

Additional Holder:

For individuals:

By:

Name:

For entities:

Stockholder Name: 

By:

Name:

Title:

Address for notices:

[Signature Page to Joinder]

 

EXHIBIT F

FORM OF Demand PROMISSORY NOTE

		
	$[•]

	[__], 20__

FOR VALUE RECEIVED, including in connection with the transactions contemplated by that certain Stock Purchase Agreement, dated as of March 7, 2017, (the "Stock Purchase Agreement"), between Heat Biologics, Inc., a Delaware corporation ("Payee"), Pelican Therapeautics, Inc., a Delaware corporation ("Maker"), the stockholders of Maker and Josiah Hornblower, as the Stockholders’ Representative, MAKER hereby promises to pay to the order of PAYEE the principal amount of $[•], payable as provided herein, with interest from the date hereof accruing at the Contract Rate (as defined below) on all unpaid principal due hereunder.  Interest shall be calculated on the basis of a year of three hundred sixty-five (365) days and charged for the actual number of days elapsed.

1.

Payments.

A.

Place.  Payment of principal and interest shall be made by wire transfer, in immediately available funds in the lawful currency of the United States of America in, to the following bank account of Payee or such other place and method of payment designated in writing by Payee to Maker:

Account Name:

Account Number:

Routing Number:

Bank Name:

Bank Address:

B.

Payment on Demand and Maturity.  Subject to the provisions of Section 2 hereof and paragraph C of this Section 1, the entire unpaid principal balance of this Demand Promissory Note (this "Promissory Note"), together with any unpaid and accrued interest and any additional amounts due and owing hereunder, shall be due and payable upon the earlier of (i) an Event of Default (as defined below) or (ii) demand by Payee; provided however, that Payee may not make such a demand until after Payee has made the first Milestone Payment (as defined in the Stock Purchase Agreement) pursuant to Section 1.4(a) of the Stock Purchase Agreement.  

C.

Interest Rate.  From the date hereof through and including the date that the entire principal balance of this Promissory Note is paid in full, interest shall accrue on the outstanding principal balance hereunder at a rate per annum equal to 8.00% (the "Contract Rate").

2.

Prepayments.  Maker may make prepayments of the principal of, and the interest on, this Promissory Note in whole or in part at any time without premium or penalty.  Prepayments shall be applied first to the payment of expenses due under this Promissory Note, second to interest accrued but unpaid on this Promissory Note and third, if the amount of prepayment exceeds the amount of all such expenses and accrued but unpaid interest, to the payment of principal on this Promissory Note.

3.

Default Rate.  Any principal payments not paid when due and, to the extent permitted by applicable law, any interest payment not paid when due, and any other amount due to Payee under this Promissory Note not paid when due, in any case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall thereafter bear interest payable upon demand at a rate which is 2.00% in excess of the Contract Rate ("Default Rate").

4.

Events of Default.  The occurrence of any of the following described in paragraphs A through E below shall constitute an "Event of Default" under this Promissory Note:

A.

Failure to Pay.  Maker's failure to make any principal or interest payment under this Promissory Note when due.

 

B.

Breach of Promissory Note.  Maker's failure to observe or perform any covenant or other agreement with Payee contained in this Promissory Note.

C.

Voluntary Bankruptcy or Insolvency Proceedings.  Maker shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or substantially all of its property, (ii) make a general assignment for the benefit of its or any of its creditors, (iii) be dissolved or liquidated, or (iv) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it.

D.

Involuntary Bankruptcy or Insolvency Proceedings.  Proceedings for the appointment of a receiver, trustee, liquidator or custodian of Payee or of all or substantially all of Maker's property, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to Maker or Maker's debts under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within twenty (20) days of commencement.  

E.

Other Bankruptcy Events.  Maker shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition against Maker under the U.S. Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization, or other relief for debtors; Maker shall admit in writing that it is generally unable to pay its debts as they become due; or Maker shall be adjudicated a bankrupt, or an order for relief shall be entered against Maker as debtor by any court of competent jurisdiction under the U.S. Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors.  

F.

Consequence of Event of Default.  UPON THE OCCURRENCE OR EXISTENCE OF ANY EVENT OF DEFAULT DESCRIBED IN PARAGRAPHS A THROUGH E OF THIS SECTION 4, IMMEDIATELY AND WITHOUT NOTICE, ALL AMOUNTS THEN OUTSTANDING UNDER THIS PROMISSORY NOTE SHALL AUTOMATICALLY BECOME IMMEDIATELY DUE AND PAYABLE, WITHOUT PRESENTMENT, DEMAND, PROTEST OR ANY OTHER NOTICE OF ANY KIND, ALL OF WHICH ARE HEREBY EXPRESSLY WAIVED.  IN ADDITION TO THE FOREGOING REMEDIES, UPON THE OCCURRENCE OR EXISTENCE OF ANY EVENT OF DEFAULT, PAYEE MAY EXERCISE ANY OTHER RIGHT POWER OR REMEDY PERMITTED TO IT BY LAW.

G.

Other Remedies on Default.  In case any one or more Events of Default shall occur, be continuing, and not have been waived, Payee may proceed to protect and enforce the rights of Payee by an action at law, suit in equity, or other appropriate proceeding, whether for the specific performance of any agreement contained herein or for an injunction against a violation of any of the terms hereof, or in aid of the exercise of any power granted hereby or thereby, or by law.  The remedies provided in this Promissory Note shall be cumulative and in addition to all other remedies available under this Promissory Note at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit Payee's right to pursue actual and consequential damages for any failure by Maker to comply with the terms of this Promissory Note.  Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by Payee and shall not, except as expressly provided herein, be subject to any other obligation of Maker (or the performance thereof).  Maker acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to Payee and that the remedy at law for any such breach may be inadequate.  Maker therefore agrees that, in the event of any such breach or threatened breach, Payee shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

H.

Waivers.  MAKER HEREBY WAIVES PRESENTMENT, DEMAND, NOTICE, PROTEST AND ALL OTHER DEMANDS AND ANY OTHER NOTICES (WHETHER OR NOT REQUIRED BY LAW) IN CONNECTION WITH SAID DELIVERY, ACCEPTANCE, PERFORMANCE, DEFAULT OR ENFORCEMENT OF THIS PROMISSORY NOTE.  MAKER HEREBY WAIVES AND RENOUNCES ANY AND ALL EXEMPTION RIGHTS UNDER OR BY VIRTUE OF THE LAWS OF ANY 

 

STATE, OR THE UNITED STATES, AS AGAINST THIS DEBT OR ANY RENEWAL DEBT.  NO DELAY OR OMISSION ON THE PART OF PAYEE IN EXERCISING ANY RIGHT HEREUNDER SHALL OPERATE AS A WAIVER OF SUCH RIGHT OR OF ANY OTHER RIGHT.  A WAIVER ON ANY ONE OCCASION SHALL NOT BE CONSTRUED AS A BAR TO OR WAIVER OF ANY SUCH RIGHT AND/OR REMEDY IN ANY FUTURE OCCASION.

5.

Representations and Warranties of Maker.  Maker represents and warrants, as of the date hereof, the following:

A.

Neither the execution or delivery of this Promissory Note nor the observance and performance of the agreements and obligations contained herein or therein are prohibited by, in conflict with or constitute a breach of any contract, agreement or other instrument or any law, ordinance, regulation, order, writ or decree to which Maker is a party or by which Maker is bound;

B.

This Promissory Note constitutes the legal, valid and binding obligation of Maker, enforceable against Maker in accordance with its terms;

C.

There are no suits or proceedings by or before any court, commission, board or other governmental body pending, or to the knowledge of Maker threatened, which involve or affect the validity or enforceability of this Promissory Note or involve any risk of any judgment or liability being imposed upon Maker which could materially adversely affect the financial condition of Maker or Maker's ability to observe and perform its agreements and obligations hereunder;

D.

Any and all federal, state and local income tax returns required to have been filed by Maker, as applicable, have been filed, or extensions for the filing thereof have been filed, and all taxes reflected upon any such tax returns, all past due taxes, interest and penalties and all estimated payments required to be paid to date have been paid; and

E.

(i) Maker is not insolvent or bankrupt and has not committed any act of bankruptcy; (ii) Maker has not made any general assignment for the benefit of its creditors; (iii) no proceeding seeking (a) relief under any bankruptcy or insolvency law, (b) the rearrangement or readjustment of debt, or (c) the appointment of a receiver, custodian, liquidator or trustee to take possession of substantially all of the assets has been commenced or threatened with respect to Maker.

6.

Covenants and Agreements of Maker.  Until this Promissory Note has been paid in full as provided herein, Maker hereby covenants and agrees with Payee as follows:

A.

No other indebtedness of Maker shall rank senior to the indebtedness evidenced by this Promissory Note.  If Maker obtains indebtedness for borrowed money, such lender shall enter into a subordination agreement with Payee reasonably acceptable to Payee.

B.

Maker will at all times take or cause to be taken all such action as may from time to time be necessary to maintain, preserve and renew its principal residence (as such term is used in the Uniform Commercial Code of the State of Delaware) as the State of [Texas].

C.

Maker will perform, keep and observe all of the terms, conditions, covenants, agreements, warranties or representations contained in this Promissory Note.

D.

Maker will pay promptly when due all taxes, assessments, governmental charges and levies owed by Maker and will comply with all laws applicable to Maker.

E.

Maker will deliver to Payee its filed United States federal income tax returns for each tax year within thirty (30) days of the filing of Maker's federal income tax returns with the United States Internal Revenue Service for such tax year.

 

7.

POWER TO CONFESS JUDGMENT.  MAKER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR CLERK OF ANY COURT OF RECORD, AFTER THE OCCURRENCE OF ANY EVENT OF DEFAULT HEREUNDER, TO APPEAR FOR MAKER, ITS SUCCESSORS, ASSIGNS, HEIRS, EXECUTORS, ADMINISTRATORS AND DULY APPOINTED LEGAL REPRESENTATIVES, AS APPLICABLE, AND, WITH OR WITHOUT COMPLAINT FILED, CONFESS JUDGMENT, OR A SERIES OF JUDGMENTS, AGAINST MAKER, ITS SUCCESSORS, ASSIGNS, HEIRS, EXECUTORS, ADMINISTRATORS AND DULY APPOINTED LEGAL REPRESENTATIVES, AS APPLICABLE, IN FAVOR OF PAYEE, ITS SUCCESSORS, ASSIGNS, HEIRS, EXECUTORS, ADMINISTRATORS AND DULY APPOINTED LEGAL REPRESENTATIVES, AS APPLICABLE, OR ANY HOLDER HEREOF FOR THE ENTIRE PRINCIPAL BALANCE OF THIS PROMISSORY NOTE AS IS THEN OUTSTANDING, ALL ACCRUED INTEREST AND ALL OTHER AMOUNTS DUE HEREUNDER, TOGETHER WITH COSTS OF SUIT AND AN ATTORNEYS' COMMISSION UP TO TWENTY PERCENT (20%) OF SUCH PRINCIPAL AND INTEREST ADDED AS A REASONABLE ATTORNEYS' FEE (PROVIDED, HOWEVER, THAT PAYEE SHALL ONLY SEEK TO RECOVER THOSE REASONABLE ATTORNEYS' FEES INCURRED BY IT FROM TIME TO TIME), AND FOR DOING SO, THIS PROMISSORY NOTE OR A COPY VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT.  MAKER HEREBY FOREVER WAIVES AND RELEASES ALL ERRORS IN SAID PROCEEDINGS AND ALL RIGHTS OF APPEAL AND ALL RELIEF FROM ANY AND ALL APPRAISEMENT, STAY OR EXEMPTION LAWS OF ANY STATE NOW IN FORCE OR HEREAFTER ENACTED.  INTEREST ON ANY SUCH JUDGMENT SHALL ACCRUE AT THE DEFAULT RATE.

NO SINGLE EXERCISE OF THE FOREGOING POWER TO CONFESS JUDGMENT, OR A SERIES OF JUDGMENTS, SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE, OR VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS PAYEE SHALL ELECT UNTIL SUCH TIME AS PAYEE SHALL HAVE RECEIVED PAYMENT IN FULL OF THE PRINCIPAL, INTEREST, EXPENSES AND ANY OTHER DEBT OWED HEREUNDER.  TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, PAYEE MAY ENTER ONE OR MORE JUDGMENTS IN THE SAME OR DIFFERENT COUNTIES FOR ALL OR ANY PART OF THE OBLIGATIONS HEREUNDER, WITHOUT REGARD TO WHETHER JUDGMENT HAS BEEN ENTERED ON MORE THAN ONE OCCASION FOR THE SAME OBLIGATIONS.  IN THE EVENT ANY JUDGMENT ENTERED AGAINST MAKER HEREUNDER IS STRICKEN OR OPENED UPON APPLICATION BY OR ON MAKER'S BEHALF FOR ANY REASON WHATSOEVER, PAYEE IS HEREBY AUTHORIZED AND EMPOWERED TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW TO AGAIN APPEAR FOR AND CONFESS JUDGMENT AGAINST MAKER ON THE BASIS PROVIDED FOR ABOVE.  NOTWITHSTANDING THE ATTORNEYS' COMMISSION PROVIDED FOR IN THE PRECEDING PARAGRAPH (WHICH IS INCLUDED IN THE WARRANT FOR PURPOSES OF ESTABLISHING A SUM CERTAIN), THE AMOUNT OF ATTORNEYS' FEES THAT PAYEE MAY RECOVER FROM MAKER SHALL NOT EXCEED THE ACTUAL ATTORNEYS' FEES AND COSTS INCURRED BY PAYEE. 

BEING FULLY AWARE OF ITS RIGHTS TO PRIOR NOTICE AND HEARING ON THE VALIDITY OF ANY CLAIMS THAT MAY BE ASSERTED AGAINST IT BY PAYEE UNDER THIS PROMISSORY NOTE BEFORE JUDGMENT CAN BE ENTERED AND BEFORE ASSETS OF MAKER CAN BE GARNISHED AND ATTACHED, MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THESE RIGHTS AND EXPRESSLY AGREES AND CONSENTS TO PAYEE, UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, ENTERING JUDGMENT AGAINST MAKER BY CONFESSION AND ATTACHING AND GARNISHING THE BANK ACCOUNTS AND OTHER ASSETS OF MAKER, WITHOUT PRIOR NOTICE OR OPPORTUNITY FOR A HEARING.  

THE POWERS OF ATTORNEY GRANTED HEREIN ARE COUPLED WITH AN INTEREST AND NOT REVOCABLE.  SUCH POWERS ARE GIVEN PRIMARILY FOR BUSINESS OR COMMERCIAL PURPOSES.  SUCH POWERS SHALL BE EXERCISED FOR THE BENEFIT OF PAYEE AND NOT FOR THE BENEFIT OF MAKER.  IN ACTING UNDER SUCH POWERS, PAYEE HAS NO FIDUCIARY DUTY TO MAKER.  

 

MAKER ACKNOWLEDGES THAT (A) IT HAS HAD THE ASSISTANCE OF ITS LEGAL COUNSEL IN THE REVIEW AND EXECUTION OF THIS PROMISSORY NOTE (OR HAS DECIDED NOT TO CONSULT COUNSEL), (B) IT HAS HAD THE OPPORTUNITY AND TIME TO REVIEW THIS PROMISSORY NOTE PRIOR TO ITS EXECUTION, AND (C) THE MEANING AND EFFECT OF THE FOREGOING PROVISIONS CONCERNING CONFESSION OF JUDGMENT HAVE BEEN FULLY EXPLAINED TO MAKER BY ITS COUNSEL (IF MAKER DECIDED TO CONSULT COUNSEL).

8.

Miscellaneous.

A.

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

B.

Waiver and Amendment.  Any provision of this Promissory Note may be amended, waived or modified upon the prior written consent of Maker and Payee.

C.

Notices.  All notices and other communications required or permitted under this Promissory Note shall be in writing and shall be delivered personally by hand or by courier, mailed by United States registered or certified mail, postage prepaid, or sent by a nationally recognized overnight courier, directed to the below address for Payee or Maker, as applicable (unless such other address is designated by applicable addressee, by three (3) business days' advance written notice to the person or entity receiving such notice): 

(a) if to Payee, at Payee's address at 

Heat Biologics, Inc.

801 Capitola Drive

Durham, North Carolina 27713

Attention: Jeff Wolf

Email: Jwolf@heatbio.com

With a copy to:

Gracin & Marlow, LLP

The Chrysler Building

405 Lexington Avenue, 26th Flr.

New York, New York 10174

Attention: Leslie Marlow, Esq.

Email: Lmarlow@gracinmarlow.com 

(b) if to Maker, at Maker's address at 

Pelican Therapeutics, Inc.

PMB #520 – 3112 Windsor Road, Suite A

Austin, Texas 78703

Attention: Josiah Hornblower 

Email: jhornblower@gmail.com

With a copy to:

Pillsbury Winthrop Shaw Pittman LLP

Two Houston Center, 909 Fannin, Suite 2000

Houston, TX 77010-1028

Attention: Andrew L. Strong, Esq.

Email: andrew.strong@pillsburylaw.com

 

All such notices and other communications shall be deemed given: (i) upon personal delivery, to the party to be notified; or (ii) five (5) days after deposit with the United States Post Office, by registered or certified mail, postage prepaid, or (iii) one (1) business day after deposit with a nationally recognized overnight courier service, specifying next business day delivery.

D.

Expenses; Attorneys' Fees.  If (i) (A) Maker breaches this Promissory Note or an Event of Default occurs and (B) this Promissory Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or Payee otherwise takes action to collect amounts due under this Promissory Note or to enforce the provisions of this Promissory Note or (ii) there occurs any bankruptcy, reorganization, receivership of Maker or other similar proceedings affecting rights of Maker's creditors and involving a claim under this Promissory Note, then Maker shall pay the reasonable costs incurred by Payee for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, reasonable attorneys' fees and disbursements.

E.

Successors and Assigns.  This Promissory Note may be assigned or transferred by Payee only with the prior written approval of Maker; provided, however, that Maker's consent shall not be required for a transfer by Payee to any of its affiliates.  This Promissory Note shall inure to the benefit of, and be enforceable by, Payee and its successors, endorsees and assigns, and shall be binding upon, and enforceable against, Maker and Maker's successors, assigns, heirs, executors, administrators and duly appointed legal representatives, as applicable.  In no event shall this Promissory Note be assigned by Maker and any attempted or purported assignment shall constitute an Event of Default hereunder.

F.

Governing Law.  This Note will be governed by and construed and enforced in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws thereof.  

G.

Consent to Jurisdiction, Etc.  Each of the parties hereto (i) agrees that any suit, action, or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Promissory Note shall be brought only to the exclusive jurisdiction of the (x) the Court of Chancery of the State of Delaware, if the Court of Chancery of the State of Delaware has subject matter jurisdiction over the matter, (y) the Superior Court of the State of Delaware (provided that, if the requirements for filing in the Complex Commercial Litigation Division of the Superior Court of the State of Delaware (the "Division") may be satisfied, the litigation relating to such matter shall be filed in the Division), if the Court of Chancery of the State of Delaware does not have subject matter jurisdiction over the matter, or (z) any court of the United States located in the State of Delaware, if under applicable law exclusive jurisdiction over the matter is vested in the federal courts; (ii) consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action, or proceeding and irrevocably agrees not to commence any litigation relating thereto except in the court identified in accordance with clause (i) hereof and further waives any objection to the laying of venue of any such litigation in such court (and, in the case of sub-clause (y) above, in the Division); and (iii) agrees not to plead or claim in such court that such litigation brought therein has been brought in an inconvenient forum (or, in the case of sub-clause (x) above, shall not be brought in the Division).  Each of the parties hereto agrees that, after a legal dispute is before a court as specified in this Section 8.G, and during the pendency of such dispute before such court, all actions, suits, or proceedings with respect to such dispute or any other dispute, including without limitation, any counterclaim, cross-claim, or interpleader, shall be subject to the exclusive jurisdiction of such court.  Process in any such suit, action, or proceeding may be served on any party hereto anywhere in the world, whether within or without the jurisdiction of any such court.  Each of the parties hereto agrees that a final judgment in any action, suit, or proceeding described in this Section 8.G after the expiration of any period permitted for appeal and subject to any stay during appeal shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable laws.

H.

WAIVER OF JURY TRIAL.  MAKER AND PAYEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY OR AGAINST PAYEE WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS PROMISSORY NOTE, ANY ALLEGED TORTIOUS CONDUCT BY MAKER OR PAYEE, OR, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISING OUT OF OR RELATED TO THE RELATIONSHIP BETWEEN MAKER AND PAYEE.

 

I.

Invalidity.  If any provision of this Promissory Note is invalid, illegal or unenforceable, the balance of this Promissory Note shall remain in effect, and if any provision is inapplicable to any person, entity or circumstance, it shall nevertheless remain applicable to all other persons, entities and circumstances.  In such an event, the parties will in good faith attempt to effect the business agreement represented by such invalidated term to the fullest extent permitted by law.  In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision(s), then (i) such provisions(s) shall be excluded from this Promissory Note, (ii) the balance of the Promissory Note shall be interpreted as if such provision(s) were so excluded, and (iii) the balance of the Promissory Note shall be enforceable in accordance with its terms.

J.

Set-off by Payee.  Any sums at any time credited by or due from Payee to Maker under any other agreement or otherwise may at any time be applied to or set off against any amounts owed by Maker to Payee hereunder.

K.

Maker Indemnification.  Maker shall indemnify, defend and hold Payee harmless from and against any and all losses, liabilities, damages, costs and obligations (or actions or claims in respect thereof) (including reasonable attorneys’ fees), which Payee may suffer or incur arising out of or based upon (i) any misrepresentation or failure to fulfill any agreement or covenant on the part of Maker under this Promissory Note or any other document related thereto; and/or (ii) any and all actions, suits, proceedings, demands, assessments, judgments, costs and legal and other expenses incident to any of the foregoing.

[Signature pages to follow]

 

THIS PROMISSORY NOTE CONTAINS A CONFESSION OF JUDGMENT AND A WAIVER OF JURY TRIAL.  THE UNDERSIGNED DOES FREELY EXECUTE THIS PROMISSORY NOTE CONTAINING THE CONFESSION OF JUDGMENT AND WAIVER OF JURY TRIAL.

IN WITNESS WHEREOF, Maker has duly executed this Promissory Note as a sealed instrument as of the day and year first above written.

[SEAL]

PELICAN THERAPEUTICS, INC., as Maker

_____________________________

Name:

Title:

                                                

			
	STATE OF 

	 
	)

	 
	 
	 

	 
	 
	SS.:

	 
	 
	 

	COUNTY OF 

	 
	)

On the ___ day of __________, in the year 20__, before me, the undersigned, a Notary Public in and for said State, personally appeared _____________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument.

_________________________________

Notary Public

Print name: ____________

 

Acknowledged and agreed to by:

[SEAL]

HEAT BIOLOGICS, INC., as Payee

_____________________________

Name:   

Title:

			
	STATE OF 

	 
	)

	 
	 
	 

	 
	 
	SS.:

	 
	 
	 

	COUNTY OF 

	 
	)

On the ___ day of __________, in the year 20__, before me, the undersigned, a Notary Public in and for said State, personally appeared _____________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument.

_____________________________

Notary Public

Print name: ____________Ex. 10.1 - Am Rest Agency MRA

		

			EXHIBIT 10.1

		

		

			EXECUTION

		

		

			 

		

		
			 
		

		
			AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT
		

		
			Dated as of March 3, 2017
		

		
			Among:
		

		
			CITIBANK, N.A., as Buyer,
		

		
			and
		

		
			PENNYMAC LOAN SERVICES, LLC, as Seller,
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

			 

		

 

		

			 

		

		

		
			TABLE OF CONTENTS
		

			
					
						1.

					
					
						APPLICABILITY

					
1 
				
	
					
						2.

					
					
						DEFINITIONS AND ACCOUNTING MATTERS

					
1 
				
	
					
						3.

					
					
						THE TRANSACTIONS

					
22 
				
	
					
						4.

					
					
						PAYMENTs; COMPUTATION; COMMITMENT FEE

					
25 
				
	
					
						5.

					
					
						TAXES; TAX TREATMENT

					
25 
				
	
					
						6.

					
					
						MARGIN MAINTENANCE

					
27 
				
	
					
						7.

					
					
						INCOME PAYMENTS

					
27 
				
	
					
						8.

					
					
						SECURITY INTEREST; BUYER’S APPOINTMENT AS ATTORNEY-IN-FACT

					
27 
				
	
					
						9.

					
					
						CONDITIONS PRECEDENT

					
31 
				
	
					
						10.

					
					
						RELEASE OF PURCHASED LOANS

					
34 
				
	
					
						11.

					
					
						RELIANCE

					
35 
				
	
					
						12.

					
					
						REPRESENTATIONS AND WARRANTIES

					
35 
				
	
					
						13.

					
					
						COVENANTS

					
41 
				
	
					
						14.

					
					
						REPURCHASE DATE PAYMENTS

					
54 
				
	
					
						15.

					
					
						REPURCHASE OF PURCHASED Loans

					
54 
				
	
					
						16.

					
					
						RESERVED

					
54 
				
	
					
						17.

					
					
						ACCELERATION OF REPURCHASE Date

					
54 
				
	
					
						18.

					
					
						EVENTS OF DEFAULT

					
55 
				
	
					
						19.

					
					
						REMEDIES

					
59 
				
	
					
						20.

					
					
						DELAY NOT WAIVER; REMEDIES ARE CUMULATIVE

					
61 
				
	
					
						21.

					
					
						NOTICES AND OTHER COMMUNICATIONS

					
62 
				
	
					
						22.

					
					
						USE OF EMPLOYEE PLAN ASSETS

					
62 
				
	
					
						23.

					
					
						INDEMNIFICATION AND EXPENSES

					
62 
				
	
					
						24.

					
					
						WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS

					
63 
				
	
					
						25.

					
					
						REIMBURSEMENT

					
63 
				
	
					
						26.

					
					
						FURTHER ASSURANCES

					
64 
				
	
					
						27.

					
					
						TERMINATION

					
64 
				
	
					
						28.

					
					
						SEVERABILITY

					
64 
				
	
					
						29.

					
					
						BINDING EFFECT; GOVERNING LAW

					
64 
				
	
					
						30.

					
					
						AMENDMENTS

					
64 
				
	
					
						31.

					
					
						RESERVED.

					
64 
				
	
					
						32.

					
					
						SURVIVAL

					
64 
				
	
					
						33.

					
					
						CAPTIONS

					
65 
				
	
					
						34.

					
					
						counterparts; Electronic Signatures

					
65 
				
	
					
						35.

					
					
						SUBMISSION TO JURISDICTION; WAIVERS

					
65 
				
	
					
						36.

					
					
						WAIVER OF JURY TRIAL

					
66 
				
	
					
						37.

					
					
						ACKNOWLEDGEMENTS

					
66 
				
	
					
						38.

					
					
						HYPOTHECATION OR PLEDGE OF PURCHASED ITEMS

					
66 
				

		
			 
		

		
			
		

		

		 

		

			i

		

 

		

			 

		

	
					
						

					
						 

					
					
						 

					
					
						 

				
	
					
						39.

					
					
						ASSIGNMENTS; PARTICIPATIONS

					
66 
				
	
					
						40.

					
					
						SINGLE AGREEMENT

					
67 
				
	
					
						41.

					
					
						INTENT

					
67 
				
	
					
						42.

					
					
						CONFIDENTIALITY

					
67 
				
	
					
						43.

					
					
						SERVICING

					
68 
				
	
					
						44.

					
					
						PERIODIC DUE DILIGENCE REVIEW

					
69 
				
	
					
						45.

					
					
						SET-OFF

					
70 
				
	
					
						46.

					
					
						ENTIRE AGREEMENT

					
70 
				
	
					
						47.

					
					
						AMENDMENT AND RESTATEMENT

					
70 
				

		
			 
		

		
			 
		

			
					
						ANNEX I

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						SCHEDULES

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						SCHEDULE 1

					
					
						Representations and Warranties re: Loans

				
	
					
						 

					
					
						SCHEDULE 2

					
					
						Filing Jurisdictions and Offices

				
	
					
						 

					
					
						SCHEDULE 3

					
					
						Subsidiaries

				
	
					
						 

					
					
						SCHEDULE 4

					
					
						Relevant States

				
	
					
						 

					
					
						SCHEDULE 5

					
					
						Other Indebtedness

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						EXHIBITS

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						EXHIBIT A

					
					
						Form of Monthly and Quarterly Certification

				
	
					
						 

					
					
						EXHIBIT B

					
					
						Officer's Compliance Certificate

				
	
					
						 

					
					
						EXHIBIT C

					
					
						Reserved

				
	
					
						 

					
					
						EXHIBIT D

					
					
						Reserved

				
	
					
						 

					
					
						EXHIBIT E

					
					
						Reserved

				
	
					
						 

					
					
						EXHIBIT F

					
					
						Required Fields for Servicing Transmission

				
	
					
						 

					
					
						EXHIBIT G

					
					
						Required Fields for Loan Schedule

				
	
					
						 

					
					
						EXHIBIT H

					
					
						Form of Confidentiality Agreement

				
	
					
						 

					
					
						EXHIBIT I

					
					
						Form of Instruction Letter

				
	
					
						 

					
					
						EXHIBIT J

					
					
						Form of Power of Attorney

				

		
			 
		

		
			
		

		

		 

		

			ii

		

 

		

			 

		

	
					
						

					
						 

					
					
						EXHIBIT K

					
					
						Form of Security Release Certification

				

		
			 
		

		
			 
		

		
			

		 

		

			iii

		

 

		

			 

		

		

		
			AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT, dated as of March 3, 2017, by and between PENNYMAC LOAN SERVICES, LLC, a Delaware limited liability company, as seller (the “Seller”) and CITIBANK, N.A., a national banking association as buyer (“Buyer”, which term shall include any “Principal” as defined and provided for in Annex I), or as agent pursuant hereto (“Agent”).
		

		
			1.        APPLICABILITY
		

		
			Buyer shall, with respect to the Committed Amount and may, with respect to the Uncommitted Amount, from time to time, upon the terms and conditions set forth herein, agree to enter into transactions in which Seller transfers to Buyer Eligible Loans against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Purchased Loans at a date certain, against the transfer of funds by Seller.  Each such transaction shall be referred to herein as a “Transaction”, and, unless otherwise agreed in writing, shall be governed by this Agreement.
		

		
			2.        DEFINITIONS AND ACCOUNTING MATTERS
		

		
			(a)      Defined Terms. As used herein, the following terms have the following meanings (all terms defined in this Section 2 or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa):
		

		
			“Ability to Repay Rule” shall mean 12 CFR 1026.43(c), including all applicable official staff commentary.
		

		
			“Accepted Servicing Practices” shall mean with respect to any Loan, those accepted and prudent mortgage servicing practices (including collection procedures) of prudent mortgage lending institutions that service mortgage loans of the same type as the Loans in the jurisdiction where the related Mortgaged Property is located, and which are in accordance with FHA Regulations, VA Regulations, Ginnie Mae, Freddie Mac and Fannie Mae servicing practices and procedures for MBS pool mortgages, as defined in the FHA, VA, Ginnie Mae, Freddie Mac and Fannie Mae servicing guides including future updates, and in a manner at least equal in quality to the servicing Seller or Seller’s designee provides to mortgage loans and real estate owned properties which it owns in its own portfolio.
		

		
			“Additional Amount” shall have the meaning provided in Section 5(a).
		

		
			“Additional Purchased Loans” shall have the meaning provided in Section 6(a).
		

		
			“Adjustable Rate Loan” shall mean a Loan which provides for the adjustment of the Mortgage Interest Rate payable in respect thereto.
		

		
			“Adjusted Tangible Net Worth” shall mean, with respect to any Person, the excess of total assets (net of goodwill and intangible assets), which shall include the value of mortgage servicing rights in an amount equal to the lesser of (i) an amount calculated in accordance with GAAP or (ii) the MSR Value Cap, of such Person, over total liabilities of such Person, determined in accordance with GAAP.”
		

		
			“Adjustment Date” shall mean with respect to each Adjustable Rate Loan, the date set forth in the related Note on which the Mortgage Interest Rate on the Loan is adjusted in accordance with the terms of the Note.
		

		
			“Affiliate” shall mean, with respect to any Person, any other Person which, directly or indirectly, controls, is controlled by, or is under common control with, such Person.  For purposes of this definition, 
		

		
			
		

		
			

		 

		

			 

		

 

		

			 

		

		

		
			“control” (together with the correlative meanings of “controlled by” and “under common control with”) means possession, directly or indirectly, of the power (a) to vote 20% or more of the securities (on a fully diluted basis) having ordinary voting power for the directors or managing general partners (or their equivalent) of such Person, or (b) to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract, or otherwise; provided, however, that (i) only wholly owned Subsidiaries of the Guarantor and (ii) any Person in which Seller has possession, directly or indirectly, of the power (a) to vote 20% or more of the securities (on a fully diluted basis) having ordinary voting power for the directors or managing general partners (or their equivalent) of such Person, or (b) to direct or cause the direction of the management or policies of such Person, through the ownership of voting securities, shall be deemed an Affiliate of Seller or Guarantor for the purposes of this Agreement
		

		
			“Agency” means FHA, VA, Freddie Mac, Fannie Mae or Ginnie Mae, as applicable.
		

		
			“Agent” shall have the meaning set forth in the preamble to this Agreement.
		

		
			“Agreement” shall mean this Amended and Restated Master Repurchase Agreement (including all exhibits, schedules and other addenda hereto or thereto), as supplemented by the Pricing Side Letter, as it may be amended, further supplemented or otherwise modified from time to time.
		

		
			“ALTA” shall mean the American Land Title Association.
		

		
			“Anti-Money Laundering Laws” shall have the meaning set forth in Section 12(dd).
		

		
			“Applicable Margin” shall have the meaning set forth in the Pricing Side Letter.
		

		
			“Applicable Percentage” shall have the meaning set forth in the Pricing Side Letter.
		

		
			“Appraised Value” shall mean the value set forth in an appraisal made in connection with the origination of the related Loan as the value of the Mortgaged Property.
		

		
			“Assignment of Mortgage” shall mean, with respect to any Mortgage, an assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the assignment of the Mortgage to Buyer.
		

		
			“Back-End DTI Ratio” shall mean with respect to a Loan, the ratio of (i) the Mortgagor’s monthly debt payments, including housing and other debt, to (ii) the Mortgagor’s gross monthly income, determined in accordance with the Underwriting Guidelines.
		

		
			“Bankruptcy Code” shall mean the United States Bankruptcy Code of 1978, as amended from time to time.
		

		
			“Basel III” means “A Global Regulatory Framework for More Resilient Banks and  Banking Systems” developed by the Basel Committee on Banking Supervision (or any successor or similar authority), initially published in December 2010.
		

		
			“Best’s” shall mean Best’s Key Rating Guide, as the same shall be amended from time to time.
		

		
			
		

		
			

		 

		

			2

		

 

		

			 

		

		

		
			“Binding Jumbo Takeout Commitment” shall mean with respect to a Jumbo Loan, an irrevocable commitment issued by a Takeout Investor in favor of Seller pursuant to which such Takeout Investor pre-approves such Jumbo Loan and agrees to purchase such Jumbo Loan at a specific price on a forward delivery basis acceptable to Buyer in its sole discretion.
		

		
			“BPO” shall mean, with respect to a Loan, a broker’s price opinion prepared by a duly licensed real estate broker who has no interest, direct or indirect, in the Loan or in the Seller or any Affiliate of the Seller and whose compensation is not affected by the results of the broker’s price opinion and which valuation indicates the expected proceeds for a sale of the related Mortgaged Property and, includes certain assumptions, including those as to the condition of the interior of the applicable Mortgaged Property and expected marketing time.  Each BPO shall take into account at least three (3) sales of comparable Loans, and at least three (3) listings of comparable Loans. 
		

		
			“BPO Value” shall mean with respect to a Loan, the value of such Loan set forth in the most recently obtained BPO.
		

		
			“Business Day” shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which the New York Stock Exchange, the Federal Reserve Bank of New York, banking and savings and loan institutions in the States of New York or California, the City of New York or the city or state in which Custodian’s offices are located are closed, or (iii) a day on which trading in securities on the New York Stock Exchange or any other major securities exchange in the United States is not conducted.
		

		
			“Capital Lease Obligations” shall mean, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.
		

		
			“Capital Stock” shall mean any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all similar ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing, including (where applicable) uncertificated membership interests in a limited liability company.
		

		
			“Cash Equivalents” shall mean (a) securities with maturities of 90 days or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of 90 days or less from the date of acquisition and overnight bank deposits of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than seven days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-1 or the equivalent thereof by Standard and Poor’s Ratings Group (“S&P”) or P-1 or the equivalent thereof by Moody’s Investors Service, Inc. (“Moody’s”) and in either case maturing within 90 days after the day of acquisition, (e) securities with maturities of 90 days or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody’s, (f) securities with maturities of 90 days or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the requirements of clause (b) of this definition, or (g) shares of money market mutual or 
		

		
			
		

		
			

		 

		

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			similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition.
		

		
			“Change of Control” shall mean the occurrence of any of the following: (a) with respect to Seller, the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) of outstanding shares of voting stock of Seller if after giving effect to such acquisition such Person or Persons owns twenty-five percent (25%) or more of such outstanding shares of voting stock, (b) Guarantor ceases to directly or indirectly own and control, of record and beneficially, 100% of the Equity Interests of Seller or any of Guarantor’s wholly owned Subsidiaries, including but not limited to those Persons identified on Schedule 3 attached hereto and (c) PennyMac Financial Services, Inc. ceases to be the sole managing member of the Guarantor.
		

		
			“Citi Credit Facility” shall mean the Amended and Restated Credit Agreement, dated as of November 18, 2016, as amended, modified or supplemented (the "Credit Agreement"), among Private National Mortgage Acceptance Company, LLC, and Credit Suisse AG, as administrative agent  and as collateral agent for the Lenders identified in the Credit Agreement.  
		

		
			“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
		

		
			“Collection Account” shall mean the account identified in the Collection Account Control Agreement. 
		

		
			“Collection Account Control Agreement” shall mean the collection account control agreement to be entered into by Buyer, Seller and the Control Bank in form and substance acceptable to Buyer to be entered into with respect to the Collection Account as of the date hereof.
		

		
			“Combined Loan‐to‐Value Ratio” or “CLTV” shall mean with respect to any Loan, the ratio of (i) the original outstanding principal amount of the Loan and any other loan which is secured by a lien on the related Mortgaged Property to (ii) the lesser of (a) the Appraised Value of the Mortgaged Property at the origination of such Loan, or (b) if the Mortgaged Property was purchased by the Mortgagor within twelve (12) months of the origination of the Loan, the purchase price of the Mortgaged Property.
		

		
			“Commitment Fee” shall have the meaning assigned to it in the Pricing Side Letter.
		

		
			“Commitment Fee Percentage” shall have the meaning assigned to it in the Pricing Side Letter. 
		

		
			“Committed Amount” shall mean $200,000,000.
		

		
			“Contractual Obligation” shall mean as to any Person, any material provision of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound or any material provision of any security issued by such Person.
		

		
			“Control Bank” shall mean Citibank, N.A.
		

		
			“CRA Loan” shall have the meaning set forth in the Pricing Side Letter.
		

		
			“Credit Party” shall mean each of Seller and Guarantor.
		

		
			
		

		
			

		 

		

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			“Custodial Agreement” shall mean the Custodial Agreement, dated as of the date hereof, among Seller, Buyer and Custodian as the same may be amended, modified and supplemented and in effect from time to time.
		

		
			“Custodian” shall mean Deutsche Bank National Trust Company, or such other entity agreed upon by Buyer and Seller from time to time, or its successors and permitted assigns.
		

		
			“Custodian Loan Transmission” shall have the meaning assigned thereto in the Custodial Agreement.
		

		
			“Default” shall mean an Event of Default or any event that, with the giving of notice or the passage of time or both, could become an Event of Default.
		

		
			“Dodd-Frank Act” means the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Pub. L. No. 111-203 and any successor statute.
		

		
			“Dollars” or “$” shall mean lawful money of the United States of America.
		

		
			“Due Date” shall mean the day of the month on which the Monthly Payment is due on a Loan, exclusive of any days of grace.
		

		
			“Due Diligence Review” shall mean the performance by Buyer of any or all of the reviews permitted under Section 44 hereof with respect to any or all of the Loans, Seller or related parties, as desired by Buyer from time to time.
		

		
			“Effective Date” shall mean the date upon which the conditions precedent set forth in Section 9(a) have been satisfied.
		

		
			“Electronic Tracking Agreement” shall mean the electronic tracking agreement among Buyer, Seller, MERSCORP Holdings, Inc. and MERS, dated as of the date hereof.
		

		
			“Electronic Transmission” shall mean the delivery of information in an electronic format acceptable to the applicable recipient thereof.  An Electronic Transmission shall be considered written notice for all purposes hereof (except when a request or notice by its terms requires execution).
		

		
			“Eligible Loan”  shall have the meaning assigned thereto in the Pricing Side Letter.
		

		
			“Environmental Laws” shall mean any federal, state, foreign or local statute, law, rule, regulation, ordinance, code, guideline, written policy or rule of common law now or hereafter in effect, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, employee health and safety or hazardous materials, including CERCLA, RCRA, the Federal Water Pollution Control Act, the Toxic Substances Control Act, the Clean Air Act, the Safe Drinking Water Act, the Oil Pollution Act of 1990, the Emergency Planning and the Community Right-to-Know Act of 1986, the Hazardous Material Transportation Act, the Occupational Safety and Health Act, and any state and local or foreign counterparts or equivalents.
		

		
			“Equity Interests” shall mean with respect to any Person, (a) any share or interest in Capital Stock (including any participation interest or divided ownership or profit sharing interest however denominated) in such Person, whether voting or nonvoting, and whether or not such share, warrant, option right or other interest is authorized or otherwise existing as of any date of determination, (b) any warrant, option or other 
		

		
			
		

		
			

		 

		

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			right for the purchase or acquisition from such Person of any share or interest described in (a) above, (c) any security convertible into or exchangeable for any of the foregoing, and (d) any other ownership interest in such Person (including partnership, member or trust interests therein).
		

		
			“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.
		

		
			“ERISA Affiliate” shall mean any Affiliate, whether or not incorporated, that is a member of any group of organizations described in Section 414(b), (c), (m) or (o) of the Code of which Seller is a member.
		

		
			“Escrow Payments” shall mean, with respect to any Loan, the amounts constituting ground rents, taxes, assessments, water charges, sewer rents, municipal charges, mortgage insurance premiums, fire and hazard insurance premiums, condominium charges, and any other payments required to be escrowed by the Mortgagor with the Mortgagee pursuant to the terms of any Note or Mortgage or any other document.
		

		
			“Event of Default” shall have the meaning provided in Section 18 hereof.
		

		
			“Excluded Taxes” shall mean any income taxes, branch profits taxes, franchise taxes, or other taxes measured by or enforced on gross receipts or net income that is imposed by the United States, a state, a foreign jurisdiction under the laws of which Buyer is organized, maintains its applicable lending office, or has a present or former connection, and any political subdivision of any of the foregoing.
		

		
			“Executive Order” shall mean Executive Order 13224-- Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism.
		

		
			“Exception” shall have the meaning assigned thereto in the Custodial Agreement.
		

		
			“Exception Report” shall mean the exception report prepared by Custodian pursuant to the Custodial Agreement.
		

		
			“Fannie Mae” shall mean Fannie Mae, or any successor thereto.
		

		
			“Fannie Mae Aged Loan” shall mean a Loan (i) in respect of which the related Takeout Investor is Fannie Mae and (ii) that (x) is subject to outstanding Transactions hereunder and/or (y) was subject to any REIT Agency Agreement Transaction, for between thirty-one (31) calendar days (whether or not consecutive) and forty-five (45) calendar days (whether or not consecutive) in the aggregate.
		

		
			“Fannie Mae Guides” shall mean the Fannie Mae Seller’s Guide, the Fannie Mae Servicing Guide and all amendments and additions thereto.
		

		
			“FHA” shall mean the Federal Housing Administration, an agency within the United States Department of Housing and Urban Development, or any successor thereto and including the Federal Housing Commissioner and the Secretary of Housing and Urban Development where appropriate under the FHA Regulations.
		

		
			“FHA 203(k) Loan” shall mean a loan for the rehabilitation and/or repair of a single family residential property in accordance with the FHA 203(k) program.
		

		
			“FHA Approved Mortgagee” shall mean an institution which is (i) with respect to Seller (and any Subservicer if applicable) approved by FHA to act as servicer and mortgagee of record pursuant to FHA 
		

		
			
		

		
			

		 

		

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			Regulations, (ii) with respect to Penny Mac Corp. approved by FHA to purchase, own and sell FHA Loans pursuant to FHA Regulations and (iii) with respect to any Qualified Originator approved by FHA to originate FHA Loans and to act as servicer and mortgagee of record pursuant to FHA Regulations.
		

		
			“FHA Insurance Contract” shall mean the contractual obligation of FHA respecting the insurance of an FHA Loan pursuant to the National Housing Act, as amended.         
		

		
			“FHA Loan” shall mean a Loan that is the subject of an FHA Insurance Contract as evidenced by a Mortgage Insurance Certificate.  
		

		
			“FHA Regulations” shall mean the regulations promulgated by HUD under the National Housing Act, codified in 24 Code of Federal Regulations, and other HUD issuances relating to FHA Loans, including the related handbooks, Circulars, Notices and Mortgagee Letters.
		

		
			“FHA Up-Front Rejection” shall mean, with respect to a Loan presented to FHA and proposed to become subject to an FHA Insurance Contract, the rejection by FHA of such Loan, as evidenced by a "notice of rejection" or similar written notice delivered by FHA to the related originator of such Loan.
		

		
			“Freddie Mac” shall mean Freddie Mac, or any successor thereto.
		

		
			“Freddie Mac Guides” shall mean the Freddie Mac Seller/Servicer Guide, and all amendments and additions thereto.
		

		
			“Front-End DTI Ratio” shall mean with respect to a Loan, the ratio of (i) the Mortgagor’s monthly housing-related debt payments, to (ii) the Mortgagor’s gross monthly income, determined in accordance with the Underwriting Guidelines.
		

		
			“GAAP” shall mean generally accepted accounting principles in effect from time to time in the United States of America.
		

		
			“Ginnie Mae” shall mean the Government National Mortgage Association, or any successor thereto.
		

		
			“Ginnie Mae Aged Loan” shall mean a Loan (i) in respect of which the related Takeout Investor is Ginnie Mae and (ii) that (x) is subject to outstanding Transactions hereunder and/or (y) was subject to any REIT Agency Agreement Transaction, for between thirty-one (31) calendar days (whether or not consecutive) and forty-five (45) calendar days (whether or not consecutive) in the aggregate.
		

		
			“Ginnie Mae Guides” shall mean the Ginnie Mae Handbook 5500.3 and all amendments and additions thereto.
		

		
			“Governmental Authority” shall mean with respect to any Person, any nation or government, any state or other political subdivision, agency or instrumentality thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any court or arbitrator having jurisdiction over such Person, any of its Subsidiaries or any of its properties.
		

		
			“Gross Margin” shall mean with respect to each Adjustable Rate Loan, the fixed percentage amount set forth in the related Note and the Loan Schedule that is added to the Index on each Adjustment Date in accordance with the terms of the related Note to determine the new Mortgage Interest Rate for such Loan.
		

		
			
		

		
			

		 

		

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			“Guarantee” shall mean, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise), provided that the term “Guarantee” shall not include (i) endorsements for collection or deposit in the ordinary course of business, or (ii) obligations to make servicing advances for delinquent taxes and insurance, or other obligations in respect of a Mortgaged Property, to the extent required by Buyer. The amount of any Guarantee of a Person shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. The terms “Guarantee” and “Guaranteed” used as verbs shall have correlative meanings.
		

		
			“Guarantor” shall mean Private National Mortgage Acceptance Company, LLC, its successors and permitted assigns.
		

		
			“Guaranty” shall mean the Guaranty Agreement, dated as of June 26, 2012, by Guarantor in favor of Buyer, as such agreement may be amended or modified from time to time in accordance with its terms.
		

		
			“Guidelines” shall mean the Freddie Mac Guides, the Fannie Mae Guides or the Ginnie Mae Guides, as applicable, as such guides have been amended from time to time with respect to Seller.
		

		
			“High Cost Loan” shall mean a Loan classified as (a) a “high cost” loan under the Home Ownership and Equity Protection Act of 1994, (b) a “high cost,” “threshold,” “covered,” or “predatory” loan under any other applicable state, federal or local law (or a similarly classified loan using different terminology under a law, regulation or ordinance imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees) or (c) a High Cost Loan or Covered Loan, as applicable (as such terms are defined in the current Standard & Poor’s LEVELS® Glossary Revised, Appendix E).
		

		
			“Income” shall mean, with respect to any Purchased Loan or Security at any time, any principal and/or interest thereon and all dividends, sale proceeds (including, without limitation, any proceeds from the liquidation or securitization of such Purchased Loan or other disposition thereof), rent and other collections and distributions thereon (including, without limitation, any proceeds received in respect of mortgage insurance), but not including any servicing fees accrued in respect of periods on or after the initial Purchase Date with respect to such Purchased Loan or Security.
		

		
			“Indebtedness” shall mean, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 90 days of the date the respective goods are delivered or the respective services are rendered; (c) indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements or like arrangements; (g) indebtedness of others Guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of 
		

		
			
		

		
			

		 

		

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			fixed assets by such Person; (i) indebtedness of general partnerships of which such Person is a general partner; and (j) any other indebtedness of such Person by a note, bond, debenture or similar instrument.
		

		
			“Index” shall mean with respect to each Adjustable Rate Loan, the index identified on the related Loan Schedule and set forth in the related Note for the purpose of calculating the interest rate thereon.
		

		
			“Instruction Letter” shall mean a letter agreement between Seller and each Subservicer or interim servicer of Purchased Loans substantially in the form of Exhibit I attached hereto, in which such Persons acknowledge Buyer’s ownership interest in the Purchased Loans, and, following any Default, agree to remit any collections with respect to such Purchased Loans to the Collection Account or as Buyer may otherwise direct from time to time, which Instruction Letter may be delivered by Buyer to such Subservicer in its sole discretion.
		

		
			“Insurance Proceeds” shall mean with respect to each Purchased Loan, proceeds of insurance policies insuring such Purchased Loan or the related Mortgaged Property, as applicable.
		

		
			“Intercreditor Agreement” shall mean that certain third amended and restated intercreditor agreement,  entered into by and among Seller, Bank of America, N.A., Credit Suisse First Boston Mortgage Capital LLC and Buyer, as the same shall be amended, restated, supplemented or otherwise modified and in effect from time to time. 
		

		
			“Interest Period” shall mean, with respect to any Transaction, the period commencing on the Purchase Date with respect to such Transaction and ending on the calendar day prior to the related Repurchase Date.  
		

		
			“Interest Rate Adjustment Date” means with respect to each Adjustable Rate Loan, the date, specified in the related Note and the Loan Schedule, on which the Mortgage Interest Rate is adjusted.
		

		
			“Investment Company Act” shall mean the Investment Company Act of 1940, as amended, including all rules and regulations promulgated thereunder.
		

		
			“Joint Account Control Agreement” shall mean that certain amended and restated joint account control agreement, entered into by and among Deutsche Bank National Trust Company, as depositary bank and paying agent, Seller, Bank of America, N.A., Credit Suisse First Boston Mortgage Capital LLC and Buyer, as the same shall be amended, restated, supplemented or otherwise modified and in effect from time to time. 
		

		
			“Joint Securities Account Control Agreement” shall mean that certain third amended and restated joint securities account control agreement, entered into by and among Deutsche Bank National Trust Company, as securities intermediary, Seller, Bank of America, N.A., Credit Suisse First Boston Mortgage Capital LLC and Buyer, as the same shall be amended, restated, supplemented or otherwise modified and in effect from time to time.
		

		
			“Jumbo Cash-Out Refinanced Loan”  A Jumbo Loan, the proceeds of which were in excess of the principal balance of any existing first and/or subordinate mortgages on the related Mortgaged Property and related closing costs, and were used to pay any such existing first and/or subordinate mortgages and the related closing costs on the related Mortgaged Property.
		

		
			
		

		
			

		 

		

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			“Jumbo Loan” shall mean a first lien Loan which conforms with all requirements (other than conforming balance limitations) of Fannie Mae and Freddie Mac, each as in effect as of the related Purchase Date.
		

		
			“LIBO Base Rate” shall mean the greater of (a) 0.00% and (b) the rate determined daily by Buyer on the basis of the “BBA’s Interest Settlement Rate” offered for one-month U.S. dollar deposits, as such rate appears on Bloomberg L.P.’s page “BBAM” as of 11:00 a.m. (London time) on such date provided that if such rate does not appear on Bloomberg L.P.’s page “BBAM” as of such time on such date, the rate for such date will be the rate determined by reference to the most recently published rate on Bloomberg L.P.’s page “BBAM”; provided further that if such rate is no longer set on Bloomberg L.P.’s page “BBAM”, the rate of such date will be determined by reference to such other comparable publicly available service publishing such rates as may be selected by Buyer in its sole discretion, which rates have performed or are expected by Buyer to perform in a manner substantially similar to the rate appearing on Bloomberg L.P.’s page “BBAM”, and which rate will be communicated to Seller.  Notwithstanding anything to the contrary herein, Buyer shall have the sole discretion to re-set the LIBO Base Rate on a daily basis. 
		

		
			“LIBO Rate” shall mean with respect to each Interest Period pertaining to a Transaction, a rate per annum determined by Buyer in its sole discretion in accordance with the following formula (rounded to five decimal places), which rate as determined by Buyer shall be conclusive absent manifest error by Buyer:
		

			
					
						 

				
	
					
						LIBO Base Rate

				
	
					
						 

				
	
					
						 

				
	
					
						1.00 – LIBO Reserve Requirements

				

		
			 
		

		
			The LIBO Rate shall be calculated on each Purchase Date and Repurchase Date commencing with the first Purchase Date.
		

		
			“LIBO Reserve Requirements” shall mean for any Interest Period for any Transaction, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements applicable to Buyer in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto), dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of such Board) maintained by a member bank of such Governmental Authority. As of the Effective Date, the LIBO Reserve Requirements shall be deemed to be zero.  Buyer will provide Seller no less than 30 days prior written notice of implementation of any change in LIBO Reserve Requirements.
		

		
			“Lien” shall mean any mortgage, lien, pledge, charge, security interest or similar encumbrance.
		

		
			“Liquidity” means with respect to any Person, the sum of (i) its unrestricted cash, plus (ii) its unrestricted Cash Equivalents. For the avoidance of doubt, such unrestricted cash shall not include any cash collateral of such Person in respect of letter of credit obligations of such Person.
		

		
			“Loan” shall mean a first lien mortgage loan, which Custodian has been instructed to hold for Buyer pursuant to the Custodial Agreement, and which Loan includes, without limitation, (i) a Note, the 
		

		
			
		

		
			

		 

		

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			related Mortgage and all other Loan Documents, (ii) all right, title and interest of Seller in and to the Mortgaged Property covered by such Mortgage and (iii) the related Servicing Rights.
		

		
			“Loan Data Transmission” shall mean a computer tape or other electronic medium generated by or on behalf of Seller and delivered or transmitted to Buyer and Custodian which provides information relating to the Loans, including the information set forth in the related Loan Schedule, in a format acceptable to Buyer.
		

		
			“Loan Documents” shall mean, with respect to a Loan, the documents comprising the Mortgage File for such Loan.
		

		
			“Loan Guaranty Certificate” shall mean the certificate evidencing a VA Loan Guaranty Agreement.
		

		
			“Loan Loss Reserves” shall mean funds held by a Seller Party to cover potential losses in connection with the mortgage loans owned in such Person’s portfolio, including without limitation any amounts required to be maintained and held as a loan loss reserve in accordance with GAAP and any other regulatory requirement applicable to such Person.
		

		
			“Loan Schedule” shall mean a hard copy or electronic format incorporating the fields identified on Exhibit G, which shall include with respect to each Loan to be included in a Transaction without limitation: (i) the Loan number, (ii) the Mortgagor’s name, (iii) the original principal amount of the Loan, (iv) the current principal balance of the Loan, (v) the name of any Subservicer (if applicable)  subservicing such Loan, and (vi) any other information required by Buyer and any other additional information to be provided pursuant to the Custodial Agreement.
		

		
			“Loan‐to‐Value Ratio” or “LTV” shall mean with respect to any Loan, the ratio of the outstanding principal amount of such Loan at the time of origination to the lesser of (a) the Appraised Value of the Mortgaged Property at the origination of such Mortgage Loan or (b) if the Mortgaged Property was purchased within twelve (12) months of the origination of the Loan, the purchase price of the related Mortgaged Property.
		

		
			“Margin Call” shall have the meaning assigned thereto in Section 6(a) hereof.
		

		
			“Margin Deficit” shall have the meaning assigned thereto in Section 6(a) hereof.
		

		
			“Market Value” shall mean the value, determined by Buyer in its sole discretion, of the Loans (including the related Servicing Rights) if sold in their entirety to a single third-party purchaser taking into account the fact that the Loans may be sold under circumstances in which Seller and/or the servicer of the Loans is in default under this Agreement. Buyer’s determination of Market Value shall be conclusive upon the parties, absent manifest error on the part of Buyer. Buyer shall have the right to mark to market the Loans on a daily basis which Market Value with respect to one or more of the Loans may be determined to be zero. Seller acknowledges that Buyer’s determination of Market Value is for the limited purpose of determining the value of Purchased Loans which are subject to Transactions hereunder without the ability to perform customary purchaser’s due diligence and is not necessarily equivalent to a determination of the fair market value of the Loans achieved by obtaining competing bids in an orderly market in which the originator/servicer is not in default under a revolving debt facility and the bidders have adequate opportunity to perform customary loan (or property, as applicable) and servicing due diligence.  For the purpose of determining the related Market Value, Buyer shall have the right to request at any time from Seller, an updated valuation for each Loan, in a form acceptable to Buyer in its sole discretion.  The Market Value 
		

		
			
		

		
			

		 

		

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			shall be deemed to be zero with respect to each Loan for which such valuation is not provided.  The Market Value shall be deemed to be zero with respect to each Loan that is not an Eligible Loan.
		

		
			“Material Adverse Effect” shall mean a material adverse effect on (a) the property, business, operations, financial condition or prospects of Seller or Guarantor, (b) the ability of Seller or Guarantor to perform its obligations under any of the Program Documents to which it is a party, (c) the validity or enforceability of any of the Program Documents, (d) the rights and remedies of Buyer under any of the Program Documents, (e) the timely repurchase of the Purchased Loans or payment of other amounts payable in connection therewith or (f) the Purchased Items.
		

		
			“Materials of Environmental Concern” shall mean any hazardous, toxic or harmful substances, materials, wastes, pollutants or contaminants defined as such in or regulated under any Environmental Law.
		

		
			“Maximum Aggregate Purchase Price” shall mean the sum of (i) the Committed Amount and (ii) in Buyer’s sole discretion, the Uncommitted Amount.
		

		
			“Maximum Mortgage Interest Rate” shall mean with respect to each Adjustable Rate Loan, a rate that is set forth on the related Loan Schedule and in the related Note and is the maximum interest rate to which the Mortgage Interest Rate on such Loan may be increased on any Adjustment Date.
		

		
			“MERS” shall mean Mortgage Electronic Registration Systems, Inc., a Delaware corporation, or any successor in interest thereto.
		

		
			“MERS Identification Number” shall mean the eighteen digit number permanently assigned to each MERS Loan.
		

		
			“MERS Loan” shall mean any Loan as to which the related Mortgage or Assignment of Mortgage has been recorded in the name of MERS, as agent for the holder from time to time of the Note, and which is identified as a MERS Loan on the related Loan Schedule.
		

		
			“Monthly Payment” shall mean the scheduled monthly payment of principal and interest on a Loan as adjusted in accordance with changes in the Mortgage Interest Rate pursuant to the provisions of the Note for an Adjustable Rate Loan.
		

		
			“Mortgage” shall mean with respect to a Loan, the mortgage, deed of trust or other instrument, which creates a first lien on the fee simple or leasehold estate in such real property and secures the Note.
		

		
			“Mortgage File” shall have the meaning assigned thereto in the Custodial Agreement.
		

		
			“Mortgage Insurance Certificate” shall mean the certificate evidencing a FHA Insurance Contract.
		

		
			“Mortgage Interest Rate” means the annual rate of interest borne on a Note, which shall be adjusted from time to time with respect to Adjustable Rate Loans.
		

		
			“Mortgaged Property” shall mean the real property (including all improvements, buildings, fixtures, building equipment and personal property thereon and all additions, alterations and replacements made at any time with respect to the foregoing) and all other collateral securing repayment of the debt evidenced by a Note.
		

		
			“Mortgagee” shall mean the record holder of a Note secured by a Mortgage.
		

		
			
		

		
			

		 

		

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			“Mortgagor” shall mean the obligor or obligors on a Note, including any person who has assumed or guaranteed the obligations of the obligor thereunder.
		

		
			“MSR Value Cap” shall have the meaning set forth in the Pricing Side Letter.
		

		
			“Multiemployer Plan” shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been or are required to be made by either Seller or any ERISA Affiliate or as to which either Seller or any ERISA Affiliate has any actual or potential liability or obligation and that is covered by Title IV of ERISA.
		

		
			“MV Margin Amount” shall mean, with respect to any Transaction, as of any date of determination, the amount obtained by application of the MV Margin Percentage to the Repurchase Price for such Transaction as of such date.
		

		
			“MV Margin Percentage” shall have the meaning assigned thereto in the Pricing Side Letter.
		

		
			“Net Income” shall mean, for any period, the net income of any Person for such period as determined in accordance with GAAP.
		

		
			“Net Worth” shall mean, with respect to any Person, the excess of total assets of such Person, over total liabilities of such Person, determined in accordance with GAAP.
		

		
			“Nonbinding Jumbo Takeout Agreement” shall mean a flow loan purchase and sale arrangement with a Takeout Investor acceptable to Buyer in its sole discretion, pursuant to which such Takeout Investor may purchase Jumbo Loans on a forward delivery basis.
		

		
			“Note” shall mean, with respect to any Loan, the related promissory note together with all riders thereto and amendments thereof or other evidence of indebtedness of the related Mortgagor.
		

		
			“Obligations” shall mean (a) all of Seller’s obligations to pay the Repurchase Price on the Repurchase Date and other obligations and liabilities (including, without limitation, the Commitment Fee) of Seller to Buyer, its Affiliates, Custodian or any other Person arising under, or in connection with, the Program Documents or directly related to the Purchased Loans, whether now existing or hereafter arising; (b) any and all sums paid by Buyer or on behalf of Buyer pursuant to the Program Documents in order to preserve any Purchased Loan or its interest therein; (c) in the event of any proceeding for the collection or enforcement of any of Seller’s indebtedness, obligations or liabilities referred to in clause (a), the reasonable expenses of retaking, holding, collecting, preparing for sale, selling or otherwise disposing of or realizing on any Purchased Loan, or of any exercise by Buyer or any Affiliate of Buyer of its rights under the Program Documents, including without limitation, reasonable attorneys’ fees and disbursements and court costs; and (d) all of Seller’s indemnity obligations to Buyer pursuant to the Program Documents.
		

		
			“OFAC” shall mean the Office of Foreign Assets Control of the United States Department of the Treasury. 
		

		
			“Officer’s Compliance Certificate” shall mean an officer’s certificate signed by a Responsible Officer of Seller substantially in the form of Exhibit B attached hereto.
		

		
			“Official Body” means any central bank or any accounting board or authority (whether or not part of a government) which is responsible for the establishment or interpretation of national or international accounting principles, in each case whether foreign or domestic.
		

		
			
		

		
			

		 

		

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			“Par Margin Amount” means, with respect to any Transaction, as of any date of determination, the amount obtained by application of the Par Margin Percentage to the Repurchase Price for such Transaction as of such date.
		

		
			“Par Margin Percentage” shall have the meaning assigned thereto in the Pricing Side Letter. 
		

		
			“Participants” shall have the meaning assigned thereto in Section 39 hereof.
		

		
			“PBGC” shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
		

		
			“Person” shall mean any individual, corporation, company, voluntary association, partnership, joint venture, limited liability company, trust, unincorporated association or government (or any agency, instrumentality or political subdivision thereof).
		

		
			“Plan” shall mean an employee benefit or other plan established or maintained by Seller or, in the case of a Plan subject to Title IV of ERISA, any ERISA Affiliate and that is covered by Title IV of ERISA, other than a Multiemployer Plan.
		

		
			“PMI Policy” or “Primary Insurance Policy” shall mean a policy of primary mortgage guaranty insurance issued by a Qualified Insurer.
		

		
			“Post-Default Rate” shall mean, in respect of the Repurchase Price for any Transaction or any other amount under this Agreement, or any other Program Document that is not paid when due to Buyer (whether at stated maturity, by acceleration or mandatory prepayment or otherwise), a rate per annum equal to the rate set forth in the Pricing Side Letter.
		

		
			“Price Differential” shall mean, with respect to each Transaction as of any date of determination, the aggregate amount obtained by daily application of the Pricing Rate (or during the continuation of an Event of Default, by daily application of the Post-Default Rate) for such Transaction to the Purchase Price for such Transaction on a 360‐day‐per‐year basis for the actual number of days elapsed during the period commencing on (and including) the Purchase Date and ending on (but excluding) the date of determination (reduced by any amount of such Price Differential in respect of such period previously paid by Seller to Buyer with respect to such Transaction).
		

		
			“Pricing Rate” shall mean the per annum percentage rate for determination of the Price Differential as set forth in the Pricing Side Letter.
		

		
			“Pricing Side Letter” shall mean the pricing side letter, dated as of the date hereof, between Seller and Buyer, as the same may be amended, supplemented or modified from time to time.
		

		
			“Principal” shall have the meaning assigned thereto in Annex I.
		

		
			“Program Documents” shall mean this Agreement, the Custodial Agreement, the Guaranty, any Servicing Agreement, the Electronic Tracking Agreement, the Pricing Side Letter, the Intercreditor Agreement, the Joint Securities Account Control Agreement, the Joint Account Control Agreement, all Instruction Letters, if any, the Collection Account Control Agreement and any other agreement entered into by Seller, on the one hand, and Buyer and/or any of its Affiliates or Subsidiaries (or Custodian on its behalf) on the other, in connection herewith or therewith.
		

		
			
		

		
			

		 

		

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			“Prohibited Jurisdiction” shall mean any country or jurisdiction, from time to time, that is the subject of a prohibition order (or any similar order or directive), sanctions or restrictions promulgated or administered by any Governmental Authority of the United States.
		

		
			“Prohibited Person” shall mean any Person:
		

		
			(i)         listed in the Annex to (the “Annex”), or otherwise subject to the provisions of, the Executive Order;
		

		
			(ii)        that is owned or controlled by, or acting for or on behalf of, any person or entity that is listed to the Annex to, or is otherwise subject to the provisions of, the Executive Order;
		

		
			(iii)       with whom the Buyer is prohibited from dealing or otherwise engaging in any transaction by any terrorism or money laundering law, including the Executive Order;
		

		
			(iv)       who commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order;
		

		
			(v)        that is named as a “specially designated national and blocked person” on the most current list published by the OFAC at its official website, http://www.treas.gov.ofac/t11sdn.pdf or at any replacement website or other replacement official publication of such list; or
		

		
			(vi)       who is an Affiliate of a Person listed above.
		

		
			“Property” shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.
		

		
			“Purchase Date” shall mean, with respect to each Transaction, the date on which Purchased Loans are sold by Seller to Buyer hereunder.
		

		
			“Purchase Notice” shall mean Buyer’s agreement to enter into a Transaction requested by Seller pursuant to a Transaction Notice. Such Purchase Notice shall specify the Loans that Buyer has agreed to purchase from Seller in such Transaction, the related Purchase Date and Repurchase Date, the related Purchase Price for such Transaction, the fields set forth on Annex 1 to the Custodial Agreement and any other terms of such Transaction agreed upon between Seller and Buyer.
		

		
			“Purchase Price” shall have the meaning set forth in the Pricing Side Letter.
		

		
			“Purchased Items” shall have the meaning assigned thereto in Section 8 hereof.
		

		
			“Purchased Loans” shall mean any Loans sold by Seller to Buyer in a Transaction, together with the related Records, the related Servicing Rights (which, for the avoidance of doubt, were sold by Seller and purchased by Buyer on the related Purchase Date), the portion of the Security related to such Loans, the related Takeout Commitment and the related Trade Assignment, if any, and with respect to each Loan, any related FHA Insurance Contract, any related VA Loan Guaranty Agreement, Seller’s rights under any takeout commitment related to the Loans and other Purchased Items with respect to the Loans, such other property, rights, titles or interest as are specified on a Purchase Notice, and all instruments, chattel paper, and general intangibles comprising or relating to all of the foregoing.  
		

		
			“QM Rule” shall mean 12 CFR 1026.43(e), including all applicable official staff commentary.
		

		
			
		

		
			

		 

		

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			“Qualified Insurer” shall mean an insurance company duly qualified as such under the laws of each state in which any Mortgaged Property is located, duly authorized and licensed in each such state to transact the applicable insurance business and to write the insurance provided, and approved as an insurer by Fannie Mae and Freddie Mac and whose claims paying ability is rated in the two highest rating categories by any of the rating agencies with respect to primary mortgage insurance and in the two highest rating categories by Best’s with respect to hazard and flood insurance.
		

		
			“Qualified Mortgage” shall mean a Loan that satisfies the criteria for a “qualified mortgage” as set forth in 12 CFR 1026.43(e)(4) as further limited by 12 CFR 1026.43(e)(1)(i).
		

		
			“Qualified Originator” shall mean those correspondent originators of PennyMac Corp. that originate mortgage loans for PennyMac Corp. in accordance with PennyMac Corp.’s Underwriting Guidelines and have not otherwise been disapproved by Buyer in writing.
		

		
			“Quality Control Program” shall have the meaning assigned to such term in Section 13(pp).
		

		
			“Records” shall mean, with respect to any Purchased Loan, the Loan Documents and the Servicing Records.
		

		
			“REIT Agency Agreement” shall mean that Amended and Restated Master Repurchase Agreement dated as of March 3, 2017, as amended (the “REIT Agency Repurchase Agreement”), among PennyMac Corp., as seller, PennyMac Loan Services, LLC, as servicer and Citibank, N.A., as buyer.
		

		
			“REIT Agency Agreement Transaction” shall mean a Transaction as defined in the REIT Agency Agreement.
		

		
			“REIT Agency Loan” shall mean a Loan that prior to its inclusion in any Transaction hereunder, was subject to a REIT Agency Agreement Transaction.
		

		
			“Refi Mortgage Loan” shall mean a Loan as to which a “refinancing” has occurred, as defined in 12 CFR 1026.20(a).
		

		
			“Related Credit Enhancement” shall have the meaning assigned to such term in Section 8(a).  
		

		
			“Reportable Event” shall mean any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .21, .22, .23, .24, .28, .29, .31, or .32 of PBGC Reg. § 4043 (provided that a failure to meet the minimum funding standard of Section 412 of the Code or Sections 302 or 303 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 430(j) of the Code or Section 303(j) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code).
		

		
			“Repurchase Date” shall mean the date occurring on the earliest of (i) the 12th day of each month following the related Purchase Date (or if such date is not a Business Day, the following Business Day), (ii) any other Business Day set forth in the related Purchase Notice, (iii) the date determined by application of Section 19, as applicable, or (iv) the Termination Date.  In no event shall the Repurchase Date for any Transaction occur after the Termination Date.
		

		
			“Repurchase Price” shall mean the price at which Purchased Loans are to be transferred from Buyer to Seller upon termination of a Transaction, which will be determined in each case (including Transactions 
		

		
			
		

		
			

		 

		

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			terminable upon demand) as the sum of the outstanding Purchase Price for such Purchased Loans and the Price Differential as of the date of such determination.
		

		
			“Requirement of Law” shall mean as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or interpretation thereof 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” shall mean, as to any Person, the chief executive officer or, with respect to financial matters, the chief financial officer of such Person; provided, that in the event any such officer is unavailable at any time he or she is required to take any action hereunder, Responsible Officer shall mean any officer authorized to act on such officer’s behalf as demonstrated by a certificate of corporate resolution.
		

		
			“Restricted Payments” shall mean with respect to any Person, collectively, all dividends or other distributions of any nature (cash, securities, assets or otherwise), and all payments, by virtue of redemption or otherwise, on any class of equity securities (including, without limitation, warrants, options or rights therefor) issued by such Person, whether such securities are now or may hereafter be authorized or outstanding and any distribution in respect of any of the foregoing, whether directly or indirectly.
		

		
			“Rural Housing Service” shall mean the Rural Housing Service of the USDA. 
		

		
			“Rural Housing Service Guaranty” shall mean with respect to a USDA Loan, the agreements evidencing the guaranty of such loan by the Rural Housing Service.
		

		
			“Safe Harbor Qualified Mortgage” shall mean a Qualified Mortgage with an annual percentage rate that does not exceed the average prime offer rate for a comparable mortgage loan as of the date the interest rate is set by  1.5 or more  percentage points for a first-lien Loan or by  3.5 or more percentage points for a subordinate-lien Loan.
		

		
			“Sanctioned Country” shall have the meaning provided in Section 12(ee).
		

		
			“Sanctioned Person” shall have the meaning provided in Section 12(ee).
		

		
			"Sanctions" shall have the meaning provided in Section 12(ee).
		

		
			“Section 404 Notice” shall mean the notice required pursuant to Section 404 of the Helping Families Save Their Homes Act of 2009 (P.L. 111-22), which amends 15 U.S.C. Section 1641 et seq., to be delivered by a creditor that is an owner or an assignee of a mortgage loan to the related Mortgagor within thirty (30) days after the date on which such mortgage loan is sold or assigned to such creditor.
		

		
			“Securities Laws” shall mean the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the Securities and Exchange Commission or the Public Company Accounting Oversight Board.
		

		
			“Security” means a fully-modified pass-through mortgage-backed security, including a participation certificate, that is (i) (a) guaranteed by Ginnie Mae or (b) issued by Fannie Mae or Freddie Mac and (ii) backed or collateralized by, or representing an interest in, a pool of Loans.
		

		
			
		

		
			

		 

		

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			“Security Release Certification” shall mean a security release certification in substantially the form set forth in Exhibit K hereto. 
		

		
			“Seller Party” shall have the meaning provided in Section 12.
		

		
			“Servicer” shall mean Seller in its capacity as servicer of the Loans, or another servicer of the Loans approved by Buyer.
		

		
			“Servicing Agreement” shall have the meaning provided in Section 43(c) hereof.
		

		
			“Servicing Delivery Requirement” shall have the meaning assigned thereto in Section 13(hh).
		

		
			“Servicing File” shall mean with respect to each Loan, the file retained by Seller (in its capacity as Servicer) consisting of all documents that a prudent originator and servicer would have, including copies of the Loan Documents, all documents necessary to document and service the Loans, including FHA and VA approval and any and all documents required to be delivered pursuant to any of the Program Documents.
		

		
			“Servicing Records” shall have the meaning assigned thereto in Section 43(b) hereof.
		

		
			“Servicing Rights” shall mean contractual, possessory or other rights of Seller or any other Person to service a Loan, whether arising under the Servicing Agreement, the Custodial Agreement or otherwise, to administer or service a Purchased Loan or to possess related Servicing Records, including the right to terminate any servicing agreement without cause and free and clear of any obligations (including the obligation to repay or reimburse any servicing advances), costs or fees.
		

		
			“Servicing Transmission” shall mean a computer-readable magnetic or other electronic format acceptable to the parties containing the information identified on Exhibit F.
		

		
			“Subservicer” shall have the meaning provided in Section 43(c) hereof.
		

		
			“Subsidiary” shall mean, with respect to any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.
		

		
			“Taxes” shall mean any taxes, levies, imposts, and similar deductions, charges or withholdings, and all liabilities for penalties, interest and additions to tax with respect thereto, imposed by any Governmental Authority, other than Excluded Taxes and Other Taxes.
		

		
			“Takeout Commitment” shall mean, (i) with respect to any Loan (other than a Jumbo Loan), (a)  an irrevocable commitment issued by a Takeout Investor in favor of Seller pursuant to which such Takeout Investor agrees to purchase such Loan or a Security at a specific price on a forward delivery basis acceptable to Buyer in its sole discretion, (b) an assignable commitment issued by an Agency in favor of Seller pursuant to which such Agency, as applicable, agrees to (1) purchase such Loan at a specific or formula price on a forward delivery basis or (2) swap, exchange or sell a Security for one or more identified Loans, or (c) an assignable commitment issued by a Takeout Investor in favor of Seller pursuant to which the Takeout 
		

		
			
		

		
			

		 

		

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			Investor, as applicable, agrees to purchase a Security from Seller, which such commitments in any case of (a)-(c) above, shall be enforceable and in full force and effect, and shall be, upon request by Buyer, validly and effectively assigned to Buyer pursuant to a Trade Assignment and (ii) with respect to any Jumbo Loan, either a Nonbinding Jumbo Takeout Agreement or a Binding Jumbo Takeout Commitment. 
		

		
			“Takeout Investor” shall mean (i) with respect to a Loan other than a Jumbo Loan, Fannie Mae, Freddie Mac, or another third party investor acceptable to Buyer, which has agreed to purchase such Loan or Security pursuant to a Takeout Commitment, and (ii) with respect to a Jumbo Loan, a third party investor acceptable to Buyer which has agreed to purchase such Jumbo Loan pursuant to a Takeout Commitment.
		

		
			“Tangible Net Worth” shall mean, with respect to any Person as of any date of determination, the consolidated Net Worth of such Person and its Subsidiaries, less the consolidated net book value of all assets of such Person and its subsidiaries (to the extent reflected as an asset in the balance sheet of such Person or any Subsidiary at such date) which will be treated as intangibles under GAAP, including, without limitation, such items as deferred financing expenses, deferred taxes, net leasehold improvements, good will, trademarks, trade names, service marks, copyrights, patents, licenses and unamortized debt discount and expense; provided, that residual securities issued by such Person or its Subsidiaries shall not be treated as intangibles for purposes of this definition.
		

		
			“Termination Date” shall mean March 2, 2018 or such earlier date on which this Agreement shall terminate in accordance with the provisions hereof or by operation of law.” 
		

		
			“Total Indebtedness” shall mean with respect to any Person, for any period, the aggregate Indebtedness of such Person and its Subsidiaries during such period, less the amount of any nonspecific consolidated balance sheet reserves maintained in accordance with GAAP and less the amount of any non-recourse debt, including any securitization debt.
		

		
			“Trade Assignment” means an assignment to Buyer of a forward trade between the Takeout Investor and Seller with respect to one or more Purchased Loans and/or Securities, together with the related trade confirmation from the Takeout Investor to Seller that has been fully executed, is enforceable and is in full force and effect and confirms the details of such forward trade.
		

		
			“Transaction” has the meaning assigned thereto in Section 1.
		

		
			“Transaction Notice” shall mean Seller’s request to enter into a Transaction delivered to Buyer pursuant to the terms of this Agreement, specifying the Loans that Seller requests to sell to Buyer in such Transaction, the fields set forth on Annex 1 to the Custodial Agreement and any other loan-level details as agreed upon between Seller and Buyer. Each Transaction Notice shall be in the form of a Loan Data Transmission, or, if such Transaction Notice is provided in another format, shall have attached thereto a Loan Data Transmission.
		

		
			“Transferor” shall mean the related seller or transferor of Loans to Seller.
		

		
			“Trust Receipt” shall have the meaning provided in the Custodial Agreement.
		

		
			“Uncommitted Amount” shall mean $200,000,000.
		

		
			“Underwriting Guidelines” shall mean collectively, the underwriting guidelines of Seller and/or PennyMac Corp., as applicable, which, other than with respect to any balance limitations applicable to Jumbo Loans, comply with all current requirements of Fannie Mae, Freddie Mac, FHA and VA, in effect 
		

		
			
		

		
			

		 

		

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			as of the date of this Agreement, as the same may be amended, supplemented or otherwise modified from time to time in accordance with terms of this Agreement.
		

		
			“Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any Purchased Items is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.
		

		
			“U.S. Person” shall mean (1) a citizen or resident of the United States, (2) a corporation or partnership organized in or under the laws of the United States or any state thereof or the District of Columbia (other than a partnership that is not treated as a U.S. person under any applicable U.S. Department of Treasury Regulations), (3) an estate the income of which is includible in gross income for United States tax purposes, regardless of its source, or (4) a trust if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more such U.S. persons have authority to control all substantial decisions of such trust.  Notwithstanding the preceding sentence, to the extent provided in applicable U.S. Department of Treasury Regulations, certain trusts in existence on August 20, 1996, and treated as U.S. persons prior to such date that elect to continue to be so treated also will be considered U.S. persons.
		

		
			“USC” shall mean the United State Code, as amended.
		

		
			“USDA” shall mean the United States Department of Agriculture.
		

		
			“USDA Loan”  shall mean a loan originated in accordance with the Rural Housing Service Section 502 Single Family Housing Guaranteed Loan Program, which loan is intended to be subject to a Rural Housing Service Guaranty.        
		

		
			“VA” shall mean the U.S. Department of Veterans Affairs, an agency of the United States of America, or any successor thereto including the Secretary of Veterans Affairs.
		

		
			“VA Approved Lender” shall mean a lender which is approved by VA to act as a lender in connection with the origination of VA Loans.
		

		
			“VA Loan” shall mean a Loan which is the subject of a VA Loan Guaranty Agreement as evidenced by a Loan Guaranty Certificate.
		

		
			“VA Loan Guaranty Agreement” shall mean the obligation of the United States to pay a specific percentage of a Loan (subject to a maximum amount) upon default of the Mortgagor pursuant to the Servicemen’s Readjustment Act, as amended.
		

		
			“VA Regulations” shall mean the regulations promulgated by the Veterans Administration pursuant to the Serviceman’s Readjustment Act, as amended, codified in 36 Code of Federal Regulations, and other VA issuances relating to VA Loans, including related Handbooks, Circulars and Notices.
		

		
			“Valuation Agent” shall mean a qualified, unaffiliated third party (acceptable to Buyer in its sole discretion including but not limited to any independent third party appointed by the Buyer in its sole discretion pursuant to Section 43(e)) that specializes in establishing a fair market value of servicing 
		

		
			
		

		
			

		 

		

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			portfolios with respect to mortgage loans substantially similar to the Loans originated or acquired by a Seller Party, as applicable.
		

		
			(b)       Accounting Terms and Determinations.  Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to Buyer hereunder shall be prepared, in accordance with GAAP.
		

		
			(c)       Interpretation.  The following rules of this subsection (c) apply unless the context requires otherwise.  A gender includes all genders.  Where a word or phrase is defined, its other grammatical forms have a corresponding meaning.  A reference to a subsection, Section, Annex or Exhibit is, unless otherwise specified, a reference to a Section of, or annex or exhibit to, this Agreement.  A reference to a party to this Agreement or another agreement or document includes the party’s successors and permitted substitutes or assigns. A reference to an agreement or document (including any Program Document) is to the agreement or document as amended, modified, novated, supplemented or replaced, except to the extent prohibited thereby or by any Program Document and in effect from time to time in accordance with the terms thereof.  A reference to legislation or to a provision of legislation includes a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it.  A reference to writing includes a facsimile transmission and any means of reproducing words in a tangible and permanently visible form.  A reference to conduct includes, without limitation, an omission, statement or undertaking, whether or not in writing.  The words “hereof”, “herein”, “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement.  The term “including” is not limiting and means “including without limitation”.  In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”, the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including”.
		

		
			Except where otherwise provided in this Agreement, any determination, consent, approval, statement or certificate made or confirmed in writing with notice to Seller by Buyer or an authorized officer of Buyer provided for in this Agreement is conclusive and binds the parties in the absence of manifest error. A reference to an agreement includes a security interest, guarantee, agreement or legally enforceable arrangement whether or not in writing related to such agreement.
		

		
			A reference to a document includes an agreement (as so defined) in writing or a certificate, notice, instrument or document, or any information recorded in computer disk form.  Where Seller is required to provide any document to Buyer under the terms of this Agreement, the relevant document shall be provided in writing or printed form unless Buyer requests otherwise.  At the request of Buyer, the document shall be provided in computer disk form or both printed and computer disk form.
		

		
			This Agreement is the result of negotiations among, and has been reviewed by counsel to, Buyer and Seller, and is the product of all parties.  In the interpretation of this Agreement, no rule of construction shall apply to disadvantage one party on the ground that such party proposed or was involved in the preparation of any particular provision of this Agreement or this Agreement itself.  Except where otherwise expressly stated, Buyer may give or withhold, or give conditionally, approvals and consents and may form opinions and make determinations at its absolute discretion.  Any requirement of good faith, discretion or judgment by Buyer shall not be construed to require Buyer to request or await receipt of information or documentation not immediately available from or with respect to Seller, a servicer of the Purchased Loans or any other Person or the Purchased Loans themselves.
		

		
			
		

		
			

		 

		

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			3.        THE TRANSACTIONS
		

		
			(a)       Subject to the terms and conditions of the Program Documents, Buyer shall, with respect to the Committed Amount and may, with respect to the Uncommitted Amount, from time to time as requested by Seller, enter into Transactions with Seller such that the aggregate Purchase Price for all Purchased Loans acquired by Buyer shall not exceed the Maximum Aggregate Purchase Price. Buyer shall have the obligation, subject to the terms and conditions of the Program Documents, to enter into Transactions up to the Committed Amount and shall have no obligation to enter into Transactions up to the Uncommitted Amount, which Transactions shall be entered into in the sole discretion of Buyer. All purchases of Loans hereunder shall be first deemed committed up to the Committed Amount and then the remainder, if any, shall be deemed uncommitted up to the Uncommitted Amount. 
		

		
			(b)       Unless otherwise agreed, Seller shall request that Buyer enter into a Transaction with  Seller by delivering (i) to Buyer and Custodian a Transaction Notice, (ii) to Buyer and Custodian an estimate of the Purchase Price for Eligible Loans to be purchased on the Purchase Date (which estimate may be included in a Transaction Notice), and (iii) to Custodian, the Mortgage Files for each such Eligible Loan proposed to be included in a Transaction by the times set forth in the Custodial Agreement, each in accordance with the times specified in the Custodial Agreement.    
		

		
			Each Transaction Notice shall specify the proposed Purchase Date, Purchase Price (which shall in all events be at least equal to $1,000,000 on each day that there is a Transaction), Pricing Rate and Repurchase Date.  In addition, each Transaction Notice shall set forth the related Purchase Price allocable to each individual Loan. Each Transaction Notice shall include a Loan Schedule in respect of the Loans that Seller proposes to include in the related Transaction.  
		

		
			Buyer shall notify Seller of its agreement to enter into a Transaction and confirm the terms of such Transaction by delivering to Seller a Purchase Notice specifying the Loans Buyer agrees to purchase on the related Purchase Date, and any other terms of the related Transaction.  In the event of a conflict between the terms set forth in the Transaction Notice delivered by Seller to Buyer and Custodian and the terms set forth in the related Purchase Notice delivered by Buyer to Seller, the terms of the related Purchase Notice shall control. In the event of a conflict between the terms set forth in this Agreement and the terms set forth in any Purchase Notice, the terms of such Purchase Notice shall control to the extent that the Purchase Notice notes such conflict and specifies that the Purchase Notice shall control. 
		

		
			By entering into a Transaction with Buyer, Seller consents to the terms set forth in the related Purchase Notice.  The Purchase Notice, together with this Agreement, shall constitute conclusive evidence of the terms agreed to between Buyer and Seller with respect to the Transaction to which the Purchase Notice relates.  
		

		
			(c)       Pursuant to the Custodial Agreement, Custodian will be required to review any Loan Documents delivered with respect to the Loans prior to 2:00 p.m. (New York City time) on any Business Day on the same day.  In accordance with the times specified in the Custodial Agreement, Custodian will be required to deliver to Buyer, via Electronic Transmission acceptable to Buyer, Custodian Loan Transmission and an Exception Report showing the status of all Loans then held by Custodian, including but not limited to the Loans that are subject to Exceptions, and the time the related Loan Documents have been released pursuant to Sections 5(a) or 5(b) of the Custodial Agreement.  In accordance with the times specified in the Custodial Agreement, Custodian will be required to deliver to Buyer, on each Purchase Date, one or more Trust Receipts (as defined in the Custodial Agreement).  The original copies of such Trust Receipts shall be delivered to 540/580 Crosspoint Parkway, Getzville, New York 14068, Attention: 
		

		
			
		

		
			

		 

		

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			Nicole Cicero for the account of Citibank, N.A., telephone number (716) 730-8008, as agent for Buyer by overnight delivery using a nationally recognized insured overnight delivery service.  
		

		
			(d)       Upon Seller’s request to enter into a Transaction pursuant to Section 3(a), Buyer shall, assuming all conditions precedent set forth in this Section 3 and in Sections 9(a) and (b) have been met, and provided no Default shall have occurred and be continuing, purchase the Eligible Loans included in the related Purchase Notice by transferring to the Seller or the Seller’s designee, via wire transfer in accordance with the written wire transfer instructions provided by Seller, the Purchase Price in immediately available funds on the related Purchase Date and not later than the related time set forth in the Custodial Agreement.  Seller acknowledges and agrees that the Purchase Price paid in connection with any Purchased Loan that is purchased in any Transaction includes a mutually negotiated premium allocated to the portion of such Purchased Loans that constitutes the related Servicing Rights in connection with any Loan.
		

		
			(e)       Anything herein to the contrary notwithstanding, if, on or prior to the determination of any LIBO Base Rate:
		

		
			(i)        Buyer determines, which determination shall be conclusive, that quotations of interest rates for the relevant deposits referred to in the definition of “LIBO Base Rate” in Section 2 are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for Transactions as provided herein; 
		

		
			(ii)       Buyer determines, which determination shall be conclusive, that the Applicable Margin plus the relevant rate of interest referred to in the definition of “LIBO Base Rate” in Section 2 upon the basis of which the rate of interest for Transactions is to be determined is not likely to adequately cover the cost to Buyer of purchasing and holding the Loans hereunder; or
		

		
			(iii)      it becomes unlawful for Buyer to enter into Transactions with a Pricing Rate based on the LIBO Base Rate;
		

		
			then Buyer shall give Seller prompt notice thereof and, so long as such condition remains in effect, Buyer shall be under no obligation to purchase Loans hereunder, and Seller shall, at its option, either repurchase the Purchased Loans then subject to a Transaction or pay a Pricing Rate at a rate per annum as determined by Buyer taking into account the increased cost to Buyer of purchasing and holding the Loans.
		

		
			(f)       Seller shall repurchase the related Purchased Loans from Buyer on each related Repurchase Date.  Each obligation to repurchase exists without regard to any prior or intervening liquidation or foreclosure with respect to any Purchased Loan.  Seller is obligated to obtain the related Purchased Loans from Buyer or its designee (including Custodian) at Seller’s expense on (or after) the related Repurchase Date.
		

		
			(g)       Provided that the applicable conditions in Sections 9(a) and (b) have been satisfied and provided further no Event of Default shall have occurred and be continuing, unless Buyer is notified to the contrary not later than 11:00 a.m. New York City time at least two (2) Business Days prior to any such Repurchase Date, on each related Repurchase Date each Purchased Loan shall automatically become subject to a new Transaction.  In such event, the related Repurchase Date on which such Transaction becomes subject to a new Transaction shall become the “Purchase Date” for such Transaction. Seller shall deliver an updated Transaction Notice with respect to such Purchased Loans. For each new Transaction, unless otherwise agreed, (y) the accrued and unpaid Price Differential shall be settled in cash on each related Repurchase Date, and (z) the Pricing Rate shall be as set forth in the Pricing Side Letter.
		

		
			
		

		
			

		 

		

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			(h)       If Seller intends to repurchase any Loans on any day which is not a Repurchase Date, Seller shall give prior written notice thereof to Buyer by 2:00 p.m. (New York City time) on the Business Day prior to the date of repurchase.  If such notice is given, the Repurchase Price specified in such notice shall be due and payable on the date specified therein, together with the Price Differential to such date on the amount prepaid. 
		

		
			(i)       If any Requirement of Law (other than with respect to any amendment made to Buyer’s certificate of incorporation and by-laws or other organizational or governing documents) or any change in the interpretation or application thereof or compliance by Buyer with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:
		

		
			(i)        shall subject Buyer to any tax of any kind whatsoever with respect to this Agreement or any Loans purchased pursuant to it (excluding net income taxes) or change the basis of taxation of payments to Buyer in respect thereof;
		

		
			(ii)       shall impose, modify or hold applicable any reserve, special deposit, compulsory advance or similar requirement against assets held by deposits or other liabilities in or for the account of Transactions or extensions of credit by, or any other acquisition of funds by any office of Buyer which is not otherwise included in the determination of the LIBO Base Rate hereunder; or
		

		
			(iii)      shall impose on Buyer any other condition;
		

		
			and the result of any of the foregoing is to increase the cost to Buyer, by an amount which Buyer deems to be material, of effecting or maintaining purchases hereunder, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, Seller shall promptly pay to Buyer such additional amount or amounts as will compensate Buyer for such increased cost or reduced amount receivable thereafter incurred.
		

		
			If Buyer shall have determined that either (i) the adoption of or any change in any  Requirement of Law (other than with respect to any amendment made to Buyer’s certificate of incorporation and by-laws or other organizational or governing documents) regarding capital adequacy or in the interpretation or application thereof or compliance by Buyer or any corporation controlling Buyer with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority or Official Body made subsequent to the date hereof; or (ii) compliance by Buyer or any corporation controlling Buyer with: (x) any directive or request from any Governing Authority or Official Body imposed after the date hereof or (y) the requirements of, whether such compliance is commenced prior to or after the date hereof, any of (a) Basel III or (b) the Dodd-Frank Act, or any existing rules, regulations, guidance, interpretations or directives from the United States bank regulatory agencies relating to Basel III or the Dodd-Frank Act; shall have the effect of reducing the rate of return on Buyer’s or such corporation’s capital (taking into consideration Buyer’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by Buyer to be material and to the extent Buyer determines such reduced rate of return to be attributable to the existence of the obligations or agreements of Buyer hereunder, then from time to time, Seller shall promptly pay to Buyer such additional amount or amounts as will thereafter compensate Buyer for such reduction.
		

		
			(j)       If the Buyer becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify Seller of the event by reason of which it has become so entitled.  A certificate as to 
		

		
			
		

		
			

		 

		

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			any additional amounts payable pursuant to this subsection submitted by the Buyer to Seller shall be conclusive in the absence of manifest error.
		

		
			4.        PAYMENTs; COMPUTATION; COMMITMENT FEE
		

		
			(a)       Payments.  All payments to be made by Seller under this Agreement shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to Buyer, except to the extent otherwise provided herein, at the following account maintained by Buyer at Citibank, New  York, Account Number 36855692, For the A/C of Citibank, N.A., ABA# 021000089, Reference: PennyMac, not later than 5:00 p.m., New York City time, on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). Seller acknowledges that it has no rights of withdrawal from the foregoing account.
		

		
			(b)       Computations.  The Price Differential shall be computed on the basis of a 360-day year for the actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable.  With respect to each Repurchase Date, Buyer shall give Seller notice of the amount of accrued Price Differential payable on such Repurchase Date at least one (1) Business Day prior to such Repurchase Date.
		

		
			(c)       Commitment Fee.  Seller agrees to pay to Buyer the Commitment Fee as set forth in the Pricing Side Letter.
		

		
			5.        TAXES; TAX TREATMENT
		

		
			(a)       All payments made by Seller to Buyer under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of any current or future Taxes.  If  Seller is required by law to deduct or withhold any Taxes from or in respect of any amount payable to a Buyer hereunder, it shall: (i) make such deduction or withholding; (ii) pay the amount so deducted or withheld to the appropriate Governmental Authority not later than the date when due; (iii) deliver to Buyer, as promptly as possible, copies of any receipts of such Taxes paid or other evidence reasonably satisfactory to Buyer of the payment when due of the full amount of such Taxes; and (iv) pay to Buyer such additional amounts (an “Additional Amount”) as may be necessary so that such Buyer receives a net amount equal to the amount it would have received under this Agreement if no deduction or withholding of Taxes had been made.
		

		
			(b)       In addition, Seller agrees to pay to the relevant Governmental Authority in accordance with applicable law any current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (including, without limitation, mortgage recording taxes, transfer taxes and similar fees) imposed by the United States or any taxing authority thereof or therein that arise from any payment made by Seller hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement (“Other Taxes”).
		

		
			(c)       Seller agrees to indemnify Buyer for the full amount of Taxes (including Additional Amounts with respect thereto) and Other Taxes, and the full amount of Taxes of any kind imposed by any jurisdiction on amounts payable under this Section 5, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, provided that Buyer shall have provided Seller with written evidence, reasonably satisfactory to Seller, of its payment of such Taxes or Other Taxes, as the case may be.
		

		
			
		

		
			

		 

		

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			(d)       (i) Any Buyer that is not incorporated under the laws of the United States, any State thereof, or the District of Columbia (a “Foreign Buyer”) shall provide Seller, on or prior to the date on which such Foreign Buyer becomes a party to this Agreement and any other Program Document, with two duly completed and executed copies of United States Internal Revenue Service (“IRS”) Form W-8BEN or W-8ECI, or any successor form prescribed by the IRS, certifying, as the case may be, that such Foreign Buyer is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest to zero, or that the income receivable by such Foreign Buyer under this Agreement is effectively connected with the conduct of a trade or business carried on in the United States by the Foreign Buyer.  Each Foreign Buyer will provide Seller with a new duly completed and executed IRS Form W-8BEN or W-8ECI no later than the earliest of (A) the end of the third calendar year following the calendar year in which the most recent applicable IRS Form W-8BEN or W-8ECI was properly submitted to the Seller and (B) the expiration of thirty (30) days after there is a “change in circumstances” with respect to such Foreign Buyer as defined in United States Treas. Reg. § 1.1441(e)(4)(ii)(D).  
		

		
			(ii) A Foreign Buyer shall not be entitled to receive (A) any Additional Amounts or “gross-up” of Taxes under this Agreement, or (B) any indemnification under Section 5(c) with respect to any Taxes imposed by the United States or with respect to any other liability (including penalties, interest and expenses) arising from or in respect of any Taxes withheld or deducted from, or imposed by the United States on, any payments under this Agreement, for any period with respect to which such Foreign Buyer fails to provide the Seller with the appropriate IRS Form W-8BEN or W-8ECI or other relevant documentation required to be provided pursuant to this Section 5(d) (unless the failure to provide such applicable IRS Form is due solely to a change in any Requirement of Law of  the United States prohibiting provision of the Form which occurs subsequent to the date on which a duly completed and executed IRS Form W-8BEN or W-8ECI was provided by Foreign Buyer to Seller in accordance with the requirements of this Section 5(d)).  If a Foreign Buyer becomes subject to, or bears the burden of imposition of, Taxes which such Foreign Buyer would not have become subject to or borne had it provided timely and valid IRS Forms to Seller in accordance with the requirements of this Section 5(d), Seller shall take such steps, subject to clause (B) below, as the Foreign Buyer may, in good faith, reasonably request be taken to assist such Foreign Buyer in recovering such Taxes, provided that, (A) any costs, expenses or other liabilities incurred or imposed on any party as a result of any such steps or actions taken by Seller at the request of the Foreign Buyer shall be entirely for the account of, and promptly paid in full by, such Foreign Buyer, and (B) in no event shall Seller be obligated hereunder to take any steps or actions requested by a Foreign Buyer to recover Taxes if, in Seller’s sole discretion, such steps or actions would or might have an adverse effect on Seller’s financial condition, business, legal positions, or relationships with any Governmental Authority. 
		

		
			(e)       Without prejudice to the survival or any other agreement of Seller hereunder, the agreements and obligations of Seller contained in this Section 5 shall survive the termination of this Agreement.  Nothing contained in this Section 5 shall require Buyer to make available any of its tax returns or other information that it deems to be confidential or proprietary.
		

		
			(f)        Each party to this Agreement acknowledges that it intends, and agrees, for United States federal, state and local income and franchise tax purposes, to treat and report each Transaction as indebtedness issued by the Seller secured by the Purchased Loans and, consistent therewith, to treat and report the Purchased Loans as loans owned by Seller, in the absence of an Event of Default by Seller that is not cured.  All parties to this Agreement hereby agree to take no action inconsistent with the tax treatment and tax reporting of the Transactions and the Purchased Loans, as described above, unless and only to the extent required by applicable United States federal, state or local income or franchise tax law.
		

		
			
		

		
			

		 

		

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			6.        MARGIN MAINTENANCE
		

		
			(a)       If at any time either (i) the aggregate Market Value of all Purchased Loans subject to all Transactions is less than the aggregate MV Margin Amount for all such Transactions, or (ii) the aggregate unpaid principal balance of the Purchased Loans subject to all Transactions is less than the aggregate Par Margin Amount for all such Transactions, (either such event, a “Margin Deficit”), then Buyer may, by notice to Seller, require Seller in such Transactions to transfer to Buyer cash within the time period specified in clause (b) below, so that both (x) the cash and aggregate Market Value of the Purchased Loans will thereupon equal or exceed such aggregate MV Margin Amount and (y) the cash and unpaid principal balance of such Purchased Loans, will thereupon equal or exceed such aggregate Par Margin Amount (either such requirement, a “Margin Call”). Buyer shall deposit such cash into a non-interest bearing account until the next succeeding Repurchase Date.  Notwithstanding the foregoing, Buyer may elect in its sole discretion to permit Seller to transfer to Buyer additional Eligible Loans (“Additional Purchased Loans”) for no additional consideration or a combination of cash and Additional Purchased Loans, to cure a Margin Deficit, in either case within the time period set forth in clause (b) below. 
		

		
			(b)        Notice required pursuant to Section 6(a) may be given by any means provided in Section 21 hereof.  Any notice given shall be met, and the related Margin Call satisfied, within twenty-four (24) hours.  The failure of Buyer, on any one or more occasions, to exercise its rights under this Section 6, shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of Buyer to do so at a later date.  Seller and Buyer each agree that a failure or delay by Buyer to exercise its rights hereunder shall not limit or waive Buyer’s rights under this Agreement or otherwise existing by law or in any way create additional rights for Seller.
		

		
			7.       INCOME PAYMENTS
		

		
			Where a particular term of a Transaction extends over the date on which Income is paid in respect of any Purchased Loan subject to that Transaction, such Income shall be the property of Buyer.  Notwithstanding the foregoing, and provided no Default has occurred and is continuing, Buyer agrees that Seller shall be entitled to receive an amount equal to all Income received in respect of the Purchased Loans, whether by Buyer, Custodian or any servicer or any other Person, which is not otherwise received by Seller, to the full extent it would be so entitled if the Purchased Loans had not been sold to Buyer; provided that any Income received by Seller while the related Transaction is outstanding shall be deemed to be held by Seller solely in trust for Buyer pending the repurchase on the related Repurchase Date.  Upon and after the occurrence of a Default, the Seller shall cause all Income to be deposited into the Collection Account within two (2) Business Days of receipt by the Servicer or Seller, as applicable.  Upon the occurrence of a Default, Seller shall either (i) hold all such Income in the Collection Account or (ii) at the sole option of Buyer, cause all such Income to be remitted directly to the account designated by Buyer.  
		

		
			8.        SECURITY INTEREST; BUYER’S APPOINTMENT AS ATTORNEY-IN-FACT
		

		
			(a)       Seller and Buyer intend that the Transactions hereunder be sales to Buyer of the Purchased Loans (including, without limitation, the related Servicing Rights) and not loans from Buyer to Seller secured by the Purchased Loans.  However, in order to preserve Buyer’s rights under this Agreement in the event that a court or other forum recharacterizes the Transactions hereunder as other than sales, and as security for Seller’s performance of all of its Obligations, Seller hereby grants Buyer a perfected first priority security interest in all of Seller’s rights, title and interest in and to the following property, whether now existing or hereafter acquired: (i) all Purchased Loans identified on a Purchase Notice delivered by Buyer to Seller and Custodian from time to time, (ii) all related Loan Documents, including without 
		

		
			
		

		
			

		 

		

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			limitation all promissory notes, (iii) any other collateral pledged or otherwise relating to such Purchased Loans, together with all files, material documents, instruments, surveys (if available), certificates, correspondence, appraisals, computer records, computer storage media, Loan accounting records and other books and records relating thereto, (iv) the Servicing Records, and the related Servicing Rights, (v) all rights of Seller to receive from any third party or to take delivery of any Records including without limitation any Servicing Records or other documents which constitute a part of the Mortgage File or Servicing File, (vi) the Collection Account and all Income relating to such Purchased Loans, (vii) all Loan Guaranty Certificates, other mortgage guaranties and insurance (issued by governmental agencies or otherwise) and any Mortgage Insurance Certificate or other document evidencing such mortgage guaranties or insurance relating to any Purchased Loans and all claims and payments thereunder and all rights of Seller to receive from any third party or to take delivery of any of the foregoing, (viii) all interests in real property collateralizing any Purchased Loans, (ix) all other insurance policies and insurance proceeds relating to any Purchased Loans or the related Mortgaged Property and  all Insurance Proceeds and all rights of Seller to receive from any third party or to take delivery of any of the foregoing, (x) any purchase agreements or other agreements, contracts or any related takeout commitments, including without limitation any Takeout Commitments and Trade Assignments to the extent related to Purchased Loans subject to a Transaction (including the rights to receive the related takeout price and Buyer’s pro rata interest in the Security related to Purchased Loans subject to a Transaction as evidenced by such Takeout Commitments) to the extent relating to or constituting any or all of the foregoing and all rights to receive documentation relating thereto, (xi) all “accounts”, “chattel paper”, “commercial tort claims”, “deposit accounts”, “documents,” “equipment”, “general intangibles”, “goods”, “instruments”, “inventory”, “investment property”, “letter of credit rights”, and “securities’ accounts” as each of those terms is defined in the Uniform Commercial Code and all cash and Cash Equivalents and all products and proceeds relating to or constituting any or all of the foregoing, and (xii) any and all replacements, substitutions, distributions on or proceeds of any or all of the foregoing (collectively the “Purchased Items”).  
		

		
			Seller acknowledges and agrees that its rights with respect to the Purchased Items (including without limitation, any security interest Seller may have in the Purchased Loans and any other collateral granted by Seller to Buyer pursuant to any other agreement) are and shall continue to be at all times junior and subordinate to the rights of Buyer hereunder.  Seller further acknowledges that it has no rights to the Servicing Rights related to the Purchased Loans.  Without limiting the generality of the foregoing and for the avoidance of doubt, in the event that Seller is deemed to retain any residual Servicing Rights, Seller  grants, assigns and pledges to Buyer a first priority security interest in all of its rights, title and interest in and to the Servicing Rights as indicated hereinabove. In addition, Seller further grants, assigns and pledges to Buyer a first priority security interest in and to all Servicing Records and rights to receive Servicing Records or other documents that constitute a part of the Mortgage File or Servicing File with respect to any Purchased Loan, and all Income related to the Purchased Loans received by Seller as Servicer, and all rights to receive such Income, and all products, proceeds and distributions relating to or constituting any or all of the foregoing (collectively, and together with the pledge of Servicing Rights in the immediately preceding sentence, the “Related Credit Enhancement”).  The Related Credit Enhancement is hereby pledged as further security for Seller’s Obligations to Buyer hereunder.
		

		
			(b)       At any time and from time to time, upon the written request of Buyer, and at Seller’s expense, Seller will promptly and duly execute and deliver, or will promptly cause to be executed and delivered, such further instruments and documents and take such further action as Buyer may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the Purchased Items and the liens created hereby.  Seller also hereby authorizes Buyer to file any such financing or continuation 
		

		
			
		

		
			

		 

		

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			statement without the signature of Seller to the extent permitted by applicable law. A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement for filing in any jurisdiction.  This Agreement shall constitute a security agreement under applicable law.
		

		
			(c)       Seller shall not (i) change the location of its chief executive office/chief place of business from that specified in Section 12(m) hereof, (ii) change its name, identity or corporate structure (or the equivalent) or change the location where it maintains its records with respect to the Purchased Items, or (iii) reincorporate or reorganize under the laws of another jurisdiction unless it shall have given Buyer at least thirty (30) days prior written notice thereof and shall have delivered to Buyer all Uniform Commercial Code financing statements and amendments thereto as Buyer shall request and taken all other actions deemed reasonably necessary by Buyer to continue its perfected status in the Purchased Items with the same or better priority.
		

		
			(d)       Seller hereby irrevocably constitutes and appoints Buyer and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Seller and in the name of Seller or in its own name, from time to time in Buyer’s discretion, for the purpose of carrying out the terms of this Agreement, including without limitation, protecting, preserving and realizing upon the Purchased Items, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, including without limitation, to protect, preserve and realize upon the Purchased Items, to file such financing statement or statements relating to the Purchased Items without Seller’s signature thereon as Buyer at its option may deem appropriate, and, without limiting the generality of the foregoing, Seller hereby gives Buyer the power and right, on behalf of Seller, without assent by, but with notice to, Seller, if an Event of Default shall have occurred and be continuing, to do the following:
		

		
			(i)        in the name of Seller, or in its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any Purchased Items and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Buyer for the purpose of collecting any and all such moneys due with respect to any Purchased Items whenever payable;
		

		
			(ii)       to pay or discharge taxes and Liens levied or placed on or threatened against the Purchased Items; and
		

		
			(iii)      (A) to direct any party liable for any payment under any Purchased Items to make payment of any and all moneys due or to become due thereunder directly to Buyer or as Buyer shall direct, including, without limitation, to send “goodbye” letters and Section 404 Notices on behalf of Seller and any applicable Servicer; (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Purchased Items; (C) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Purchased Items; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Purchased Items or any proceeds thereof and to enforce any other right in respect of any Purchased Items; (E) to defend any suit, action or proceeding brought against Seller with respect to any Purchased Items; (F) to settle, compromise or adjust any suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as Buyer may deem appropriate; and (G) generally, to sell, transfer, pledge 
		

		
			
		

		
			

		 

		

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			and make any agreement with respect to or otherwise deal with any Purchased Items as fully and completely as though Buyer were the absolute owner thereof for all purposes, and to do, at Buyer’s option and Seller’s expense, at any time, and from time to time, all acts and things which Buyer deems necessary to protect, preserve or realize upon the Purchased Items and Buyer’s Liens thereon and to effect the intent of this Agreement, all as fully and effectively as Seller might do.
		

		
			Seller hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.  This power of attorney is a power coupled with an interest and shall be irrevocable and shall survive termination of the Agreement.  This power of attorney shall not revoke any prior powers of attorney granted by Seller.
		

		
			Seller also authorizes Buyer, if an Event of Default shall have occurred and be continuing, from time to time, to execute, in connection with any sale provided for in Section 19 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Purchased Items.
		

		
			(e)       The powers conferred on Buyer hereunder are solely to protect Buyer’s interests in the Purchased Items and shall not impose any duty upon it to exercise any such powers.  Buyer shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to Seller for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.
		

		
			(f)        If Seller fails to perform or comply with any of its agreements contained in the Program Documents and Buyer performs or complies, or otherwise causes performance or compliance, with such agreement, the reasonable out-of-pocket expenses of Buyer incurred in connection with such performance or compliance, together with interest thereon at a rate per annum equal to the Post-Default Rate, shall be payable by Seller to Buyer on demand and shall constitute Obligations.
		

		
			(g)       Buyer’s duty with respect to the custody, safekeeping and physical preservation of the Purchased Items in its possession, under Section 9-207 of the Uniform Commercial Code or otherwise, shall be to deal with it in the same manner as Buyer deals with similar property for its own account. Neither Buyer nor any of its directors, officers or employees shall be liable for failure to demand, collect or realize upon all or any part of the Purchased Items or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Purchased Items upon the request of Seller or otherwise.
		

		
			(h)       All authorizations and agencies herein contained with respect to the Purchased Items are irrevocable and powers coupled with an interest.
		

		
			(i)        At Buyer's sole option, exercisable prospectively or retrospectively with respect to the Purchased Loans in whole or in part, and without notice to Seller or any other person, (i) the sale of the Purchased Loans to Buyer on each Purchase Date may be deemed a sale of a 100% participation interest, constituting 100% beneficial ownership, of the related Purchased Loans, in lieu of a sale to Buyer of the Purchased Loans themselves, and (ii) to such extent Seller is deemed to retain legal title to the Purchased Loans solely to service or supervise the servicing thereof, this Agreement will be deemed the related participation agreement in such event.
		

		
			
		

		
			

		 

		

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			9.        CONDITIONS PRECEDENT
		

		
			(a)       As conditions precedent to the initial Transaction, Buyer shall have received on or before the date on which such initial Transaction is consummated (or as otherwise set forth below) the following, in form and substance satisfactory to Buyer and duly executed by each party thereto (as applicable):
		

		
			(i)          Program Documents. The Program Documents (including all exhibits, annexes and schedules related thereto) duly executed and delivered by each party thereto and being in full force and effect, free of any modification, breach or waiver.
		

		
			(ii)        Organizational Documents.  A good standing certificate of Seller and the Guarantor, dated as of a recent date, but in no event more than ten (10) days prior to the date of such initial Transaction, and certified copies of the charter and by-laws (or equivalent documents) of Seller and the Guarantor, and of all corporate or other authority for Seller and the Guarantor with respect to the execution, delivery and performance of the Program Documents and each other document to be delivered by Seller from time to time in connection herewith (and Buyer may conclusively rely on such certificate until it receives notice in writing from Seller to the contrary).
		

		
			(iii)        Incumbency Certificate.  An incumbency certificate of the secretary of Seller and the Guarantor certifying the names, true signatures and titles of such Person’s representatives duly authorized to request Transactions hereunder and to execute the Program Documents and the other documents to be delivered thereunder.
		

		
			(iv)        Legal Opinion.  On or before April 3, 2017, Buyer shall have received such opinions of counsel to Seller as Buyer may require as to corporate issues, perfection and priority of security interest, “securities contract” matters, “repurchase agreement” matters and Investment Company Act issues.
		

		
			(v)         Filings, Registrations, Recordings. (i) Any documents (including, without limitation, financing statements) required to be filed, registered or recorded in order to create, in favor of Buyer, a perfected, first-priority security interest in the Purchased Items, subject to no Liens other than those created hereunder, shall have been properly prepared and executed for filing (including the applicable county(ies) if Buyer determines such filings are necessary in its reasonable discretion), registration or recording in each office in each jurisdiction in which such filings, registrations and recordations are required to perfect such first-priority security interest; and (ii) UCC lien searches, dated as of a recent date, in no event more than fourteen (14) days prior to the date of such initial Transaction, in such jurisdictions as shall be applicable to Seller and the Purchased Items, the results of which shall be satisfactory to Buyer.
		

		
			(vi)        Fees and Expenses. Buyer shall have received all fees and expenses (including without limitation, the Commitment Fee) required to be paid by Seller on or prior to the initial Purchase Date, which fees and expenses may be netted out of any purchase proceeds paid by Buyer hereunder.
		

		
			(vii)       Financial Statements. Buyer shall have received the financial statements referenced in Sections 12(b) and 13(a).
		

		
			
		

		
			

		 

		

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			(viii)     Underwriting Guidelines. Buyer and Seller shall have agreed upon Seller’s current Underwriting Guidelines for Loans and Buyer shall have received a copy thereof certified by a Responsible Officer of Seller.
		

		
			(ix)        Consents, Licenses, Approvals, etc. Buyer shall have received copies certified by Seller of all consents, licenses and approvals, if any, required in connection with the execution, delivery and performance by Seller of, and the validity and enforceability of, the Loan Documents, which consents, licenses and approvals shall be in full force and effect, including but not limited to, evidence of Seller’s status as an FHA Approved Mortgagee and VA approval as lender, as well as FHA approval as an FHA Approved Mortgagee with respect to any Subservicer of the Loans.
		

		
			(x)         Insurance. Buyer shall have received evidence in form and substance satisfactory to Buyer showing compliance by Seller as of such initial Purchase Date with Section 13(v) hereof.
		

		
			(xi)        Collection Account.  Buyer shall have received evidence in form and substance satisfactory to Buyer showing the establishment of the Collection Account and compliance with the terms and conditions of the Collection Account Control Agreement.
		

		
			(xii)       Servicing Agreement(s).  Buyer shall have received a copy of and approved the terms of each Servicing Agreement applicable to the Purchased Loans, in each case, as such agreement may be amended, supplemented or otherwise modified from time to time and approved by Buyer; provided, however, that Buyer’s failure to approve any such amendment, supplement or modification shall not affect the validity or enforceability of such amendment, modification or supplement or the Servicing Agreement except as it relates to the Purchased Loans, which shall continue to be serviced in accordance with the terms of such agreement without giving effect to such amendment, supplement or modification thereto.
		

		
			(i)        Power of Attorney.   A separate power of attorney of each Seller with respect to the powers described in Section 8(d) substantially in the form attached hereto as Exhibit J.
		

		
			(ii)        Other Documents. Buyer shall have received such other documents as Buyer or its counsel may reasonably request.
		

		
			(b)        The obligation of Buyer to enter into each Transaction pursuant to this Agreement (including the initial Transaction) is subject to the following further conditions precedent, both immediately prior to any Transaction and also after giving effect thereto and to the intended use thereof:
		

		
			(i)         No Default or Event of Default shall have occurred and be continuing.
		

		
			(ii)        Both immediately prior to entering into such Transaction and also after giving effect thereto and to the intended use of the proceeds thereof, the representations and warranties made by Seller in Section 12 and Schedule 1 hereof, and in each of the other Program Documents, shall be true and complete on and as of the Purchase Date in all material respects (in the case of the representations and warranties in Section 12(w) and Schedule 1, solely with respect to Loans which have not been repurchased by Seller) with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). At the request of Buyer, Buyer shall have received an officer’s certificate signed by a Responsible Officer of Seller certifying as to the truth and accuracy of the above, which certificate shall specifically include a statement that Seller is in compliance with all 
		

		
			
		

		
			

		 

		

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			governmental licenses and authorizations and is qualified to do business and in good standing in all required jurisdictions.
		

		
			(iii)       The then aggregate outstanding Purchase Price for all Purchased Loans, when added to the Purchase Price for the requested Transaction, shall not exceed the Maximum Aggregate Purchase Price.
		

		
			(iv)        Subject to Buyer’s right to perform one or more Due Diligence Reviews pursuant to Section 44 hereof, Buyer shall have completed its Due Diligence Review of the Loan Documents for each Loan subject to such Transaction and such other documents, records, agreements, instruments, Mortgaged Properties or information relating to Seller and/or such Loans as Buyer in its reasonable discretion deems appropriate to review and such review shall be satisfactory to Buyer in its reasonable discretion.
		

		
			(v)        Buyer or its designee shall have received on or before the day of a Transaction with respect to any Loans (unless otherwise specified in this Agreement) the following, in form and substance satisfactory to Buyer and (if applicable) duly executed:
		

		
			(A)        the Transaction Notice with respect to such Purchased Loans, delivered pursuant to Section 3(a);
		

		
			(B)        the Trust Receipt with respect to such Purchased Loans, with the Purchase Notice attached;  
		

		
			(C)        such certificates, customary opinions of counsel or other documents as Buyer may reasonably request, provided that such opinions of counsel shall not be required routinely in connection with each Transaction but shall only be required from time to time as deemed necessary by Buyer in its commercially reasonable judgment;
		

		
			(D)        all information requested from Sellers relating to Takeout Commitments and Trade Assignments.
		

		
			(vi)       With respect to any Purchased Loan that was acquired by Seller from an Affiliate of Seller, Buyer may, in its sole discretion, require Seller to provide evidence sufficient to satisfy Buyer that such Loan was acquired in a legal sale, including without limitation, an opinion, in form and substance and from an attorney, in both cases, acceptable to Buyer in its sole discretion, that such Loan was acquired in a legal sale.
		

		
			(vii)       No event beyond the control of Buyer which Buyer reasonably determines may result in Buyer’s inability to perform its obligations under this Agreement including, without limitation, acts of God, strikes, lockouts, riots, acts of war or terrorism, epidemics, nationalization, expropriation, currency restrictions, fire, communication line failures, computer viruses, power failures, earthquakes, or other disasters of a similar nature to the foregoing, shall have occurred or be continuing.
		

		
			(viii)      If any Purchased Loans are serviced or interim serviced by a Person other than Servicer (a “Subservicer”), Buyer shall have received, no later than 10:00 a.m. three (3) days prior to the requested Purchase Date, an Instruction Letter in the form attached hereto as Exhibit I, 
		

		
			
		

		
			

		 

		

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			executed by Seller in blank to the attention of each Subservicer and executed by such Subservicer, with the related Servicing Agreement attached thereto in form and substance acceptable to Buyer.
		

		
			(ix)        Buyer shall have determined that all actions necessary or, in the reasonable opinion of Buyer, desirable to maintain Buyer’s perfected interest in the Purchased Loans and other Purchased Items have been taken, including, without limitation, duly executing and filing Uniform Commercial Code financing statements on Form UCC‐1.
		

		
			(x)         Seller shall have paid to Buyer all fees and expenses owed to Buyer in accordance with this Agreement and any other Program Document including, without limitation the amount of any Commitment Fees then due and owing, and all of Buyer’s attorney fees and expenses and due diligence expenses then due and owing.
		

		
			(xi)        Buyer or its designee shall have received any other documents reasonably requested by Buyer.
		

		
			(xii)       There shall be no Margin Deficit at the time immediately prior to entering into a new Transaction.
		

		
			(xiii)      If requested by Buyer, Seller shall have provided to Buyer copies of all due diligence (including all FICO updates, valuations, and credit and compliance related diligence) that the Seller has performed with respect to any Loans to be purchased by Buyer hereunder.
		

		
			(xiv)     With respect to each Purchased Loan that is subject to a security interest (including any precautionary security interest) immediately prior to the Purchase Date, Buyer shall have received a Security Release Certification for such Purchased Loan that is duly executed by the related secured party and Seller.  If necessary, such secured party shall have filed Uniform Commercial Code termination statements in respect of any Uniform Commercial Code filings made in respect of such Loan, and each such release and Uniform Commercial Code termination statement has been delivered to Buyer prior to each Transaction and to Custodian as part of the Mortgage File. 
		

		
			(xv)       PennyMac Corp. shall not be in default under, have failed to perform as required under, or have otherwise breached the terms of the REIT Agency Agreement or any other Program Document (as such term is defined in the REIT Agency Agreement).
		

		
			(xvi)      The Seller shall have delivered to Buyer copies of each related Servicing Agreement with respect to each Purchased Loan, including any and all amendments that materially affect the servicing of the Purchased Loans and Buyer’s interest therein.
		

		
			(xvii)     On or before April 3, 2017, Seller shall have delivered fifty (50) original separate powers of attorney (or such other amount as reasonably requested by Buyer) with respect to the powers described in Section 8(d) substantially in the form attached hereto as Exhibit J.
		

		
			10.       RELEASE OF PURCHASED LOANS
		

		
			Upon timely payment in full of the Repurchase Price then owing with respect to a Purchased Loan and the satisfaction of all other Obligations (if any) then outstanding, unless a Default or Event of Default shall have occurred and be continuing, then (a) Buyer shall be deemed to have terminated any security 
		

		
			
		

		
			

		 

		

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			interest that Buyer may have in such Purchased Loan and any Purchased Items solely related to such Purchased Loan and (b) with respect to such Purchased Loan, Buyer shall direct Custodian to release such Purchased Loan and any Purchased Items solely related to such Purchased Loan to Seller unless such release and termination would give rise to or perpetuate a Margin Deficit.  Seller shall give at least one (1) Business Day prior written notice to Buyer if such repurchase shall occur on any date other than the Repurchase Date. 
		

		
			If such release and termination gives rise to or perpetuates a Margin Deficit, Buyer shall notify Seller of the amount thereof and prior to such release and termination Seller shall thereupon satisfy the Margin Call in the manner specified in Section 6.
		

		
			11.       RELIANCE
		

		
			With respect to any Transaction, Buyer may conclusively rely upon, and shall incur no liability to Seller in acting upon, any request or other communication that Buyer reasonably believes to have been given or made by a person authorized to enter into a Transaction on Seller’s behalf.
		

		
			12.       REPRESENTATIONS AND WARRANTIES
		

		
			Seller represents and warrants to Buyer that throughout the term of this Agreement with respect to Seller and the Guarantor, as applicable, (each, a “Seller Party”): 
		

		
			(a)       Existence.  Each Seller Party (a) is a limited liability company, duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was formed, as specified in this Agreement, (b) has all requisite corporate or other power, and has all governmental licenses, authorizations, consents and approvals, necessary to (i) own its assets and carry on its business as now being or as proposed to be conducted and (ii) with respect to the Seller, acquire, own, sell, assign, pledge and repurchase the Purchased Loans and service and administer the Purchased Loans, (c) is qualified to do business and is in good standing in all other jurisdictions in which the nature of the business conducted by it makes such qualification necessary, except where failure so to qualify would not be reasonably likely (either individually or in the aggregate) to have a Material Adverse Effect, and (d) is in compliance in all material respects with all Requirements of Law.  Seller’s tax identification number is 26-2049351.  Seller’s fiscal year is the calendar year.  No Seller Party has changed its name within the past twelve (12) months.
		

		
			(b)       Financial Condition.  Each Seller Party has heretofore furnished to Buyer a copy of its audited consolidated balance sheets and the audited consolidated balance sheets of its consolidated Subsidiaries, each as at December 31, 2015 with the opinion thereon of Deloitte & Touche LLP, a copy of which has been provided to Buyer. Each Seller Party has also heretofore furnished to Buyer the related consolidated statements of income and retained earnings and of cash flows for such Seller Party and its consolidated Subsidiaries for the one year period ending December 31, 2015.  All such financial statements are complete and correct in all material respects and fairly present the consolidated financial condition of such Seller Party and its Subsidiaries and the consolidated results of their operations for the fiscal year ended on said date, all in accordance with GAAP applied on a consistent basis. Since December 31, 2015, there has been no development or event nor any prospective development or event which has had or should reasonably be expected to have a Material Adverse Effect.  No Seller Party has any material contingent liability or liability for taxes or any long term lease or unusual forward or long term commitment, which is not reflected in the foregoing statements or notes.  Since the date of the financial statements and other information delivered to Buyer prior to the date of this Agreement, no Seller Party has sold, transferred or otherwise disposed of any material part of its property or assets (except pursuant to the Program Documents) 
		

		
			
		

		
			

		 

		

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			or acquired any property or assets (including Equity Interests of any other Person) that are material in relation to the financial condition of such Seller Party.
		

		
			(c)       Litigation.  There are no actions, suits, arbitrations, investigations or proceedings pending or, to its knowledge, threatened against such Seller Party or any of its Subsidiaries or Affiliates or affecting any of the property thereof before any Governmental Authority, (i) as to which individually or in the aggregate there is a reasonable likelihood of an adverse decision which would be reasonably likely to have a Material Adverse Effect, (ii) which questions the validity or enforceability of any of the Program Documents or any action to be taken in connection with the transactions contemplated thereby, or (iii) which seeks to prevent the consummation of any Transaction.  
		

		
			(d)       No Breach.  Neither (a) the execution and delivery of the Program Documents, nor (b) the consummation of the transactions therein contemplated in compliance with the terms and provisions thereof will conflict with or result in a breach of the charter or by-laws of such Seller Party, or any applicable law, rule or regulation, or any order, writ, injunction or decree of any Governmental Authority, or other material agreement or instrument to which such Seller Party is a party or by which any Seller Party or any Seller Party’s property is bound or to which any of them or their property is subject, or constitute a default under any such material agreement or instrument, or (except for the Liens created pursuant to this Agreement) result in the creation or imposition of any Lien upon any property of any Seller Party, pursuant to the terms of any such agreement or instrument.
		

		
			(e)       Action.  Each Seller Party has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations under each of the Program Documents to which it is a party; the execution, delivery and performance by such Seller Party of each of the Program Documents to which it is a party has been duly authorized by all necessary corporate or other action on its part; and each Program Document has been duly and validly executed and delivered by each Seller Party and constitutes a legal, valid and binding obligation of such Seller Party, enforceable against such Seller Party in accordance with its terms.
		

		
			(f)       Approvals.  No authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority, or any other Person, are necessary for the execution, delivery or performance by any Seller Party of the Program Documents to which it is a party or for the legality, validity or enforceability thereof, except for filings and recordings in respect of the Program Documents and the Liens created pursuant to this Agreement.
		

		
			(g)       Taxes.  Each Seller Party has filed all Federal income tax returns and all other material tax returns that are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by any of them, except for any such taxes, if any, that are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided. The charges, accruals and reserves on the books of such Seller Party and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of such Seller Party, adequate. Any taxes, fees and other governmental charges payable by such Seller Party in connection with a Transaction and the execution and delivery of the Program Documents have been paid.         
		

		
			(h)       Investment Company Act.  No Seller Party is an “investment company” or a company controlled by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.  Each Seller Party (i) has been structured so as not to constitute, and is not, a “covered fund” for purposes of Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Volcker Rule”), and (ii) is relying upon an exception or exemption from the registration requirements of the 
		

		
			
		

		
			

		 

		

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			Investment Company Act other than those set forth in Sections 3(c)(1) and 3(c)(7) of the Investment Company Act.        
		

		
			(i)       No Legal Bar.  The execution, delivery and performance of this Agreement, the other Program Documents, the sales hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of any Seller Party and will not result in, or require, the creation or imposition of any Lien (other than the Liens created hereunder) on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation.  
		

		
			(j)       Compliance with Law.  No practice, procedure or policy employed or proposed to be employed by a Seller Party in the conduct of its business violates any law, regulation, judgment, agreement, regulatory consent, order or decree applicable to it which, if enforced, would result in a Material Adverse Effect with respect to such Seller Party.  The execution, delivery and performance of the Program Documents does not require compliance by any Seller Party with any “bulk sales” or similar laws.
		

		
			(k)       No Default.  No Seller Party is in default under or with respect to any of its Contractual Obligations in any respect which should reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.
		

		
			(l)        Collateral; Collateral Security.
		

		
			(i)         Immediately prior to the sale of any Loan by Seller, Seller was the sole owner of such Loan and had good and marketable title thereto, free and clear of all Liens, in each case except for Liens to be released simultaneously with the sale of the Loans to Buyer hereunder and no Person has any Lien on any Loan.
		

		
			(ii)        The provisions of this Agreement are effective to create in favor of Buyer a valid security interest in all right, title and interest of Seller in, to and under the Purchased Items.
		

		
			(iii)       Upon receipt by Custodian of each Note, endorsed in blank by a duly authorized officer of the Seller, Buyer shall have a fully perfected first priority security interest therein, in the Purchased Loan evidenced thereby and in Seller’s interest in the related Mortgaged Property.
		

		
			(iv)       Upon the filing of financing statements on Form UCC-1 naming Buyer as “Secured Party” and Seller as “Debtor”, and describing the Purchased Items, in the jurisdictions and recording offices listed on Schedule 2 attached hereto, the security interests granted hereunder in the Purchased Items will constitute fully perfected first priority security interests under the Uniform Commercial Code in all right, title and interest of Seller in, to and under such Purchased Items, which can be perfected by filing under the Uniform Commercial Code.
		

		
			(m)      Chief Executive Office; Chief Operating Office.  As of the Effective Date, Seller’s corporate headquarters is located at 3043 Townsgate Road, Westlake Village, CA  91361.
		

		
			(n)       Location of Books and Records.  The location where Seller keeps its books and records including all computer tapes and records relating to the Purchased Items is Seller’s chief executive office.
		

		
			
		

		
			

		 

		

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			(o)       True and Complete Disclosure.  The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of each Seller Party to Buyer in connection with the negotiation, preparation or delivery of this Agreement and the other Program Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by or on behalf of each Seller Party or any of its Subsidiaries to Buyer in connection with this Agreement and the other Program Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified. There is no fact known to a Responsible Officer that, after due inquiry, could reasonably be expected to have a Material Adverse Effect that has not been disclosed herein, in the other Program Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to Buyer for use in connection with the transactions contemplated hereby or thereby.
		

		
			(p)       Financial Representations and Warranties. (A) Seller’s Adjusted Tangible Net Worth is greater than or equal to $170,000,000; (B) Seller’s unrestricted cash is greater than or equal to $20,000,000; (C) the ratio of Seller’s Total Indebtedness, to Adjusted Tangible Net Worth is less than 10:1; and (D) Seller’s consolidated Net Income was equal to or greater than $1.00 for at least one (1) of the previous two (2) calendar quarters.
		

		
			(q)       ERISA. Each Plan which is not a Multiemployer Plan, and, to the knowledge of each Seller Party, each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other Federal or State law. No event or condition has occurred and is continuing as to which any Seller Party would be under an obligation to furnish a report to Buyer under Section 13(a)(xi) hereof.  The present value of all accumulated benefit obligations under each Plan subject to Title IV of ERISA (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such Plans.   Each Seller Party and its Subsidiaries do not provide any material medical or health benefits to former employees other than as required by the Consolidated Omnibus Budget Reconciliation Act, as amended, or similar state or local law at no cost to the employer (collectively, “COBRA”).
		

		
			(r)       Licenses.  Buyer will not be required as a result of purchasing the Loans to be licensed, registered or approved or to obtain permits or otherwise qualify (i) to do business in any state in which it is not currently so required or (ii) under any state or other jurisdiction’s consumer lending, fair debt collection or other applicable state or other jurisdiction’s statute or regulation.
		

		
			(s)       Filing Jurisdictions/Relevant States.  As of the Effective Date, Schedule 2 sets forth all of the jurisdictions and filing offices in which a financing statement should be filed in order for Buyer to perfect its security interest in the Purchased Items that can be perfected by filing. Schedule 4 sets forth all of the states or other jurisdictions in which Seller is licensed to own and service mortgage loans or otherwise exempt from such licensing requirements. 
		

		
			
		

		
			

		 

		

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			(t)        Seller Approvals.  Seller is approved (i) by the FHA as an FHA Title II non-supervised lender, (ii) by Ginnie Mae as an issuer of Ginnie Mae I and II single family mortgage-backed securities, (iii) by Fannie Mae as a servicer, (iv) by Freddie Mac as a servicer and (v) by VA as a VA Approved Lender.  Seller and each Subservicer (if any) servicing any Purchased Loans hereunder has all consents, licenses and approvals necessary to service the Purchased Loans.  
		

		
			(u)       No Burdensome Restrictions.  No Requirement of Law or Contractual Obligation of any Seller Party has a Material Adverse Effect.
		

		
			(v)       Subsidiaries/Other Indebtedness.  All of the Subsidiaries of Seller and the wholly owned subsidiaries of Guarantor at the date hereof are listed on Schedule 3 to this Agreement.  All Indebtedness of each Seller Party (other than Indebtedness created pursuant to this Agreement) is listed on Schedule 5 to this Agreement.  
		

		
			(w)      Origination and Acquisition of Loans.  The Loans were acquired by Seller, and the origination and collection practices used by Seller, PennyMac Corp. or any Qualified Originator, as applicable, with respect to the Loans have been, in all material respects legal, proper, prudent and customary in the residential mortgage loan origination and servicing business and in accordance with FHA and/or VA standards as applicable, and in accordance with the Underwriting Guidelines. All Loans are in conformity with the Underwriting Guidelines. Each of the Loans complies with the representations and warranties listed in Schedule 1 hereto.  The review and inquiries made on behalf of the Seller in connection with the making of the representations and warranties listed in Schedule 1 hereto have been made by Persons having the requisite expertise, knowledge and background to verify such representations and warranties.  Seller has no knowledge of any material fact that could reasonably lead them to expect that the Market Value of any Purchased Loan will not be obtained or realized.  Each of the Purchased Loans is an Eligible Loan.  With respect to each Purchased Loan purchased by Seller or an Affiliate of Seller from a Transferor, (a) such Purchased Loan was acquired and transferred on a true sale basis, (b) such Transferor received reasonably equivalent value in consideration for the transfer of such Purchased Loan, (c) no such transfer was made for or on account of an antecedent debt owed by such Transferor to Seller or an Affiliate of Seller, (d) no such transfer is or may be voidable or subject to avoidance under the Bankruptcy Code, and (e) the representations and warranties made by such Transferor to Seller or such Affiliate in the related underlying sale agreement are hereby incorporated by reference and are hereby remade by the Seller to Buyer as of the related date such representations and warranties were made in the related underlying agreement.
		

		
			(x)       No Adverse Selection.  Seller used no selection procedures that identified the Purchased Loans, when taken as a whole, as being less desirable or valuable than other comparable Loans owned by Seller.
		

		
			(y)       Solvency; Fraudulent Conveyance.  As of the date hereof and immediately after giving effect to each Transaction, each Seller Party is and will be solvent, is able and will be able to pay and is paying its debts as they mature and does not and will not have an unreasonably small amount of capital to engage in the business in which it is engaged and proposes to engage. No Seller Party intends to incur, or believes that it has incurred, debts beyond its ability to pay such debts as they mature. No Seller Party is contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of such Seller Party or any of its assets. Neither Seller is transferring any Loans with any intent to hinder, delay or defraud any of its creditors.
		

		
			(z)       MERS. Servicer is a member of MERS in good standing.
		

		
			
		

		
			

		 

		

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			(aa)     No Broker.  No Seller Party has dealt with any broker, investment banker, agent, or other person, except for Buyer, who may be entitled to any commission or compensation in connection with the sale of Purchased Loans pursuant to this Agreement; provided, that if any Seller Party has dealt with any broker, investment banker, agent, or other person, except for Buyer, who may be entitled to any commission or compensation in connection with the sale of Purchased Loans pursuant to this Agreement, such commission or compensation shall have been paid in full by Seller.
		

		
			(bb)     FHA/VA.  Each of Seller, PennyMac Corp. and/or any other Qualified Originator, if applicable, is an FHA Approved Mortgagee and a VA Approved Lender in good standing to acquire, originate and service, as applicable, mortgages and has not been suspended as a mortgagee or servicer by FHA or VA as applicable.  Seller and Subservicer are not under review or investigation or have knowledge of imminent or future investigation, by FHA or VA.
		

		
			(cc)     Seller’s Internal Mortgage Tracking System.  Each printout and paper copy produced by the Seller’s internal mortgage tracking system and delivered to Buyer is true, complete and accurate.
		

		
			(dd)     Anti-Money Laundering Laws.  The operations of each Seller Party and Servicer and each of their subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements, including the Currency and Foreign Transactions Reporting Act of 1970, as amended, the applicable money laundering statutes of all jurisdictions where such Seller Party or Servicer or any of their subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the "Anti-Money Laundering Laws") and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving any Seller Party, Servicer or any of their subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the best knowledge of any Seller Party or Servicer, threatened.
		

		
			(ee)     Sanctions.  No Seller Party, Servicer or any of their subsidiaries nor, to the knowledge of the Seller and Guarantor, any director, officer, agent, employee or affiliate of any Seller Party, Servicer or any of their subsidiaries (i) is, or is controlled or 50% or more owned in the aggregate by or is acting on behalf of, one or more individuals or entities that are currently the subject of any sanctions administered or enforced by the United States (including any administered or enforced by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State or the Bureau of Industry and Security of the U.S. Department of Commerce), the United Nations Security Council, the European Union, a member state of the European Union (including sanctions administered or enforced by Her Majesty’s Treasury of the United Kingdom) or other relevant sanctions authority (collectively, “Sanctions” and such persons, “Sanctioned Persons” and each such person, a “Sanctioned Person”), (ii) is located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions that broadly prohibit dealings with that country or territory (collectively, “Sanctioned Countries” and each, a “Sanctioned Country”) or (iii) will, directly or indirectly, use the proceeds of this Agreement, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other individual or entity in any manner that would result in a violation of any Sanctions by, or could result in the imposition of Sanctions against, any individual or entity (including any individual or entity participating in the offering, whether as underwriter, advisor, investor or otherwise).
		

		
			(ff)     Servicer Approvals; Compliance with Guidelines.  Servicer and each subservicer servicing any Purchased Loans hereunder has all consents, licenses and approvals necessary to service such Purchased Loans on behalf of each Agency and has remained at all times in compliance with the Guidelines. 
		

		
			
		

		
			

		 

		

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			(gg)     Environmental Matters.  No Mortgaged Property contains or previously contained any Materials of Environmental Concern that constitute or constituted a violation of Environmental Laws or reasonably could be expected to give rise to liability of Seller thereunder.  No Seller has knowledge of any violation, alleged violation, non-compliance, liability or potential liability of Seller under any Environmental Law.  No Materials of Environmental Concern have been released, transported, generated, treated, stored or disposed of in violation of Environmental Laws or in a manner that could reasonably be expected to give rise to liability of Seller.
		

		
			(hh)     Financial Reporting. There has been no material weakness in, or fraud that involves management or other employees who have a significant role in, the internal controls of any Seller Party or any Affiliate thereof over financial reporting, in each case as described in the Securities Laws.
		

		
			(ii)      No Statutory Limitations to Indebtedness.  No Seller Party is subject to any Federal or state statute or regulation which limits its ability to incur indebtedness.
		

		
			(jj)      Fannie Mae/Freddie Mac.  Seller is a seller approved by Fannie Mae and Freddie Mac, in good standing to originate and service mortgages and has not been suspended as a mortgagee or servicer by Fannie Mae or Freddie Mac.  Seller is not under review or investigation and has no knowledge of imminent or future investigation by Fannie Mae or Freddie Mac (other than in the ordinary course of Seller’s business).  
		

		
			(kk)     [Reserved]
		

		
			(ll)      Transactions with Sanctioned Persons. No Seller Party, Servicer or any of their subsidiaries has engaged in any dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country, in the preceding three (3) years, nor does any Seller Party, Servicer or any of their subsidiaries have any plans to engage in dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country.
		

		
			(mm)   Foreign Corrupt Practices Act; U.K. Bribery Act. No Seller Party, Servicer nor any of its subsidiaries nor, to the knowledge of any Seller Party or Servicer, any director, officer, agent, employee, affiliate or other person acting on behalf of any Seller Party, Servicer or any of its subsidiaries is aware of or has taken any action, directly or indirectly, that could result in a violation or a sanction for violation by such persons of the Foreign Corrupt Practices Act of 1977 or the U.K. Bribery Act 2010, each as may be amended, or similar law of any other relevant jurisdiction, or the rules or regulations thereunder; and each Seller Party, Servicer and each of their subsidiaries have instituted and maintain policies and procedures to ensure compliance therewith.  No part of the proceeds of the offering will be used, directly or indirectly, in violation of the Foreign Corrupt Practices Act of 1977 or the U.K. Bribery Act 2010, each as may be amended, or similar law of any other relevant jurisdiction, or the rules or regulations thereunder.
		

		
			13.       COVENANTS
		

		
			Seller covenants and agrees with Buyer that during the term of this Agreement with respect to each Seller Party as applicable: 
		

		
			
		

		
			

		 

		

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			(a)        Financial Statements and Other Information.  
		

		
			Seller shall deliver to Buyer:
		

		
			(i)         As soon as available and in any event within forty (40) days after the end of each calendar month, the consolidated balance sheets of each Seller Party and its consolidated Subsidiaries as at the end of such month, the related unaudited consolidated statements of income and retained earnings and if requested by Buyer, of cash flows for such Seller Party and its consolidated Subsidiaries for such period and the portion of the fiscal year through the end of such period;
		

		
			(ii)        As soon as available and in any event within forty-five (45) days after the end of each of the first three quarterly fiscal periods of each fiscal year of each Seller Party, the consolidated balance sheets of such Seller Party and its consolidated Subsidiaries as at the end of such period and the related unaudited consolidated statements of income and retained earnings and of cash flows for such Seller Party and its consolidated Subsidiaries for such period and the portion of the fiscal year through the end of such period;
		

		
			(iii)       As soon as available and in any event within ninety (90) days after the end of each fiscal year of each Seller Party, the consolidated balance sheets of such Seller Party and its consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of income and retained earnings and of cash flows for such Seller Party, accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall not be qualified as to scope of audit or going concern and shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of such Seller Party and its consolidated Subsidiaries at the end of, and for, such fiscal year in accordance with GAAP;
		

		
			(iv)       Seller shall deliver to the Buyer the following certificates (any of which may be consolidated for any month or quarter, respectively, on the latest date as to which any such consolidated certificates for such month or quarter, respectively, are due): 
		

		
			(1) On or prior to the last day of each calendar month, a certificate of a Responsible Officer of each Seller Party in the form of Exhibit A attached hereto;
		

		
			(2) at the time each Seller Party furnishes each set of financial statements pursuant to paragraph (ii) above, a certificate of a Responsible Officer of such Seller Party to the effect that, to the best of such Responsible Officer’s knowledge, such Seller Party during such fiscal period or year has observed or performed all of its covenants and other agreements, and satisfied every material condition, contained in this Agreement and the other Program Documents to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate (and, if any Default or Event of Default has occurred and is continuing, describing the same in reasonable detail and describing the action Seller has taken or proposes to take with respect thereto); and
		

		
			(3) at the time it furnishes consolidated financial statements pursuant to paragraphs (i) and (ii) above, a certificate of a Responsible Officer of each related Seller Party, which certificate shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of such Seller Party and its Subsidiaries in accordance with 
		

		
			
		

		
			

		 

		

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			GAAP, consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments). 
		

		
			(v)        From time to time at the request of Buyer, Seller shall provide Buyer with a paper or electronic copy produced by Seller’s internal mortgage tracking system reflecting that the Purchased Loans are registered in the name of Buyer within three (3) Business Days of such request;
		

		
			(vi)       From time to time (1) such other information regarding the financial condition, operations, well being or business of any Seller Party as Buyer may reasonably request, within two (2) Business Days of such request and (2) if such Loan was consummated on or after January 10, 2014, copies of all documentation in connection with the underwriting and origination of any Purchased Loan that evidences compliance with the Ability to Repay Rule and the QM Rule, as Buyer may reasonably request, as soon as possible but in any event no later than three (3) Business Days following such request;
		

		
			(vii)      As soon as available, and in any event within five (5) days after the date on which any audit reports with respect to Seller or its Subsidiaries are required to be delivered to HUD or any Agency, copies of any such reports, performed and delivered in compliance with all requirements of HUD or such Agency and accompanied by an opinion thereon of an independent certified public accountant, if applicable;
		

		
			(viii)     Within (i) three (3) Business Days after receipt by a Seller Party (to the extent such Seller Party owns any servicing rights with respect to any mortgage loans) of a request from Buyer, the servicing valuation conducted by such Seller Party and used to support the calculation of the servicing multiple used in determining the book value of such Seller Party’s servicing portfolio in accordance with GAAP; and (ii) if so requested by Buyer, within (3) Business Days of its completion, the servicing valuation conducted by a Valuation Agent with respect to the value of such Seller Party’s servicing portfolio in accordance with GAAP;
		

		
			(ix)       Within five (5) Business Days after receipt by Seller of a request from Buyer, any loan level information requested by Buyer with respect to mortgage loans (which are acceptable for delivery to any Agency at the time such loans were originated by or acquired by Seller) held on the books of Seller (whether or not such mortgage loans are “held for investment” by Seller); 
		

		
			(x)        Within eight (8) days after the end of each month, (i) a report of all sales, repurchase and other transactions with respect to the Purchased Loans, which schedule shall be acceptable to Buyer, (ii) a properly completed Loan Schedule with respect to each Purchased Loan, (iii) servicing reports for the prior month, including static pool analyses, liquidity (cash and availability) and identification of any modifications to any Purchased Loans, and (iv) servicing data feeds for the prior month detailing Loan level attributes;
		

		
			(xi)       Within five (5) days after any material amendment, modification or supplement to the Servicing Agreement a certified, fully executed copy of such amendment, modification or supplement;
		

		
			(xii)      Promptly upon reasonable request by Buyer, information regarding any Seller Party’s portfolio including information regarding asset allocation, leverage, liquidity, and such 
		

		
			
		

		
			

		 

		

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			other information respecting the condition or operations (financial or otherwise), of such Seller Party;
		

		
			(xiii)     Promptly after receipt by Seller of a request from Buyer, Seller shall provide copies of its latest Quality Control Program reports and all responses made by the management of Seller to address any issues, risks, vulnerabilities or adverse findings contained in such Quality Control Program.
		

		
			(xiv)     Promptly upon the establishment of any rating of any Seller Party by any Rating Agency and any downgrade in or withdrawal of any such rating once established;
		

		
			(xv)      Within one (1) Business Day of any margin call (however defined or described in the applicable Indebtedness documents) or other similar request (including a claim under a guaranty) is made upon any Seller Party under any Indebtedness of any Seller Party in an aggregate amount in excess of $1,000,000, notice of such margin call or other request;
		

		
			(xvi)     As soon as reasonably possible, and in any event within fifteen (15) days after a Responsible Officer of any Seller Party knows or has reason to believe, that any of the events or conditions specified below with respect to any Plan or Multiemployer Plan has occurred or exists, a statement signed by a senior financial officer of such Seller Party setting forth details respecting such event or condition and the action, if any, that such Seller Party or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by such Seller Party or an ERISA Affiliate with respect to such event or condition):
		

		
			(A)        any Reportable Event, or any request for a waiver under Section 412(c) of the Code for any Plan;
		

		
			(B)        the distribution under Section 4041(c) of ERISA of a notice of intent to terminate any Plan or any action taken by Seller or an ERISA Affiliate to terminate any Plan;
		

		
			(C)        the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by Seller or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan;
		

		
			(D)        the complete or partial withdrawal from a Multiemployer Plan by a Seller Party or any ERISA Affiliate that results in liability under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by any Seller Party or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA;
		

		
			(E)        the institution of a proceeding by a fiduciary of any Multiemployer Plan against any Seller Party or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; and
		

		
			
		

		
			

		 

		

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			(F)        the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code, would result in the loss of tax-exempt status of the trust of which such Plan is a part if any Seller Party or an ERISA Affiliate fails to timely provide security to such Plan in accordance with the provisions of said Sections.
		

		
			(b)        Litigation.  Each Seller Party will promptly, and in any event within three (3) days after service of process on any of the following, give to Buyer notice of all legal or arbitrable proceedings affecting such Seller Party or any of its Subsidiaries that (i) questions or challenges the validity or enforceability of any of the Program Documents, (ii) as to which there is a reasonable likelihood that an adverse determination would result in a Material Adverse Effect or (iii) seeks to prevent the consummation of any Transaction.
		

		
			(c)        Existence, Etc.  Each Seller Party will:
		

		
			(i)      (A) preserve and maintain its legal existence and all of its material rights, privileges, franchises; (B) maintain all licenses, permits or other approvals necessary to conduct its business and to perform its obligations under the Program Documents;  (C) except as would not be reasonably likely to have a Material Adverse Effect or would have a material adverse effect on the Purchased Loans or Buyer’s interest therein, remain in good standing under the laws of each state in which it conducts business or any Mortgaged Property is located; and (D) not change its tax identification number, fiscal year or method of accounting without the consent of Buyer;
		

		
			(ii)     comply with the requirements of and conduct its business strictly in accordance with all applicable laws, rules, regulations and orders of Governmental Authorities (including, without limitation, truth in lending, real estate settlement procedures and all environmental laws) if failure to comply with such requirements would be reasonably likely (either individually or in the aggregate) to have a Material Adverse Effect;
		

		
			(iii)     keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied;
		

		
			(iv)     not move its chief executive office or chief operating office from the addresses referred to in Section 12(m) unless it shall have provided Buyer thirty (30) days prior written notice of such change;
		

		
			(v)      pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its Property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained; 
		

		
			(vi)     permit representatives of Buyer, during normal business hours upon three (3) Business Days’ prior written notice at a mutually desirable time or at any time during the continuance of an Event of Default, to examine, copy and make extracts from its books and records, to inspect any of its Properties, and to discuss its 
		

		
			
		

		
			

		 

		

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			business and affairs with its officers, all to the extent reasonably requested by Buyer; and
		

		
			(vii)    not directly or indirectly enter into any agreement that would be violated or breached by any Transaction or the performance by such Seller Party of any Program Document.
		

		
			(d)        Prohibition of Fundamental Changes.   No Seller Party shall at any time, directly or indirectly, (i) enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) or sell all or substantially all of its assets without Buyer’s prior consent; or (ii) form or enter into any partnership, joint venture, syndicate or other combination which would have a Material Adverse Effect with respect to such Seller Party.
		

		
			(e)        Margin Deficit. If at any time there exists a Margin Deficit, Seller shall cure the same in accordance with Section 6 hereof.
		

		
			(f)        Notices. Seller shall give notice to Buyer promptly in writing of any of the following:
		

		
			(i)       promptly upon becoming aware of the occurrence of any Default, Event of Default or any event of default or default under any Program Document or other material agreement of such Seller Party;
		

		
			(ii)      upon, and in any event within three (3) Business Days after, service of process on a Seller Party or any of its Subsidiaries, or any agent thereof for service of process, in respect of any legal or arbitrable proceedings affecting Seller or any of its Subsidiaries (i) that questions or challenges the validity or enforceability of any of the Program Documents, or (ii) in which the amount in controversy exceeds $1,000,000 and as to which an adverse determination would be reasonably likely to result in a Material Adverse Effect;
		

		
			(iii)     upon becoming aware of any Material Adverse Effect and any event or change in circumstances which should reasonably be expected to have a Material Adverse Effect;
		

		
			(iv)     upon determining during the normal course of its business that the Mortgaged Property in respect of any Loan or Loans with an aggregate BPO Value of at least $1,000,000 has been damaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty, or otherwise damaged so as to materially and adversely affect the Market Value of such Loan;
		

		
			(v)      upon the entry of a judgment or decree against a Seller Party or any of its Subsidiaries in an amount in excess of $1,000,000;
		

		
			(vi)     upon, and in any event within five (5) Business Days after, the involuntary termination, acceleration, maturity of or reduction in the amount available for borrowing under any repurchase agreement, loan and security agreement or similar credit facility or agreement for borrowed funds entered into by a Seller Party and any third party to the extent that such agreement or facility, prior to the effectiveness of such termination, acceleration, maturity or reduction, provides for 
		

		
			
		

		
			

		 

		

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			a minimum amount available for borrowing by such Seller Party equal to or greater than $10,000,000;
		

		
			(vii)    upon Seller becoming aware of, and in any event within one (1) Business Day after the occurrence of any event such that, the aggregate amount of all repurchase and indemnity obligations of Seller to its third party investors (including any Agency) exceeds 30% of Seller’s Liquidity;
		

		
			(viii)   any material change in the insurance coverage required of any Seller Party or any other Person pursuant to any Program Document, with copy of evidence of same attached;
		

		
			(ix)     any material dispute, licensing issue, litigation, audit, revocation, sanctions, penalties, investigation, proceeding or suspension between a Seller Party on the one hand, and any Governmental Authority or any other Person; 
		

		
			(x)      any material change in accounting policies or financial reporting practices of a Seller Party or its Subsidiaries; 
		

		
			(xi)    any material change in the management of a Seller Party; 
		

		
			(xii)    notice of the revocation of any approvals of any Agency or HUD or changes to the approved mortgagee or approved servicer status with respect to the origination or servicing of mortgage loans by Seller or any subservicer; 
		

		
			(xiii)   notice of any amendments, modifications or waivers of any term or condition of or extension of the scheduled maturity date or modification of the interest rate of any item of the Purchased Loan or settlement or compromise of any claim in respect of any Purchased Loans that in the aggregate during any calendar month exceed 3% of the aggregate outstanding Purchase Price of all Purchased Loans; and
		

		
			(xiv)   any non-routine inspection or investigation of Seller, Seller’s files or Seller’s  facilities by or at the request of, HUD or any Agency.
		

		
			Each notice pursuant to this Section 13(f) shall be accompanied by a statement of a Responsible Officer of the related Seller Party, setting forth details of the occurrence referred to therein and stating what action Seller has taken or proposes to take with respect thereto.
		

		
			(g)        Servicing.  Except as provided in Section 43, Seller shall not permit any Person other than the Servicer to service Loans without the prior written consent of Buyer.
		

		
			(h)        OFAC.  At all times throughout the term of this Agreement, each Seller Party (a) shall be in full compliance with all applicable orders, rules, regulations and recommendations of OFAC and (b) shall not permit any Purchased Loans to be maintained, insured, traded, or used (directly or indirectly) in violation of any United States statutes, rules or regulations, in a Prohibited Jurisdiction or by a Prohibited Person.  
		

		
			(i)         Underwriting Guidelines.  Seller agrees to provide notice to Buyer within three (3) Business Days of  any material modifications to be made to the Underwriting Guidelines that will impact either Buyer or any Assets that will become Purchased Assets.  Seller agrees to deliver to Buyer copies of 
		

		
			
		

		
			

		 

		

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			the Underwriting Guidelines in the event that any changes are made to the Underwriting Guidelines following the Effective Date.  No material changes to the Underwriting Guidelines shall be effective with respect to any Purchased Loan until Buyer has consented in writing to any such change.
		

		
			(j)         Lines of Business. No Seller Party shall engage to any substantial extent in any line or lines of business activity other than the businesses generally carried on by it as of the Effective Date.  
		

		
			(k)        Transactions with Affiliates.  No Seller Party shall (1) enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (i) otherwise permitted under this Agreement, (ii) in the ordinary course of such Seller Party’s business and (iii) upon fair and reasonable terms that such Seller Party has reasonably determined are no less favorable to such Seller Party than such Seller Party believes it would obtain in a comparable arm’s length transaction with a Person which is not an Affiliate or (2) make a payment that is not otherwise permitted by this Section (j) to any Affiliate.  
		

		
			(l)        Defense of Title.  Seller warrants and will defend the right, title and interest of Buyer in and to all Purchased Items against all adverse claims and demands of all Persons whomsoever.
		

		
			(m)       Preservation of Purchased Items. Seller shall do all things necessary to preserve the Purchased Items so that such Purchased Items remain subject to a first priority perfected security interest hereunder. Without limiting the foregoing, Seller will comply with all applicable laws, rules and regulations of any Governmental Authority applicable to Seller or relating to the Purchased Items and cause the Purchased Items to comply with all applicable laws, rules and regulations of any such Governmental Authority.  Seller will not allow any default to occur for which Seller is responsible under any Purchased Items or any Program Documents and Seller shall fully perform or cause to be performed when due all of its obligations under any Purchased Items or the Program Documents.
		

		
			(n)       No Assignment.  No Seller Party shall (i) sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge, hypothecate or grant a security interest in or lien on or otherwise encumber (except pursuant to the Program Documents), any of the Purchased Loans (including any servicing rights or servicing advances with respect to any Purchased Loans) or any interest therein, or (ii) enter into any agreement or undertaking restricting the right or ability of Seller or Buyer to sell, assign or transfer any of the Loans (including the servicing rights appurtenant thereto), provided that this Section 13(m) shall not prevent any contribution, assignment, transfer or conveyance of Purchased Loans in accordance with the Program Documents.  No Purchased Loans shall at any time be subject to any servicing advance facility or similar agreement or facility and the servicing advances made with respect to any Purchased Loans have not been sold, assigned, transferred, pledged or hypothecated to any party or otherwise encumbered in any way.
		

		
			(o)        Limitation on Sale of Loans. Except in connection with the Program Documents or any securitization transaction, no Seller Party shall convey, sell, lease, assign, transfer or otherwise dispose of (collectively, “Transfer”), all or substantially all of its Property, business or assets (including, without limitation, receivables and leasehold interests) whether now owned or hereafter acquired.
		

		
			(p)        Limitation on Distributions.  Without Buyer’s consent, no Seller Party shall make any payment on account of, or set apart assets for a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of, any stock or senior or subordinate debt of a Seller Party, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of a Seller Party. 
		

		
			
		

		
			

		 

		

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			(q)        Financial Covenants.  (i)  Seller covenants and agrees with Buyer that during the term of this Agreement:  (A) Servicer’s Adjusted Tangible Net Worth shall at all times be greater than or equal to $170,000,000 (B) Servicer’s unrestricted cash shall at all times be greater than or equal to $20,000,000; (C) the ratio of Servicer’s Total Indebtedness, to Adjusted Tangible Net Worth shall at all times be less than 10:1; and (D) Servicer’s consolidated Net Income shall be equal to or greater than $1.00 for one (1) of the previous two (2) calendar quarters.
		

		
			(r)         Financial Covenants of Guarantor. In the event that Guarantor becomes an operating company or ceases to be a holding company, Seller agrees, at the sole option of Buyer, to enter into an amendment to this Agreement to require Guarantor to make financial representations, warranties and covenants to Buyer, the substance of which shall contain  financial tests substantially similar to the financial tests contained in Sections 12(p) and 13(q) herein.   Seller shall provide prompt notice to Buyer in the event that Guarantor acquires any new Subsidiary.
		

		
			(s)        Takeout Commitments.  Upon Buyer’s request, Seller shall deliver to Buyer any and all information relating to Takeout Commitments that relate specifically to Purchased Loans that are then subject to a Transaction.
		

		
			(t)         Power of Attorney.  Seller shall, from time to time at the request of Buyer, deliver to Buyer any powers of attorney or other documentation required by Buyer to ensure the enforceability under applicable law of any rights and/or powers granted to Buyer in Section 8 of this Agreement.
		

		
			(u)        Restricted Payments.  No Seller Party shall make any Restricted Payments following the occurrence of a Default.
		

		
			(v)        Servicing Transmission.  Seller shall provide to Buyer within five (5) Business Days of Buyer’s request: (i) the Servicing Transmission, on a loan-by-loan basis and in the aggregate, with respect to the Loans serviced by Seller which were funded prior to the first day of the current month, summarizing or identifying (A) delinquency and loss experience with respect to Loans serviced by Seller (including, in the case of the Loans, the following categories: current, 30-59, 60-89 and 90+), (B) any Mortgagor that is in bankruptcy, and (C) any amendments, modifications or waivers of any term or condition of or extension of the scheduled maturity date or modification of the interest rate of any item of the Purchased Loan or settlement or compromise of any claim in respect of any Purchased Loan; and (ii) any other information reasonably requested by Buyer with respect to the Purchased Loans.  Each monthly servicing report described above shall separately identify Purchased Loans subject to outstanding Transactions hereunder and the related Purchase Date therefor.  
		

		
			(w)       Takeout Payments.  With respect to each Purchased Loan and the portion of each Security related to Purchased Loans subject to a Transaction, in each case that is subject to a Takeout Commitment, Seller shall ensure that the related portion of the purchase price and all other payments under such Takeout Commitment to the extent related to Purchased Loans subject to a Transaction or such portion of each Security related to Purchased Loans subject to a Transaction shall be paid to Buyer (or its designee) in accordance with the Joint Account Control Agreement or the Joint Securities Account Control Agreement, as applicable.
		

		
			(x)        Maintenance of Property; Insurance.  Each Seller Party shall keep all property useful and necessary in its business in good working order and condition.  Seller shall maintain errors and omissions insurance and/or mortgage impairment insurance and blanket bond coverage in such amounts as are in effect on the Effective Date and are customarily required by Fannie Mae and Freddie Mac (as disclosed to 
		

		
			
		

		
			

		 

		

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			Buyer in writing) and shall not reduce such coverage without the written consent of Buyer, and shall also maintain such other insurance with financially sound and reputable insurance companies, and with respect to property and risks of a character usually maintained by entities engaged in the same or similar business similarly situated, against loss, damage and liability of the kinds and in the amounts customarily maintained by such entities.
		

		
			(y)        Further Identification of Purchased Items.  Seller will furnish to Buyer from time to time statements and schedules further identifying and describing the Purchased Items and such other reports in connection with the Purchased Items as Buyer may reasonably request, all in reasonable detail.
		

		
			(z)        Loans Determined to be Defective.  Upon discovery by Seller of any breach of any representation or warranty listed on Schedule 1 hereto applicable to any Loan, Seller shall promptly give notice of such discovery to Buyer.
		

		
			(aa)      Trade Assignments.  With respect to any Purchased Loan or Security subject to a Takeout Commitment, upon request by Buyer, Seller shall deliver to Buyer as soon as possible but no more than one (1) Business Day following the date on which Seller enters into a Takeout Commitment for such Purchased Loan or Security, a duly executed Trade Assignment together with a copy of the Takeout Commitment.
		

		
			(bb)      [reserved]
		

		
			(cc)      Additional Committed Repurchase or Warehouse Facility.  Seller shall maintain throughout the term of this Agreement, with a nationally recognized and established counterparty (other than Buyer or Seller’s parent or any Affiliates of Seller), one or more committed loan repurchase or warehouse facilities for mortgage loans of a credit quality similar to the Loans to be purchased hereunder, originated or acquired by Seller, in an aggregate amount not less than $75,000,000, which facility or facilities shall accommodate “jumbo” mortgage loans in an amount not less than $7,000,000 shall have a term at least equal to that provided under this Agreement, and the terms and conditions comparable to those provided under this Agreement, including as to the financial condition of Seller. Notwithstanding the foregoing, in the event that any facilities of the type listed above that are in place as of the date hereof or at any time hereafter, are terminated or the amount available for borrowing thereunder is reduced such that the aggregate amount available for borrowing under such facility or facilities is less than $75,000,000, Seller shall not be deemed to be in breach of this Section 13(bb) as a result of such termination or reduction to the extent that (1) a term sheet for a replacement facility or facilities that meet the criteria set forth above is in place with another lender or lenders within sixty (60) days of such termination or reduction, and (2) such replacement facility or facilities is in place and available for borrowing by the Seller within one hundred twenty (120) days of such termination or reduction.  
		

		
			(dd)     Maintenance of Papers, Records and Files.  
		

		
			(i)       Seller shall acquire, and Seller shall build, maintain and have available, a complete file in accordance with lending industry custom and practice for each Purchased Loan.  Seller will maintain all such Records not in the possession of Custodian or Buyer in good and complete condition in accordance with industry practices and preserve them against loss or destruction.
		

		
			(ii)      Seller shall collect and maintain or cause to be collected and maintained all Records relating to the Purchased Loans in accordance with industry custom and 
		

		
			
		

		
			

		 

		

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			practice, including those maintained pursuant to subsection (i), and all such Records shall be in Custodian’s possession unless Buyer otherwise approves.  Seller shall deliver to Buyer or its designee updates of such Servicing Records at least monthly, and more frequently as requested by Buyer. Seller will not cause or authorize any such papers, records or files that are an original or an only copy to leave Custodian’s possession, except for individual items removed in connection with servicing a specific Loan, in which event Seller will obtain or cause to be obtained a receipt from Custodian for any such paper, record or file.
		

		
			(iii)     For so long as Buyer has an interest in or lien on any Purchased Loan, Seller will hold or cause to be held all related Records in trust for Buyer.  Seller shall notify, or cause to be notified, every other party holding any such Records of the interests and liens granted hereby.
		

		
			(iv)     Upon reasonable advance notice from Custodian or Buyer, Seller shall (x) make any and all such Records available to Custodian or Buyer to examine any such Records, either by its own officers or employees, or by agents or contractors, or both, and make copies of all or any portion thereof, (y) permit Buyer or its authorized agents to discuss the affairs, finances and accounts of each Seller Party with its respective chief operating officer and chief financial officer and to discuss the affairs, finances and accounts of each Seller Party with its independent certified public accountants.
		

		
			(ee)      Maintenance of Licenses. Each Seller Party shall (i) maintain all licenses, permits or other approvals necessary for such Seller Party to conduct its business and to perform its obligations under the Program Documents, including, but not limited to, any FHA or VA licenses or approvals, (ii) remain in good standing under the laws of each state in which it conducts business or any Mortgaged Property is located, and (iii) shall conduct its business strictly in accordance with applicable law.
		

		
			(ff)       Taxes, Etc.  Each Seller Party shall pay and discharge or cause to be paid and discharged, when due, all taxes, assessments and governmental charges or levies imposed upon such Seller Party or upon its income and profits or upon any of its property, real, personal or mixed (including without limitation, the Purchased Loans) or upon any part thereof, as well as any other lawful claims which, if unpaid, might become a Lien upon such properties or any part thereof, except for any such taxes, assessments and governmental charges, levies or claims as are appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves are provided.  Each Seller Party shall file on a timely basis all federal, state and local tax and information returns, reports and any other information statements or schedules required to be filed by or in respect of it.
		

		
			(gg)      Use of Custodian. Without the prior written consent of Buyer, Seller shall use no third party custodian as document custodian other than Custodian with respect to the Purchased Loans.
		

		
			(hh)      Change of Fiscal Year.  No Seller Party will at any time, directly or indirectly, except upon ninety (90) days’ prior written notice to Buyer, change the date on which such Seller Party’s fiscal year begins.
		

		
			(ii)        Delivery of Servicing Rights and Servicing Records.  With respect to the Servicing Rights appurtenant to each Purchased Loan, Buyer shall own, and Seller shall deliver, such Servicing Rights to Buyer on the related Purchase Date.  Seller shall deliver (or cause the related Subservicer to deliver) the 
		

		
			
		

		
			

		 

		

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			Servicing Records (including any FHA or VA required records) and the physical and contractual servicing of each Purchased Loan, to Buyer or its designee upon the termination of Seller, Seller or Subservicer as the servicer or subservicer, respectively, pursuant to Section 43(d).  In addition, with respect to the Servicing Records for each Purchased Loan and the physical and contractual servicing of each Purchased Loan, the Seller shall deliver (or cause the related Subservicer to deliver) such Servicing Records and, to the extent applicable, the servicing to Buyer or its designee within thirty (30) days of the earlier of (i) the termination of Seller or Subservicer as the servicer or subservicer, respectively, of the Purchased Loans and (ii) the related Purchase Date for each such Purchased Loan (the “Servicing Delivery Requirement”).  Notwithstanding the foregoing, such Servicing Delivery Requirement will be deemed restated for each such Purchased Loan on each Repurchase Date on which such Purchased Loan is repurchased by Seller and becomes subject to a new Transaction (and the immediately preceding delivery requirement will be deemed to be rescinded), and a new thirty (30) day Servicing Delivery Requirement will be deemed to commence for such Purchased Loans as of such Repurchase Date in the absence of directions to the contrary from Buyer.  Further, the Servicing Delivery Requirement will no longer apply to any Purchased Loan that is repurchased in full by the Seller in accordance with the provisions of this Agreement and is no longer subject to a Transaction.  Seller’s transfer of the Servicing Rights, Servicing Records and the physical and contractual servicing under this Section shall be in accordance with customary standards in the industry and such transfer shall include the transfer of the gross amount of all escrows held for the related mortgagors (without reduction for unreimbursed advances or “negative escrows”).  
		

		
			(jj)        Collection Account.  Prior to the initial Purchase Date, Seller shall establish the Collection Account for the sole and exclusive benefit of Buyer.  Seller shall deposit all Income received with respect to the Purchased Loans to be deposited to the Collection Account, and to be held therein until distributed by the Buyer in accordance with Section 7.  No amounts deposited into such account shall be removed without Buyer’s prior written consent.  Seller shall follow the instructions of Buyer with respect to the Purchased Loans and deliver to Buyer any information with respect to the Purchased Loans reasonably requested by Buyer.  Seller shall deposit or credit to the Collection Account all items to be deposited or credited in accordance with Section 7 herein, thereto irrespective of any right of setoff or counterclaim arising in favor of it (or any third party claiming through it) under any other agreement or arrangement.
		

		
			(kk)     MERS.  Seller is a member of MERS in good standing and current in the payment of all fees and assessments imposed by MERS, and shall comply with all rules and procedures of MERS in connection with the servicing of MERS Loans for as long as such Purchased Loans are registered with MERS.
		

		
			(ll)        Seller Approvals.  (A) Seller shall at all times remain approved (i) by FHA as an FHA Title II non-supervised lender, (ii) by Ginnie Mae as an issuer of Ginnie Mae I and II single family mortgage-backed securities, (iii) by Fannie Mae as a servicer, (iv) by Freddie Mac as a servicer and (v) by VA as a VA Approved Lender, and (B)  Seller and each Subservicer (if any) servicing any Purchased Loans hereunder shall at all times have all consents, licenses and approvals necessary to service the Purchased Loans.          
		

		
			(mm)     Issuance of Security.  With respect to any Security, upon the request of Buyer, Seller shall execute and deliver to Buyer an Officer’s Compliance Certificate prior to the issuance of such Security.
		

		
			(nn)       FHA/VA.  Seller shall make all advances and other payments and provide all such reports and notices as are required under the FHA Regulations or VA Regulations, as applicable, and otherwise take all actions necessary to maintain and keep in full force and effect, during the term of this Agreement, the FHA Insurance Contract or VA Guaranty Agreement, as applicable, including providing any notices 
		

		
			
		

		
			

		 

		

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			required to be delivered to the FHA or the VA, as the case may be, by the Seller in connection with the servicing of the Loans pursuant hereto.
		

		
			(oo)      Agency Approvals.  Should Seller, for any reason, cease to possess any applicable Agency approval, or should notification to the relevant Agency or to the Department of Housing and Urban Development, VA or FHA be required, Seller shall so notify Buyer immediately in writing.  Notwithstanding the preceding sentence, Seller shall take all necessary action to maintain all of its applicable Agency approvals at all times during the term of this Agreement and each outstanding Transaction.    
		

		
			(pp)       Loan Purchase Agreements.   Seller shall either (i) maintain, and shall not be in default under, after the expiration of any applicable cure or exception period, at least one whole loan purchase agreement with at least one Agency, pursuant to which such Agency has agreed to purchase Eligible Loans from Seller or (ii) maintain, and shall not be in material default under, after the expiration of any applicable cure or exception period, at least one whole loan purchase agreement with at least one non-Agency third party purchaser, pursuant to which such third party purchaser has agreed to purchase Eligible Loans from Seller.  Seller shall ensure that each Loan sold to Buyer in a Transaction hereunder is eligible for sale to such Agency or non-Agency third party purchaser, as the case may be, pursuant to such purchase agreement. 
		

		
			(qq)      Maintenance of Financial Covenants.  To the extent that Seller is obligated under any other Indebtedness (whether now in effect or in effect at any time during the term of the Agreement) to comply with a financial covenant that is comparable to any of the financial covenants set forth in Section 13(p) and such comparable financial covenant is more restrictive to Seller or otherwise more favorable to the related lender or buyer thereunder than any financial covenant hereunder, such comparable financial covenant shall, with no further action required on the part of either Seller or Buyer, automatically become a part hereof and be incorporated herein, and Seller hereby covenants to maintain compliance with such comparable financial covenant at all times throughout the terms of this Agreement. In the event that such other Indebtedness is terminated or otherwise amended such that the comparable financial covenant is no longer more restrictive to Seller, Seller shall provide notice to Buyer of such termination or amendment, and within thirty (30) days of Buyer’s receipt of such notice, Buyer may in its sole reasonable discretion agree that the original terms of the related financial covenant in this Agreement is deemed to be reinstated by providing written notice to Seller of such reinstatement.  
		

		
			(rr)       Quality Control.  Seller shall maintain an internal quality control program that evaluates and monitors, on a regular basis, the overall quality of its servicing activities and that: ensures that the Mortgage Loans are serviced in accordance with Accepted Servicing Practices; guards against dishonest, fraudulent, or negligent acts; and guards against errors and omissions by officers, employees, or other authorized persons (the “Quality Control Program”).
		

		
			(ss)       CRA Loan Reporting.  On a weekly basis,  Seller shall deliver to Buyer a report identifying each CRA Loan subject to Transactions and describing in reasonable detail (i) the status of due diligence for each such CRA Loan, (ii) expected timing and eligibility in connection with the sale of each such CRA Loan to CMI, and (iii) any other information reasonably requested by Buyer with respect to each such CRA Loan.
		

		
			(tt)        Servicing Advances.  No Purchased Loans shall be subject to any servicing advance facility and no servicing advances with respect to any Purchased Loans shall be pledged, sold, financed or otherwise encumbered at any time such Purchased Loan is subject to a Transaction.  
		

		
			
		

		
			

		 

		

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			(uu)      Takeout Commitments.  Upon Buyer’s reasonable request, Seller shall deliver to Buyer any and all information relating to Takeout Commitments that relate specifically to Purchased Loans that are then subject to a Transaction.
		

		
			(vv)      Acquisition of Repurchase or Indemnity Obligations.  The Seller shall not acquire any loan level repurchase or indemnity obligations from any third party in connection with its purchase of any mortgage loan pool or mortgage origination platform, other than in the ordinary course of Seller’s business.
		

		
			14.        REPURCHASE DATE PAYMENTS
		

		
			On each Repurchase Date, Seller shall remit or shall cause to be remitted to Buyer the Repurchase Price together with any other Obligations then due and payable.
		

		
			15.        REPURCHASE OF PURCHASED LOANS
		

		
			Upon discovery by Seller of a breach of any of the representations and warranties set forth on Schedule 1 to this Agreement, Seller shall give prompt written notice thereof to Buyer.  It is understood and agreed that the representations and warranties set forth in Schedule 1 with respect to the Purchased Loans shall survive delivery of the respective Mortgage Files to Custodian and shall inure to the benefit of Buyer.  The fact that Buyer has conducted or has failed to conduct any partial or complete due diligence investigation in connection with its purchase of any Purchased Loan shall not affect Buyer’s right to demand repurchase of such Purchased Loan as provided under this Agreement.  Seller shall, upon the earlier of Seller’s discovery or Seller receiving notice with respect to any Purchased Loan of (i) any breach of a representation or warranty contained in Schedule 1, or (ii) any failure to deliver any of the items required to be delivered as part of the Mortgage File within the time period required for delivery pursuant to the Custodial Agreement, promptly cure such breach or delivery failure in all material respects.  If on the Business Day after the earlier of Seller’s discovery of such breach or delivery failure or Seller receiving notice thereof that such breach or delivery failure has not been remedied by Seller and such breach or delivery failure would cause Buyer to require the repurchase of such Purchased Loan, Seller shall promptly upon receipt of written instructions from Buyer repurchase such Purchased Loan at the Repurchase Price with respect to such Purchased Loan by wire transfer to the account designated by Buyer.  Income with respect to such Purchased Loans received by Buyer after payment of the Repurchase Price shall be remitted to Seller in accordance with Section 7.  In the event that it is discovered that the circumstances with respect to any Purchased Loan are not accurately reflected in any of the applicable representations and warranties made by Seller set forth in Schedule 1 to this Agreement, notwithstanding the actual knowledge or lack of knowledge of Seller, and notwithstanding that such representation and warranty is made “to the best of Seller’s knowledge,” then such representation and warranty shall be deemed to be breached.
		

		
			16.        RESERVED
		

		
			17.        ACCELERATION OF REPURCHASE DATE
		

		
			Buyer may, in its sole discretion, at any time, terminate any Transactions with respect to the Uncommitted Amount by providing written notice to Seller.  Within thirty (30) calendar days of receipt of such notice, Seller agrees to repurchase all such Purchased Loans at the Repurchase Price and to satisfy all of its Obligations with respect to such Purchased Loans. 
		

		
			
		

		
			

		 

		

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			18.        EVENTS OF DEFAULT
		

		
			Each of the following events shall constitute an Event of Default (an “Event of Default”) hereunder:
		

		
			(a)          Seller fails to transfer the related Purchased Loans to Buyer on the applicable Purchase Date (provided Buyer has tendered the related Purchase Price); or
		

		
			(b)          Seller fails to repurchase the Purchased Loans on the applicable Repurchase Date, fails to perform its obligations under Section 6; or
		

		
			(c)          Seller or Guarantor shall default in the payment of any other amount payable by it hereunder or under any other Program Document after notification by Buyer of such default, and such default shall have continued unremedied for three (3) Business Days; or
		

		
			(d)          Any representation, warranty or certification made or deemed made herein or in any other Program Document by any Seller Party or any certificate furnished to Buyer pursuant to the provisions thereof, shall prove to have been false or misleading in any material respect as of the time made or furnished (other than the representations and warranties set forth in Schedule 1 which shall be considered solely for the purpose of determining the Market Value of the Loans; unless (i) Seller shall have made any such representations and warranties with knowledge that they were materially false or misleading at the time made or (ii) any such representations and warranties have been determined by Buyer in its sole discretion to be materially false or misleading on a regular basis); or
		

		
			(e)           (i) A Seller Party shall fail to comply with the requirements of Section 13(c)(i)(A), Section 13(d), Section 13(f)(i), Section 13(m), Section 13(n), Section 13(o), Section 13(dd) or Section 13(kk)(B) hereof, and such default shall continue unremedied for a period of one (1) Business Day; (ii) a Seller Party shall fail to comply with the requirements of Section 13(p) or Section 13(q) hereof or Section 3 of the Pricing Side Letter, and such default shall continue unremedied for a period of two (2) Business Days; or (iii) Seller shall otherwise fail to observe or perform any other obligation, representation or covenant contained in this Agreement or any other Program Document and such failure to observe or perform shall continue unremedied for a period of five (5) Business Days; or 
		

		
			(f)          Any final judgment or judgments or order or orders for the payment of money in excess of $1,000,000 in the aggregate (to the extent that it is, in the reasonable determination of Buyer, uninsured and provided that any insurance or other credit posted in connection with an appeal shall not be deemed insurance for these purposes) shall be rendered against any Seller Party by one or more courts, administrative tribunals or other bodies having jurisdiction over them and the same shall not be discharged (or provisions shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within sixty (60) days from the date of entry thereof and such Seller Party shall not, within said period of sixty (60) days, or such longer period during which execution of the same shall have been stayed or bonded, appeal therefrom and cause the execution thereof to be stayed during such appeal; or
		

		
			(g)          Any Seller Party shall admit in writing its inability to, or intention not to, perform any of its Obligations, or Buyer shall have determined in good faith that a Seller Party is unable to meet its commitments; or
		

		
			(h)          A Seller Party files a voluntary petition in bankruptcy, seeks relief under any provision of any bankruptcy, reorganization, moratorium, delinquency, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction whether now or subsequently in effect; or consents to the filing of any petition against it under any such law; or consents to the appointment of or taking possession 
		

		
			
		

		
			

		 

		

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			by a custodian, receiver, conservator, trustee, liquidator, sequestrator or similar official for such Seller Party, or of all or any part of such Seller Party’s Property; or makes an assignment for the benefit of such Seller Party’s creditors; or
		

		
			(i)          A custodian, receiver, conservator, liquidator, trustee, sequestrator or similar official for any Seller Party, or of any of such Seller Party’s respective Property (as a debtor or creditor protection procedure), is appointed or takes possession of such Property; or a Seller Party generally fails to pay its debts as they become due; or a Seller Party is adjudicated bankrupt or insolvent; or an order for relief is entered under the Federal Bankruptcy Code, or any successor or similar applicable statute, or any administrative insolvency scheme, against a Seller Party; or any of a Seller Party’s Property is sequestered by court or administrative order; or a petition is filed against such Seller Party under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution, moratorium, delinquency or liquidation law of any jurisdiction, whether now or subsequently in effect; or
		

		
			(j)          Any Governmental Authority or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the Property of any Seller Party or any of its Affiliates, or shall have taken any action to displace the management of a Seller Party or any of its Affiliates or to curtail its authority in the conduct of the business of a Seller Party or any of its Affiliates, or takes any action in the nature of enforcement to remove, limit or restrict the approval of such Seller Party or any of their Affiliates as an issuer, buyer or seller/servicer of loans or securities backed thereby, and such action provided for in this subsection (j) shall not have been discontinued or stayed within thirty (30) days; or
		

		
			(k)          (i) Any Program Document shall for whatever reason (including an event of default thereunder) be terminated (other than as agreed upon by Buyer and Seller), (ii) this Agreement shall for any reason cease to create a valid, first priority security interest or ownership interest upon transfer in any of the Purchased Loans or Purchased Items purported to be covered hereby or any of Seller’s material obligations (including the Obligations hereunder) shall cease to be in full force and effect, or the enforceability thereof shall be contested by any Seller Party; or
		

		
			(l)           Any Material Adverse Effect shall have occurred as determined by Buyer in its reasonable discretion; or
		

		
			(m)         (i) Seller shall engage in any non-exempt “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) a determination that a Plan is “at risk” (within the meaning of Section 302 of ERISA) or any Lien in favor of the PBGC or a Plan shall arise on the assets of Seller or any ERISA Affiliate, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of Buyer, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Plan shall terminate for purposes of Title IV of ERISA, (v) Seller or any ERISA Affiliate shall, or in the reasonable opinion of Buyer is likely to, incur any liability in connection with a withdrawal from, or the insolvency or reorganization of, a Multiemployer Plan, (vi) Seller or any ERISA Affiliate shall file an application for a minimum funding waiver under Section 302 of ERISA or Section 412 of the Code with respect to any Plan, (vii) any obligation for post-retirement medical costs (other than as required by COBRA or other applicable law, at the expense of the retiree) exists, or (viii) any other event or condition shall occur or exist with respect to a Plan and in each case in clauses (i) through (vii) above, such event or condition, together with all other such events or conditions, if any, is likely to subject Seller or any of its Affiliates to any tax, penalty or other liabilities in the aggregate material in relation to the 
		

		
			
		

		
			

		 

		

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			business, operations, property or financial or other condition of Seller or any of its Affiliates or could reasonably be expected to have a Material Adverse Effect; or
		

		
			(n)          A Change of Control of any Seller Party shall have occurred without the prior consent of Buyer or a material change in the management of any Seller Party shall have occurred which has not been approved by Buyer; or
		

		
			(o)          A Seller Party shall grant, or suffer to exist, any Lien on any Purchased Items except the Liens contemplated hereby; or the Liens contemplated hereby shall cease to be first priority perfected Liens on the Purchased Items in favor of Buyer or shall be Liens in favor of any Person other than Buyer; or
		

		
			(p)          Buyer shall reasonably request, specifying the reasons for such request, reasonable information, and/or written responses to such requests, regarding the financial well-being of Seller or any Seller Party and such reasonable information and/or responses shall not have been provided within three (3) Business Days of such request; or
		

		
			(q)          Any Seller Party or any Affiliate of a Seller Party shall default under, or fail to perform as required under, or shall otherwise breach the terms of any repurchase agreement, loan and security agreement, MSFTA/derivatives agreement, or similar credit facility or agreement for borrowed funds between a Seller Party or such other entity, on the one hand, and Buyer or any of Buyer's Affiliates on the other; or a Seller Party shall default under, or fail to perform as required under, the terms of any repurchase agreement, loan and security agreement or similar credit facility or agreement for borrowed funds with outstanding amount at least $10,000,000 (including without limitation any Citi Credit Facility) entered into by such Seller Party, which default or failure entitles any party to cause acceleration or require prepayment of any indebtedness thereunder; or 
		

		
			(r)          Seller’s membership in MERS is terminated for cause or Seller voluntarily terminates its membership in MERS to the extent any Purchased Loans are MERS Loans; or
		

		
			(s)          The aggregate amount of all outstanding repurchase and indemnity obligations (after giving effect to any applicable cure period) of Seller to its third party investors (including any Agency) exceeds 30% of Seller’s Liquidity; or
		

		
			(t)          Seller fails to deposit any Income received by it into the Collection Account within one (1) Business Day of the date such deposit was due;
		

		
			(u)          Seller shall default under any Servicing Agreement and such failure shall not have been waived by Buyer; 
		

		
			(v)          Seller receives a notice of denial from any Agency or any Agency terminates, revokes or suspends Seller’s approval to sell and service loans to such Agency (including but not limited to its approval to use DU or LP to underwrite mortgage loans); 
		

		
			(w)         Seller shall cease to be approved by or its approval shall be revoked, suspended, rescinded, halted, eliminated, withdrawn, annulled, repealed, voided or terminated by (i) Ginnie Mae as an approved issuer, (ii) HUD, pursuant to Sections 203 and 211 of the National Housing Act, (iii) FHA, as an FHA Approved Mortgagee or servicer, (iv) VA as a VA Approved Lender, (v) Fannie Mae as an approved seller/servicer or lender, or (vi) Freddie Mac as an approved seller/servicer or lender; or
		

		
			
		

		
			

		 

		

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			(x)          Any Agency shall at any time cease to accept delivery of any loan or loans from Seller under any program or notifies Seller that any such Agency shall cease accepting loan deliveries from Seller; or        
		

		
			(y)         All or a portion of Seller’s or any Guarantor’s servicing portfolio consisting of Fannie Mae or Freddie Mac loans is seized or the servicing of all or a portion of such loans is otherwise transferred away from Seller or any Guarantor; or
		

		
			(z)          If one or more of the events set forth in Section 11 of the Guaranty shall have occurred; or
		

		
			(aa)        Seller fails to pay any portion of the Commitment Fee when due hereunder; or
		

		
			(bb)        Seller’s or Subservicer’s FHA servicing eligibility is suspended, revoked or becomes subject to an investigation by the FHA; or
		

		
			(cc)        Seller’s status as an FHA Approved Mortgagee is suspended, revoked or becomes subject to an investigation by the FHA; or
		

		
			(dd)        (i) Seller’s status as an VA Approved Lender is suspended, revoked or becomes subject to an investigation by the VA;  or (ii) on or after the date, if any, in which Seller becomes a VA Approved Lender, Seller’s status as an VA Approved Lender is suspended, revoked or becomes subject to an investigation by the VA; or 
		

		
			(ee)        (1)  The 6-month rolling average rate of rejection (i.e. denial of insurance claim) by the FHA of insurance claims by Seller and/or any Subsidiary or Affiliate of Seller exceeds 5% (by number of loans or unpaid principal balance) of claims (“Rejected Insurance Trigger”) submitted by Seller and/or any Subsidiary or Affiliate of Seller and (2) Seller has failed to repurchase all Purchased Loans hereunder within five (5) days of Buyer’s request for such repurchase following the occurrence of any Rejected Insurance Trigger; or  
		

		
			(ff)         (1) The 6-month rolling average ratio of reimbursement by the FHA to claims submitted by Seller and/or any Subsidiary or Affiliate of Seller is less than 90% of the proceeds (“Reimbursement Trigger”) Seller and/or any Subsidiary or Affiliate of Seller is entitled to and (2) Seller has failed to repurchase all Purchased Loans hereunder within five (5) days of Buyer’s request for such repurchase following the occurrence of any Reimbursement Trigger; or  
		

		
			(gg)        (1) The 6-month rolling average rate of rejection by Fannie Mae or Freddie Mac of sales by Seller and/or any Subsidiary or Affiliate of Seller exceeds 5% (by number of loans or unpaid principal balance) of proposed sales (“Rejected Sales Trigger”) by Seller and/or any Subsidiary or Affiliate of Seller and (2) Seller has failed to repurchase all Purchased Loans hereunder within five (5) days of Buyer’s request for such repurchase following the occurrence of any Rejected Sales Trigger; or  
		

		
			(hh)        (1) The 6-month rolling average ratio of sales by Seller and/or any Subsidiary of Seller to Fannie Mae or Freddie Mac to proposed sales by Seller and/or any Subsidiary or Affiliate of Seller to Fannie Mae or Freddie Mac is less than 90% (“Sales Ratio Trigger”) and (2) Seller has failed to repurchase all Purchased Loans hereunder within five (5) days of Buyer’s request for such repurchase following the occurrence of any Sales Ratio Trigger; or
		

		
			(ii)          (1) The “compare ratio” assigned to Seller by FHA under its “Neighborhood Watch” program is greater than 100% (“Compare Ratio Trigger”); provided,  however, that Buyer may, by providing prior written notice to Seller in Buyer’s sole discretion, adopt a different threshold for such ratio or other statistic, 
		

		
			
		

		
			

		 

		

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			and in such event, there shall be a Compare Ratio Trigger hereunder if the “compare ratio” or such other statistic assigned to Seller by FHA is less favorable than such threshold adopted by Buyer and (2) Seller has failed to repurchase all Purchased Loans hereunder within five (5) days of Buyer’s request for such repurchase following the occurrence of any Compare Ratio Trigger; or
		

		
			(jj)          To the extent Seller has “delegated lender insurance authority” from HUD as of the date hereof, such authority shall be revoked or suspended at any time by HUD; or
		

		
			(kk)        The 6-month rolling average rate of FHA Up-Front Rejections with respect to mortgage loans originated by Seller and/or any Subsidiary or Affiliate of Seller exceeds 5% of the total number of mortgage loans originated by Seller and/or such Subsidiary or Affiliate of Seller and presented to FHA (by number of loans).
		

		
			19.        REMEDIES
		

		
			Upon the occurrence of an Event of Default, Buyer, at its option (which option shall be deemed to have been exercised immediately upon the occurrence of an Event of Default pursuant to Section 18(g), (h), (i) or (j) hereof), shall have the right to exercise any or all of the following rights and remedies:  
		

		
			(a)(i)     The Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occur (provided that, in the event that the Purchase Date for any Transaction has not yet occurred as of the date of such exercise or deemed exercise, such Transaction shall be deemed immediately canceled).  Seller’s obligations hereunder to repurchase all Purchased Loans at the Repurchase Price therefor on the Repurchase Date in such Transactions shall thereupon become immediately due and payable; all Income then on deposit in the Collection Account and all Income paid after such exercise or deemed exercise shall be remitted to and retained by Buyer and applied to the aggregate Repurchase Price and any other amounts owing by Seller hereunder; Seller shall immediately deliver to Buyer or its designee any and all original papers, Records and files relating to the Purchased Loans subject to such Transaction then in Seller’s possession and/or control; and all right, title and interest in and entitlement to such Purchased Loans (including the Servicing Rights thereon) shall be deemed transferred to Buyer or its designee.
		

		
			(ii)        Buyer shall have the right to (A) sell, on or following the Business Day following the date on which the Repurchase Price became due and payable pursuant to Section 19(a)(i) without notice or demand of any kind, at a public or private sale and at such price or prices as Buyer may deem commercially reasonable any or all Purchased Loans and/or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Loans, to give Seller credit for such Purchased Loans in an amount equal to the Market Value of the Purchased Loans against the aggregate unpaid Repurchase Price and any other amounts owing by Seller hereunder, provided, however, with respect to Purchased Loans with a Market Value of zero, Buyer shall in its sole discretion either sell such Purchased Loans in accordance with clause (A) of this Section 19(a)(ii) or release such Purchased Loans to Seller.  Seller shall remain liable to Buyer for any amounts that remain owing to Buyer following a sale and/or credit under the preceding sentence.  The proceeds of any disposition of Purchased Loans shall be applied first to the reasonable costs and expenses incurred by Buyer in connection with or as a result of an Event of Default; second, costs of cover and/or related hedging transactions; third to the aggregate Repurchase Prices; and fourth to all other Obligations.
		

		
			
		

		
			

		 

		

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			(iii)       Buyer shall have the right to terminate this Agreement and declare all obligations of Seller to be immediately due and payable, by a notice in accordance with Section 21 hereof provided no such notice shall be required for an Event of Default pursuant to Section 18(g), (h), (i) or (j).
		

		
			(iv)        The parties recognize that it may not be possible to purchase or sell all of the Purchased Loans on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Loans may not be liquid.  In view of the nature of the Purchased Loans, the parties agree that liquidation of a Transaction or the underlying Purchased Loans does not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner.  Accordingly, Buyer may elect the time and manner of liquidating any Purchased Loans and nothing contained herein shall obligate Buyer to liquidate any Purchased Loans on the occurrence of an Event of Default or to liquidate all Purchased Loans in the same manner or on the same Business Day or constitute a waiver of any right or remedy of Buyer.  Notwithstanding the foregoing, the parties to this Agreement agree that the Transactions have been entered into in consideration of and in reliance upon the fact that all Transactions hereunder constitute a single business and contractual obligation and that each Transaction has been entered into in consideration of the other Transactions.
		

		
			(v)         To the extent permitted by applicable law, Seller waives all claims, damages and demands Seller may acquire against Buyer arising out of the exercise by Buyer of any of its rights hereunder, other than those claims, damages and demands arising from the gross negligence or willful misconduct of Buyer.  If any notice of a proposed sale or other disposition of Purchased Items shall be required by law, such notice shall be deemed reasonable and proper if given at least 2 days before such sale or other disposition.
		

		
			(b)        Seller hereby acknowledges, admits and agrees that Seller’s obligations under this Agreement are recourse obligations of Seller to which Seller pledges its full faith and credit. In addition to its rights hereunder, Buyer shall have the right to proceed against any of Seller’s assets which may be in the possession of Buyer, any of Buyer’s Affiliates or their respective designees (including Custodian), including the right to liquidate such assets and to set‐off the proceeds against monies owed by (x) Seller to Buyer pursuant to this Agreement and (y) any Credit Party to Buyer pursuant to the related Citi Credit Facility.  Buyer may set off cash, the proceeds of the liquidation of the Purchased Loans, any other Purchased Items and their proceeds and all other sums or obligations owed by Buyer, or any of Buyer’s Affiliates, to Seller against all of (i) Seller’s obligations to Buyer, whether under this Agreement, under a Transaction, or under any other agreement among the parties, and (ii) the obligations of each Credit Party to Buyer under the related Citi Credit Facility, or under any other agreement among the parties, in each case whether or not such obligations are then due, without prejudice to Buyer’s right to recover any deficiency.
		

		
			(c)        Buyer shall have the right to obtain physical possession of the Servicing Records and all other files of Seller relating to the Purchased Loans and all documents relating to the Purchased Loans which are then or may thereafter come into the possession of Seller or any third party acting for Seller and Seller shall deliver to Buyer such assignments as Buyer shall request.
		

		
			(d)        Buyer shall have the right to direct all Persons servicing the Purchased Loans to take such action with respect to the Purchased Loans as Buyer determines appropriate.
		

		
			
		

		
			

		 

		

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			(e)        Buyer shall, without regard to the adequacy of the security for the Obligations, be entitled to the appointment of a receiver by any court having jurisdiction, without notice, to take possession of and protect, collect, manage, liquidate, and sell the Purchased Loans and any other Purchased Items or any portion thereof, collect the payments due with respect to the Purchased Loans and any other Purchased Items or any portion thereof, and do anything that Buyer is authorized hereunder or by law to do.  Seller shall pay all costs and expenses incurred by Buyer in connection with the appointment and activities of such receiver.
		

		
			(f)        Buyer may, at its option, enter into one or more interest rate protection agreements covering all or a portion of the Purchased Loans, and Seller shall be responsible for all damages, judgments, costs and expenses of any kind which may be imposed on, incurred by or asserted against Buyer relating to or arising out of such interest rate protection agreements for a period of thirty (30) days following the occurrence of an Event of Default; including without limitation any losses resulting from such interest rate protection agreements.
		

		
			(g)        In addition to all the rights and remedies specifically provided herein, Buyer shall have all other rights and remedies provided by applicable federal, state, foreign, and local laws, whether existing at law, in equity or by statute, including, without limitation, all rights and remedies available to a purchaser or a secured party, as applicable, under the Uniform Commercial Code.
		

		
			Except as otherwise expressly provided in this Agreement, Buyer shall have the right to exercise any of its rights and/or remedies without presentment, demand, protest or further notice of any kind other than as expressly set forth herein, all of which are hereby expressly waived by Seller.
		

		
			Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives, to the extent permitted by law, any right Seller might otherwise have to require Buyer to enforce its rights by judicial process.  Seller also waives, to the extent permitted by law, any defense Seller might otherwise have to the Obligations, arising from use of nonjudicial process, enforcement and sale of all or any portion of the Purchased Loans and any other Purchased Items or from any other election of remedies.  Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.
		

		
			Seller shall cause all sums received by it with respect to the Purchased Loans to be deposited to the Collection Account.  Seller shall be liable to Buyer for the amount of all expenses (plus interest thereon at a rate equal to the Post-Default Rate).
		

		
			20.        DELAY NOT WAIVER; REMEDIES ARE CUMULATIVE
		

		
			No failure on the part of Buyer to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by Buyer of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All rights and remedies of Buyer provided for herein are cumulative and in addition to any and all other rights and remedies provided by law, the Program Documents and the other instruments and agreements contemplated hereby and thereby, and are not conditional or contingent on any attempt by Buyer to exercise any of its rights under any other related document.  Buyer may exercise at any time after the occurrence of an Event of Default one or more remedies, as they so desire, and may thereafter at any time and from time to time exercise any other remedy or remedies.
		

		
			
		

		
			

		 

		

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			21.        NOTICES AND OTHER COMMUNICATIONS
		

		
			Except as otherwise expressly permitted by this Agreement, all notices, requests and other communications provided for herein and under the Custodial Agreement (including, without limitation, any modifications of, or waivers, requests or consents under, this Agreement) shall be given or made in writing (including, without limitation, by telex or telecopy or Electronic Transmission) delivered to the intended recipient at the “Address for Notices” specified below its name on the signature pages hereof); or, as to any party, at such other address as shall be designated by such party in a written notice to each other party. Except as otherwise provided in this Agreement and except for notices given by Seller under Section 3(b) (which shall be effective only on receipt), all such communications shall be deemed to have been duly given when transmitted (i) by Electronic Transmission and followed by written notice via overnight courier or (ii) by telex or telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid.
		

		
			22.       USE OF EMPLOYEE PLAN ASSETS
		

		
			No assets of an employee benefit plan subject to any provision of ERISA shall be used by either party hereto in a Transaction.
		

		
			23.       INDEMNIFICATION AND EXPENSES
		

		
			(a)        Seller agrees to hold Buyer, its Affiliates and each of their officers, directors, employees, agents and advisors (each an “Indemnified Party”) harmless from and indemnify any Indemnified Party against all liabilities, losses, damages, judgments, costs and expenses of any kind which may be imposed on, incurred by or asserted against such Indemnified Party (collectively, the “Costs”) relating to or arising out of this Agreement, any other Program Document or any transaction contemplated hereby or thereby, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, any other Program Document or any transaction contemplated hereby or thereby, that, in each case, results from anything other than any Indemnified Party’s gross negligence or willful misconduct.  Without limiting the generality of the foregoing, Seller agrees to hold any Indemnified Party harmless from and indemnify such Indemnified Party against all Costs with respect to all Loans relating to or arising out of any violation or alleged violation of any environmental law, rule or regulation or any consumer credit laws, including without limitation laws with respect to unfair or deceptive lending practices and predatory lending practices, the Truth in Lending Act and/or the Real Estate Settlement Procedures Act, that, in each case, results from anything other than such Indemnified Party’s gross negligence or willful misconduct.  In any suit, proceeding or action brought by an Indemnified Party in connection with any Loan for any sum owing thereunder, or to enforce any provisions of any Loan, Seller will save, indemnify and hold such Indemnified Party harmless from and against all expense, loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction of liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by Seller of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from Seller.  Seller also agrees to reimburse any Indemnified Party as and when billed by such Indemnified Party for all such Indemnified Party’s costs and expenses incurred in connection with the enforcement or the preservation of such Indemnified Party’s rights under this Agreement, any other Program Document or any transaction contemplated hereby or thereby, including without limitation the reasonable fees and disbursements of its counsel.  Seller hereby acknowledges that the obligations of Seller under this Agreement are recourse obligations of Seller.
		

		
			
		

		
			

		 

		

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			(b)        Seller agrees to pay as and when billed by Buyer all of the out-of pocket costs and expenses incurred by Buyer in connection with the development, preparation, negotiation, administration, enforcement and execution of, and any amendment, waiver, supplement or modification to, this Agreement, any other Program Document or any other documents prepared in connection herewith or therewith.  Seller agrees to pay as and when billed by Buyer all of the reasonable out-of-pocket costs and expenses incurred in connection with the consummation and administration of the transactions contemplated hereby and thereby including, without limitation, (i) all the reasonable fees, disbursements and expenses of counsel to Buyer, and (ii) all the due diligence, inspection, testing and review (including but not limited to any asset level file review of any Loans and all on-going due diligence costs) and expenses incurred by Buyer with respect to Purchased Items under this Agreement, including, but not limited to, those costs and expenses incurred by Buyer pursuant to Sections 23, 39 and 44 hereof.  Seller also agrees not to assert any claim against Buyer or any of its Affiliates, or any of their respective officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Program Documents, the actual or proposed use of the proceeds of the Transactions, this Agreement or any of the transactions contemplated hereby or thereby.  THE FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES. 
		

		
			(c)        If Seller fails to pay when due any costs, expenses or other amounts payable by it under this Agreement, including, without limitation, reasonable fees and expenses of counsel and indemnities, such amount may be paid on behalf of Seller by Buyer, in its sole discretion and Seller shall remain liable for any such payments by Buyer.  No such payment by Buyer shall be deemed a waiver of any of Buyer’s rights under the Program Documents. 
		

		
			(d)       Without prejudice to the survival of any other agreement of Seller hereunder, the covenants and obligations of Seller contained in this Section 23 shall survive the termination of this Agreement, the payment in full of the Repurchase Price and all other amounts payable hereunder and delivery of the Purchased Loans by Buyer against full payment therefor.
		

		
			24.      WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS
		

		
			Seller hereby expressly waives, to the fullest extent permitted by law, every statute of limitation on a deficiency judgment, any reduction in the proceeds of any Purchased Items as a result of restrictions upon Buyer or Custodian contained in the Program Documents or any other instrument delivered in connection therewith, and any right that it may have to direct the order in which any of the Purchased Items shall be disposed of in the event of any disposition pursuant hereto.
		

		
			25.      REIMBURSEMENT
		

		
			All sums reasonably expended by Buyer in connection with the exercise of any right or remedy provided for herein shall be and remain Seller’s obligation (unless and to the extent that Seller is the prevailing party in any dispute, claim or action relating thereto).  Seller agrees to pay, with interest at the Post-Default Rate to the extent that an Event of Default has occurred, the reasonable out‐of‐pocket expenses and reasonable attorneys’ fees incurred by Buyer and/or Custodian in connection with the preparation, negotiation, enforcement (including any waivers), administration and amendment of the Program Documents (regardless of whether a Transaction is entered into hereunder), the taking of any action, including legal action, required or permitted to be taken by Buyer and/or Custodian pursuant thereto, any 
		

		
			
		

		
			

		 

		

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			“due diligence” or loan agent reviews conducted by Buyer or on its behalf or by refinancing or restructuring in the nature of a “workout.”
		

		
			26.        FURTHER ASSURANCES
		

		
			Seller agrees to do such further acts and things and to execute and deliver to Buyer such additional assignments, acknowledgments, agreements, powers and instruments as are reasonably required by Buyer to carry into effect the intent and purposes of this Agreement and the other Program Documents, to perfect the interests of Buyer in the Purchased Items or to better assure and confirm unto Buyer its rights, powers and remedies hereunder and thereunder.
		

		
			27.        TERMINATION
		

		
			This Agreement shall remain in effect until the Termination Date.  However, no such termination shall affect Seller’s outstanding obligations to Buyer at the time of such termination.  Seller’s obligations under Section 3(i), Section 5, Section 12, Section 13, Section 23 and Section 25 and any other reimbursement or indemnity obligation of Seller to Buyer pursuant to this Agreement or any other Program Documents shall survive the termination hereof.
		

		
			28.        SEVERABILITY
		

		
			If any provision of any Program Document is declared invalid by any court of competent jurisdiction, such invalidity shall not affect any other provision of the Program Documents, and each Program Document shall be enforced to the fullest extent permitted by law.
		

		
			29.        BINDING EFFECT; GOVERNING LAW
		

		
			This Agreement shall be binding and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF (EXCEPT FOR SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
		

		
			30.        AMENDMENTS
		

		
			Except as otherwise expressly provided in this Agreement, any provision of this Agreement may be modified or supplemented only by an instrument in writing signed by Seller, Servicer and Buyer and any provision of this Agreement may be waived by Buyer.
		

		
			31.        Reserved.
		

		
			32.        SURVIVAL
		

		
			Seller’s obligations under sections 3(i), 5, 12, 13, 23 and 25 hereof and any other reimbursement or indemnity obligation of Seller to Buyer pursuant to this Agreement or any other Program Document shall survive the repurchase of the Loans hereunder, the purchase of any Loans pursuant to a takeout commitment and the termination of this Agreement. In addition, each representation and warranty made, or deemed to be made by a request for a purchase, herein or pursuant hereto shall survive the making of such representation and warranty, and Buyer shall not be deemed to have waived, by reason of purchasing any 
		

		
			
		

		
			

		 

		

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			Loan, any Default that may arise by reason of such representation or warranty proving to have been false or misleading, notwithstanding that Buyer may have had notice or knowledge or reason to believe that such representation or warranty was false or misleading at the time such purchase was made.
		

		
			33.        CAPTIONS
		

		
			The table of contents and captions and Section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.
		

		
			34.        counterparts; Electronic Signatures
		

		
			This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart.  The parties agree that this Agreement, any documents to be delivered pursuant to this Agreement and any notices hereunder may be transmitted between them by e-mail and/or by facsimile.  The parties intend that faxed signatures and electronically imaged signatures such as .pdf files shall constitute original signatures and are binding on all parties.  
		

		
			35.        SUBMISSION TO JURISDICTION; WAIVERS
		

		
			EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY:
		

		
			(A)        SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND/OR ANY OTHER PROGRAM DOCUMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
		

		
			(B)        CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
		

		
			(C)        AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH BUYER SHALL HAVE BEEN NOTIFIED; AND
		

		
			(D)        AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.
		

		
			
		

		
			

		 

		

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			36.        WAIVER OF JURY TRIAL
		

		
			EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
		

		
			37.        ACKNOWLEDGEMENTS
		

		
			Seller hereby acknowledges that:
		

		
			(a)   it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Program Documents to which it is a party;
		

		
			(b)   Buyer has no fiduciary relationship to any Seller Party; and
		

		
			(c)   no joint venture exists among or between Buyer and any Seller Party.
		

		
			38.        HYPOTHECATION OR PLEDGE OF PURCHASED ITEMS 
		

		
			Buyer shall have free and unrestricted use of all Purchased Loans and Purchased Items and nothing in this Agreement shall preclude Buyer from engaging in repurchase transactions with the Purchased Loans and Purchased Items or otherwise selling, pledging, repledging, transferring, assigning, hypothecating, rehypothecating or otherwise conveying the Purchased Loans and Purchased Items. Nothing contained in this Agreement shall obligate Buyer to segregate any Purchased Loans or Purchased Items delivered to Buyer by Seller.
		

		
			39.        ASSIGNMENTS; PARTICIPATIONS
		

		
			(a)   Seller may assign any of its rights or obligations hereunder only with the prior written consent of Buyer.  Buyer may assign or transfer to any bank or other financial institution that makes or invests in repurchase agreements or loans or any Affiliate of Buyer all or any of its rights and obligations under this Agreement and the other Program Documents.
		

		
			(b)   Buyer may, in accordance with applicable law, at any time sell to one or more entities (“Participants”) participating interests in this Agreement, its agreement to purchase Loans, or any other interest of Buyer hereunder and under the other Program Documents.  In the event of any such sale by Buyer of participating interests to a Participant, Buyer’s obligations under this Agreement to Seller shall remain unchanged, Buyer shall remain solely responsible for the performance thereof and Seller shall continue to deal solely and directly with Buyer in connection with Buyer’s rights and obligations under this Agreement and the other Program Documents. Seller agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Buyer under this Agreement; provided, that such Participant shall only be entitled to such right of set-off if it shall have agreed in the agreement pursuant to which it shall have acquired its participating interest to share with Buyer the proceeds thereof.  Buyer also agrees that each Participant shall be entitled to the benefits of Sections 3(h), 3(i) and 23 with respect to its 
		

		
			
		

		
			

		 

		

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			participation in the Loans and Purchased Items outstanding from time to time; provided, that Buyer and all Participants shall be entitled to receive no greater amount in the aggregate pursuant to such Sections than Buyer would have been entitled to receive had no such transfer occurred.
		

		
			(c)   Buyer may furnish any information concerning the Seller Parties or any of their Subsidiaries in the possession of Buyer from time to time to assignees and Participants (including prospective assignees and Participants) only after notifying Seller in writing and securing signed confidentiality statements (a form of which is attached hereto as Exhibit H) and only for the sole purpose of evaluating assignments or participations and for no other purpose.
		

		
			(d)   Seller agrees to cooperate with Buyer in connection with any such assignment and/or participation, to execute and deliver replacement notes, and to enter into such restatements of, and amendments, supplements and other modifications to, this Agreement and the other Program Documents in order to give effect to such assignment and/or participation. Seller further agrees to furnish to any Participant identified by Buyer to Seller copies of all reports and certificates to be delivered by Seller to Buyer hereunder, as and when delivered to Buyer.
		

		
			40.        SINGLE AGREEMENT
		

		
			Seller and Buyer acknowledge that, and have entered hereinto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other.  Accordingly, Seller, Servicer and Buyer each agree (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, and (ii) that payments, deliveries and other transfers made by any of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transaction hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted.
		

		
			41.        INTENT
		

		
			Seller and Buyer intend that this Agreement and each Transaction is a “repurchase agreement,” as that term is defined in section 101(47)(A)(i) of the Bankruptcy Code, a “securities contract,” as that term is defined in section 741(7)(A)(i) of the Bankruptcy Code, and a “master netting agreement,” as that term is defined in section 101(38A)(A) of the Bankruptcy Code; and that the pledge of the Related Credit Enhancement in Section 8(a) hereof is intended to constitute “a security agreement or arrangement or other credit enhancement” that is “related to” this Agreement and Transactions hereunder within the meaning of sections 101(38A)(A), 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code.
		

		
			Seller and Buyer further intend that Buyer be entitled to, without limitation, the liquidation, termination, acceleration, setoff and non-avoidability rights afforded to parties such as Buyer to “repurchase agreements,” pursuant to sections 559, 362(b)(7) and 546(f) of the Bankruptcy Code; “securities contracts,” pursuant to sections 555, 362(b)(6) and 546(e) of the Bankruptcy Code; and “master netting agreements,” pursuant to sections 561, 362(b)(27) and 546(j) of the Bankruptcy Code.
		

		
			42.        CONFIDENTIALITY
		

		
			The Program Documents and their respective terms, provisions, supplements and amendments, and transactions and notices thereunder, are proprietary to Buyer and shall be held by Seller in strict confidence 
		

		
			
		

		
			

		 

		

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			and shall not be disclosed to any third party without the consent of Buyer except for (i) disclosure to Seller’s Affiliates, directors, attorneys, agents or accountants, provided that such attorneys or accountants likewise agree to be bound by this covenant of confidentiality, or are otherwise subject to confidentiality restrictions or (ii) upon prior written notice to Buyer, disclosure required by law, rule, regulation or order of a court or other regulatory body or (iii)  when circumstances reasonably permit, any disclosures or filing required under Securities and Exchange Commission (“SEC”) or state securities’ laws; provided that in the case of disclosure by any party pursuant to the foregoing clauses (ii) and (iii), Seller shall take reasonable actions to provide Buyer with prior written notice; provided further that in the case of (iii), Seller shall not file any of the Program Documents other than the Agreement and the Guaranty with the SEC or state securities office unless Seller shall have provided at least thirty (30) days (or such lesser time as may be demanded by the SEC or state securities office) prior written notice of such filing to Buyer.  Notwithstanding anything herein to the contrary, each party (and each employee, representative, or other agent of each party) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure.  For this purpose, tax treatment and tax structure shall not include (i) the identity of any existing or future party (or any Affiliate of such party) to this Agreement or (ii) any specific pricing information or other commercial terms, including the amount of any fees, expenses, rates or payments arising in connection with the transactions contemplated by this Agreement.
		

		
			43.        SERVICING
		

		
			(a)   Seller and Servicer covenant to maintain or cause the servicing of the Purchased Loans to be maintained in conformity with Accepted Servicing Practices and pursuant to the related underlying Servicing Agreement. In the event that the preceding language is interpreted as constituting one or more servicing contracts, each such servicing contract shall terminate automatically upon the earliest of (i) the termination thereof by Buyer pursuant to subsection (d) below, (ii) thirty (30) days after the last Purchase Date of such Purchased Loan, (iii) a Default or an Event of Default, (iv) the date on which all the Obligations have been paid in full, or (v) the transfer of servicing to any entity approved by Buyer and the assumption thereof by such entity. Upon any such termination, Seller and Servicer, as applicable, shall comply with the requirements set forth in Section 13(hh) as to the delivery of the Servicing Records and the physical servicing of each Purchased Loan.   
		

		
			(b)   During any period Seller or Servicer is servicing any Purchased Loans, (i) Seller and Servicer agree that Buyer is the owner of the Servicing Rights and all servicing records, including but not limited to any and all servicing agreements, files, documents, records, data bases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the servicing of such Loans (the “Servicing Records”), and (ii) Seller as Servicer grants Buyer a security interest in all servicing fees and rights relating to the Purchased Loans and all Servicing Records to secure the obligation of Seller, Servicer or any Subservicer to service in conformity with this Section 43 and any other obligation of Seller and/or Servicer to Buyer.  At all times during the term of this Agreement, Servicer covenants to hold such Servicing Records in trust for Buyer and to safeguard, or cause each Subservicer to safeguard, such Servicing Records and to deliver them, or cause any such Subservicer to deliver them to the extent permitted under the related Servicing Agreement promptly to Buyer or its designee (including Custodian) at Buyer’s request or otherwise as required by operation of Section 13(hh) hereof.  It is understood and agreed by the parties that prior to an Event of Default, Servicer may retain the servicing fees with respect to the Purchased Loans.
		

		
			(c)   If any Loan that is proposed to be sold on a Purchase Date is serviced by a servicer other than Seller or Servicer (including any interim servicer) (a “Subservicer”), or if the servicing of any 
		

		
			
		

		
			

		 

		

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			Purchased Loan is to be transferred to a Subservicer, Seller shall provide a copy of the related servicing agreement and an Instruction Letter executed by such Subservicer (collectively, the “Servicing Agreement”) to Buyer at least three (3) Business Days prior to such Purchase Date or transfer date, as applicable, which Servicing Agreement shall be in form and substance acceptable to Buyer.  In addition, Seller shall have obtained the prior written consent of Buyer for such Subservicer to subservice the Loans.  
		

		
			(d)   In addition to the rights provided in Section 43(a), Buyer shall have the right, exercisable at any time in its sole discretion, upon written notice, to terminate Seller, Servicer or any Subservicers as servicer or subservicer, respectively, and any related Servicing Agreement.  With respect to any Servicing Rights, any such termination shall be effective as of the date that occurs thirty (30) days after the last Purchase Date. Upon the effectiveness of any such termination, Servicer shall transfer or shall cause Subservicer to transfer such servicing with respect to such Purchased Loans to Buyer or its designee, at no cost or expense to Buyer.  Seller and Servicer, as applicable, agree to cooperate with Buyer in connection with the transfer of servicing. 
		

		
			(e)   Buyer shall have the right in its sole discretion to appoint a third party to perform due diligence with respect to Servicer’s servicing facilities at any time.  Servicer shall cooperate with Buyer and/or its designees to provide access to Servicer’s servicing facilities including without limitation its books and records with respect to Servicer’s servicing portfolio and the Purchased Loans.  In addition to the foregoing, Servicer shall permit Buyer to inspect upon reasonable prior written notice at a mutually convenient time, Servicer’s servicing facilities, as the case may be, for the purpose of satisfying Buyer that Servicer has the ability to service the Loans as provided in this Agreement and in any Servicing Agreement.  In addition, with respect to any Subservicer which is not an Affiliate of Servicer, Servicer shall use its best efforts to enable Buyer to inspect the servicing facilities of such Subservicer and to cause such Subservicer to cooperate with Buyer and/or its designees in connection with any due diligence performed by Buyer and/or such designees in accordance with this Section 43(e).  Seller and Buyer further agree that all reasonable out-of-pocket costs and expenses incurred by Buyer in connection with any due diligence or inspection performed pursuant to this Section 43(e) shall be paid by Buyer.
		

		
			44.        PERIODIC DUE DILIGENCE REVIEW
		

		
			Seller and Servicer acknowledge that Buyer has the right to perform continuing due diligence reviews with respect to the Loans, for purposes of verifying compliance with the representations, warranties, covenants and specifications made hereunder or under any other Program Document, or otherwise, and Seller agrees that upon reasonable (but no less than one (1) Business Day’s) prior notice to Seller or Servicer (provided that upon the occurrence of a Default or an Event of Default, no such prior notice shall be required), Buyer or its authorized representatives will be permitted during normal business hours to examine, inspect, make copies of, and make extracts of, the Mortgage Files, the Servicing Records and any and all documents, records, agreements, instruments or information relating to such Loans in the possession, or under the control, of Seller, Servicer and/or Custodian. Seller and Servicer also shall make available to Buyer a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Mortgage Files and the Loans. Without limiting the generality of the foregoing, Seller acknowledges that Buyer shall purchase Loans from Seller based solely upon the information provided by Seller to Buyer in the Loan Schedule and the representations, warranties and covenants contained herein, and that Buyer, at its option, has the right, at any time to conduct a partial or complete due diligence review on some or all of the Purchased Loans, including, without limitation, ordering new credit reports, new appraisals on the related Mortgaged Properties and otherwise re-generating the information used to originate the related Loan.  Buyer may underwrite such Loans itself or engage a third party underwriter to perform such underwriting.  Seller agrees to cooperate with Buyer and any third party underwriter in 
		

		
			
		

		
			

		 

		

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			connection with such underwriting, including, but not limited to, providing Buyer and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Loans in the possession, or under the control, of  Seller.  In addition, Buyer has the right to perform continuing Due Diligence Reviews (including, without limitation, operational, legal, corporate and background due diligence) of Seller, Servicer and its Affiliates, directors, and their respective Subsidiaries and the officers, employees and significant shareholders thereof.  Seller and Buyer further agree that all reasonable out-of-pocket costs and expenses incurred by Buyer in connection with Buyer’s activities pursuant to this Section 44 shall be paid by Seller.
		

		
			45.        SET-OFF
		

		
			In addition to any rights and remedies of Buyer provided by this Agreement and by law, Buyer shall have the right, without prior notice to Seller, any such notice being expressly waived by Seller to the extent permitted by applicable law, upon any amount becoming due and payable by Seller hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all Property and deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by Buyer or any Affiliate thereof to or for the credit or the account of Seller or any other Credit Party.  Buyer may set-off cash, the proceeds of the liquidation of any Purchased Items and all other sums or obligations owed by Buyer or its Affiliates to Seller against all of Seller’s or any Credit Party’s obligations to Buyer or its Affiliates, whether under this Agreement with respect to Seller or any Citi Credit Facility with respect to any Credit Party or under any other agreement between the parties or between Seller or any Credit Party and any Affiliate of Buyer, or otherwise, whether or not such obligations are then due, without prejudice to Buyer’s or its Affiliate’s right to recover any deficiency.  Buyer agrees promptly to notify Seller and each Credit Party after any such set-off and application made by Buyer; provided that the failure to give such notice shall not affect the validity of such set-off and application.
		

		
			46.        ENTIRE AGREEMENT
		

		
			This Agreement and the other Program Documents embody the entire agreement and understanding of the parties hereto and thereto and supersede any and all prior agreements, arrangements and understandings relating to the matters provided for herein and therein.  No alteration, waiver, amendments, or change or supplement hereto shall be binding or effective unless the same is set forth in writing by a duly authorized representative of each party hereto.
		

		
			47.        AMENDMENT AND RESTATEMENT 
		

		
			Buyer and Seller entered into the Original Agreement.  Buyer and Seller desire to enter into this Agreement in order to amend and restate the Original Agreement in its entirety.  Effective as of the date hereof, the terms and provisions of that certain Master Repurchase Agreement, dated as of June 26, 2012, by and between Buyer and Seller (the “Original Agreement”) shall be and hereby are amended, superseded and restated in their entirety by the terms and provisions of this Agreement. For the avoidance of doubt, this Agreement is not intended to, and shall not, effect a novation of any of the obligations of the parties to the Original Agreement, but is merely an amendment and restatement of the terms governing such obligations.
		

		
			 
		

		
			 
		

		
			

		 

		

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			IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.
		

			
					
						 

					
					
						PENNYMAC LOAN SERVICES, LLC, a Delaware limited liability company,

				
	
					
						 

					
					
						 as Seller and Servicer

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						By:

					
					
						/s/ Pamela Marsh

				
	
					
						 

					
					
						Name:

					
					
						Pamela Marsh

				
	
					
						 

					
					
						Title:

					
					
						Managing Director, Treasurer

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						Address for Notices:

					
						3043 Townsgate Road

					
						Westlake Village, CA  91361

					
						Attention: Chief Legal Officer

					
						Telephone No.: (818) 224-7442

					
						Facsimile No.: (818) 224-7393

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						CITIBANK, N.A. as Buyer and Agent, as applicable

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						By:

					
					
						/s/ Susan Mills

				
	
					
						 

					
					
						Name:

					
					
						Susan Mills

				
	
					
						 

					
					
						Title:

					
					
						Vice President

				
	
					
						 

					
					
						 

					
					
						Citibank, N.A.

				
	
					
						 

					
					
						Address for Notices:

					
						390 Greenwich Street, 5th Floor

					
						New York, New York 10013

					
						Attention: Bobbie Theivakumaran

					
						Telephone No.: (212) 723-6753

					
						Fax No.: (646) 291-3799

				

		
			 
		

		
			 
		

		
			

		 

		

			[Signature Page to Citibank/PennyMac Master Repurchase Agreement]

		

 

		

			 

		

		

		
			ANNEX I
		

		
			BUYER ACTING AS AGENT
		

		
			This Annex I forms a part of the Amended and Restated Master Repurchase Agreement dated as of March 3, 2017, (the “Agreement”) by and between PennyMac Loan Services, LLC and Citibank, N.A. This Annex I sets forth the terms and conditions governing all transactions in which Buyer selling assets or buying assets, as the case may be (“Agent”), in a Transaction is acting as agent for one or more third parties (each, a “Principal”).  Capitalized terms used but not defined in this Annex I shall have the meanings ascribed to them in the Agreement.
		

		
			1.          Additional Representations.  Agent hereby makes the following representations, which shall continue during the term of any Transaction: Principal has duly authorized Agent to execute and deliver the Agreement and the other Program Documents on its behalf, has the power to so authorize Agent and to enter into the Transactions contemplated by the Agreement and the other Program Documents and to perform the obligations of Buyer under such Transactions, and has taken all necessary action to authorize such execution and delivery by Agent and such performance by it.
		

		
			2.          Identification of Principals. Agent agrees (a) to provide the other party, prior to the date on which the parties agree to enter into any Transaction under the Agreement, with a written list of Principals for which it intends to act as Agent (which list may be amended in writing from time to time with the consent of the other party) and (b) to provide the other party, before the close of business on the next business day after orally agreeing to enter into a Transaction, with notice of the specific Principal or Principals for whom it is acting in connection with such Transaction.  If (i) Agent fails to identify such Principal or Principals prior to the close of business on such next business day or (ii) the other party shall determine in its sole discretion any Principal or Principals identified by Agent are not acceptable to it, the other party may reject and rescind any Transaction with such Principal or Principals, return to Agent any Purchased Loans or portion of the Purchase Price, as the case may be, previously transferred to the other party and refuse any further performance under such Transaction, and Agent shall immediately return to the other party any portion of the Purchase Price or Purchased Loans, as the case may be, previously transferred to Agent in connection with such Transaction; provided, however, that (A) the other party shall promptly (and in any event within one business day) notify Agent of its determination to reject and rescind such Transaction and (B) to the extent that any performance was rendered by any party under any Transaction rejected by the other party, and such party shall remain entitled to any Price Differential or other amounts that would have been payable to it with respect to such performance if such Transaction had not been rejected.  The other party acknowledges that Agent shall not have any obligation to provide it with confidential information regarding the financial status of its Principals; Agent agrees, however, that it will assist the other party in obtaining from Agent’s Principals such Information regarding the financial status of such Principals as the other party may reasonably request.
		

		
			3.          Limitation of Agent’s Liability. The parties expressly acknowledge that if the representations of Agent under the Agreement, including this Annex I, are true and correct in all material respects during the term of any Transaction and Agent otherwise complies with the provisions of this Annex I, then (a) Agent’s obligations under the Agreement shall not include a guarantee of performance by its Principal or Principals; provided that Agent shall remain liable for performance pursuant to Section 10 of the Agreement, and (b) the other party’s remedies shall not include a right of setoff 
		

		
			
		

		
			

		 

		

			Annex 1-1

		

 

		

			 

		

		

		
			in respect of rights or obligations, if any, of Agent arising in other transactions in which Agent is acting as principal.
		

		
			4.         Multiple Principals.
		

		
			(a)  In the event that Agent proposes to act for more than one Principal hereunder, Agent and the other party shall elect whether (i) to treat Transactions under the Agreement as transactions entered into on behalf of separate Principals or (ii) to aggregate such Transactions as if they were transactions by a single Principal.  Failure to make such an election in writing shall be deemed an election to treat Transactions under the Agreement as transactions on behalf of a single Principal.
		

		
			(b)  In the event that Agent and the other party elect (or are deemed to elect) to treat Transactions under the Agreement as transactions on behalf of separate Principals, the parties agree that (i) Agent will provide the other party, together with the notice described in Section 2(b) of this Annex I, notice specifying the portion of each Transaction allocable to the account of each of the Principals for which it is acting (to the extent that any such Transaction is allocable to the account of more than one Principal); (ii) the portion of any individual Transaction allocable to each Principal shall be deemed a separate Transaction under the Agreement; (iii) the margin maintenance obligations of Seller under Section 6(a) of the Agreement shall be determined on a Transaction‐by‐Transaction basis (unless the parties agree to determine such obligations on a Principal‐by‐Principal basis); and (iv) Buyer’s remedies under the Agreement upon the occurrence of an Event of Default shall be determined as if Agent had entered into a separate Agreement with the other party on behalf of each of its Principals.
		

		
			(c)  In the event that Agent and the other party elect to treat Transactions under the Agreement as if they were transactions by a single Principal, the parties agree that (i) Agent’s notice under Section 2(b) of this Annex I need only identify the names of its Principals but not the portion of each Transaction allocable to each Principal’s account; (ii) the margin maintenance obligations of Seller under Section 6(a) of the Agreement shall, subject to any greater requirement imposed by applicable law, be determined on an aggregate basis for all Transactions entered into by Agent on behalf of any Principal; and (iii) Buyer’s remedies upon the occurrence of an Event of Default shall be determined as if all Principals were a single Buyer.
		

		
			(d)  Notwithstanding any other provision of the Agreement (including, without limitation, this Annex I), the parties agree that any Transactions by Agent on behalf of an employee benefit plan under ERISA shall be treated as Transactions on behalf of separate Principals in accordance with Section 4(b) of this Annex I (and all margin maintenance obligations of the parties shall be determined on a Transaction‐by‐Transaction basis).
		

		
			5.          Interpretation of Terms.  All references to “Buyer” in the Agreement shall, subject to the provisions of this Annex I (including, among other provisions, the limitations on Agent’s liability in Section 3 of this Annex I), be construed to reflect that (i) each Principal shall have, in connection with any Transaction or Transactions entered into by Agent on its behalf, the rights, responsibilities, privileges and obligations of a “Buyer”, directly entering into such Transaction or Transactions with the other party under the Agreement, and (ii) Agent’s Principal or Principals have designated Agent as their sole agent for performance of Buyer’s obligations to Seller and for receipt of performance by Seller of its obligations to Buyer in connection with any Transaction or 
		

		
			
		

		
			

		 

		

			Annex 1-2

		

 

		

			 

		

		

		
			Transactions under the Agreement (including, among other things, as Agent for each Principal in connection with transfers of Loans, securities, cash or other property and as agent for giving and receiving all notices under the Agreement). Both Agent and its Principal or Principals shall be deemed “parties” to the Agreement and all references to a “party” or “either party” in the Agreement shall be deemed revised accordingly.
		

		
			 
		

		
			 
		

		
			

		 

		

			Annex 1-3

		

 

		

			 

		

		

		
			Schedule 1
		

		
			REPRESENTATIONS AND WARRANTIES RE: LOANS
		

		
			Eligible Loans
		

		
			As to each Loan that is subject to a Transaction hereunder (and the related Mortgage, Note, Assignment of Mortgage and Mortgaged Property), Seller shall be deemed to make the following representations and warranties to Buyer as of the Purchase Date and as of each date such Loan is subject to a Transaction:
		

		
			(a)   Loans as Described. The information set forth in the Loan Schedule with respect to the Loan is complete, true and correct in all material respects.
		

		
			(b)   Payments Current.  The first Monthly Payment shall have been made prior to the second scheduled Monthly Payment becoming due.
		

		
			(c)   No Outstanding Charges.  There are no defaults in complying with the terms of the Mortgage securing the Loan, and all taxes, governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents which previously became due and owing have been paid, or will be paid prior to any economic loss or forfeiture of the related Mortgaged Property or an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid and which has been assessed but is not yet due and payable. Except as disclosed to Buyer, Seller has not advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any amount required under the Loan, except for interest accruing from the date of the Note or date of disbursement of the proceeds of the Loan, whichever is more recent, to the day which precedes by one month the Due Date of the first installment of principal and interest thereunder. 
		

		
			(d)   Original Terms Unmodified.  Any waiver, alteration or modification of the Note and/or Mortgage has been made pursuant to a written instrument.  Any waiver, alteration or modification of the Note and/or Mortgage that has the effect of increasing the balance of the Loan is flagged on the Loan Schedule.  The original principal balance and current outstanding balance (including any capitalized amounts) of each Loan are listed on the Loan Schedule.
		

		
			(e)   Licensing. No Loan is secured by a Mortgaged Property located in any state in which Seller is not licensed to own mortgage loans or otherwise not required to be so licensed.
		

		
			(f)   Original Terms Unmodified.  The terms of the Note and Mortgage have not been impaired, waived, altered or modified in any respect, from the date of origination; except by a written instrument which has been recorded or sent out for recording (or promptly will be recorded, in the case of any of the foregoing that occurs after the related Purchase Date), if necessary to protect the interests of Buyer, and which has been delivered to Custodian and the terms of which are reflected in the Loan Schedule. The substance of any such waiver, alteration or modification has been approved by the title insurer, to the extent required by the title insurance policy, and its terms are reflected on the Loan Schedule. No Mortgagor in respect of the Loan has been released, in whole or in part, except in connection with an assumption agreement approved by the title insurer, to the extent required by such policy, and which assumption agreement is part of the Mortgage File delivered to Custodian and the terms of which are reflected in the Loan Schedule.
		

		
			
		

		
			

		 

		

			Schedule 1-1

		

 

		

			 

		

		

		
			(g)   FHA Approval.  All parties which have had any interest in the Mortgage, whether as mortgagee or assignee, are (or, during the period in which they held and disposed of such interest, were) an FHA Approved Mortgagee.
		

		
			(h)   FHA Insurance; VA Loan Guaranty.  With respect to the FHA Loans, the FHA Insurance Contract is in full force and effect and there exists no impairment to full recovery without indemnity to the Department of Housing and Urban Development or the FHA under FHA Mortgage Insurance.  With respect to the VA Loans, the VA Loan Guaranty Agreement is in full force and effect to the maximum extent stated therein.  All necessary steps have been taken to keep such guaranty or insurance valid, binding and enforceable and each of such is the binding, valid and enforceable obligation of the FHA and the VA, respectively, to the full extent thereof, without surcharge, set-off or defense.  Each FHA Loan and VA Loan was originated in accordance with the criteria of an Agency for purchase of such Loans.
		

		
			(i)   No Defenses.  The Loan is not subject to any right of rescission, setoff, counterclaim or defense, including without limitation the defense of usury, nor will the operation of any of the terms of the Note or the Mortgage, or the exercise of any right thereunder, render either the Note or the Mortgage unenforceable, in whole or in part and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto, and no Mortgagor in respect of the Loan was a debtor in any state or Federal bankruptcy or insolvency proceeding at the time the Loan was originated.
		

		
			(j)   Hazard Insurance.  All buildings or other improvements upon the Mortgaged Property are insured by a Qualified Insurer acceptable to Freddie Mac and Fannie Mae against loss by fire, hazards of extended coverage and such other hazards as are customary in the area where the Mortgaged Property is located, in an amount not less than the lesser of (1) 100% of the replacement cost (as calculated by the Qualified Insurer) of all improvements to the Mortgaged Property, and (2) the outstanding principal balance of the Mortgage Loan with respect to each Loan; provided, however, in no event shall the amount of insurance be less than (x) the minimum amount necessary to fully compensate for any damage or loss on a replacement cost basis, and (y) the amount necessary to avoid the operation of any co-insurance provisions with respect to the Mortgaged Property. All such insurance policies contain a standard mortgagee clause naming the Seller, its successors and assigns as mortgagee and all premiums thereon have been paid.  Where required by state law or regulation, the Mortgagor has been given an opportunity to choose the carrier of the required hazard insurance.  The hazard insurance policy is the valid and binding obligation of the insurer. If the Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards (and such flood insurance has been made available) a flood insurance policy meeting the requirements of the current guidelines of the Federal Flood Insurance Administration is in effect with a generally acceptable insurance carrier, which policy conforms to the requirements of Fannie Mae and Freddie Mac and in an amount not less than the greater of (1) lesser of (a) 100% of the replacement cost of all improvements to the Mortgaged Property and (b) the outstanding principal balance of the Mortgage Loan with respect to each First Lien Mortgage Loan and (2) the maximum amount of insurance which is available under the  National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of 1973, as amended; provided, however, in no event shall the amount of insurance be less than the amount necessary to avoid the operation of any co-insurance provisions with respect to the Mortgaged Property.  Each Mortgage Loan is covered by a “life of loan” Flood Zone Service Contract which is assignable to the Buyer or its designee at no cost to the Buyer or its designee or, for each Mortgage Loan not covered by such Flood Zone Service Contract, the Seller agrees to pay the related fee.
		

		
			
		

		
			

		 

		

			Schedule 1-2

		

 

		

			 

		

		

		
			(k)   Compliance with Applicable Laws.  Any and all requirements of any federal, state or local law have been complied with, and the consummation of the transactions contemplated hereby will not involve the violation of any such laws or regulations. 
		

		
			(l)   No Satisfaction of Mortgage.  The Mortgage has not been satisfied, canceled, subordinated or rescinded, in whole or in part, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole or in part, nor has any instrument been executed that would effect any such release, cancellation, subordination or rescission except (i) in connection with an assumption agreement which has been approved by the FHA, to the extent required by the applicable FHA Insurance Contract, (ii) in the case of a release of a portion of the land comprising a Mortgaged Property or (iii) a release of a blanket Mortgage which release will not cause the Loan to fail to satisfy the Underwriting Guidelines. Seller has not waived the performance by the Mortgagor of any action, if the Mortgagor’s failure to perform such action would cause the Loan to be in default, nor has Seller waived any default resulting from any action or inaction by the Mortgagor, except as permitted under the Servicing Agreement. 
		

		
			(m)  Location and Type of Mortgaged Property.  The Mortgaged Property is located in the state identified in the Loan Schedule and consists of a single parcel of real property with a detached single family residence erected thereon, or a two- to four-family dwelling, or an individual condominium unit in a condominium project, or an individual unit in a planned unit development or a de minimis planned unit development, provided, however, that any condominium unit or planned unit development shall conform with the applicable Fannie Mae and Freddie Mac requirements regarding such dwellings, and that no residence or dwelling is a mobile home or a manufactured dwelling. No portion of the Mortgaged Property is used for commercial purposes.
		

		
			(n)  Valid Lien.  The Mortgage is a valid, subsisting, enforceable and perfected first lien and first priority security interest with respect to each Loan, on the real property included in the Mortgaged Property, including all buildings on the Mortgaged Property and all installations and mechanical, electrical, plumbing, heating and air conditioning systems located in or annexed to such buildings, and all additions, alterations and replacements made at any time with respect to the foregoing. The lien of the Mortgage is subject only to:
		

		
			(1)        the lien of current real property taxes and assessments not yet due and payable;
		

		
			(2)        covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording acceptable to prudent mortgage lending institutions generally and specifically referred to in the lender’s title insurance policy delivered to the originator of the Loan and (a) referred to or otherwise considered in the appraisal made for the originator of the Loan or (b) which do not adversely affect the Appraised Value of the related Mortgaged Property set forth in such appraisal; and
		

		
			(3)        other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Mortgaged Property.
		

		
			Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Loan establishes and creates a valid, subsisting and enforceable first lien and first priority security interest with respect to each Loan, on the property described therein and Seller has full right to pledge and assign the same to Buyer. 
		

		
			
		

		
			

		 

		

			Schedule 1-3

		

 

		

			 

		

		

		
			(o)   Validity of Mortgage Documents.   The Note and the Mortgage and any other agreement executed and delivered by a Mortgagor or guarantor, if applicable, in connection with a Loan are genuine, and each is the legal, valid and binding obligation of the maker thereof enforceable in accordance with its terms.   To the best of Seller’s knowledge, all parties to the Note, the Mortgage and any other such related agreement had legal capacity to enter into the Loan and to execute and deliver the Note, the Mortgage and any such agreement, and the Note, the Mortgage and any other such related agreement have been duly and properly executed by such related parties.  No fraud, error, negligence, omission, misrepresentation or similar occurrence with respect to a Loan has taken place on the part of Seller or, to the best of Seller’s knowledge, any other Person, including, without limitation, the Mortgagor, any appraiser, any builder or developer, or any other party involved in the origination of the Loan or in the application of any insurance in relation to such Loan. Seller has reviewed all of the documents constituting the Servicing File and has made such inquiries as it deems necessary to make and confirm the accuracy of the representations set forth herein.
		

		
			(p)   Full Disbursement of Proceeds.   The proceeds of the Loan have been fully disbursed and there is no further requirement for future advances thereunder.  To the best of Seller’s knowledge, any and all requirements as to completion of any on-site or off-site improvement and as to disbursements of any escrow funds therefor have been complied with. All costs, fees and expenses incurred in making or closing the Loan and the recording of the Mortgage were paid, and the Mortgagor is not entitled to any refund of any amounts paid or due under the Note or Mortgage.
		

		
			(q)   Ownership.  Seller is the sole owner and holder of the Loan.  The Loan is not assigned or pledged, and Seller has good, indefeasible and marketable title thereto, and has full right to transfer, pledge and assign the Loan to Buyer free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest, and has full right and authority subject to no interest or participation of, or agreement with, any other party, to assign, transfer and pledge each Loan pursuant to this Agreement and following the pledge of each Loan, Buyer will hold such Loan free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest except any such security interest created pursuant to the terms of this Agreement.
		

		
			(r)   Doing Business.  To the best of Seller’s knowledge, all parties which have had any interest in the Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) (i) in compliance with any and all applicable licensing requirements of the laws of the state wherein the Mortgaged Property is located, and (ii) either (A) organized under the laws of such state, (B) qualified to do business in such state, (C) a federal savings and loan association, a savings bank or a national bank having a principal office in such state or (D) not doing business in such state.
		

		
			(s)   LTV.  As of the date of origination of the Loan, the LTV is as identified on the Loan Schedule.  No Loan (other than a Jumbo Loan) shall have an LTV or CLTV greater than 100%. No Jumbo Loan shall have an LTV or CLTV greater than (i) 80%, with respect to any Jumbo Loan where the related Mortgage Property is a primary residence or (ii) 70%,with respect to any Jumbo Loan where the related Mortgage Property is a secondary residence or investment property.
		

		
			(t)   Title Insurance.  The Loan is covered by either (i) an attorney’s opinion of title and abstract of title, the form and substance of which is acceptable to prudent mortgage lending institutions making mortgage loans in the area wherein the Mortgaged Property is located or (ii) an ALTA lender’s title insurance policy or other generally acceptable form of policy or insurance acceptable to the FHA, VA, 
		

		
			
		

		
			

		 

		

			Schedule 1-4

		

 

		

			 

		

		

		
			Fannie Mae or Freddie Mac and each such title insurance policy is issued by a title insurer acceptable to the FHA, VA, Fannie Mae or Freddie Mac and qualified to do business in the jurisdiction where the Mortgaged Property is located, insuring Seller, its successors and assigns, as to the first priority lien of the Mortgage in the original principal amount of the Loan, subject only to the exceptions contained in clauses (1), (2) and (3) of paragraph (j) of this Part I of Schedule 1, with respect to each Loan, and in the case of Adjustable Rate Loans, against any loss by reason of the invalidity or unenforceability of the lien resulting from the provisions of the Mortgage providing for adjustment to the Mortgage Interest Rate and Monthly Payment.   Where required by state law or regulation, the Mortgagor has been given the opportunity to choose the carrier of the required mortgage title insurance. Additionally, such lender’s title insurance policy affirmatively insures ingress and egress and against encroachments by or upon the Mortgaged Property or any interest therein.  The title policy does not contain any special exceptions (other than the standard exclusions) for zoning and uses and has been marked to delete the standard survey exception or to replace the standard survey exception with a specific survey reading.  Seller, its successors and assigns, are the sole insureds of such lender’s title insurance policy, and such lender’s title insurance policy is valid and remains in full force and effect and will be in force and effect upon the consummation of the transactions contemplated by this Agreement.  No claims have been made under such lender’s title insurance policy, and no prior holder or servicer of the related Mortgage, including Seller, has done, by act or omission, anything which would impair the coverage of such lender’s title insurance policy, including, without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other Person, and no such unlawful items have been received, retained or realized by Seller.
		

		
			(u)   No Defaults.  There is no default, breach, violation or event of acceleration existing under the Mortgage or the Note and no event has occurred which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration, and neither Seller nor its predecessors have waived any default, breach, violation or event of acceleration.
		

		
			(v)   No Mechanics’ Liens.  There are no mechanics’ or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under the law could give rise to such liens) affecting the Mortgaged Property which are or may be liens prior to, or equal or coordinate with the lien of the Mortgage. 
		

		
			(w)   Location of Improvements; No Encroachments.  To the best of Seller’s knowledge, all improvements which were considered in determining the Appraised Value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of the Mortgaged Property, and no improvements on adjoining properties encroach upon the Mortgaged Property.  No improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning and building law, ordinance or regulation.
		

		
			(x)   Origination; Payment Terms.  The Loan was originated or acquired by or in conjunction with a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act, a savings and loan association, a savings bank, a commercial bank, credit union, insurance company or similar banking institution which is supervised and examined by a federal or state authority.  Monthly Payments on the Loan commenced no more than sixty (60) days after funds were disbursed in connection with the Loan. The Mortgage Interest Rate is adjusted, with respect to Adjustable Rate Loans, on each Interest Rate Adjustment Date to equal the Index plus the Gross Margin (rounded up or down to the nearest .125%), subject to the Mortgage Interest Rate Cap. With respect to each Loan, the Mortgage Note is payable on the first day of each month in equal monthly installments of principal and 
		

		
			
		

		
			

		 

		

			Schedule 1-5

		

 

		

			 

		

		

		
			interest, which installments of interest, with respect to an Adjustable Rate Loan, are subject to change due to the adjustments to the Mortgage Interest Rate on each Adjustment Date, with interest calculated and payable in arrears, sufficient to amortize the Loan fully by the stated maturity date, over an original term of not more than 30 years from commencement of amortization.  No Loan is an interest only Loan.  No Loan has a balloon payment feature.
		

		
			(y)   Customary Provisions.  The Note has a stated maturity which shall not exceed 360 months from the date of the Loan’s origination.  The Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including, (i) in the case of a Mortgage designated as a deed of trust, by trustee’s sale, and (ii) otherwise by judicial foreclosure.  Upon default by a Mortgagor on a Loan and foreclosure on, or trustee’s sale of, the Mortgaged Property pursuant to the proper procedures, the holder of the Loan will be able to deliver good and merchantable title to the Mortgaged Property.  There is no homestead or other exemption available to a Mortgagor which would interfere with the right to sell the Mortgaged Property at a trustee’s sale or the right to foreclose the Mortgage.
		

		
			(z)   Conformance with Underwriting Guidelines and Agency Standards. The Loan was underwritten in accordance with the applicable Underwriting Guidelines. The Note and Mortgage are on forms similar to those used by Freddie Mac or Fannie Mae and Seller has not made any representations to a Mortgagor that are inconsistent with the mortgage instruments used.
		

		
			(aa)   Occupancy of the Mortgaged Property.  As of the Purchase Date, the Mortgaged Property is either vacant or lawfully occupied under applicable law. All inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities. Seller has not received written notification from any governmental authority that the Mortgaged Property is in material non-compliance with such laws or regulations, is being used, operated or occupied unlawfully or has failed to have or obtain such inspection, licenses or certificates, as the case may be.  Seller has not received notice of any violation or failure to conform with any such law, ordinance, regulation, standard, license or certificate.  Except as otherwise set forth in the Loan Schedule, the Mortgagor represented at the time of origination of the Loan that the Mortgagor would occupy the Mortgaged Property as the Mortgagor’s primary residence.
		

		
			(bb)    No Additional Collateral.  The Note is not and has not been secured by any collateral except the lien of the corresponding Mortgage and the security interest of any applicable security agreement or chattel mortgage referred to in clause (j) above.
		

		
			(cc)    Deeds of Trust.  In the event the Mortgage constitutes a deed of trust, a trustee, authorized and duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses are or will become payable by Custodian or Buyer to the trustee under the deed of trust, except in connection with a trustee’s sale after default by the Mortgagor.
		

		
			(dd)    Delivery of Mortgage Documents.  The Note, the Mortgage, the Assignment of Mortgage (other than for a MERS Loan) and any other documents required to be delivered under the Custodial Agreement for each Loan have been delivered to Custodian. Seller or its agent is in possession of a 
		

		
			
		

		
			

		 

		

			Schedule 1-6

		

 

		

			 

		

		

		
			complete, true and materially accurate Mortgage File in compliance with the Custodial Agreement, except for such documents the originals of which have been delivered to Custodian.
		

		
			(ee)    Transfer of Loans.  The Assignment of Mortgage is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is located.
		

		
			(ff)     Due-On-Sale.  The Mortgage contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the Loan in the event that the Mortgaged Property is sold or transferred without the prior written consent of the mortgagee thereunder.
		

		
			(gg)    No Buydown Provisions; No Graduated Payments or Contingent Interests.  The Loan does not contain provisions pursuant to which Monthly Payments are paid or partially paid with funds deposited in any separate account established by Seller, the Mortgagor, or anyone on behalf of the Mortgagor, or paid by any source other than the Mortgagor nor does it contain any other similar provisions which may constitute a “buydown” provision.  The Loan is not a graduated payment mortgage loan and the Loan does not have a shared appreciation or other contingent interest feature.
		

		
			(hh)    Consolidation of Future Advances.  Any future advances made to the Mortgagor prior to the origination of the Loan have been consolidated with the outstanding principal amount secured by the Mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term.  The lien of the Mortgage securing the consolidated principal amount is expressly insured as having first lien priority with respect to each Loan, by a title insurance policy, an endorsement to the policy insuring the mortgagee’s consolidated interest or by other title evidence acceptable to the FHA, VA, Fannie Mae and Freddie Mac. The consolidated principal amount does not exceed the original principal amount of the Loan.
		

		
			(ii)     Mortgaged Property Undamaged.  The Mortgaged Property is undamaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty so as to materially affect the value of the Mortgaged Property as security for the Loan or the use for which the premises were intended and each Mortgaged Property is in good repair. There have not been any condemnation proceedings with respect to the Mortgaged Property and Seller has no knowledge of any such proceedings.
		

		
			(jj)     Collection Practices; Escrow Deposits: Interest Rate Adjustments.  The origination and collection practices used by the originator and each servicer of the Loan and the Seller with respect to the Loan have been in all material respects in compliance with Accepted Servicing Practices, applicable laws and regulations, and have been in all respects legal and proper.  With respect to escrow deposits and Escrow Payments, all such payments are in the possession of, or under the control of, Seller and  there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made.  All Escrow Payments have been collected in full compliance with state and federal law.  An escrow of funds is not prohibited by applicable law and has been established in an amount sufficient to pay for every item that remains unpaid and has been assessed but is not yet due and payable.  No escrow deposits or Escrow Payments or other charges or payments due Seller have been capitalized under the Mortgage or the Note. All Mortgage Interest Rate adjustments have been made in strict compliance with state and federal law and the terms of the related Note.  Any interest required to be paid pursuant to state, federal and local law has been properly paid and credited.
		

		
			(kk)    Conversion to Fixed Interest Rate.  With respect to Adjustable Rate Loans, the Loan is not convertible to a fixed interest rate Loan.
		

		
			
		

		
			

		 

		

			Schedule 1-7

		

 

		

			 

		

		

		
			(ll)     Other Insurance Policies.  No action, inaction or event has occurred and no state of facts exists or has existed that has resulted or will result in the exclusion from, denial of, or defense to coverage under any applicable special hazard insurance policy, PMI Policy or bankruptcy bond, irrespective of the cause of such failure of coverage.  In connection with the placement of any such insurance, no commission, fee, or other compensation has been or will be received by Seller or by any officer, director, or employee of Seller or any designee of Seller or any corporation in which Seller or any officer, director, or employee had a financial interest at the time of placement of such insurance.
		

		
			(mm) Servicepersons’ Civil Relief Act.  The Mortgagor has not notified Seller, and Seller has no knowledge, of any relief requested or allowed to the Mortgagor under the Servicepersons’ Civil Relief Act.
		

		
			(nn)    Appraisal.  The Mortgage File contains either (A) an appraisal of the related Mortgaged Property signed prior to the approval of the Loan application by a qualified appraiser, duly appointed by Seller or the related Qualified Originator, who had no interest, direct or indirect in the Mortgaged Property or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of the Loan, and the appraisal and appraiser both satisfy the requirements of Fannie Mae, Freddie Mac, the FHA, VA and Title XI of the Federal Institutions Reform, Recovery, and Enforcement Act of 1989 as amended and the regulations promulgated thereunder, all as in effect on the date the Loan was originated or (B) another valuation model acceptable Buyer in its sole discretion.
		

		
			(oo)    Disclosure Materials.  As required by applicable law, the Mortgagor has executed a statement to the effect that the Mortgagor has received all disclosure materials required by applicable law with respect to the making of adjustable rate mortgage loans, and Seller maintains such statement in the Mortgage File.
		

		
			(pp)    Construction or Rehabilitation of Mortgaged Property.  No Loan was made in connection with the construction or rehabilitation of a Mortgaged Property or facilitating the trade-in or exchange of a Mortgaged Property.
		

		
			(qq)    No Defense to Insurance Coverage.  No action has been taken or failed to be taken, no event has occurred and no state of facts exists or has existed on or prior to the Purchase Date (whether or not known to Seller on or prior to such date) which has resulted or will result in an exclusion from, denial of, or defense to coverage under any private mortgage insurance (including, without limitation, any exclusions, denials or defenses which would limit or reduce the availability of the timely payment of the full amount of the loss otherwise due thereunder to the insured) whether arising out of actions, representations, errors, omissions, negligence, or fraud of Seller, the related Mortgagor or any party involved in the application for such coverage, including the appraisal, plans and specifications and other exhibits or documents submitted therewith to the insurer under such insurance policy, or for any other reason under such coverage, but not including the failure of such insurer to pay by reason of such insurer’s breach of such insurance policy or such insurer’s financial inability to pay.
		

		
			(rr)     Capitalization of Interest.  The Note does not by its terms provide for the capitalization or forbearance of interest.
		

		
			(ss)     No Equity Participation.  No document relating to the Loan provides for any contingent or additional interest in the form of participation in the cash flow of the Mortgaged Property or a sharing in the appreciation of the value of the Mortgaged Property. The indebtedness evidenced by the Note is not 
		

		
			
		

		
			

		 

		

			Schedule 1-8

		

 

		

			 

		

		

		
			convertible to an ownership interest in the Mortgaged Property or the Mortgagor and Seller has not financed nor does it own directly or indirectly, any equity of any form in the Mortgaged Property or the Mortgagor.
		

		
			(tt)     Withdrawn Loans.  If the Loan has been released to Seller pursuant to a Request for Release as permitted under Section 5 of the Custodial Agreement, then the promissory note relating to the Loan was returned to Custodian within 10 days (or if such tenth day was not a Business Day, the next succeeding Business Day).
		

		
			(uu)    No Exception.  Other than as noted by Custodian on the Exception Report; no Exception exists (as defined in the Custodial Agreement) with respect to the Loan which would materially adversely affect the Loan or Buyer’s security interest, granted by Seller, in the Loan as determined by Buyer in its sole discretion.
		

		
			(vv)    Origination. The Loan has been originated by Seller or a Qualified Originator.
		

		
			(ww)  Mortgage Submitted for Recordation.  The Mortgage (other than for a MERS Loan) has been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.
		

		
			(xx)   Takeout Commitment.  Each Purchased Loan that is subject to a Takeout Commitment, conforms to the requirements and the specifications set forth in such Takeout Commitment and the related regulations, rules, requirements and/or handbooks of the applicable Takeout Investor.  Each such Takeout Commitment is enforceable, in full force and effect and if requested by Buyer, validly and effectively assigned to Buyer pursuant to a Trade Assignment.  Each such Trade Assignment is enforceable and in full force and effect.  Each Takeout Commitment and Trade Assignment is a legal, valid and binding obligation of Seller enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
		

		
			(yy)   Environmental Matters.  The Mortgaged Property is free from any and all toxic or hazardous substances and there exists no violation of any local, state or federal environmental law, rule or regulation.
		

		
			(zz)    Ground Leases.  With respect to each ground lease to which the Mortgaged Property is subject (a “Ground Lease”): (i) the Mortgagor is the owner of a valid and subsisting interest as tenant under the Ground Lease; (ii) the Ground Lease is in full force and effect, unmodified and not supplemented by any writing or otherwise; (iii) all rent, additional rent and other charges reserved therein have been paid to the extent they are payable to the date hereof; (iv) the Mortgagor enjoys the quiet and peaceful possession of the estate demised thereby, subject to any sublease; (v) the Mortgagor is not in default under any of the terms thereof and there are no circumstances which, with the passage of time or the giving of notice or both, would constitute an event of default thereunder; (vi)  the lessor under the Ground Lease is not in default under any of the terms or provisions thereof on the part of the lessor to be observed or performed; (vii) the lessor under the Ground Lease has satisfied all of its repair or construction obligations, if any, to date pursuant to the terms of the Ground Lease; (viii) the remaining term of the Ground Lease extends not less than ten (10) years following the maturity date of such Loan; and (ix) the execution, delivery and performance of the Mortgage do not require the consent (other than those consents which have been obtained and are in full force and effect) under, and will not contravene any provision of or cause a default under, the Ground Lease.
		

		
			
		

		
			

		 

		

			Schedule 1-9

		

 

		

			 

		

		

		
			(aaa)    FHA Loans.  With respect to each FHA Loan, the Seller has provided the Buyer with all loan-level details available to Seller, including without limitation the related FHA case number and Mortgage Insurance Certificate number for such Loan and evidence of the payment (where available) of all FHA insurance fees. To the extent requested by Buyer, the Seller has provided the Buyer with a copy (in either physical or electronic format) of the related Mortgage Insurance Certificate, if such Mortgage Insurance Certificate is available.
		

		
			(bbb)   HOEPA.  No Loan is (a) subject to the provisions of the Homeownership and Equity Protection Act of 1994 as amended (“HOEPA”), (b) a “high cost” mortgage loan, “covered” mortgage loan, “high risk home” mortgage loan,  or “predatory” mortgage loan or any other comparable term, no matter how defined under any federal, state or local law, (c) subject to any comparable federal, state or local statutes or regulations, or any other statute or regulation providing for heightened regulatory scrutiny or assignee liability to holders of such mortgage loans, or (d) a High Cost Loan or Covered Loan, as applicable (as such terms are defined in the current Standard & Poor’s LEVELS® Glossary Revised, Appendix E).
		

		
			(ccc)    No Predatory Lending.  No predatory, abusive or deceptive lending practices, including but not limited to, the extension of credit to a mortgagor without regard for the mortgagor’s ability to repay the Loan and the extension of credit to a mortgagor which has no tangible net benefit to the mortgagor, were employed in connection with the origination of the Loan. 
		

		
			(ddd)   Georgia Loans.  No Loan which is secured by a Mortgaged Property which is located in the state of Georgia was originated prior to March 7, 2003.
		

		
			(eee)    Takeout Commitments.  Each Takeout Commitment is or will be within (i) forty-five (45) days of the related Purchase Date (if the related Takeout Investor is Fannie Mae) or (ii) thirty (30) days of the related Purchase Date (if the related Takeout Investor is not Fannie Mae), a valid, binding and subsisting obligation of such Takeout Investor enforceable in accordance with its terms; provided that a Nonbinding Jumbo Takeout Agreement may be a nonbinding commitment in accordance with its terms.  Each Loan (other than a Jumbo Loan) is subject to one Takeout Commitment. Each Jumbo Loan is either (i) eligible for at least two (2) Nonbinding  Jumbo Takeout Agreements or (ii) subject to at least one (1) Binding Jumbo Takeout Commitment. Each Takeout Commitment has been assigned to Buyer as of the related Purchase Date.
		

		
			(fff)     MERS Loans.   With respect to each MERS Loan, a Mortgage Identification Number has been assigned by MERS and such Mortgage Identification Number is accurately provided on the Loan Schedule.  The related Assignment of Mortgage to MERS has been duly and properly recorded.  With respect to each MERS Loan, Seller has not received any notice of liens or legal actions with respect to such Loan and no such notices have been electronically posted by MERS.  Each Loan is a MERS Loan, unless otherwise approved by Buyer in its sole discretion.
		

		
			(ggg)   Higher Priced Mortgage Loans.  No Loans are “higher priced mortgage loans” as defined in 12 C.F.R. 226.35. 
		

		
			(hhh)   Seasoning.  Each Loan other than a REIT Agency Loan was closed and funded by Seller less than fifteen (15) days prior to the related Purchase Date.  Each REIT Agency Loan was closed and funded by Seller or a Qualified Originator less than sixty (60) days prior to the related Purchase Date
		

		
			(iii)      Interest Only Loans. No Loan is an interest only loan.
		

		
			
		

		
			

		 

		

			Schedule 1-10

		

 

		

			 

		

		

		
			(jjj)      Reverse Mortgage Loans. No Loan is a reverse mortgage loan.
		

		
			(kkk)   Negative Amortization Loans. No Loan provides for negative amortization.
		

		
			(lll)      Higher Priced Mortgage Loans.  No Loans are “higher priced mortgage loans” as defined in 12 C.F.R. 226.35.
		

		
			(mmm) Reserved.
		

		
			(nnn)   Wholesale. No Loan was originated through Seller’s wholesale channel.
		

		
			(ooo)   Cooperative Loan. No Loan is a cooperative loan.
		

		
			(ppp)   USDA Loan. No Loan is a USDA Loan.
		

		
			(qqq)   FHA 203(k) Loan. No Loan is an FHA 203(k) Loan.
		

		
			(rrr)     Manufactured Housing/Mobile Homes; Home Equity Line of Credit. No Loan is secured by manufactured housing or a mobile home.  No Loan is a home equity line of credit.
		

		
			(sss)    Compliance with Interagency Guidance.  Each Purchased Loan that is a “nontraditional mortgage loan” within the meaning of the Interagency Guidance on Nontraditional Mortgage Product Risks, 71 FR 58609 (October 4, 2006), and that has a residential loan application date on or after September 13, 2007 (or, if such date cannot be determined, an origination date on or after October 1, 2007), complies in all respects with such guidance, including any interpretations, applications or implementation plans with respect thereto that have been communicated and/or agreed to by an institution’s regulator, regardless of whether the Purchased Loan’s originator or seller is subject to such guidance. 
		

		
			(ttt)      Compliance with Subprime Statement.  No Purchased Loan that is an Adjustable Rate Mortgage Loan and that has a residential loan application date on or after September 13, 2007, is subject to the Interagency Statement on Subprime Mortgage Lending, 72 FR 37569 (July 10, 2007) as defined by Fannie Mae in  the Lender Letter 03-07 (August 15, 2007) or by Freddie Mac in  Freddie Mac Single Family Advisory (September 7, 2007) and Freddie Mac Bulletin 2007-4).
		

		
			(uuu)   Underwriting Methodology.  With respect to each Purchased Loan, the related originator has underwritten such Loan in accordance with the Underwriting Guidelines and determined, based on verified and documented information at the time the loan was originated, that the borrower has a reasonable ability to repay the loan according to its terms, using a payment schedule that fully amortizes the loan over the term of the loan.
		

		
			(vvv)   Jumbo Loans.  With respect to each Jumbo Loan, (a) the related Back-End DTI Ratio does not exceed 41%, and (b) the related Front-End DTI Ratio does not exceed 31%.        
		

		
			(www) No Discrimination.  Seller makes credit accessible to all qualified applicants in accordance with all Requirements of Law. Seller has not discriminated, and will not discriminate, against credit applicants on the basis of any prohibited characteristic, including race, color, religion, national origin, sex, marital or familial status, age (provided that the applicant has the ability to enter into a binding contract), handicap, sexual orientation or because all or part of the applicant’s income is derived from a public assistance program or because of the applicant’s good faith exercise of rights under the Federal Consumer 
		

		
			
		

		
			

		 

		

			Schedule 1-11

		

 

		

			 

		

		

		
			Protection Act.   Seller has measures in place designed to monitor its lending practices and platform-level origination details to prevent discrimination on any of the foregoing prohibited bases.   Furthermore, Seller has not discouraged, and will not discourage, the completion of any credit application based on any of the foregoing prohibited bases. In addition, Seller has complied with all anti-redlining provisions and equal credit opportunity laws applicable under all Requirements of Law.
		

		
			(xxx)  Qualified Mortgage.  If the Loan is consummated on or after January 10, 2014 (including a Refi Mortgage Loan), such Loan satisfies the following criteria: 
		

		
			(i)        Such Loan is a Qualified Mortgage; 
		

		
			(ii)       Each Jumbo Loan is a Safe Harbor Qualified Mortgage and such Loan is accurately identified as a Safe Harbor Qualified Mortgage on the Loan Schedule;
		

		
			(iii)      Prior to the origination of such Loan, the related originator made a reasonable and good faith determination that the related Mortgagor would have a reasonable ability to repay such Loan according to its terms, in accordance with, at a minimum, the eight underwriting factors set forth in 12 CFR 1026.43(c)(2);  and 
		

		
			(iv)      Such Loan is supported by documentation that  evidences compliance with 12 CFR 1026.43 (e) and 12 CFR 1026.43 (c)(2). 
		

		
			(yyy)  Ability to Repay Rule; QM Rule. There are no actions, suits, arbitrations, investigations or proceedings pending or, to its knowledge, threatened against Seller that questions or challenges the compliance of the Loan with the Ability to Repay Rule or the QM Rule. 
		

		
			 
		

		
			 
		

		
			

		 

		

			Schedule 1-12

		

 

		

			 

		

		

		
			Schedule 2
		

		
			Filing Jurisdictions and Offices
		

		
			State of Delaware - Secretary of State
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

			Schedule 2-1

		

 

		

			 

		

		

		
			Schedule 3 
		

		
			Subsidiaries
		

		
			 
		

		
			Seller:                PNMAC GMSR ISSUER TRUST
		

		
			 
		

		
			Guarantor:          PennyMac Loan Services, LLC
		

		
			        PNMAC Capital Management, LLC
		

		
			        PNMAC Opportunity Fund Associates, LLC
		

		
			        PennyMac Loan Services, Inc.
		

		
			        PNMAC Finance Corporation
		

		
			 
		

		
			 
		

		
			

		 

		

			Schedule 3-1

		

 

		

			 

		

		

		
			 
		

		
			Schedule 4 
		

		
			Relevant States
		

		
			All fifty (50) U.S. States 
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

			Schedule 4-1

		

 

		

			 

		

		

		
			Schedule 5
		

		
			Other Indebtedness 
		

		
			[To be provided separately by Seller]
		

		
			 
		

		
			 
		

		
			

		 

		

			Schedule 5-1

		

 

		

			 

		

		

		
			 
		

		
			 
		

		
			

		 

		

			A-1

		

 

		

			 

		

		

		
			EXHIBIT A
		

		
			FORM OF [MONTHLY][QUARTERLY] CERTIFICATION
		

		
			In connection with (i) the Amended and Restated Master Repurchase Agreement dated as of  March 3, 2017, as amended (the “Agreement”), by and between PennyMac Loan Services, LLC (the “Seller”) and Citibank, N.A. (“Buyer”) and (ii) the Guaranty Agreement, dated as of June 26, 2012 by [___________] (“Guarantor”) in favor of Buyer, I, _______________, _______________ of [Seller] [Servicer] [Guarantor], do hereby certify that:
		

		
			(i)      Seller is in compliance with all provisions and terms of the Agreement;
		

		
			(ii)     no Default has occurred thereunder and no Default exists as of the date hereof;
		

		
			(iii)    there have not been any modifications to the Underwriting Guidelines that would require notice to Buyer under the Agreement;
		

		
			(iv)    all additional modifications to the Underwriting Guidelines since the date of the most recent disclosure to Buyer of any modification to the Underwriting Guidelines are set forth herein;
		

		
			(v)     (A) Seller’s Adjusted Tangible Net Worth is greater than or equal to $170,000,000; (B) Seller’s unrestricted cash is greater than or equal to $20,000,000; (C) the ratio of Seller’s Total Indebtedness, to Tangible Net Worth is less than 10:1; (D) Seller’s consolidated Net Income was equal to or greater than $1.00 for at least one (1) of the previous two (2) calendar quarters; and (E) The servicing multiple used in determining the book value of Seller’s servicing portfolio in accordance with GAAP for the previous month is equal to [__].
		

		
			(vi)    Seller has at all times during the term of the Agreement remained an approved servicer in good standing to service mortgage loans for Fannie Mae and Freddie Mac; 
		

		
			(vii)   Seller has at all times during the term of the Agreement remained an approved mortgagee with the Department of Housing and Urban Development (“HUD”) pursuant to Section 203 of the National Housing Act and has remained an approved servicer with the Federal Housing Administration to service mortgage loans for HUD; 
		

		
			(viii)  To the extent that any Mortgage Loan subject to any Transaction hereunder is an FHA Loan, Seller is in good standing with the FHA as an FHA Approved Mortgagee;
		

		
			(ix)    To the extent that any Mortgage Loan subject to any Transaction hereunder is a VA Loan, Seller is in good standing with the VA as a VA Approved Lender;
		

		
			
		

		
			

		 

		

			A-1

		

 

		

			 

		

		

		
			(x)    As at the end of [INSERT APPLICABLE MONTH/QUARTER/YEAR]: 
		

		
			(a)  The Adjusted Tangible Net Worth of Seller is $__________ ;
		

		
			(b)  The ratio of Seller’s Total Indebtedness to its Adjusted Tangible Net Worth is _________ ;
		

		
			(c)  The Liquidity of Seller is $_________ ;
		

		
			(d)  Attached as Schedule I hereto are the calculations demonstrating Seller’s compliance with the Tangible Net Worth covenant, Seller’s compliance with the ratio of Indebtedness to Tangible Net Worth covenant, and Seller’s compliance with the Liquidity Covenant, each as set forth in Section 13(p) of the Agreement; 
		

		
			(e)  Attached as Schedule II hereto is a list of any repurchase agreements, loan and security agreements or similar credit facilities or agreements for borrowed funds entered into by Seller and any third party that have been terminated in the last thirty (30) Business Days or with respect to which the amount available for borrowing has been reduced;
		

		
			(f)  Attached as Schedule III hereto is a list of any repurchase agreements, loan and security agreements or similar credit facilities or agreements for borrowed funds entered into by Seller and any third party and shall include the size of such facilities and the related termination date of such facilities;
		

		
			(g)  Seller has received ____ repurchase and indemnity requests from its third party investors (including any Agency) during the previous calendar month.  The aggregate amount of all repurchase and indemnity requests delivered to Seller by its third party investors (including any Agency) during the previous calendar month is $______;
		

		
			(h)  The aggregate amount of all repurchase and indemnity claims paid by Seller to its third party investors (including any Agency) during the previous calendar month is $_______;
		

		
			(i)  As of the date hereof, the aggregate outstanding amount of all repurchase and indemnity obligations of Seller to its third party investors (including any Agency) is $________; 
		

		
			(j)  The amount of Loan Loss Reserves of Seller is equal to $_________; 
		

		
			(k)  Seller has at all times during the previous calendar month maintained its status with (i) Ginnie Mae as an approved issuer, (ii) HUD, pursuant to Sections 203 and 211 of the National Housing Act, (iii) the FHA, as an FHA Approved Mortgagee and servicer, (iv) VA as a VA approved Lender, and (vi) Fannie Mae and Freddie Mac as an approved seller/servicer and lender; and
		

		
			(l)  As of the date hereof, the “compare ratio” assigned to Servicer by FHA under its “Neighborhood Watch” program is ______.
		

		
			
		

		
			

		 

		

			A-2

		

 

		

			 

		

		

		
			Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Agreement.
		

		
			IN WITNESS WHEREOF, I have signed this certificate.
		

		
			Date:                         , 2017
		

			
					
						 

					
					
						[SELLER][GUARANTOR]

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						By: 

					
					
						 

				
	
					
						 

					
					
						Name:

					
					
						 

				
	
					
						 

					
					
						Title: 

					
					
						 

				

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

			A-3

		

 

		

			 

		

		

		
			Schedule I
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

			A-III-1

		

 

		

			 

		

		

		
			Schedule II
		

		
			 
		

			
					
						NAME OF LENDER

					
					
						TYPE

					
					
						PREVIOUS 
SIZE 
($)

					
					
						CURRENT SIZE 
($)

					
					
						TERMINATION 
DATE

				
	
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

				

		
			 
		

		
			 
		

		
			

		 

		

			A-III-1

		

 

		

			 

		

		

		
			Schedule III
		

		
			 
		

			
					
						NAME OF 
LENDER

					
					
						TYPE

					
					
						CURRENT SIZE 
($)

					
					
						MAXIMUM
SIZE ($)

					
					
						TERMINATION
DATE

				
	
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

					
					
						 

					
					
						 

				

		
			 
		

		
			 
		

		
			

		 

		

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			EXHIBIT B
		

		
			OFFICER’S COMPLIANCE CERTIFICATE
		

		
			 
		

		
			I, _____________, do hereby certify that I am the duly elected, qualified and authorized officer of PennyMac Loan Services, LLC (the “Seller”).  This Certificate is delivered to you in connection with the Amended and Restated Master Repurchase Agreement dated as of  March 3, 2017, among Seller and Citibank, N.A. (the “Buyer”), as the same may have been amended from time to time (as amended from time to time, the “Agreement”).  I hereby certify that as of the date hereof, Seller is and has been in compliance with all the terms of the Agreement and, without limiting the generality of the foregoing, I certify that:
		

		
			1.          Seller intends with respect to the Mortgage Loans listed on Exhibit A attached hereto (the “Pooled Mortgage Loans”) to either:
		

		
			(a)        deposit the Pooled Mortgage Loans into a Ginnie Mae mortgage-backed security with a Ginnie Mac Pool number of                  (such transaction, the “GNMA Issuance” and such security the “GNMA MBS”);
		

		
			(b)        sell the Pooled Mortgage Loans to Fannie Mae in return for mortgage-backed securities issued by Fannie Mae (such transaction, the “FNMA Issuance” and such security the “FNMA MBS”); or
		

		
			(c)        sell the Pooled Mortgage Loans to the Federal Home Loan Mortgage Corporation (“Freddie Mac”) in return for mortgage-backed securities issued by Freddie Mac (such transaction, the “Freddie Mac Issuance” and together with the GNMA Issuance and the FNMA Issuance, the “Applicable  Issuance”) and designated as the “Freddie Mac MBS” (and together with the GNMA MBS and the FNMA MBS, the “Applicable MBS”).
		

		
			2.         In connection with the Applicable Issuance, the Buyer has, at the Seller’s request, executed the following form attached hereto as Exhibit B: (a) with respect to the GNMA Issuance, the Form HUD 11711A (the “Form 11711A”); (b) with respect to the FNMA Issuance, the Fannie Mae Form 2004A (the “Form 2004A”); or (c) with respect to the Freddie Mac Issuance, the Freddie Mac Form 996 (the “Form 996” and together with the Form 11711A and From 2004A, the “Applicable Form”);
		

		
			3.          In accordance with Buyer’s request under Section 13(ll) of the Agreement, Seller hereby represents and warrants to Buyer that (i) the Applicable Form attached hereto is true and correct, (ii) Seller has designated with Ginnie Mae, Fannie Mae or Freddie Mac, as applicable, the account number:  #                  at Deutsche Bank Trust Company Americas (the “MBS Delivery Account”) as the account into which the Applicable MBS shall be delivered and (iii) Seller shall not take any action, without the prior written consent of Buyer, to change the MBS Delivery Account for the Applicable MBS.
		

		
			
		

		
			

		 

		

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			4.         Capitalized terms used, but not otherwise defined, herein shall have the respective meanings assigned to such terms in the Agreement.
		

		
			IN WITNESS WHEREOF, I have set my hand this          day of                 , 20        
		

			
					
						 

					
					
						By:  

					
					
						 

				
	
					
						 

					
					
						Name:  

					
					
						 

				
	
					
						 

					
					
						Title: 

					
					
						 

				

		
			 
		

		
			 
		

		
			

		 

		

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			EXHIBIT C
		

		
			RESERVED
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

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			EXHIBIT D
		

		
			RESERVED
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

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			EXHIBIT E
		

		
			RESERVED
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

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			EXHIBIT F
		

		
			REQUIRED FIELDS FOR SERVICING TRANSMISSION
		

		
			[Required fields to be provided separately by Buyer]
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

			F-1

		

 

		

			 

		

		

		
			EXHIBIT G
		

		
			REQUIRED FIELDS FOR LOAN SCHEDULE 
		

		
			[Required fields to be provided separately by Buyer]
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

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			EXHIBIT H
		

		
			FORM OF CONFIDENTIALITY AGREEMENT
		

		
			In connection with your consideration of a possible or actual acquisition of a participating interest (the “Transaction”) in an advance, note or commitment of Citibank, N.A. (“Buyer”) pursuant to a Amended and Restated Master Repurchase Agreement by and between PennyMac Loan Services, LLC, a Delaware limited liability company, as seller (the “Seller”) and Buyer, dated as of March 3, 2017, you have requested the right to review certain non-public information regarding Seller that is in the possession of Buyer. In consideration of, and as a condition to, furnishing you with such information and any other information (whether communicated in writing or communicated orally) delivered to you by Buyer or its affiliates, directors, officers, employees, advisors, agents or “controlling persons” (within the meaning of the Securities Exchange Act of 1934, as amended (the “1934 Act”)) (such affiliates and other persons being herein referred to collectively as Buyer “Representatives”) in connection with the consideration of a Transaction (such information being  herein referred to as “Evaluation Material”), Buyer hereby requests your agreement as follows:
		

		
			1.        The Evaluation Material will be used solely for the purpose of evaluating a possible Transaction with Buyer involving you or your affiliates, and unless and until you have completed such Transaction pursuant to a definitive agreement between you or any such affiliate and Buyer, such Evaluation Material will be kept strictly confidential by you and your affiliates, directors, officers, employees, advisors, agents or controlling persons (such affiliates and other persons being herein referred to collectively as “your Representatives”), except that the Evaluation Material or portions thereof may be disclosed to those of your Representatives who need to know such information for the purpose of evaluating a possible Transaction with Buyer (it being understood that prior to such disclosure your Representatives will be informed of the confidential nature of the Evaluation Material and shall agree to be bound by this Agreement). You agree to be responsible for any breach of this Agreement by your Representatives.
		

		
			2.        The term “Evaluation Material” does not include any information which (i) at the time of disclosure or thereafter is generally known by the public (other than as a result of its disclosure by you or your Representatives) or (ii) was or becomes available to you on a nonconfidential basis from a person not otherwise bound by a confidential agreement with Buyer or its Representatives or is not otherwise prohibited from transmitting the information to you. As used in this Agreement, the term “person” shall be broadly interpreted to include, without limitation, any corporation, company, joint venture, partnership or individual.
		

		
			3.        In the event that you receive a request to disclose all or any part of the information contained in the Evaluation Material under the terms of a valid and effective subpoena or order issued by a court of competent jurisdiction, you agree to (i) immediately notify Buyer and Seller of the existence, terms and circumstances surrounding such a request, (ii) consult with Seller on the advisability of taking legally available steps to resist or narrow such request, and (iii) if disclosure of such information is required, exercise your best efforts to obtain an order or other reliable assurance that confidential treatment will be accorded to such information.
		

		
			4.        Unless otherwise required by law in the opinion of your counsel, neither you nor your Representative will, without our prior written consent, disclose to any person the fact that the Evaluation Material has been made available to you.
		

		
			
		

		
			

		 

		

			H-1

		

 

		

			 

		

		

		
			5.        You agree not to initiate or maintain contact (except for those contacts made in the ordinary course of business) with any officer, director or employee of Seller regarding the business, operations, prospects or finances of Seller or the employment of such officer, director or employee, except with the express written permission of Seller.
		

		
			6.        You understand and acknowledge that Seller is not making any representation or warranty, express or implied, as to the accuracy or completeness of the Evaluation Material or any other information provided to you by Buyer.  None of Seller, its respective affiliates or Representatives, nor any of its respective officers, directors, employees, agents or controlling persons (within the meaning of the 1934 Act) shall have any liability to you or any other person (including, without limitation, any of your Representatives) resulting from your use of the Evaluation Material.
		

		
			7.        You agree that neither Buyer nor Seller has granted you any license, copyright, or similar right with respect to any of the Evaluation Material or any other information provided to you by Buyer.
		

		
			8.        If you determine that you do not wish to proceed with the Transaction, you will promptly deliver to Buyer all of the Evaluation Material, including all copies and reproductions thereof in your possession or in the possession of any of your Representatives.
		

		
			9.        Without prejudice to the rights and remedies otherwise available to Seller, Seller shall be entitled to equitable relief by way of injunction if you or any of your Representatives breach or threaten to breach any of the provisions of this Agreement. You agree to waive, and to cause your Representatives to waive, any requirement for the securing or posting of any bond in connection with such remedy.
		

		
			10.       The validity and interpretation of this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York applicable to agreements made and to be fully performed therein (excluding the conflicts of law rules). You submit to the jurisdiction of any court of the State of New York or the United States District Court for the Southern District of the State of New York for the purpose of any suit, action, or other proceeding arising out of this Agreement.
		

		
			11.       The benefits of this Agreement shall inure to the respective successors and assigns of the parties hereto, and the obligations and liabilities assumed in this Agreement by the parties hereto shall be binding upon the respective successors and assigns.
		

		
			12.       If it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that any term or provision hereof is invalid or unenforceable, (i) the remaining terms and provisions hereof shall be unimpaired and shall remain in full force and effect and (ii) the invalid or unenforceable provision or term shall be replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of such invalid or unenforceable term or provision.
		

		
			13.       This Agreement embodies the entire agreement and understanding of the parties hereto and supersedes any and all prior agreements, arrangements and understandings relating to the matters provided for herein. No alteration, waiver, amendments, or change or supplement hereto 
		

		
			
		

		
			

		 

		

			H-2

		

 

		

			 

		

		

		
			shall be binding or effective unless the same is set forth in writing by a duly authorized representative of each party and may be modified or waived only by a separate letter executed by Seller and you expressly so modifying or waiving such Agreement.
		

		
			14.       For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties hereto. Each such counterpart shall be, and shall be deemed to be, an original instrument, but all such counterparts taken together shall constitute one and the same Agreement.
		

		
			
		

		
			

		 

		

			H-3

		

 

		

			 

		

		

		
			Kindly execute and return one copy of this letter which will constitute our Agreement with respect to the subject matter of this letter.
		

			
					
						 

					
					
						CITIBANK, N.A.

				
	
					
						 

					
					
						By:

					
					
						 

				

		
			 
		

		
			 
		

		
			 
		

		
			Confirmed and agreed to
		

		
			this _____ day of _____________, 20__.
		

		
			By:____________________________________
Name
Title:
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

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			EXHIBIT I
		

		
			FORM OF INSTRUCTION LETTER
		

		
			 
		

		
			__________ __, 20__
		

		
			___________________, as  Subservicer/Additional Collateral Servicer
		

		
			____________________ 
		

		
			____________________ 
		

		
			Attention:  _______________
		

		
			Re:       Amended and Restated Master Repurchase Agreement, dated as of March 3, 2017, by and between PennyMac Loan Services, LLC, as seller (“Seller”) and Citibank, N.A., a national banking association as buyer
		

		
			Ladies and Gentlemen:
		

		
			As [sub]servicer of those assets described on Schedule 1 hereto, which may be amended or updated from time to time (the “Eligible Loans”) pursuant to that Servicing Agreement, between You and the undersigned Seller, as amended or modified, attached hereto as Exhibit A (the “Servicing Agreement”), you are hereby notified that the undersigned Seller has sold to Buyer such Eligible Loans, including, without limitation, the servicing rights appurtenant thereto, pursuant to that certain Amended and Restated Master Repurchase Agreement, dated as of March 3, 2017 (the “Agreement”), among Buyer, Seller and Servicer.
		

		
			You agree to service the Eligible Loans in accordance with the terms of the Servicing Agreement for the benefit of Buyer and, except as otherwise provided herein, Buyer shall have all of the rights, but none of the duties or obligations of Seller under the Servicing Agreement including, without limitation, payment of any indemnification or reimbursement or payment of any servicing fees or any other fees.  No subservicing relationship shall be hereby created between You and Buyer.
		

		
			Upon your receipt of written notification by Buyer that a Default has occurred under the Agreement (the “Default Notice”), you, as [Subservicer] [Additional Collateral Servicer], hereby agree to remit all payments or distributions made with respect to such Eligible Loans, net of the servicing fees payable to you with respect thereto, immediately in accordance with Buyer’s wiring instructions provided below, or in accordance with other instructions that may be delivered to you by Buyer:
		

		
			[BANK]
		

		
			Account No.:     [_____________]
		

		
			For the A/C of Citibank, N.A.
		

		
			ABA No.:          [_____________]
		

		
			Reference:         [_____________]
		

		
			 You agree that, following your receipt of such Default Notice, under no circumstances will you remit any such payments or distributions in accordance with any instructions delivered to you by the undersigned Seller, except if Buyer instructions you in writing otherwise.  
		

		
			You further agree that, upon receipt written notification by Buyer that an Event of Default has occurred under the Agreement, Buyer shall assume all of the rights and obligations of Seller under the Servicing Agreement, except as otherwise provided herein.  Subject to the terms of the Servicing Agreement, You shall (x) follow the instructions of Buyer with respect to the Eligible Loans and deliver to 
		

		
			
		

		
			

		 

		

			I-1

		

 

		

			 

		

		

		
			a Buyer any information with respect to the Eligible Loans reasonably requested by such Buyer, and (y) treat this letter agreement as a separate and distinct servicing agreement between You and Buyer (incorporating the terms of the Servicing Agreement by reference), subject to no setoff or counterclaims arising in Your favor (or the favor of any third party claiming through You) under any other agreement or arrangement between You and Seller or otherwise.   Notwithstanding anything to the contrary herein or in the Servicing Agreement, in no event shall Buyer be liable for any fees, indemnities, costs, reimbursements or expenses incurred by You prior to such Event of Default or otherwise owed to You in respect of the period of time prior to such Event of Default.
		

		
			Notwithstanding anything to the contrary herein or in the Servicing Agreement, with respect to those Eligible Loans marked as “Servicing Released” on Schedule 1 (the “Servicing Released Loans”), You are hereby instructed to service such Servicing Released Loans for a term of thirty (30) days (each, a “Servicing Term”) commencing as of the date such Servicing Released Loans become subject to a purchase transaction under the Agreement, which Servicing Term shall be deemed to be renewed at the end of each 30-day period subject to the following sentence.  The Servicing Term shall terminate upon the occurrence of any of the following events: (i) if the related purchase transaction is not renewed at the end of such Servicing Term and such Servicing Released Loan is not repurchased by Seller, or (ii) You shall have received a written termination notice from Buyer at any time with respect to some or all of the Servicing Released Loans being serviced by You (each, a “Servicing Termination”).  In the event of a Servicing Termination, You hereby agree to (i) deliver all servicing and “records” relating to such Servicing Released Loans to the designee of Buyer at the end of each such Servicing Term and (ii) cooperate in all respects with the transfer of servicing to Buyer or its designee. The transfer of servicing and such records by You shall be in accordance with customary standards in the industry and the terms of the Servicing Agreement, and such transfer shall include the transfer of the gross amount of all escrows held for the related mortgagors (without reduction for unreimbursed advances or “negative escrows”).  
		

		
			Further, You hereby constitute and appoint Buyer and any officer or agent thereof, with full power of substitution, as Your true and lawful attorney-in-fact with full irrevocable power and authority in Your place and stead and in Your name or in Buyer’s own name, following any Servicer Termination with respect solely to the Servicing Released Loans that are subject to such Servicer Termination, to direct any party liable for any payment under any such Servicing Released Loans to make payment of any and all moneys due or to become due thereunder directly to Buyer or as Buyer shall direct including, without limitation, the right to send “goodbye” and “hello” letters on Your behalf.  You hereby ratify all that said attorneys shall lawfully do or cause to be done by virtue hereof.  This power of attorney is a power coupled with an interest and shall be irrevocable.
		

		
			For the purpose of the foregoing, the term “records” shall be deemed to include but not be limited to any and all servicing agreements, files, documents, records, data bases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the servicing of such Servicing Released Loans.
		

		
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			Please acknowledge receipt of this instruction letter by signing in the signature block below and forwarding an executed copy to Buyer promptly upon receipt.  Any notices to Buyer should be delivered to the following address: Citibank, N.A. 390 Greenwich Street, New York, NY 10013, Attention: Bobbie Theivakumaran, Telecopier No.: (646) 291-3799, Telephone No.: (212) 723-6753.
		

			
					
						 

					
					
						Very truly yours,

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						PENNYMAC LOAN SERVICES, LLC

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						By:

					
					
						 

				
	
					
						 

					
					
						Name:

					
					
						 

				
	
					
						 

					
					
						Title:

					
					
						 

				

		
			 
		

			
					
						Acknowledged and Agreed as of this __ day of ___________, 20__:

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						[SUBSERVICER] [ADDITIONAL COLLATERAL SERVICER]

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						By:

					
					
						 

					
					
						 

				
	
					
						Name:

					
					
						 

				
	
					
						Title:

					
					
						 

				

		
			 
		

		
			 
		

		
			

		 

		

			I-3

		

 

		

			 

		

		

		
			EXHIBIT J
		

		
			FORM OF POWER OF ATTORNEY
		

		
			KNOW ALL MEN BY THESE PRESENTS:
		

		
			WHEREAS, CITIBANK, N.A. (the "Buyer"), PENNYMAC LOAN SERVICES, LLC ("Seller"),  have entered into the Amended and Restated Master Repurchase Agreement dated as of March 3, 2017, amended, restated, supplemented or otherwise modified, the "Repurchase Agreement") pursuant to which Buyer has agreed to provide financing from time to time with respect to certain mortgage loans (the "Assets") subject to the terms therein; 
		

		
			WHEREAS, Seller has agreed to give to Buyer a power of attorney on the terms and conditions contained herein in order for Buyer to take any action that Buyer may deem necessary or advisable to accomplish the purposes of the Repurchase Agreement;
		

		
			NOW THEREFORE, Seller hereby irrevocably constitutes and appoints Buyer and any officer or agent thereof, with full power of substitution, as its true and lawful attorney‐in‐fact with full irrevocable power and authority in the place and stead of Seller and in the name of Seller or in its own name, from time to time in Buyer’s discretion if an Event of Default shall have occurred and be continuing:
		

		
			(i)      in the name of Seller, or in its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any Assets and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Buyer for the purpose of collecting any and all such moneys due with respect to any Assets whenever payable;
		

		
			(ii)     to pay or discharge taxes and liens levied or placed on or threatened against the Assets;
		

		
			(iii)    (A) to direct any party liable for any payment under any Assets to make payment of any and all moneys due or to become due thereunder directly to Buyer or as Buyer shall direct, including, without limitation, to send “goodbye” letters and Section 404 Notices on behalf of Seller and any applicable Servicer; (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Assets; (C) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Assets; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Purchased Items or any proceeds thereof and to enforce any other right in respect of any Assets; (E) to defend any suit, action or proceeding brought against Seller with respect to any Assets; (F) to settle, compromise or adjust any suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as Buyer may deem appropriate; and (G) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with 
		

		
			
		

		
			

		 

		

			J-1

		

 

		

			 

		

		

		
			any Assets as fully and completely as though Buyer were the absolute owner thereof for all purposes, and to do, at Buyer’s option and Seller’s expense, at any time, and from time to time, all acts and things which Buyer deems necessary to protect, preserve or realize upon the Assets and Buyer’s Liens thereon and to effect the intent of the Repurchase Agreement, all as fully and effectively as Seller might do;
		

		
			(iv)     for the purpose of effecting the transfer of servicing with respect to the Assets from Seller and any applicable Servicer to a successor servicer appointed by Buyer in its sole discretion and to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish such transfer of servicing, and, without limiting the generality of the foregoing, Seller hereby gives Buyer the power and right, on behalf of Seller, without assent by Seller, to, in the name of Seller or its own name, or otherwise, prepare and send or cause to be sent “good‐bye” letters and Section 404 Notices on behalf of Seller and any applicable Servicer in connection with such transfer of servicing; and
		

		
			(v)      for the purpose of delivering any notices of sale to mortgagors or other third parties, including without limitation, those required by law. 
		

		
			Seller hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable and shall survive the termination of the Agreement.  
		

		
			Seller also authorizes Buyer, from time to time, to execute, in connection with any sale, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Assets.
		

		
			The powers conferred on Buyer hereunder are solely to protect Buyer’s interests in the Assets and shall not impose any duty upon it to exercise any such powers.  Buyer shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to Seller for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.
		

		
			IN ORDER TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND Seller ON ITS OWN BEHALF AND ON BEHALF OF SELLER'S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.
		

		
			[REMAINDER OF PAGE INTENTIONALLY BLANK.  SIGNATURES FOLLOW.]
		

		
			
		

		
			

		 

		

			J-2

		

 

		

			 

		

		

		
			IN WITNESS WHEREOF Seller has caused this Power of Attorney to be duly executed and Seller’s seal to be affixed this ____ day of ___________, 2017.
		

			
					
						 

					
					
						PENNYMAC LOAN SERVICES, LLC,

				
	
					
						 

					
					
						as Seller

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						By:

					
					
						 

				
	
					
						 

					
					
						Name:

					
					
						 

				
	
					
						 

					
					
						Title:

					
					
						 

				

		
			 
		

		
			 
		

		
			A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
		

		
			State of California
		

		
			County of_________________________________)
		

		
			On March 3, 2017, before me, personally appeared [__________________(NAME/TITLE)], who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
		

		
			I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
		

		
			WITNESS my hand and official seal.
		

		
			Signature ____________________________________(Seal)
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

			J-3

		

 

		

			 

		

		

		
			EXHIBIT K
		

		
			FORM OF SECURITY RELEASE CERTIFICATION
		

		
			[insert date]
		

		
			Citibank, N.A.
		

		
			390 Greenwich Street, 4th Floor
		

		
			New York, New York  10001
		

		
			Attention:  _______________________
		

		
			Re:        Security Release Certification
		

		
			Effective as of ___[DATE]________ [___________ ] hereby relinquishes any and all right, title and interest it may have in and to the Loans described in Exhibit A attached hereto upon purchase thereof by Citibank, N.A. (“Buyer”) from Seller named below pursuant to that certain Amended and Restated Master Repurchase Agreement, dated as of March 3, [2017] as of the date and time of receipt by [___________] of  $____________ for such Loans (the “Date and Time of Sale”) and certifies that all notes, mortgages, assignments and other documents in its possession relating to such Loans have been delivered and released to Seller named below or its designees as of the Date and Time of Sale. 
		

		
			Name and Address of Lender:
		

		
			                   [Custodian]
		

		
			                   [           ]
		

		
			                   For Credit Account No. [              ]
		

		
			                   Attention:  [             ]
		

		
			                   Phone:  [                ]
		

		
			                   Further Credit – [              ]
		

			
					
						 

					
					
						[NAME OF WAREHOUSE LENDER]

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						By:

					
					
						 

				
	
					
						 

					
					
						Name:

					
					
						 

				
	
					
						 

					
					
						Title:

					
					
						 

				

		
			 
		

		
			Seller named below hereby certifies to Buyer that, as of the Date and Time of Sale of the above mentioned Loans to Buyer, the security interests in the Loans released by the above named [corporation] comprise all security interests relating to or affecting any and all such Loans.  Seller warrants that, as of such time, there are and will be no other security interests affecting any or all of such Loans.
		

			
					
						 

					
					
						PENNYMAC LOAN SERVICES, LLC

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						By:

					
					
						 

				
	
					
						 

					
					
						Name:

					
					
						 

				
	
					
						 

					
					
						Title:

					
					
						 

				

		
			 
		

		
			
		

		
			

		 

		

			L-1

		

 

		

			 

		

		

		
			EXHIBIT TO SECURITY RELEASE CERTIFICATION
		

		
			[List of Loans]
		

		
			 
		

		 

		

			L-2

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