Document:

Exhibit 10.2

 

SUBORDINATION AGREEMENT AND RIGHT TO PURCHASE DEBT

 

This Subordination Agreement and Right to Purchase Debt (this “Agreement”) is made as of June 29, 2017 by and among CHICAGO VENTURE PARTNERS, L.P., a Utah limited partnership (“Creditor”), JAGUAR ANIMAL HEALTH, INC., a Delaware corporation (“Borrower”), and HERCULES CAPITAL, INC. (f/k/a Hercules Technology Growth Capital, Inc.), a Maryland corporation (“Agent”), in its capacity as administrative agent for itself and the Lender (as defined in the Loan Agreement (as defined below)).

 

Recitals

 

A.                                    Borrower has requested and/or obtained certain loans or other credit accommodations from Lender which are or may be from time to time secured by assets and property of Borrower pursuant to the terms of that certain Loan and Security Agreement dated August 18, 2015 by and among Borrower, Agent and Lender, as amended by the First Amendment thereto, dated April 21, 2016, and as further amended by the Second Amendment thereto, dated March 31, 2017 (as amended, the “Loan Agreement”).

 

B.                                    Creditor has extended loans or other credit accommodations to Borrower, and/or may extend loans or other credit accommodations to Borrower from time to time, subject to the terms of the Loan Agreement.

 

C.                                    Subject to the terms and conditions of this Agreement, Creditor is willing to subordinate:  (i) all of Borrower’s indebtedness and obligations to Creditor, whether presently existing or arising in the future (the “Subordinated Debt”), to all of Borrower’s indebtedness and obligations to Agent and Lender; and (ii) all of Creditor’s security interests, if any, in Borrower’s property, to all of the Agent’s security interests in the Borrower’s property.

 

D.                                    As further consideration for Agent’s execution and delivery of this Agreement, Borrower makes the further agreements and acknowledgments set forth in Section 11 hereof.

 

NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

 

1.                                      Creditor subordinates to Agent any security interest or lien that Creditor may have in any property of Borrower.  Notwithstanding the respective dates of attachment or perfection of the security interest of Creditor and the security interest of Agent, the security interest of Agent in the Collateral, as defined in the Loan Agreement, shall at all times be prior to the security interest of Creditor.  Capitalized terms not otherwise defined herein shall have the same meaning as in the Loan Agreement.

 

2.                                      All Subordinated Debt is subordinated in right of payment to all obligations of Borrower to Agent and Lender now existing or hereafter arising, together with all costs of collecting such obligations (including attorneys’ fees), including, without limitation, all interest accruing after the commencement by or against Borrower of any Bankruptcy, reorganization or similar proceeding, and all obligations under the Loan Agreement (the “Senior Debt”).

 

3.                                      Creditor will not demand or receive from Borrower (and Borrower will not pay to Creditor) all or any part of the Subordinated Debt (other than by the conversion of all or part of the Subordinated Debt into Borrower’s common stock in accordance with the terms of any notes evidencing the Subordinated Debt), by way of payment, prepayment, setoff, lawsuit or otherwise, nor will Creditor exercise any remedy with respect to the Collateral, nor will Creditor commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against Borrower (other than an action solely for specific performance to compel Borrower, following Borrower’s uncured material breach, to deliver shares of its common stock to Creditor in accordance with the terms of any notes evidencing the Subordinated Debt), for so long as any portion of the Senior Debt remains outstanding, provided, however (and notwithstanding anything to the contrary herein) that Creditor may convert any part of the Subordinated Debt, including any fees payable with respect thereto, into common stock of Borrower in accordance with the terms of any notes evidencing such Subordinated Debt.

 

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4.                                      In consideration for Creditor’s subordination agreements with respect to the Subordinated Debt made pursuant to this Agreement and the payment made by Borrower to Agent from the proceeds received by Borrower from the Subordinated Debt, Agent hereby grants to Creditor the right to purchase the Senior Debt and all related transaction documents and security interests (the “Purchased Debt”) at any time for an amount equal to the full value of Borrower’s obligations under the Purchased Debt, including principal, interest, fees (including a further end of term charge of $40,000 if the obligations under the Loan Agreement are not paid in full within 90 days of the date hereof), accrued expenses and other costs owed by Borrower to Agent, including attorney’s fees, pursuant to the Loan Agreement, as it may be amended (such amount, the “Purchase Price”, and such right, the “Purchase Right”). Creditor may exercise the Purchase Right by delivering written notice to each of Agent and Borrower in accordance with the provisions of Section 11.2 (Notice) of the Loan Agreement. Agent and Creditor covenant and agree: (i) to proceed in good faith to document the purchase and assignment of the Purchased Debt in a timely manner following receipt of written notice from Creditor of its exercise of the Purchase Right, it being agreed that the Purchased Debt (and related loan documents) shall be acquired by Creditor on an “as-is” basis; and (ii) to execute and deliver all such other agreements, certificates, instruments and documents, as reasonably required in order to carry out the purchase and assignment of the Purchased Debt and the transfer of all related security interests from Agent to Creditor. Borrower hereby confirms, acknowledges and agrees that (x) the sale of the Purchased Debt to the Creditor is an assignment permitted under Section 11.7 of the Loan Agreement; (y) Borrower’s consent is not required for the purchase and assignment of the Purchased Debt to Creditor; and (z) Borrower shall do and perform, or cause to be done and performed, all such further acts and things, and execute and deliver all such other agreements, certificates, instruments and documents as either Agent or Creditor may reasonably request in order to carry out the purchase and assignment of the Purchased Debt and the transfer of all related security interests from Agent to Creditor. Agent further covenants and agrees not to sell, transfer, assign, pledge or hypothecate the Purchased Debt to any third party unless such third party agrees to take the Purchased Debt subject to the terms and conditions of this Agreement.

 

5.                                      Creditor shall promptly deliver to Agent in the form received (except for endorsement or assignment by Creditor where required by Agent) for application to the Senior Debt any payment, distribution, security or proceeds received by Creditor with respect to the Subordinated Debt (i) other than any shares of Borrower common stock received by Creditor upon conversion of all or part of the Subordinated Debt in accordance with the terms of any notes evidencing the Subordinated Debt and (ii) other than in accordance with this Agreement.

 

6.                                      In the event of Borrower’s insolvency, reorganization or any case or proceeding under any Bankruptcy or insolvency law or laws relating to the relief of debtors, these provisions shall remain in full force and effect, and Agent’s and Lender’s claims against Borrower shall be paid in full before any cash payment is made to any Creditor.

 

7.                                      For so long as any of the Senior Debt remains unpaid, Creditor irrevocably appoints Agent as Creditor’s attorney-in-fact, and grants to Agent a power of attorney with full power of substitution, in the name of Creditor or in the name of Agent, for the use and benefit of Agent, without notice to Creditor, to perform at Agent’s option the following acts in any Bankruptcy, insolvency or similar proceeding involving Borrower:

 

(i)                                     To file the appropriate claim or claims in respect of the Subordinated Debt on behalf of Creditor if Creditor does not do so prior to 15 days before the expiration of the time to file claims in such proceeding and if Agent elects, in its sole discretion, to file such claim or claims; and

 

(ii)                                  To accept or reject any plan of reorganization or arrangement on behalf of Creditor and to otherwise vote Creditor’s claims in respect of any Subordinated Debt in any manner that Agent deems appropriate for the enforcement of its rights hereunder.

 

8.                                      In the event of Borrower’s insolvency, reorganization or any case or proceeding, arrangement or transaction under any federal or state bankruptcy or insolvency law or similar laws or proceedings involving the Borrower, for so long as any of the Senior Debt remains unpaid, if the Agent, the

 

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Lender or any of them shall seek to provide the Borrower or any other Loan Party with any financing under Section 364 of the Bankruptcy Code, or Agent or Lender support or consent to such financing provided by a third party, or consent to any order for the use of cash collateral under Section 363 of the Bankruptcy Code (each, a “DIP Financing” or “Cash Collateral Use”), with such DIP Financing or Cash Collateral Use to be secured by all or any portion of the Collateral (including assets that, but for the application of Section 552 of the Bankruptcy Code (or any similar provision of any foreign laws relating to the relief of debtors) would be Collateral), then Creditor agrees that it will raise no objection and will not support, directly or indirectly, any objection to such DIP Financing or Cash Collateral Use nor object to the liens or claims granted in connection therewith on any grounds, including a failure to provide “adequate protection” for the liens, if any, securing any Subordinated Debt (and will not request any adequate protection as a result of such DIP Financing or Cash Collateral Use, and will not support any debtor-in-possession financing or Cash Collateral Use which would compete with such DIP Financing or Cash Collateral Use which is provided to or consented to by Agent or Lender).  In addition, Creditor agrees that it will not provide nor seek to provide or support any debtor-in-possession financing without the prior written consent of the Agent.

 

9.                                      Creditor shall immediately affix a legend to the instruments evidencing the Subordinated Debt stating that the instruments are subject to the terms of this Agreement.  No amendment of the documents evidencing or relating to the Subordinated Debt shall directly or indirectly modify the provisions of this Agreement in any manner which might terminate or impair the subordination of the Subordinated Debt or the subordination of the security interest or lien that Creditor may have in any property of Borrower.  In addition, such instruments shall not be amended to (i) increase the rate of interest with respect to the Subordinated Debt, or (ii) accelerate the payment of the principal or interest or any other portion of the Subordinated Debt.

 

10.                               This Agreement shall remain effective for so long as Agent or Lender has any obligation to make credit extensions to Borrower or Borrower owes any amounts to Agent or Lender under the Loan Agreement.  If, at any time after payment in full of the Senior Debt any payments of the Senior Debt must be disgorged by Agent or Lender for any reason (including, without limitation, the Bankruptcy of Borrower), this Agreement and the relative rights and priorities set forth herein shall be reinstated as to all such disgorged payments as though such payments had not been made and Creditor shall immediately pay over to Agent all payments received with respect to the Subordinated Debt to the extent that such payments would have been prohibited hereunder.  At any time and from time to time, without notice to Creditors, Agent or Lender may take such actions with respect to the Senior Debt as Agent and Lender, respectively, in its sole discretion, may deem appropriate, including, without limitation, terminating advances to Borrower, increasing the principal amount in connection with any DIP Financing, extending the time of payment, increasing applicable interest rates, renewing, compromising or otherwise amending the terms of any documents affecting the Senior Debt and any collateral securing the Senior Debt, and enforcing or failing to enforce any rights against Borrower or any other person.  Notwithstanding the foregoing, the Senior Debt may not be amended to increase the principal amount of the Senior Debt without Creditor’s consent; provided that such consent shall not be required if the principal amount is increased in connection with a DIP Financing. No such action or inaction shall impair or otherwise affect Agent’s or Lender’s rights hereunder.

 

11.                               Borrower hereby agrees with Agent as follows: (a) this Agreement shall constitute a “Loan Document” for all purposes under the Loan Agreement (including, without limitation, Section 9.2 of the Loan Agreement); (b) $1,000,000 of the proceeds from the Subordinated Debt shall be used by Borrower to prepay an equal amount of the principal outstanding under the Loan Agreement within two business days following the Amendment Effective Date (as defined below); and (c) Borrower shall use good faith efforts to agree with Agent to a binding, definitive amendment agreement reflecting the terms set forth in Exhibit A on or before July 7, 2017 (the “Amendment Effective Date”).

 

12.                               This Agreement shall bind any successors or assignees of Creditor and shall benefit any successors or assigns of Agent.  This Agreement is solely for the benefit of Creditor, Agent and Lender and not for the benefit of Borrower or any other party.  Creditor further agrees that if Borrower is in the process of refinancing a portion of the Senior Debt with a new lender, and if Agent makes a request of Creditor,

 

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Creditor shall agree to enter into a new subordination agreement with the new lender on substantially the terms and conditions of this Agreement.

 

13.                               This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

14.                               This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of California, without regard to principles of conflicts of law.  Jurisdiction shall lie in the State of California.  THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES.  TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS, HIS OR HER CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR AGREEMENT BETWEEN THE UNDERSIGNED PARTIES. If the jury waiver set forth in this Section is not enforceable, then any dispute, controversy or claim arising out of or relating to this Agreement or any of the transactions contemplated herein shall be resolved by judicial reference pursuant to Code of Civil Procedure Section 638 et seq before a mutually acceptable referee or, if none is selected, then a referee chosen by the Presiding Judge of the California Superior Court for Santa Clara County, provided this provision shall not restrict any party from seeking to enforce any prejudgment remedies.

 

15.                               This Agreement represents the entire agreement with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and commitments.  No Creditor is relying on any representations by Agent, Lender or Borrower in entering into this Agreement, and Creditor has kept and will continue to keep itself fully apprised of the financial and other condition of Borrower.  This Agreement may be amended only by written instrument signed by Creditor and Agent.

 

16.                               In the event of any legal action to enforce the rights of a party under this Agreement, the party prevailing in such action shall be entitled, in addition to such other relief as may be granted, all reasonable costs and expenses, including reasonable attorneys’ fees, incurred in such action.

 

[Remainder of page intentionally left blank; signature page follows]

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

 

	
 
    	
“Agent”
    
	
 
    	
 
    
	
 
    	
HERCULES   CAPITAL, INC.
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Zhuo Huang
    
	
 
    	
 
    
	
 
    	
Name: 
    	
Zhuo Huang
    
	
 
    	
 
    	
 
    
	
 
    	
Title: 
    	
Associate General   Counsel
    
	
 
    	
 
    
	
 
    	
“Borrower”
    
	
 
    	
 
    
	
 
    	
JAGUAR ANIMAL   HEALTH, INC.
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Lisa A. Conte
    
	
 
    	
 
    
	
 
    	
Name: 
    	
Lisa A. Conte
    
	
 
    	
 
    	
 
    
	
 
    	
Title: 
    	
President and CEO
    
					

 

[CREDITOR SIGNATURE PAGES FOLLOW]

 

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“Creditor”
    
	
 
    	
 
    	
 
    
	
 
    	
CHICAGO VENTURE   PARTNERS, L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Chicago Venture   Management, L.L.C.,
    
	
 
    	
 
    	
its General Partner
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
CVM, Inc., its   Manager
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
/s/ John M. Fife
    
	
 
    	
 
    	
 
    	
 
    	
John M. Fife, President
    
						

 

 

EXHIBIT A

 

(see attachment)

 

 

 

Via e-mail: lconte@jaguaranimalhealth.com

 

June 26, 2017

 

Lisa Conte

Chief Executive Officer

Jaguar Animal Health Inc.

201 Mission St #2375,

San Francisco, CA 94105

 

Dear Lisa:

 

Based on our recent discussions, and the information provided to us by Jaguar Animal Health, Inc. (“Jaguar”), we are proposing to make the following changes to the Loan & Security Agreement (and existing amendments) between Hercules Capital Inc. (“Hercules”) and Jaguar.

 

1.                                      Hercules consents to Chicago Venture Partners (“CVP”) providing a $1.7M unsecured loan (“CVP Loan”) to Jaguar, subject to executing the Subordination Agreement with Hercules.  Jaguar agrees that no changes can be made to the terms of CVP Loan without Hercules consent Jaguar can make changes to the pricing terms only for stock payments to CVP.  For avoidance of doubt, no changes can be made to cash payment terms for the CVP Loan without Hercules consent.

 

2.                                      Hercules agrees to amend the L&SA subject to the following conditions:

 

i)                                         Funding of the $1.7M CVP Loan.

 

ii)                                      $1M principal paydown of Hercules loan before July 31, 2017.

 

Subject to the above conditions, Hercules agrees to amend the L&SA such that:

 

·                  The minimum cash requirement would change from $1.5M to $500k, i.e., Jaguar would need to maintain at least $500k in cash balance in accounts over which Hercules has an Account Control Agreement.  The minimum cash requirements will reduce by the amount of principal payment made each month (see related point below).

 

·                  Jaguar would make interest only payments for the months of August, September and October 2017.  Hercules loan would start to amortize on Nov 1, 2017, with no changes to the loan maturity date, i.e., Aug 1, 2018.

 

·                  If Hercules loan is not paid off in full within 90 days of the merger consummation between Napa and Jaguar, an additional End of Term Charge

 

400 Hamilton Ave, Suite 310

Palo Alto, CA 94301

650- 289-3065 (Direct)

650-473-9 I 94 (Fax)

 

 

of $40,000 will become due to Hercules, at the earlier of payoff of maturity of the Hercules loan.

 

The proposed terms and conditions are provided for discussion purposes only and do not represent an agreement.  The actual terms and conditions are subject to satisfactory completion of review of documentation and such other terms and conditions as may be determined by Lender and which would be contained in definitive legal documents for the loan amendment contemplated hereby.

 

Sincerely,

 

	
/s/   Himani Bhalla
    	
 
    
	
Himani   Bhalla
    	
 
    
	
Principal,   Life Sciences
    	
 
    
	
Hercules   Capital, Inc.
    	
 
    

 

 

AGREED AND ACCEPTED this 26 day of June, 2017

 

	
Jaguar Animal Health Inc.
    
	
 
    
	
By:   
    	
/s/   Lisa A. Conte
    	
 
    
	
 
    	
 
    
	
Name:
    	
Lisa   A. Conte
    	
 
    
	
 
    	
 
    
	
Title:
    	
President   and CEO
    	
 
    
						

 

The information contained herein is confidential and may not be released by you or your representative in written or verbal form without the prior written consent of the Lender.

 

2Exhibit 10.3

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Agreement”), dated as of June 29, 2017, is executed by Jaguar Animal Health, Inc., a Delaware corporation (“Debtor”), in favor of Chicago Venture Partners, L.P., a Utah limited partnership (“Secured Party”).

 

A.                                    Debtor has issued to Secured Party a certain Secured Convertible Promissory Note of even date herewith, as may be amended from time to time, in the original face amount of $2,155,000.00 (the “Note”).

 

B.                                    In order to induce Secured Party to extend the credit evidenced by the Note, Debtor has agreed to enter into this Agreement and to grant Secured Party a security interest in the Collateral (as defined below).

 

NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Debtor hereby agrees with Secured Party as follows:

 

1.                                      Definitions and Interpretation. When used in this Agreement, the following terms have the following respective meanings:

 

“Collateral” has the meaning given to that term in Section 2 hereof.

 

“Effective Date” means the date on which Secured Party: (a) purchases the Hercules Debt from Hercules pursuant to the purchase option set forth in Section 4 of the Subordination Agreement; or (b) Debtor repays the Hercules Debt in full.

 

“Hercules” means Hercules Technology Growth Capital, Inc., a Maryland corporation.

 

“Hercules Debt” means all amounts owing to Hercules pursuant to the Hercules Loan Agreement and all other related documentation.

 

“Hercules Loan Agreement” means that certain Loan and Security Agreement dated August 18, 2015 entered into by and between Debtor and Hercules, as amended.

 

“Intellectual Property” means all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses (software or otherwise), information, know-how, inventions, discoveries, published and unpublished works of authorship, processes, any and all other proprietary rights, and all rights corresponding to all of the foregoing throughout the world, now owned and existing or hereafter arising, created or acquired.

 

“Lien” shall mean, with respect to any property, any security interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such property or the income therefrom, including, without limitation, the interest of a vendor or lessor under a conditional sale agreement, capital lease or other title retention agreement, or any agreement to provide any of the foregoing, and the filing of any financing statement or similar instrument under the UCC or comparable law of any jurisdiction.

 

“Obligations” means (a) all loans, advances, future advances, debts, liabilities and obligations, howsoever arising, owed by Debtor to Secured Party or any affiliate of Secured Party of every kind and description, now existing or hereafter arising, created by the Note, this Agreement, that certain Securities Purchase Agreement of even date herewith, entered into by and between Debtor and Secured Party (the “Purchase Agreement”), any other Transaction Documents (as defined in the Purchase Agreement), or any modification or amendment to any of the foregoing, (b) all reasonable and 

 

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documented out-of-pocket costs and expenses, including reasonable and documented attorneys’ fees, incurred by Secured Party or any affiliate of Secured Party in connection with the Note or in connection with the collection or enforcement of any portion of the indebtedness, liabilities or obligations described in the foregoing clause (a) to the extent requested to be reimbursed by the Debtor pursuant to the terms of the Transaction Documents, (c) the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Agreement, and (d) the performance of the covenants and agreements of Debtor contained in this Agreement and all other Transaction Documents; provided that “Obligations” does not include obligations relating to shares of common stock of Debtor issued upon conversion or redemption of all or any portion of the Note.

 

“Permitted Indebtedness” means (a) indebtedness of Debtor in favor of Secured Party arising under this Agreement or any other Transaction Document; (b) indebtedness to trade creditors incurred in the ordinary course of business, including indebtedness incurred in the ordinary course of business with corporate credit cards; (c) indebtedness consisting of financing of insurance premiums incurred in the ordinary course of business; (d) other indebtedness in an amount not to exceed $250,000 at any time outstanding; (e) indebtedness consisting of capital leases and purchase money debt in an amount not to exceed $300,000 at any time outstanding; (f) reimbursement obligations in connection with letters of credit that are secured by cash and issued on behalf of Debtor or a subsidiary thereof in an amount not to exceed $300,000 at any time outstanding; and (g) extensions, refinancings and renewals of any items of Permitted Indebtedness, provided that the principal amount is not increased or the terms modified to impose materially more burdensome terms upon Debtor.

 

“Permitted Liens” means (a) Liens for taxes, fees, assessment or other governmental charges or levies, either not yet delinquent or being contested in good faith and by appropriate proceedings for which adequate reserves have been established; (b) Liens in favor of Secured Party under this Agreement or arising under the other Transaction Documents; (c) Liens securing claims or demands of materialmen, artisans, mechanics, carriers, warehousemen, landlords and other like persons arising in the ordinary course of Debtor’s business and imposed without action of such parties; provided, that the payment thereof is not yet required; (d) Liens arising from judgments, decrees or attachments in circumstances which do not constitute an Event of Default hereunder; (e) the following deposits, to the extent made in the ordinary course of business: deposits under worker’s compensation, unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure statutory obligations (other than Liens arising under ERISA or environmental Liens) or surety or appeal bonds, or to secure indemnity, performance or other similar bonds; (f) Liens on equipment or software or other Intellectual Property constituting purchase money Liens; (g) leasehold interests in leases or subleases and licenses granted in the ordinary course of business and not interfering in any material respect with the business of the licensor; (h) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties that are promptly paid on or before the date they become due; (i) Liens on insurance proceeds securing the payment of financed insurance premiums that are promptly paid on or before the date they become due (provided that such Liens extend only to such insurance proceeds and not to any other property or assets); (j) statutory and common law rights of set-off and other similar rights as to deposits of cash and securities in favor of banks, other depository institutions and brokerage firms; (k) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business so long as they do not materially impair the value or marketability of the related property; (l) customary liens securing capital leases on the assets financed thereby; (m) liens on cash securing letters of credit; and (n) Liens incurred in connection with the extension, renewal or refinancing of indebtedness secured by Liens of the type described in clauses (a) through (n) above; provided, that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced (as may have been reduced by any payment thereon) does not increase.

 

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“Subordination Agreement” means that certain Subordination and Option Agreement of even date herewith entered into by and among Hercules, Secured Party and Debtor.

 

“UCC” means the Uniform Commercial Code as in effect in the state whose laws would govern the security interest in, including without limitation the perfection thereof, and foreclosure of the applicable Collateral.

 

Unless otherwise defined herein, all terms defined in the UCC have the respective meanings given to those terms in the UCC.

 

2.                                      Grant of Security Interest. As security for the Obligations, Debtor hereby pledges to Secured Party and grants to Secured Party a security interest in all right, title, interest, claims and demands of Debtor in and to the property described in Schedule A hereto, and all replacements, proceeds, products, and accessions thereof (collectively, the “Collateral”). Notwithstanding anything herein to the contrary, the foregoing grant of security interest shall not be effective until the Effective Date at which time such grant of security interest will immediately and automatically become effective without the need for any further action by Debtor or Secured Party.

 

3.                                      Authorization to File Financing Statements. Debtor hereby irrevocably authorizes Secured Party at any time on or after the Effective Date to file with the Secretary of State of the State of Delaware (as well as any other state (if any) in which Debtor incorporates while the Obligations remain outstanding) any financing statements or documents having a similar effect and amendments thereto that provide any other information required by the Uniform Commercial Code (or similar law of any non-United States jurisdiction, if applicable) of such state or jurisdiction for the sufficiency or filing office acceptance of any financing statement or amendment, including whether Debtor is an organization, the type of organization and any organization identification number issued to Debtor. Debtor agrees to furnish any such information to Secured Party promptly upon Secured Party’s request.

 

4.                                      General Representations and Warranties. Debtor represents and warrants to Secured Party that (a) Debtor is the owner of the Collateral and that no other person has any right, title, claim or interest (by way of Lien or otherwise) in, against or to the Collateral, other than Permitted Liens, (b) so long as the Effective Date has occurred, upon the filing of UCC-1 financing statements with the Delaware Secretary of State, Secured Party shall have a perfected first-position security interest in the Collateral to the extent that a security interest in the Collateral can be perfected by such filing, except for Permitted Liens, (c) Debtor has received at least a reasonably equivalent value in exchange for entering into this Agreement, (d) Debtor is not insolvent, as defined in any applicable state or federal statute, nor will Debtor be rendered insolvent by the execution and delivery of this Agreement to Secured Party; and (e) as such, this Agreement is a valid and binding obligation of Debtor, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditor rights and by general principles of equity.

 

5.                                      Additional Covenants. Commencing on the date hereof, Debtor hereby agrees not to grant a security interest in any of its assets without Secured Party’s prior written consent. Commencing upon and following the occurrence of the Effective Date, Debtor hereby agrees:

 

5.1.                            to perform all acts that may be necessary to maintain, preserve, protect and perfect in the Collateral, the Lien granted to Secured Party therein, and the perfection and priority of such Lien solely to the extent (i) Debtor determines to do so in the exercise of its business judgment or (ii) with respect to perfection, such perfection is required hereunder;

 

5.2.                            to procure, execute (including endorse, as applicable), and deliver from time to time any endorsements, assignments, and financing statements reasonably deemed necessary or appropriate by Secured Party to perfect, maintain and protect Secured Party’s Lien hereunder and the priority thereof;

 

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5.3.                            to provide at least fifteen (15) days prior written notice to Secured Party of any of the following events: (a) any changes or alterations of Debtor’s name, (b) any changes with respect to Debtor’s address or principal place of business, and (c) the formation of any subsidiaries of Debtor;

 

5.4.                            upon the occurrence of an Event of Default (as defined in the Note) under the Note and, solely during the existence thereof, at Secured Party’s request, to endorse (up to the outstanding amount under such promissory notes at the time of Secured Party’s request), assign and deliver any promissory notes and all other instruments, documents, or writings included in the Collateral to Secured Party, accompanied by such instruments of transfer or assignment duly executed in blank as Secured Party may from time to time specify;

 

5.5.                            not to sell or otherwise dispose, or offer to sell or otherwise dispose, of the Collateral or any interest therein (other than inventory in the ordinary course of business);

 

5.6.                            not to, directly or indirectly, allow, grant or suffer to exist any Lien upon any of the Collateral, other than Permitted Liens;

 

5.7.                            not to incur any indebtedness (other than Permitted Indebtedness) without Secured Party’s prior written consent;

 

5.8.                            not to grant any license or sublicense under any of its Intellectual Property, or enter into any other agreement with respect to any of its Intellectual Property, except in the ordinary course of Debtor’s business;

 

5.9.                            to the extent commercially reasonable and in Debtor’s good faith business judgment: (a) to file and prosecute diligently any material patent, trademark or service mark applications pending as of the date hereof or hereafter until all Obligations (other than contingent and indemnification obligations) shall have been paid in full, (b) to make application on unpatented but patentable material inventions and on trademarks and service marks, (c) to preserve and maintain all rights in all of its material Intellectual Property, and (d) to ensure that all of its material Intellectual Property is and remains enforceable. Any and all costs and expenses incurred in connection with each of Debtor’s obligations under this Section 5.10 shall be borne by Debtor. Debtor shall not knowingly and unreasonably abandon any right to file a material patent, trademark or service mark application, or abandon any pending patent application, or any other of its material Intellectual Property, without the prior written consent of Secured Party except for Intellectual Property that Debtor determines, in the exercise of its good faith business judgment, is not or is no longer material to its business; and

 

5.10.                     upon the reasonable request of Secured Party at any time or from time to time, and at the sole cost and expense (including, without limitation, reasonable attorneys’ fees) of Debtor, Debtor shall take all actions and execute and deliver any and all instruments, agreements, assignments, certificates and/or documents reasonably required by Secured Party to collaterally assign any and all of Debtor’s material patent, copyright and trademark registrations and applications now owned or hereafter acquired to and in favor of Secured Party.

 

6.                                      Authorized Action by Secured Party. Commencing upon and following the occurrence of the Effective date, Debtor hereby irrevocably appoints Secured Party as its attorney-in-fact (which appointment is coupled with an interest) and agrees that Secured Party may perform solely during the existence of an Event of Default (but Secured Party shall not be obligated to and shall incur no liability to Debtor or any third party for failure so to do) any act which Debtor is obligated by this Agreement to perform, and, solely during the existence of an Event of Default, to exercise such rights and powers as Debtor might exercise with respect to the Collateral, including the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) enter into any 

 

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extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Collateral; (c) make any compromise or settlement, and take any action Secured Party deems advisable, with respect to the Collateral, including without limitation bringing a suit in Secured Party’s own name to enforce any Intellectual Property; (d) endorse Debtor’s name on all applications, documents, papers and instruments necessary or desirable for Secured Party in the use of any Intellectual Property; (e) grant or issue any exclusive or non-exclusive license under any Intellectual Property to any person or entity; (f) assign, pledge, sell, convey or otherwise transfer title in or dispose of any Intellectual Property to any person or entity; (g) cause the Commissioner of Patents and Trademarks, United States Patent and Trademark Office (or as appropriate, such equivalent agency in foreign countries) to issue any and all patents and related rights and applications to Secured Party as the assignee of Debtor’s entire interest therein; (h) file a copy of this Agreement with any governmental agency, body or authority, including without limitation the United States Patent and Trademark Office and, if applicable, the United States Copyright Office or Library of Congress, at the sole cost and expense of Debtor; (i) insure, process and preserve the Collateral; (j) pay any indebtedness of Debtor relating to the Collateral; (k) execute and file UCC financing statements and other documents, certificates, instruments and agreements with respect to the Collateral or as otherwise required or permitted hereunder; and (l) take any and all appropriate action and execute any and all documents and instruments that may be necessary or useful to accomplish the purposes of this Agreement. The powers conferred on Secured Party under this Section 6 are solely to protect its interests in the Collateral and shall not impose any duty upon it to exercise any such powers. Secured Party shall be accountable only for the amounts that it actually receives as a result of the exercise of such powers, and neither Secured Party nor any of its stockholders, directors, officers, managers, employees or agents shall be responsible to Debtor for any act or failure to act, except with respect to Secured Party’s own gross negligence or willful misconduct. Nothing in this Section 6 shall be deemed an authorization for Debtor to take any action that it is otherwise expressly prohibited from undertaking by way of other provision of this Agreement.

 

7.                                      Default and Remedies.

 

7.1.                            Default. Following the occurrence of the Effective Date, Debtor shall be deemed in default under this Agreement upon the occurrence and continuation of an Event of Default.

 

7.2.                            Remedies. Upon the occurrence and continuation of any such Event of Default following the occurrence of the Effective Date, Secured Party shall have the rights of a secured creditor under the UCC, all rights granted by this Agreement and by law, including, without limiting the foregoing, (a) the right to require Debtor to assemble the Collateral and make it available to Secured Party at a place to be designated by Secured Party, and (b) the right to take possession of the Collateral, and for that purpose Secured Party may enter upon premises on which the Collateral may be situated and remove the Collateral therefrom. Debtor hereby agrees that fifteen (15) days’ notice of a public sale of any Collateral or notice of the date after which a private sale of any Collateral may take place is reasonable. In addition, Debtor waives any and all rights that it may have to a judicial hearing in advance of the enforcement of any of Secured Party’s rights and remedies hereunder, including, without limitation, Secured Party’s right following an Event of Default to take immediate possession of Collateral and to exercise Secured Party’s rights and remedies with respect thereto. Secured Party may also have a receiver appointed to take charge of all or any portion of the Collateral and to exercise all rights of Secured Party under this Agreement. Secured Party may exercise any of its rights under this Section 7.2 without demand or notice of any kind. The remedies in this Agreement, including without limitation this Section 7.2, are in addition to, not in limitation of, any other right, power, privilege, or remedy, either in law, in equity, or otherwise, to which Secured Party may be entitled. No failure or delay on the part of Secured party in exercising any right, power, or remedy will operate as a waiver thereof, nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. All of Secured Party’s rights and remedies, whether evidenced by this Agreement or by any other agreement, instrument or document shall be cumulative and may be exercised singularly or concurrently.

 

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7.3.                            Standards for Exercising Rights and Remedies. To the extent that applicable law imposes duties on Secured Party to exercise remedies in a commercially reasonable manner, Debtor acknowledges and agrees that it is not commercially unreasonable for Secured Party (a) to fail to incur expenses reasonably deemed significant by Secured Party to prepare Collateral for disposition, (b) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against account debtors or other persons obligated on Collateral or to fail to remove liens or encumbrances on or any adverse claims against Collateral, (d) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other persons, whether or not in the same business as Debtor, for expressions of interest in acquiring all or any portion of the Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (h) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, (k) to purchase insurance or credit enhancements to insure Secured Party against risks of loss, collection or disposition of Collateral or to provide to Secured Party a guaranteed return from the collection or disposition of Collateral, or (l) to the extent deemed appropriate by Secured Party, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Secured Party in the collection or disposition of any of the Collateral. Debtor acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by Secured Party would fulfill Secured Party’s duties under the UCC in Secured Party’s exercise of remedies against the Collateral and that other actions or omissions by Secured Party shall not be deemed to fail to fulfill such duties solely on account of not being indicated in this Section. Without limitation upon the foregoing, nothing contained in this Section shall be construed to grant any rights to Debtor or to impose any duties on Secured Party that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.

 

7.4.                            Marshalling. Secured Party shall not be required to marshal any present or future Collateral for, or other assurances of payment of, the Obligations or to resort to such Collateral or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such Collateral and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising. To the extent that it lawfully may, Debtor hereby agrees that it will not invoke any law relating to the marshalling of Collateral which might cause delay in or impede the enforcement of Secured Party’s rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, Debtor hereby irrevocably waives the benefits of all such laws.

 

7.5.                            Application of Collateral Proceeds. Following the occurrence of the Effective Date, the proceeds and/or avails of the Collateral, or any part thereof, and the proceeds and the avails of any remedy hereunder (as well as any other amounts of any kind held by Secured Party at the time of, or received by Secured Party after, the occurrence of an Event of Default) shall be paid to and applied as follows:

 

(a)                                 First, to the payment of reasonable and documented out-of-pocket costs and expenses, including all amounts expended to preserve the value of the Collateral, of foreclosure or suit, if any, and of such sale and the exercise of any other rights or remedies, and of all proper fees, expenses, liability and advances, including reasonable legal expenses and attorneys’ fees, incurred or made hereunder by Secured Party;

 

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(b)                                 Second, to the payment to Secured Party of the amount then owing or unpaid on the Note (to be applied first to accrued interest and fees and second to outstanding principal) and all amounts owed under any of the other Transaction Documents or other documents included within the Obligations; and

 

(c)                                  Third, to the payment of the surplus, if any, to Debtor, its successors and assigns, or to whosoever may be lawfully entitled to receive the same.

 

In the absence of final payment and satisfaction in full of all of the Obligations (other than contingent and indemnification obligations), Debtor shall remain liable for any deficiency.

 

8.                                      Miscellaneous.

 

8.1.                            Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by this reference.

 

8.2.                            Non-waiver. No failure or delay on Secured Party’s part in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right.

 

8.3.                            Amendments and Waivers. This Agreement may not be amended or modified, nor may any of its terms be waived, except by written instruments signed by Debtor and Secured Party. Each waiver or consent under any provision hereof shall be effective only in the specific instances for the purpose for which given.

 

8.4.                            Assignment. This Agreement shall be binding upon and inure to the benefit of Secured Party and Debtor and their respective successors and assigns; provided, however, that Debtor may not sell, assign or delegate rights and obligations hereunder without the prior written consent of Secured Party.

 

8.5.                            Cumulative Rights, etc. The rights, powers and remedies of Secured Party under this Agreement shall be in addition to all rights, powers and remedies given to Secured Party by virtue of any applicable law, rule or regulation of any governmental authority, or the Note, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing Secured Party’s rights hereunder. Debtor waives any right to require Secured Party to proceed against any person or entity or to exhaust any Collateral or to pursue any remedy in Secured Party’s power.

 

8.6.                            Partial Invalidity. If any part of this Agreement is construed to be in violation of any law, such part shall be modified to achieve the objective of the parties to the fullest extent permitted and the balance of this Agreement shall remain in full force and effect.

 

8.7.                            Expenses. Debtor shall pay on demand all reasonable and documented out-of-pocket fees and expenses incurred following the occurrence of the Effective Date, including reasonable and documented attorneys’ fees and expenses, incurred by Secured Party in connection with the custody, preservation or sale of, or other realization on, any of the Collateral or the enforcement or attempt to enforce any of the Obligations which are not performed as and when required by this Agreement.

 

8.8.                            Entire Agreement. This Agreement, the Note, and the other Transaction Documents, taken together, constitute and contain the entire agreement of Debtor and Secured Party with respect to this particular matter and supersede any and all prior agreements, negotiations, correspondence, 

 

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understandings and communications between the parties, whether written or oral, respecting the subject matter hereof.

 

8.9.                            Governing Law; Venue. Except as otherwise specifically set forth herein, the parties expressly agree that this Agreement shall be governed solely by the laws of the State of Utah, without giving effect to the principles thereof regarding the conflict of laws; provided, however, that enforcement of Secured Party’s rights and remedies against the Collateral as provided herein will be subject to the UCC. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

8.10.                     Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

8.11.                     Purchase Agreement; Arbitration of Disputes. By executing this Agreement, each party agrees to be bound by the terms, conditions and general provisions of the Purchase Agreement and the other Transaction Documents, including without limitation the Arbitration Provisions (as defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement.

 

8.12.                     Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which together shall constitute one instrument. Any electronic copy of a party’s executed counterpart will be deemed to be an executed original.

 

8.13.                     Further Assurances. Debtor shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as Secured Party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

8.14.                     Time of the Essence. Time is expressly made of the essence with respect to each and every provision of this Agreement.

 

[Remainder of page intentionally left blank; signature page follows]

 

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IN WITNESS WHEREOF, Secured Party and Debtor have caused this Agreement to be executed as of the day and year first above written.

 

	
 
    	
SECURED   PARTY:
    
	
 
    	
 
    
	
 
    	
CHICAGO   VENTURE PARTNERS, L.P.
    
	
 
    	
 
    
	
 
    	
By:   
    	
Chicago   Venture Management, L.L.C.,
    
	
 
    	
 
    	
its   General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
CVM, Inc.,   its Manager
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:   
    	
/s/   John M. Fife
    
	
 
    	
 
    	
 
    	
 
    	
John   M. Fife, President
    
	
 
    	
 
    	
 
    	
 
    

 

	
 
    	
DEBTOR:
    
	
 
    	
 
    
	
 
    	
JAGUAR ANIMAL HEALTH, INC.
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Lisa A. Conte
    
	
 
    	
Name:   
    	
Lisa   A. Conte
    
	
 
    	
Title:   
    	
President   and CEO
    
					

 

[Signature Page to Security Agreement]

 

 

SCHEDULE A

TO SECURITY AGREEMENT

 

All right, title, interest, claims and demands of Debtor in and to all of Debtor’s assets owned as of the date hereof and/or acquired by Debtor at any time while the Obligations are still outstanding, including without limitation, the following property:

 

1.                                      All equity interests in all wholly- or partially-owned subsidiaries of Debtor.

 

2.                                      All customer accounts, insurance contracts, and clients underlying such insurance contracts.

 

3.                                      All goods and equipment now owned or hereafter acquired, including, without limitation, all laboratory equipment, computer equipment, office equipment, machinery, fixtures, vehicles, and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located;

 

4.                                      All inventory now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Debtor’s custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above, and Debtor’s books relating to any of the foregoing;

 

5.                                      All accounts receivable, contract rights, general intangibles, healthcare insurance receivables, payment intangibles and commercial tort claims, now owned or hereafter acquired, including, without limitation, all patents, patent rights and patent applications (including without limitation, the inventions and improvements described and claimed therein, and (a) all reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof, (b) all income, royalties, damages, proceeds and payments now and hereafter due or payable under or with respect thereto, including, without limitation, damages and payments for past or future infringements thereof, (c) the right to sue for past, present and future infringements thereof, and (d) all rights corresponding thereto throughout the world), trademarks and service marks (and applications and registrations therefor), inventions, discoveries, copyrights and mask works (and applications and registrations therefor), trade names, trade styles, software and computer programs including source code, trade secrets, methods, published and unpublished works of authorship, processes, know how, drawings, specifications, descriptions, and all memoranda, notes, and records with respect to any research and development, goodwill, license agreements, information, any and all other proprietary rights, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer disks, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind and whether in tangible or intangible form or contained on magnetic media readable by machine together with all such magnetic media, and all rights corresponding to all of the foregoing throughout the world, now owned and existing or hereafter arising, created or acquired;

 

6.                                      All now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Debtor arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Debtor (subject, in each case, to the contractual rights of third parties to require funds received by Debtor to be expended in a particular manner), whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Debtor and Debtor’s books relating to any of the foregoing;

 

 

7.                                      All accounts, documents, cash, deposit accounts, letters of credit, letter of credit rights, supporting obligations, certificates of deposit, instruments, chattel paper, electronic chattel paper, tangible chattel paper and investment property, including, without limitation, all securities, whether certificated or uncertificated, security entitlements, securities accounts, commodity contracts and commodity accounts, and all financial assets held in any securities account or otherwise, wherever located, now owned or hereafter acquired and Debtor’s books relating to the foregoing;

 

8.                                      All other assets, goods and personal property of Debtor, wherever located, whether tangible or intangible, and whether now owned or hereafter acquired; and

 

9.                                      Any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds and products thereof, including, without limitation, insurance, condemnation, requisition or similar payments and the proceeds thereof.

 

Notwithstanding the foregoing, the Collateral does not include the following:

 

a.                                More than 65% of the presently existing and hereafter arising issued and outstanding shares of capital stock owned by Debtor of any foreign subsidiary, which shares entitle the holder thereof to vote for directors or any other matter;

 

b.                                Any lease, license, contract or agreement to which the Debtor is a party, and any of its rights or interest thereunder, if and for so long as the valid grant of a Lien therein to Secured Party is prohibited as a matter of law or under the terms of such lease, license, contract or other agreement (including where the violation of any such prohibition would result in the termination of the applicable lease, license, contract or other agreement), and such prohibition has not been or is not waived or the consent of the other party to such lease, license, contract or other agreement, has not been or is not otherwise obtained; provided, that the exclusions set forth in this subsection (b) shall in no way be construed (A) to apply if any described prohibition is unenforceable under applicable laws (including, without limitation, Sections 9-406, 9-407 or 9-408 of the UCC), (B) to apply after the cessation of any such prohibition, and upon the cessation of such prohibition, such property shall automatically become part of the Collateral, (C) so as to limit, impair or otherwise affect Secured Party’s Lien upon Debtor’s rights or interests in or to monies due or to become due under any described lease, license, contract or other agreement, or (D) to limit, impair or otherwise affect Secured Party’s Lien upon any of Borrower’s rights or interest in and to any proceeds from the sale, license, lease or other disposition of any such lease, license, contract or other agreement

 

c.                                 Any property, lease, license, general intangible, contract or agreement subject to Permitted Liens securing purchase money indebtedness to the extent that a grant or perfection of a Lien in favor of Secured Party on any such property is prohibited by or results in a breach or termination of, or constitutes a default under, the documentation governing such Liens or the obligations secured by such Liens, to the extent enforceable under applicable law (including, without limitation, Section 9406 of the UCC); or

 

d.              Any deposit account exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Debtor’s employees.

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