Document:

Exhibit 10.1

 

[_______]1

 

	To:	
        Omeros Corporation

        201 Elliott Avenue West

        Seattle, WA 98119

	 	 
	From:	[_______]
	 	 
	Re:	[Base]2[Additional]3 Capped Call Transaction
	 	 
	
        Ref. 

        No:
	[_______]4
	 	 
	Date:	[_______], 2020

 

Dear Ladies and Gentlemen:

 

The purpose of this communication (this
“Confirmation”) is to set forth the terms and conditions of the above-referenced transaction entered into on
the Trade Date specified below (the “Transaction”) between [___] (“Dealer”) and Omeros Corporation
(“Counterparty”). This communication constitutes a “Confirmation” as referred to in the ISDA Master
Agreement specified below.

 

1. This Confirmation is subject to, and
incorporates, the definitions and provisions of the 2006 ISDA Definitions (the “2006 Definitions”) and the definitions
and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”, and together with
the 2006 Definitions, the “Definitions”), in each case, as published by the International Swaps and Derivatives
Association, Inc. (“ISDA”). In the event of any inconsistency between the 2006 Definitions and the Equity Definitions,
the Equity Definitions will govern and in the event of any inconsistency between terms defined in the Equity Definitions and this
Confirmation, this Confirmation shall govern.

 

This Confirmation evidences a complete and
binding agreement between Dealer and Counterparty as to the terms of the Transaction to which this Confirmation relates. This Confirmation
shall be subject to an agreement (the “Agreement”) in the form of the 2002 ISDA Master Agreement as if Dealer
and Counterparty had executed an agreement in such form on the Trade Date (but without any Schedule except for (i) the election
of the laws of the State of New York as the governing law (without reference to choice of law doctrine, [(ii) the provision of
an executed guarantee of [__________] (“Guarantor”) dated as of the Trade Date in substantially the form attached
hereto as Schedule 1 and (iii)]5
[and (ii)] the election that the “Cross Default” provisions of Section 5(a)(vi) of the Agreement shall apply to Dealer,
(a) with a “Threshold Amount” of 3% of the shareholders’ equity of Dealer’s ultimate parent on the
Trade Date, (b) “Specified Indebtedness” having the meaning set forth in Section 14 of the Agreement, except that
it shall not include any obligation in respect of deposits received in the ordinary course of Dealer’s banking business,
(c) the phrase “, or becoming capable at such time of being declared,” shall be deleted from clause (1) of such
Section 5(a)(vi) of the Agreement, and (d) the following sentence shall be added to the end of Section 5(a)(vi) of the Agreement:
“Notwithstanding the foregoing, a default under subsection (2) hereof shall not constitute an Event of Default if (i) the
default was caused solely by error or omission of an administrative or operational nature; (ii) funds were available to enable
the relevant party to make payment when due; and (iii) the payment is made within two Local Business Days of such party’s
receipt of written notice of its failure to pay.”).

 

All provisions contained in, or incorporated
by reference to, the Agreement will govern this Confirmation except as expressly modified herein. In the event of any inconsistency
between this Confirmation and either the Definitions or the Agreement, this Confirmation shall govern.

 

 

 

1
Include Dealer name, address and logo

2
Include for base call option.

3 Include for additional call
option.

4
If applicable

5 Requested if Dealer is not the highest rated
entity in group, typically from Parent.

 

    1

     

    

 

The Transaction hereunder shall be the sole
Transaction under the Agreement. If there exists any ISDA Master Agreement between Dealer and Counterparty or any confirmation
or other agreement between Dealer and Counterparty pursuant to which an ISDA Master Agreement is deemed to exist between Dealer
and Counterparty, then notwithstanding anything to the contrary in such ISDA Master Agreement, such confirmation or agreement or
any other agreement to which Dealer and Counterparty are parties, the Transaction shall not be considered a Transaction under,
or otherwise governed by, such existing or deemed ISDA Master Agreement.

 

2. The Transaction constitutes a Share Option
Transaction for purposes of the Equity Definitions. The terms of the particular Transaction to which this Confirmation relates
are as follows:

 

General Terms:

 

	Trade Date:	[•], 2020
	 	 
	Effective Date:	[•], 2020, or such other date as agreed by the parties in writing.
	 	 
	Components:	The Transaction will be divided into individual Components, each with the terms set forth in this Confirmation, and, in particular, with the Number of Options and Expiration Date set forth in Annex A to this Confirmation.  The exercise, valuation and settlement of the Transaction will be effected separately for each Component as if each Component were a separate Transaction under the Agreement.
	 	 
	Option Style:	“European”, as described under “Procedures for Exercise” below.
	 	 
	Option Type:	Call
	 	 
	Seller:	Dealer
	 	 
	Buyer:	Counterparty
	 	 
	Shares:	The Common Stock of Counterparty, par value USD $0.01 per share (Ticker Symbol: “OMER”).
	 	 
	Number of Options:	For each Component, as provided in Annex A to this Confirmation.6
	 	 
	Option Entitlement:	One Share per Option
	 	 
	Strike Price:	USD [_____]
	 	 
	Cap Price:	USD [_____]; provided that in no event shall the Cap Price be reduced to an amount less than the Strike Price in connection with any commercially reasonable adjustment by the Calculation Agent under this Confirmation.

 

 

 

6
[For the base capped call, the total should be equal to, in aggregate among
all Components, (i) the number of Convertible Notes in principal amount of $1,000 initially issued on the closing date for
the Convertible Notes (excluding any Convertible Notes sold pursuant to the over-allotment option) multiplied by (ii) the
initial conversion rate multiplied by (iii) the dealer’s percentage allocation of the overall capped call. For the additional
capped call, the total should be equal to (i) the number of additional Convertible Notes in principal amount of $1,000 multiplied
by (ii) the initial conversion rate multiplied by (iii) the dealer’s percentage allocation of the overall
capped call.]

 

    2

     

    

 

	Number of Shares:	As of any date, a number of Shares equal to the product of (i) the Number of Options and (ii) the Option Entitlement.
	 	 
	Premium:	USD [_____]; Dealer and Counterparty hereby agree that notwithstanding anything to the contrary herein or in the Agreement, following the payment of the Premium, in the event that (a) an Early Termination Date (whether as a result of an Event of Default or a Termination Event) (other than an Event of Default arising under Section 5(a)(ii) or 5(a)(iv) of the Agreement that is within the Counterparty’s control) occurs or is designated with respect to any Transaction and, as a result, Counterparty owes to Dealer the amount calculated under Section 6(d) and Section 6(e) or otherwise under the Agreement (calculated as if the Transactions terminated on such Early Termination Date were the sole Transactions under the Agreement) or (b) Counterparty owes to Dealer, pursuant to Sections 12.2, 12.3, 12.6, 12.7, 12.8 or 12.9 of the Equity Definitions or otherwise under the Equity Definitions, an amount calculated under Section 12.8 of the Equity Definitions, such amount shall be deemed to be zero. 
	 	 
	Premium Payment Date:	The Effective Date
	 	 
	Exchange:	The Nasdaq Global Market
	 	 
	Related Exchange:	All Exchanges; provided that Section 1.26 of the Equity Definitions shall be amended to add the words “United States” before the word “exchange” in the tenth line of such Section.
	 	 
	Procedures for Exercise:	 
	 	 
	Expiration Time:	The Valuation Time
	 	 
	Expiration Date:	For any Component, as provided in Annex A to this Confirmation (or, if such date is not a Scheduled Valid Day, the next following Scheduled Valid Day that is not already an Expiration Date for another Component); provided that if that date is a Disrupted Day, the Expiration Date for such Component shall be the first succeeding Scheduled Valid Day that is not a Disrupted Day and is not or is not deemed to be an Expiration Date in respect of any other Component of the Transaction hereunder; and provided further that in no event shall the Expiration Date be postponed to a date later than the Final Termination Date and, notwithstanding anything to the contrary in this Confirmation or the Equity Definitions, the Relevant Price for such Expiration Date that occurs on the Final Termination Date and is a Disrupted Day shall be the prevailing market value per Share determined by the Calculation Agent in a good faith and commercially reasonable manner. Notwithstanding the foregoing and anything to the contrary in the Equity Definitions, if a Market Disruption Event occurs on any Expiration Date, the Calculation Agent may determine in a good faith and commercially reasonable manner that such Expiration Date is a Disrupted Day only in part, in which case the Calculation Agent shall make commercially reasonable adjustments to the Number of Options for the relevant Component for which such day shall be the Expiration Date, shall designate the Scheduled Valid Day determined in the manner described in the immediately preceding sentence as the Expiration Date for the remaining Options for such Component and may determine the Relevant Price in a commercially reasonable manner based on transactions in the Shares on such Disrupted Day taking into account the nature and duration of such Market Disruption Event on such day. Any Scheduled Valid Day on which, as of the date hereof, the Exchange is scheduled to close prior to its normal close of trading shall be deemed not to be a Scheduled Valid Day; if a closure of the Exchange prior to its normal close of trading on any Scheduled Valid Day is scheduled following the date hereof, then such Scheduled Valid Day shall be deemed to be a Disrupted Day in full. Section 6.6 of the Equity Definitions shall not apply to any Valuation Date occurring on an Expiration Date.

 

    3

     

    

 

	Final Termination Date:	July 8, 2026
	 	 
	Automatic Exercise:	Applicable, which means that the Number of Options for the relevant Component will be deemed to be automatically exercised at the Expiration Time on the Expiration Date for such Component if at such time such Component is In-the-Money, unless Buyer notifies Seller (in writing) prior to the Expiration Time on such Expiration Date that it does not wish Automatic Exercise to occur with respect to such Component, in which case Automatic Exercise will not apply with respect to such Component.  “In-the-Money” means, in respect of any Component, that the Relevant Price on the Expiration Date for such Component is greater than the Strike Price for such Component.
	 	 
	Valuation Time:	At the close of trading of the regular trading session on the Exchange; provided that if the principal trading session is extended, the Calculation Agent shall determine the Valuation Time in a good faith and commercially reasonable manner.
	 	 
	Valuation Date:	For any Component, the Expiration Date therefor.
	 	 
	Market Disruption Event:	Section 6.3(a) of the Equity Definitions is hereby amended by deleting the words “during the one hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be,” in clause (ii) thereof.

     

    Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.  

	 	 
	Settlement Terms:	 
	 	 
	Settlement Method Election:	Applicable; provided that (a) Section 7.1 of the Equity Definitions is hereby amended by replacing the term
“Physical Settlement” with the term “Net Share Settlement”, (b) Counterparty must make a single irrevocable
election for all Components and (c) if Counterparty is electing Cash Settlement, such Settlement Method Election would be effective
only if Counterparty represents and warrants to Dealer in writing on the date of such Settlement Method Election that (i) Counterparty
is not in possession of any material non-public information regarding Counterparty or the Shares, and (ii) such election is being
made in good faith and not as part of a plan or scheme to evade compliance with the federal securities laws.  

 

    4

     

    

 

	 	Without limiting the generality of the foregoing, Counterparty acknowledges its responsibilities under applicable securities laws, and in particular Sections 9 and 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder in respect of such election.  
	 	 
	Electing Party:	Counterparty
	 	 
	Settlement Method Election Date:	The second Scheduled Valid Day prior to the scheduled Expiration Date for the Component with the earliest scheduled Expiration Date.
	 	 
	Default Settlement Method:	Net Share Settlement
	 	 
	Net Share Settlement:	
        With respect to any Component, if Net Share Settlement is applicable
        to the Options exercised or deemed exercised hereunder, Dealer will deliver to Counterparty on the Settlement Date, a number of
        Shares (the “Net Share Settlement Amount”) equal to (i) the Daily Option Value on the Expiration Date of such
        Component divided by (ii) the Relevant Price on such Expiration Date.

         

        Dealer will deliver cash in lieu of any fractional
Shares to be delivered with respect to any Net Share Settlement Amount valued at the Relevant Price for the Expiration Date of
such Component.

	 	 
	Cash Settlement:	With respect to any Component, if Cash Settlement is applicable to the Options exercised or deemed exercised hereunder, in lieu of Section 8.1 of the Equity Definitions, Dealer will pay to Counterparty, on the Settlement Date, an amount of cash (the “Cash Settlement Amount”) equal to the Daily Option Value on the Expiration Date of such Component.
	 	 
	Daily Option Value:	For any Component, an amount equal to (i) the Number of Options in such Component, multiplied by (ii) the Option Entitlement, multiplied by (iii) (A) the lesser of the Relevant Price on the Expiration Date of such Component and the Cap Price, minus (B) the Strike Price on such Expiration Date; provided that if the calculation contained in clause (iii) above results in a negative number, the Daily Option Value for such Component shall be deemed to be zero. In no event will the Daily Option Value be less than zero.
	 	 
	Valid Day:	A day on which (i) there is no Market Disruption Event and (ii) trading in the Shares generally occurs on the Exchange. If the Shares are not listed, quoted or traded on any U.S. securities exchange or any other market, “Valid Day” means a Business Day.
	 	 
	Scheduled Valid Day:	A day that is scheduled to be a Valid Day on the Exchange. If the Shares are not listed, quoted or traded on any U.S. securities exchange or any other market, “Scheduled Valid Day” means a Business Day.
	 	 
	Business Day:	Any day other than a Saturday, a Sunday or other day on which banking institutions are authorized or required by law, regulation or executive order to close or be closed in the State of New York.

 

    5

     

    

 

	Relevant Price:	On any Valid Day, the per Share volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg page “OMER <equity> AQR” (or its equivalent successor if such page is not available) (the “VWAP”) in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary trading session on such Valid Day (or if such volume-weighted average price is unavailable at such time, the market value of one Share on such Valid Day, as determined by the Calculation Agent in a good faith and commercially reasonable manner using, if practicable, a volume-weighted average method substantially similar to the method for determining the VWAP). The Relevant Price will be determined without regard to after-hours trading or any other trading outside of the regular trading session trading hours.
	 	 
	Settlement Date:	For all Components of the Transaction, the date one Settlement Cycle immediately following the Expiration Date for the Component with the latest scheduled Expiration Date.
	 	 
	Settlement Currency:	USD
	 	 
	Other Applicable Provisions:	The provisions of Sections 9.1(c), 9.8, 9.9, 9.11 and 9.12 of the Equity Definitions will be applicable, except that all references in such provisions to “Physically-settled” shall be read as references to “Net Share Settlement.”
	 	 
	Representation and Agreement:	Notwithstanding anything to the contrary in the Equity Definitions (including, but not limited to, Section 9.11 thereof), the parties acknowledge that (i) any Shares delivered to Counterparty shall be, upon delivery, subject to restrictions, obligations and limitations arising from Counterparty’s status as issuer of the Shares under applicable securities laws, (ii) Dealer may deliver any Shares required to be delivered hereunder in certificated form in lieu of delivery through the Clearance System and (iii) any Shares delivered to Counterparty may be “restricted securities” (as defined in Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”)). 
	 	 
	Adjustments:	 
	 	 
	Method of Adjustment:	Calculation Agent Adjustment; provided that the parties agree that (x) open market Share repurchases at prevailing market price and (y) Share repurchases through a dealer pursuant to accelerated share repurchases, forward contracts or similar transactions (including, without limitation, any discount to average VWAP prices) that are entered into at prevailing market prices and in accordance with customary market terms for transactions of such type to repurchase the Shares shall not be considered Potential Adjustment Events; provided, further, that, the entry into any such open market Share repurchases, accelerated share repurchase transaction, forward contract or similar transaction described in clauses (x) or (y) shall constitute a Potential Adjustment Event to the extent that, after giving effect to such transactions, the aggregate number of Shares repurchased during the term of the Transaction pursuant to all such transactions would exceed 10% of the number of Shares outstanding as of the Trade Date, as determined by the Calculation Agent and as adjusted by the Calculation Agent in good faith and in a commercially reasonable manner to account for any subdivision or combination with respect to the Shares.

 

    6

     

    

 

	Extraordinary Events:	 
	 	 
	New Shares:	In the definition of New Shares in Section 12.1(i) of the Equity Definitions, (a) the text in clause (i) thereof shall be deleted in its entirety and replaced with “publicly quoted, traded or listed on any of The New York Stock Exchange, The NASDAQ Global Market or The NASDAQ Global Select Market (or their respective successors),” and (b) the following phrase shall be inserted immediately prior to the period: “and (iii) of a corporation organized under the laws of the United States, any State thereof or the District of Columbia that (x) also becomes the Counterparty under the Transaction or (y) agrees to be subject to Sections 8(d) and 8(e) of the Confirmation governing the Transaction, in either case, following such Merger Event or Tender Offer”.
	 	 
	Merger Events:	Applicable
	 	 
	Consequences of Merger Events:	 
	 	 
	(a)   Share-for-Share:	Modified Calculation Agent Adjustment
	 	 
	(b)   Share-for-Other:	Cancellation and Payment (Calculation Agent Determination)
	 	 
	(c)   Share-for-Combined:	Cancellation and Payment (Calculation Agent Determination); provided that the Calculation Agent may elect Modified Calculation Agent Adjustment or Component Adjustment for all or part of the Transaction
	 	 
	Tender Offer:	Applicable; provided that the definition of “Tender Offer” in Section 12.1(d) of the Equity Definitions will be amended by replacing the phrase “greater than 10% and less than 100% of the outstanding voting shares of the Counterparty” in the third and fourth line thereof with “greater than 15% and less than 100% of the outstanding Shares of the Counterparty”. In addition, Section 12.1(e) of the Equity Definitions shall be amended by replacing “voting shares” in the first line thereof with “Shares”, and Section 12.1(l) of the Equity Definitions shall be amended by replacing “voting shares” in the fifth line thereof with “Shares”. 
	 	 
	Consequences of Tender Offers:	 
	 	 
	(a)   Share-for-Share:	Modified Calculation Agent Adjustment 
	 	 
	(b)   Share-for-Other:  	Modified Calculation Agent Adjustment
	 	 
	(c)   Share-for-Combined:	Modified Calculation Agent Adjustment

 

    7

     

    

 

 

	Consequences of Announcement Events:	Modified Calculation Agent Adjustment as set forth in Section 12.3(d) of the Equity Definitions; provided that, in respect of an Announcement Event, (x) references to “Tender Offer” shall be replaced by references to “Announcement Event” and references to “Tender Offer Date” shall be replaced by references to “date of such Announcement Event” in the definition of Modified Calculation Agent Adjustment set forth in Section 12.3(d), (y) the phrase “exercise, settlement, payment or any other terms of the Transaction (including, without limitation, the spread)” in the third and fourth lines of the definition of Modified Calculation Agent Adjustment set forth in Section 12.3(d) shall be replaced with the phrase “Cap Price (provided that in no event shall the Cap Price be less than the Strike Price)” and the words “whether within a commercially reasonable (as determined in good faith by the Calculation Agent) period of time prior to or after the Announcement Event” shall be inserted prior to the word “which” in the seventh line, and (z) for the avoidance of doubt, the Calculation Agent shall, in good faith and a commercially reasonable manner, determine whether the relevant Announcement Event has had a material economic effect on the Transaction and, if so, shall adjust the Cap Price accordingly to take into account such economic effect on one or more occasions on or after the date of the Announcement Event up to, and including, the final Expiration Date, any Early Termination Date and/or any other date of cancellation, it being understood that (i) any adjustment in respect of an Announcement Event shall take into account any earlier adjustment relating to the same Announcement Event and shall not be duplicative with any other adjustment or cancellation valuation made pursuant to this Confirmation, the Equity Definitions or the Agreement and (ii) in making any adjustment the Calculation Agent shall solely take into account changes in stock price, volatility, expected dividends, stock loan rate, and liquidity relevant to the Shares or to such Transaction, or other commercially reasonable option pricing inputs.  An Announcement Event shall be an “Extraordinary Event” for purposes of the Equity Definitions, to which Article 12 of the Equity Definitions is applicable; provided further that upon the Calculation Agent making an adjustment, determined in a commercially reasonable manner, to the Cap Price upon any Announcement Event, then the Calculation Agent shall make an adjustment to the Cap Price upon any announcement regarding the same event that gave rise to the original Announcement Event regarding the abandonment of any such event to the extent necessary to reflect the economic effect of such subsequent announcement on the Transaction (provided that in no event shall the Cap Price be less than the Strike Price).

 

    8

    

    

 

	Announcement Event:	(i) The public announcement (whether by Counterparty, a subsidiary, affiliate, agent or representative of Counterparty, or a Valid Third Party Entity (any such person or entity, a “Relevant Party”)) of any transaction or event that the Calculation Agent determines is reasonably likely to be completed and that, if completed, would constitute a Merger Event or Tender Offer (it being understood and agreed that in determining whether such transaction or event is reasonably likely to be completed, the Calculation Agent shall take into consideration whether the relevant announcement by such party has had a material effect on the Shares and/or options on the Shares), or the announcement by a Relevant Party of any intention to enter into a Merger Event or Tender Offer, (ii) the public announcement by a Relevant Party of any potential acquisition or disposition by Counterparty and/or its subsidiaries where the consideration exceeds 30% of the market capitalization of the Counterparty as of the date of such announcement (an “Acquisition Transaction”) (iii) the public announcement by a Relevant Party of an intention by Counterparty or such other Relevant Party to solicit or enter into, or to explore strategic alternatives or other similar undertaking that may include, a Merger Event, Tender Offer or Acquisition Transaction, or (iv) any subsequent public announcement by a Relevant Party of a change to a transaction or intention that is the subject of an announcement of the type described in clause (i), (ii) or (iii) of this sentence (including, without limitation, a new announcement relating to such a transaction or intention or the announcement of a withdrawal from, or the abandonment or discontinuation of, such a transaction or intention), as determined by the Calculation Agent in a commercially reasonable manner. For the avoidance of doubt, the occurrence of an Announcement Event with respect to any transaction or intention shall not preclude the occurrence of a later Announcement Event with respect to such transaction or intention. For purposes of this definition of “Announcement Event,” “Merger Event” shall mean such term as defined under Section 12.1(b) of the Equity Definitions (but, for the avoidance of doubt, the remainder of the definition of “Merger Event” in Section 12.1(b) of the Equity Definitions following the definition of “Reverse Merger” therein shall be disregarded). 
	 	 
	Valid Third Party Entity:	In respect of any transaction or event, any third party, or its subsidiary, affiliate, agent or representative, that has a bona fide intent to enter into or consummate such transaction or event, it being understood and agreed that in determining, in a commercially reasonable manner, whether such third party has such a bona fide intent, the Calculation Agent shall take into consideration whether the relevant announcement by such party has had a material economic effect on the Shares and/or options on the Shares.
	 	 
	Notice of Merger Consideration and Consequences:	Upon the occurrence of a Merger Event that causes the Shares to be converted into the right to receive more than a single type of consideration (determined based in part upon any form of stockholder election), Counterparty shall reasonably promptly (but in any event prior to the relevant Merger Date) notify the Calculation Agent of (i) the type and amount of consideration that a holder of Shares would have been entitled to in the case of reclassifications, consolidations, mergers, sales or transfers of assets or other transactions that cause Shares to be converted into the right to receive more than a single type of consideration and (ii) the weighted average of the types and amounts of consideration to be received by the holders of Shares that affirmatively make such an election.
	 	 
	Nationalization, Insolvency or Delisting:	Cancellation and Payment (Calculation Agent Determination); provided that in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it will also constitute a Delisting if the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.

 

    9

    

    

 

	Additional Disruption Events:	 
	 	 
	(a) Change in Law:	Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the parenthetical beginning after the word “regulation” in the second line thereof with the words “(including, for the avoidance of doubt and without limitation, (x) any tax law or (y) adoption or promulgation of new regulations authorized or mandated by existing statute)”, (ii) replacing the phrase “the interpretation” in the third line thereof with the phrase “, or public announcement of, the formal or informal interpretation”, (iii) by adding the phrase “and/or type of commercially reasonable Hedge Position that would be entered into by a commercially reasonable dealer” after the word “Shares” in clause (X) thereof, (iv) by immediately following the word “Transaction” in clause (X) thereof, adding the phrase “in the manner contemplated by the Hedging Party on the Trade Date assuming the dealer maintains a commercially reasonable hedge position.”, (v) adding the words “or holding, acquiring or disposing of Shares or any Hedge Positions relating to,” after the words “obligations under” in clause (Y) thereof and (vi) adding the words “provided that, in the case of clause (Y) hereof and any law, regulation or interpretation, the consequence of such law, regulation or interpretation is applied in a non-discriminatory manner by Dealer to its similarly situated counterparties and/or similar transactions.” after the semi-colon in the last line thereof.
	 	 
	(b) Failure to Deliver:	Applicable
	 	 
	(c) Insolvency Filing: 	Applicable
	 	 
	(d) Hedging Disruption: 	Applicable; provided that “Hedging Disruption” shall be amended in its entirety to mean that a Hedging Party is unable, after using commercially reasonable efforts, to (A) acquire, establish, re-establish, substitute, maintain, unwind or dispose of any transaction(s) or asset(s) it deems necessary to hedge the equity price risk of entering into and performing its obligations with respect to the Transaction, or (B) realize, recover or remit the proceeds of any such transaction(s) or asset(s), provided that any such inability that is incurred solely due to the deterioration of the creditworthiness of the Hedging Party shall not be deemed a Hedging Disruption; provided further that Section 12.9(b)(iii) of the Equity Definitions is hereby amended by inserting in the third line thereof, after the words “to terminate the Transaction”, the words “or a portion of the Transaction affected by such Hedging Disruption”.
	 	 
	(e) Increased Cost of Hedging: 	Not Applicable
	 	 
	Hedging Party:	Dealer

 

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	Determining Party:	
        For all applicable Extraordinary Events, Dealer; provided
        that, when making any determination or calculation as “Determining Party,” Dealer shall be bound by the same obligations
        relating to required acts of the Calculation Agent as set forth in Section 1.40 of the Equity Definitions and this Confirmation
        as if Determining Party were the Calculation Agent.

         

        Following any determination or calculation by Determining Party
        hereunder, upon a written request by Counterparty, Determining Party will promptly (but in any event within five Scheduled Trading
        Days) provide to Counterparty by email to the email address provided by Counterparty in such written request a report (in a commonly
        used file format for the storage and manipulation of financial data) displaying in reasonable detail the basis for such determination
        or calculation (including any assumptions used in making such determination or calculation), it being understood that in no event
        will Determining Party be obligated to share with Counterparty any proprietary or confidential data or information or any proprietary
        or confidential models used by it in making such determination or calculation or any information that is subject to an obligation
        not to disclose such information.

         

        All calculations and determinations made by Determining Party
        shall be made in good faith and in a commercially reasonable manner.

        

	 	 
	Non-Reliance:	Applicable
	 	 
	Agreements and Acknowledgments Regarding Hedging Activities:	Applicable
	 	 
	Additional Acknowledgments:	Applicable
	 	 

	3. Calculation Agent:	Dealer; provided that, following the occurrence and during the continuance of an
Event of Default pursuant to Section 5(a)(vii) of the Agreement with respect to which Dealer is the sole Defaulting Party, Counterparty
shall have the right to designate a nationally recognized third-party dealer in over-the-counter corporate equity derivatives
to act, during the period commencing on the date such Event of Default occurred and ending on the Early Termination Date with
respect to such Event of Default (or, if earlier, the date on which such Event of Default is no longer continuing) as the Calculation
Agent, and the parties shall work in good faith to execute any appropriate documentation required by such replacement Calculation
Agent.
	 	 
	 	Following any adjustment, determination
or calculation by the Calculation Agent hereunder, upon a written request by Counterparty, the Calculation Agent will promptly
(but in any event within five Scheduled Trading Days) provide to Counterparty by email to the email address provided by Counterparty
in such written request a report (in a commonly used file format for the storage and manipulation of financial data) displaying
in reasonable detail the basis for such adjustment, determination or calculation (including any assumptions used in making such
adjustment, determination or calculation), it being understood that in no event will the Calculation Agent be obligated to share
with Counterparty any proprietary or confidential data or information or any proprietary or confidential models used by it in making
such adjustment, determination or calculation or any information that is subject to an obligation not to disclose such information.
	 	 
	 	All calculations and determinations
by the Calculation Agent shall be made in good faith and in a commercially reasonable manner.

 

4. Account Details:

 

Dealer Payment Instructions:

 

		[Bank:]	[_________]

		[SWIFT:]	[_________]

		[Bank Routing:]	[_________]

		[Acct Name:]	[_________]

		[Acct No.:]	[_________]

 

Counterparty Payment Instructions: To be advised.

 

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5. Offices:

 

The Office of Dealer
for the Transaction is: [New York, New York]

 

The Office of Counterparty for the Transaction is: Inapplicable,
Counterparty is not a Multibranch Party.

 

6. Notices: For purposes of
this Confirmation:

 

(a) Address for notices or communications
to Counterparty:

 

	 	To:	Omeros Corporation
	 	 	201 Elliott Avenue West
	 	 	Seattle, WA 98119
	 	 	 
	 	Attention:	Michael Jacobsen, Chief Accounting Officer
	 	Telephone:	 
	 	Email:	 

 

(b) Address for notices or communications
to Dealer:

 

		To:	[____________]
	 	 	 
		Attention:	[____________]
		Telephone:	[____________]
		Email:	[____________]
	 	 	 
	 	With a copy to:	 
	 	 	 
		To:	[____________]
	 	 	 
		Attention:	[____________]
		Telephone:	[____________]
		Email:	[____________]

 

For the avoidance of doubt, any notice or other communication
delivered by electronic messaging system, e-mail or facsimile transmission shall be deemed to be “in writing.”

 

7. Representations, Warranties and
Agreements: 

 

(a) In addition to the representations and
warranties in the Agreement and those contained elsewhere herein, Counterparty represents and warrants to and for the benefit of,
and agrees with, Dealer as follows:

 

(i) On the Trade Date (A) none
of Counterparty and its officers and directors is aware of any material non-public information regarding Counterparty or the Shares,
and (B) all reports and other documents filed by Counterparty with the Securities and Exchange Commission pursuant to the Exchange
Act when considered as a whole (with the more recent such reports and documents deemed to supersede inconsistent statements contained
in any earlier such reports and documents), do not contain any untrue statement of a material fact or any omission of a material
fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they
were made, not misleading.

 

(ii) On the Trade Date, (A)
the Shares or securities that are convertible into, or exchangeable or exercisable for Shares, are not, and shall not be,
subject to a “restricted period,” as such term is defined in Regulation M under the Exchange Act
(“Regulation M”), and (B) Counterparty is not engaged in any “distribution,” as such term is
defined in Regulation M, other than (1) a distribution meeting the requirements of the exceptions set forth in Rules
101(b)(10) and 102(b)(7) or Rule 102(c)(1)(i) of Regulation M or (2) the distribution of the Convertible Notes and the
concurrent distribution of the Shares in the “Concurrent Common Stock Offering” described in the Prospectus (the
“Prospectus”) relating to the offering of the Convertible Notes (as defined below).

 

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(iii) On the Trade Date, neither
Counterparty nor any “affiliate” or “affiliated purchaser” (each as defined in Rule 10b-18 of the Exchange
Act (“Rule 10b-18”)) shall directly or indirectly (including, without limitation, by means of any cash-settled
or other derivative instrument) purchase, offer to purchase, place any bid or limit order that would effect a purchase of, or commence
any tender offer relating to, any Shares (or an equivalent interest, including a unit of beneficial interest in a trust or limited
partnership or a depository share) or any security convertible into or exchangeable or exercisable for Shares, other than the repurchase
by Counterparty of its 6.25% Convertible Senior Notes as described in the Prospectus.

 

(iv) Without limiting the generality
of Section 13.1 of the Equity Definitions, Counterparty acknowledges that neither Dealer nor any of its affiliates is making any
representations or warranties or taking any position or expressing any view with respect to the treatment of the Transaction under
any accounting standards including ASC Topic 260, Earnings Per Share, ASC Topic 815, Derivatives and Hedging, or
ASC Topic 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging – Contracts
in Entity’s Own Equity (or any successor issue statements).

 

(v) Without limiting the generality
of Section 3(a)(iii) of the Agreement, the Transaction will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.

 

(vi) Prior to the Trade Date,
Counterparty shall deliver to Dealer a resolution of Counterparty’s board of directors authorizing the Transaction and approving
the Transaction and any related hedging activity for purposes of Chapter 23B.19 of the Washington Business Corporation Act.

 

(vii) Counterparty is not entering
into this Confirmation to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable
for Shares) or to manipulate the price of the Shares (or any security convertible into or exchangeable for Shares) or otherwise
in violation of the Exchange Act.

 

(viii) Counterparty is not, and
after giving effect to the transactions contemplated hereby will not be, required to register as, an “investment company”
as such term is defined in the Investment Company Act of 1940, as amended.

 

(ix) On each of the Trade Date
and the Premium Payment Date, (A) the value of the total assets of Counterparty is greater than the sum of the total liabilities
(including contingent liabilities) and the capital of Counterparty, (B) the capital of Counterparty is adequate to conduct the
business of Counterparty, and Counterparty’s entry into the Transaction will not impair its capital, (C) Counterparty has
the ability to pay its debts and obligations as such debts mature and does not intend to, or does not believe that it will, incur
debt beyond its ability to pay as such debts mature, (D) Counterparty is not “insolvent” (as such term is defined under
Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”)) and
(E) Counterparty would be able to purchase the aggregate Number of Shares for the Transaction in compliance with the laws of the
jurisdiction of Counterparty’s incorporation.

 

(x) To Counterparty’s knowledge,
no U.S. state or local law, rule, regulation or regulatory order applicable to the Shares would give rise to any reporting, consent,
registration or other requirement (including without limitation a requirement to obtain prior approval from any person or entity)
as a result of Dealer or its affiliates owning or holding (however defined) Shares; provided that no such representation
shall be made by Counterparty with respect to any rules and regulations applicable to Dealer (including FINRA) arising from Dealer’s
status as a regulated entity under applicable law.

 

(xi) Counterparty (A) is capable
of evaluating investment risks independently, both in general and with regard to all transactions and investment strategies involving
a security or securities; (B) will exercise independent judgment in evaluating the recommendations of any broker-dealer or its
associated persons, unless it has otherwise notified the broker-dealer in writing, (C) has total assets of at least $50 million.

 

    13

    

    

 

(b) Each of Dealer and Counterparty agrees
and represents that it is an “eligible contract participant” as defined in Section 1a(18) of the U.S. Commodity Exchange
Act, as amended.

 

(c) Each of Dealer and Counterparty acknowledges
that the offer and sale of the Transaction to it is intended to be exempt from registration under the Securities Act, by virtue
of Section 4(a)(2) thereof. Accordingly, Counterparty represents and warrants to Dealer that (i) it has the financial ability to
bear the economic risk of its investment in the Transaction and is able to bear a total loss of its investment and its investments
in and liabilities in respect of the Transaction, which it understands are not readily marketable, are not disproportionate to
its net worth, and it is able to bear any loss in connection with the Transaction, including the loss of its entire investment
in the Transaction, (ii) it is an “accredited investor” as that term is defined in Regulation D as promulgated under
the Securities Act, (iii) it is entering into the Transaction for its own account and without a view to the distribution or resale
thereof, (iv) the assignment, transfer or other disposition of the Transaction has not been and will not be registered under the
Securities Act and is restricted under this Confirmation, the Securities Act and state securities laws, and (v) its financial condition
is such that it has no need for liquidity with respect to its investment in the Transaction and no need to dispose of any portion
thereof to satisfy any existing or contemplated undertaking or indebtedness and is capable of assessing the merits of and understanding
(on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of
the Transaction.

 

(d) Each of Dealer and Counterparty agrees
and acknowledges that Dealer is a “financial institution,” “swap participant” and “financial participant”
within the meaning of Sections 101(22), 101(53C) and 101(22A) of the Bankruptcy Code. The parties hereto further agree and acknowledge
(A) that this Confirmation is (i) a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy
Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,”
“payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code
and a “settlement payment” within the meaning of Section 546 of the Bankruptcy Code, and (ii) a “swap agreement,”
as such term is defined in Section 101(53B) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or
in connection herewith is a “termination value,” “payment amount” or “other transfer obligation”
within the meaning of Section 362 of the Bankruptcy Code and a “transfer” within the meaning of Section 546 of the
Bankruptcy Code, and (B) that Dealer is entitled to the protections afforded by, among other sections, Sections 362(b)(6), 362(b)(17),
362(b)(27), 362(o), 546(e), 546(g), 546(j), 548(d)(2), 555, 560 and 561 of the Bankruptcy Code.

 

(e) As a condition to the effectiveness
of the Transaction, Counterparty shall deliver to Dealer an opinion of counsel, dated as of the Effective Date and reasonably acceptable
to Dealer in form and substance, with respect to the matters set forth in Section 3(a)(i), (ii), (iii) and (iv) of the Agreement
and Section 7(a)(viii) hereof; provided that any such opinion of counsel may contain customary exceptions and qualifications,
including, without limitation, exceptions and qualifications relating to indemnification provisions.

 

(f) Counterparty understands that notwithstanding
any other relationship between Counterparty and Dealer and its affiliates, in connection with the Transaction and any other over-the-counter
derivative transactions between Counterparty and Dealer or its affiliates, Dealer or its affiliates is acting as principal and
is not a fiduciary or advisor in respect of any such transaction, including any entry, exercise, amendment, unwind or termination
thereof.

 

(g) The assets of Counterparty do not constitute
“plan assets” under the Employee Retirement Income Security Act of 1974, as amended, the Department of Labor Regulations
promulgated thereunder or similar law.

 

(h) Counterparty
understands that no obligations of Dealer to it hereunder will be entitled to the benefit of deposit insurance and that such obligations
will not be guaranteed by any affiliate of Dealer [(other than as expressly provided herein)] or any governmental agency. 

 

(i) [Each party acknowledges and agrees
to be bound by the Conduct Rules of the Financial Industry Regulatory Authority, Inc. applicable to transactions in options, and
further agrees not to violate the position and exercise limits set forth therein.

 

    14

    

    

 

 

(j) Counterparty represents and
warrants that it has received, read and understands the OTC Options Risk Disclosure Statement and a copy of the most recent
disclosure pamphlet prepared by The Options Clearing Corporation entitled “Characteristics and Risks of Standardized
Options”.]
7 

 

8. Other Provisions:

 

(a) Right to Extend. Dealer
may divide any Component into additional Components and designate the Expiration Date and the Number of Options for each such Component
if Dealer determines, in good faith and a commercially reasonable manner, that such further division would be necessary or advisable
to preserve a commercially reasonable dealer’s hedging or hedge unwind activity with respect to the Transaction in light
of existing liquidity conditions or to enable such a dealer to purchase or sell Shares or enter into swap or other derivatives
transactions with respect to Shares in connection with its commercially reasonable hedging, hedge unwind or settlement activity
with respect to the Transaction in a manner that would, if such dealer were Counterparty or an affiliated purchaser of Counterparty,
be compliant and consistent with applicable legal, regulatory or self-regulatory requirements generally applicable to transactions
of the type of the Transaction, or with related policies and procedures adopted voluntarily by Dealer in good faith so long as
such policies and procedures are generally applicable in similar situations and applied in a non-discriminatory manner; provided
that in no event shall any Expiration Date for any Component be postponed to a date later than the Final Termination Date.

 

(b) Additional Termination
Events. Promptly (but in any event within ten Scheduled Trading Days) following any repurchase, redemption or
conversion (the notice of which repurchase, redemption or conversion occurs prior to the 55th Scheduled Trading
Day prior to February 15, 2026) of any of the Counterparty’s [__]% Convertible Senior Notes due 2026 (the
“Convertible Notes”) issued pursuant to the Counterparty’s indenture (the
“Indenture”) [to be]
8 dated [__], 2020 between the Counterparty and Wells Fargo Bank, National Association, as trustee, Counterparty
may notify Dealer in writing of (i) such repurchase, redemption or conversion, (ii) the number of Convertible Notes so
repurchased, redeemed or converted and (iii) the number of Shares underlying each USD 1,000 principal amount of Convertible
Notes (any such notice, a “Repurchase Notification” and any such event, a “Repurchase
Event”)[; provided that any “Repurchase Notification” delivered to Dealer pursuant to the Base
Capped Call Transaction Confirmation letter agreement dated [•], 2020 between Dealer and Counterparty (the
“Base Call Option Confirmation”) shall be deemed to be a Repurchase Notification pursuant to this
Confirmation and the terms of such Repurchase Notification shall apply, mutatis mutandis, to this Confirmation]
9 . Notwithstanding anything to the contrary in this Confirmation, the receipt by Dealer from Counterparty of
(x) any Repurchase Notification, within the applicable time period set forth in the preceding sentence, and (y) a written
representation and warranty by Counterparty that, as of the date of such Repurchase Notification, Counterparty is not in
possession of any material non-public information regarding Counterparty or the Shares, shall constitute an Additional
Termination Event as provided in this paragraph. Upon receipt of any such Repurchase Notification and the related written
representation and warranty, Dealer shall promptly designate an Exchange Business Day following receipt of such Repurchase
Notification as an Early Termination Date with respect to the portion of this Transaction corresponding to a number of
Options (the “Repurchase Options”) equal to the lesser of (A) [(x)] [__]10%
of the aggregate number of Shares underlying the number of Convertible Notes specified in such Repurchase Notification, divided
by the Option Entitlement[, minus (y) the number of “Repurchase Options” (as defined in the Base Call
Option Confirmation), if any, that relate to such Convertible Notes (and for the purposes of determining whether any Options
under this Confirmation or under, and as defined in, the Base Call Option Confirmation will be among the Repurchase Options
hereunder or under, and as defined in, the Base Call Option Confirmation, the number of Convertible Notes specified in such
Repurchase Notification shall be allocated first to the Base Call Option Confirmation until all Options thereunder are
exercised or terminated)]11 and
(B) the aggregate Number of Options as of the date Dealer designates such Early Termination Date and, as of such date, the
aggregate Number of Options shall be reduced by the number of Repurchase Options on a pro rata basis across all Components,
as determined by the Calculation Agent in good faith and in a commercially reasonable manner. Any payment hereunder with
respect to such termination shall be calculated pursuant to Section 6 of the Agreement as if (1) an Early Termination Date
had been designated in respect of a Transaction having terms identical to this Transaction and an aggregate Number of Options
equal to the number of Repurchase Options, (2) Counterparty were the sole Affected Party with respect to such Additional
Termination Event and (3) the terminated portion of the Transaction were the sole Affected Transaction.

 

 

 

7
Include as applicable for FINRA-registered dealers.

8
Include if the Indenture is not completed at the time of the Confirmation.

9
Include in Additional Call Option Confirmation only.

10
Include Dealer’s percentage allocation of the overall capped call transaction.

11 Include in Additional Call Option Confirmation
only.

 

    15

     

    

 

(c) Alternative Calculations and Payment
on Early Termination and on Certain Extraordinary Events. If (a) an Early Termination Date (whether as a result of an Event
of Default or a Termination Event) occurs or is designated with respect to the Transaction or (b) the Transaction is cancelled
or terminated upon the occurrence of an Extraordinary Event (except as a result of (i) a Nationalization, Insolvency or Merger
Event in which the consideration to be paid to all holders of Shares consists solely of cash, (ii) a Merger Event or Tender Offer
that is within Counterparty’s control, or (iii) an Event of Default in which Counterparty is the Defaulting Party or a Termination
Event in which Counterparty is the Affected Party, which Event of Default or Termination Event resulted from an event or events
within the Counterparty’s control), and if Dealer would owe any amount to Counterparty pursuant to Section 6(d)(ii) and 6(e)
of the Agreement or any Cancellation Amount pursuant to Article 12 of the Equity Definitions (any such amount, a “Payment
Obligation”), then Dealer shall satisfy the Payment Obligation by the Share Termination Alternative (as defined below)
unless (a) Counterparty gives irrevocable telephonic notice to Dealer, confirmed in writing within one Scheduled Trading Day, no
later than 12:00 p.m. (New York City time) on the Merger Date, Tender Offer Date, Announcement Date (in the case of a Nationalization,
Insolvency or Delisting), Early Termination Date or date of cancellation, as applicable, of its election that the Share Termination
Alternative shall not apply, (b) as of the date of such election, Counterparty represents that is not in possession of any material
non-public information regarding Counterparty or the Shares, and that such election is being made in good faith and not as part
of a plan or scheme to evade compliance with the federal securities laws, and (c) Dealer agrees, in its commercially reasonable
discretion, to such election, in which case the provisions of Section 12.7 or Section 12.9 of the Equity Definitions, or the provisions
of Section 6(d)(ii) and 6(e) of the Agreement, as the case may be, shall apply.

 

	Share Termination Alternative:	If applicable, Dealer shall deliver to Counterparty the Share Termination Delivery Property on, or within a commercially reasonable period of time after, the date when the relevant Payment Obligation would otherwise be due pursuant to Section 12.7 or 12.9 of the Equity Definitions or Section 6(d)(ii) and 6(e) of the Agreement, as applicable, in satisfaction of such Payment Obligation in the manner reasonably requested by Counterparty free of payment.
	Share Termination Delivery Property:	A number of Share Termination Delivery Units, as calculated by the Calculation Agent in good faith and in a commercially reasonable manner, equal to the Payment Obligation divided by the Share Termination Unit Price. The Calculation Agent shall, in good faith and in a commercially reasonable manner, adjust the Share Termination Delivery Property by replacing any fractional portion of a security therein with an amount of cash equal to the value of such fractional security based on the values used to calculate the Share Termination Unit Price.
	Share Termination Unit Price:	The value of property contained in one Share Termination Delivery Unit, as determined by the Calculation Agent in its discretion by commercially reasonable means and notified by the Calculation Agent to Dealer at the time of notification of the Payment Obligation. For the avoidance of doubt, the parties agree that in determining the Share Termination Delivery Unit Price the Calculation Agent may consider a variety of factors, including the market price of the Share Termination Delivery Units and/or the purchase price paid in connection with the commercially reasonable purchase of Share Termination Delivery Property. 

 

    16

     

    

 

	Share Termination Delivery Unit:	One Share or, if the Shares have changed into cash or any other property or the right to receive cash or any other property as the result of a Nationalization, Insolvency or Merger Event (any such cash or other property, the “Exchange Property”), a unit consisting of the type and amount of such Exchange Property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional amounts of any securities) in such Nationalization, Insolvency or Merger Event, as determined by the Calculation Agent.
	Failure to Deliver:	Applicable
	Other Applicable Provisions:	If Share Termination Alternative is applicable, the provisions of Sections 9.8, 9.9 and 9.11 (as modified above) of the Equity Definitions and the provisions set forth opposite the caption “Representation and Agreement” in Section 2 will be applicable, except that all references in such provisions to “Physically-settled” shall be read as references to “Share Termination Settled” and all references to “Shares” shall be read as references to “Share Termination Delivery Units”.  “Share Termination Settled” in relation to the Transaction means that the Share Termination Alternative is applicable to the Transaction.

 

(d) Disposition of Hedge
Shares. Counterparty hereby agrees that if, in the good faith reasonable judgment of Dealer, based on the advice of
legal counsel, the Shares acquired by Dealer for the purpose of effecting a commercially reasonable hedge of its obligations
pursuant to the Transaction (the “Hedge Shares”) cannot be sold in the U.S. public market by Dealer
without registration under the Securities Act, Counterparty shall, at its election: (i) in order to allow Dealer to sell the
Hedge Shares in a registered offering, use its commercially reasonable efforts to make available to Dealer an effective
registration statement under the Securities Act to cover the resale of such Hedge Shares and (A) enter into an agreement, in
form and substance commercially reasonably satisfactory to Dealer, substantially in the form of an underwriting agreement for
a registered offering for companies of a similar size in a similar industry, (B) provide accountant’s
“comfort” letters in customary form for registered offerings of equity securities for companies of a similar size
in a similar industry, (C) provide disclosure opinions of nationally recognized outside counsel to Counterparty in customary
form for registered offerings of equity securities for companies of a similar size in a similar industry, (D) provide other
customary opinions, certificates and closing documents customary in form for registered offerings of equity securities for
companies of a similar size in a similar industry and (E) afford Dealer a reasonable opportunity to conduct a “due
diligence” investigation with respect to Counterparty customary in scope for underwritten offerings of equity
securities for companies of a similar size in a similar industry; provided, however, that, if Counterparty elects
clause (i) above but Dealer, in its commercially reasonable discretion, is not satisfied with access to due diligence
materials, the results of its due diligence investigation, or the procedures and documentation for the registered offering
referred to above, then clause (ii) or clause (iii) of this Section 8(d) shall apply at the election of Counterparty; provided that
Dealer has given Counterparty reasonable notice of its determination and provided Counterparty with reasonable opportunity to
satisfy Dealer’s concerns; (ii) in order to allow Dealer to sell the Hedge Shares in a private placement, enter into a
private placement agreement substantially similar to private placement purchase agreements customary for private placements
of equity securities of companies of a similar size in a similar industry, in form and substance commercially reasonably
satisfactory to Dealer using reasonable best efforts to include customary representations, covenants, blue sky and other
governmental filings and/or registrations, indemnities to Dealer, due diligence rights (for Dealer or any designated buyer of
the Hedge Shares from Dealer), opinions and certificates and such other documentation as is customary for private placements
agreements of equity securities of companies of a similar size in a similar industry, as is reasonably acceptable to Dealer
(in which case, the Calculation Agent shall make any adjustments to the terms of the Transaction that are necessary, in its
good faith and commercially reasonable judgment, to compensate Dealer for any customary liquidity discount from the public
market price of the Shares incurred on the sale of Hedge Shares in a private placement); provided that no
“comfort letter” or accountants’ consent shall be required to be delivered in connection with any private
placements; or (iii) purchase the Hedge Shares from Dealer at the then-prevailing market price at one or more times on such
Exchange Business Days, and in the amounts, requested by Dealer.

 

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(e) Repurchase Notices. Counterparty
shall, at least one Scheduled Valid Day prior to any day on which Counterparty intends to effect any repurchase of Shares, give
Dealer written notice of such repurchase (a “Repurchase Notice”) on such day if, following such repurchase,
the Notice Percentage would reasonably be expected to be (i) greater than [__]12%
and (ii) greater by 0.5% than the Notice Percentage included in the immediately preceding Repurchase Notice (or, in the case of
the first such Repurchase Notice, greater than the Notice Percentage as of the date hereof); provided that, if such repurchase,
or the intention to effect the same, would constitute material non-public information with respect to Counterparty or the Shares,
Counterparty shall make public disclosure thereof at or prior to delivery of such Repurchase Notice. The “Notice Percentage”
as of any day is the fraction, expressed as a percentage, the numerator of which is the aggregate Number of Shares, plus
the aggregate number of Shares underlying any other call options sold by Dealer to Counterparty and the denominator of which is
the number of Shares outstanding on such day. In the event that Counterparty fails to provide Dealer with a Repurchase Notice on
the day and in the manner specified in this Section 8(e) then Counterparty agrees to indemnify and hold harmless Dealer, its affiliates
and their respective directors, officers, employees, agents and controlling persons (Dealer and each such person being an “Indemnified
Party”) from and against any and all commercially reasonable losses (including direct losses relating to Dealer’s
commercially reasonable hedging activities as a consequence of becoming, or of the risk of becoming, a Section 16 “insider”,
including without limitation, any forbearance from hedging activities or cessation of hedging activities and any losses in connection
therewith with respect to the Transaction), claims, damages and liabilities (or actions in respect thereof), joint or several,
to which such Indemnified Party may become subject under applicable securities laws, including without limitation, Section 16 of
the Exchange Act relating to or arising out of such failure. If for any reason the foregoing indemnification is unavailable to
any Indemnified Party or insufficient to hold harmless any Indemnified Party, then Counterparty shall contribute, to the maximum
extent permitted by law, to the amount paid or payable by the Indemnified Party as a result of such loss, claim, damage or liability.
In addition, Counterparty will reimburse any Indemnified Party for all commercially reasonable expenses (including commercially
reasonable outside counsel fees and expenses) as they are incurred (after notice to Counterparty) in connection with the investigation
of, preparation for or defense or settlement of any pending or threatened claim or any action, suit or proceeding arising therefrom,
whether or not such Indemnified Party is a party thereto and whether or not such claim, action, suit or proceeding is initiated
or brought by or on behalf of Counterparty, in each case relating to or arising out of such failure. Counterparty shall be relieved
from liability under this Section 8(e) to the extent that the Indemnified Party fails promptly to notify Counterparty of any action
commenced against it in respect of which indemnity may be sought hereunder (it being understood that any such notice delivered
within 30 calendar days of the commencement of any such action shall be deemed to have been delivered promptly for such purpose).
This indemnity shall survive the completion of the Transaction contemplated by this Confirmation and any assignment and delegation
of the Transaction made pursuant to this Confirmation or the Agreement shall inure to the benefit of any permitted assignee of
Dealer. Counterparty will not be liable under this indemnity provision to the extent any loss, claim, damage, liability or expense
is conclusively found in a final and non-appealable judgment by a court of competent jurisdiction to have resulted from Dealer’s
gross negligence or willful misconduct.

 

 

 

12 To be 0.5% higher than the percentage calculated
by dividing (1) the number of Shares underlying the capped call transaction and any prepaid forward with the Issuer of the Dealer
with the highest percentage allocation of the capped call by (2) the number of Shares outstanding.

 

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(f) Transfer and
Assignment. Either party may transfer or assign any of its rights or obligations under the Transaction with the prior
written consent of the non-transferring party, such consent not to be unreasonably withheld or delayed; provided that
Dealer may transfer or assign its rights and obligations hereunder, in whole or in part, to (A) without Counterparty’s
consent, to any affiliate or branch of Dealer (1) that has a long-term issuer rating that is equal to or better than
Dealer’s credit rating at the time of such transfer or assignment, or (2) whose obligations would be guaranteed by
Dealer or Dealer’s ultimate parent or (B) with Counterparty’s consent (such consent not to be unreasonably
withheld or delayed) any person (including any affiliate or branch of Dealer not satisfying clause (A)) or any person whose
obligations would be guaranteed by a person (a “Designated Transferee”), in either case under this clause
(B), with a rating for its long-term, unsecured and unsubordinated indebtedness at least equivalent to Dealer’s (or its
guarantor’s), provided, however, that, in the case of this clause (B), in no event shall the credit
rating of the Designated Transferee or of its guarantor (whichever is higher) be lower than A3 from Moody’s Investor
Service, Inc. or its successor or A- from Standard and Poor’s Rating Group, Inc. or its successor; provided
further that (i) Dealer will notify Counterparty in writing promptly following any proposed transfer or assignment to a
Designated Transferee, (ii) after any such transfer, Counterparty will not, as a result of any withholding or deduction made
by the transferee or assignee as a result of any tax, receive from the such transferee or assignee on any payment date or
delivery date (after accounting for amounts paid under Section 2(d)(i)(4) of the Agreement as well as such withholding or
deduction) an amount or a number of Shares, as applicable, lower than the amount or the number of Shares, as applicable, that
Dealer would have been required to pay or deliver to Counterparty in the absence of such transfer (except to the extent such
lower amount or number results from a change in law after the date of such transfer), and (iii) Dealer shall cause the
transferee or assignee to make the Payee Tax Representations and provide Counterparty with a complete and accurate U.S.
Internal Revenue Service Form W-9 or W-8 (as applicable) prior to becoming a party to the Transaction. At any time at which
(1) the Equity Percentage exceeds 8.0% or (2) Dealer, Dealer Group (as defined below) or any person whose ownership position
would be aggregated with that of Dealer or Dealer Group (Dealer, Dealer Group or any such person, a “Dealer
Person”) under any applicable “business combinations statute” (including Chapter 23B.19 of the
Washington Business Corporation Act) or other federal, state or local law, rule, regulation or regulatory order or
organizational documents or contracts of Counterparty applicable to ownership of Shares (“Applicable
Restrictions”), owns, beneficially owns, constructively owns, controls, holds the power to vote or otherwise meets
a relevant definition of ownership in excess of a number of Shares equal to (x) the number of Shares that would give rise to
reporting, registration, filing or notification obligations or other requirements (including obtaining prior approval by a
state or federal regulator) of a Dealer Person under Applicable Restrictions and with respect to which such requirements have
not been met or the relevant approval has not been received minus (y) 1% of the number of Shares outstanding on the
date of determination (either such condition described in clause (1) or (2), an “Excess Ownership
Position”), if Dealer, in its commercially reasonable discretion, is unable to effect a transfer or assignment to a
third party in accordance with the requirements set forth above after its commercially reasonable efforts on pricing and
terms and within a time period reasonably acceptable to Dealer such that an Excess Ownership Position no longer exists,
Dealer may designate any Scheduled Valid Day as an Early Termination Date with respect to a portion (the “Terminated
Portion”) of the Transaction, such that an Excess Ownership Position no longer exists following such partial
termination. In the event that Dealer so designates an Early Termination Date with respect to a portion of the Transaction, a
payment or delivery shall be made pursuant to Section 6 of the Agreement and Section 8(c) of this Confirmation as if (i) an
Early Termination Date had been designated in respect of a Transaction having terms identical to the Terminated Portion of
the Transaction, (ii) Counterparty were the sole Affected Party with respect to such partial termination, (iii) such portion
of the Transaction were the only Terminated Transaction and (iv) Dealer were the party entitled to designate an Early
Termination Date pursuant to Section 6(b) of the Agreement and to determine the amount payable pursuant to Section 6(e) of
the Agreement. The “Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the
numerator of which is the number of Shares that Dealer and any of its affiliates subject to aggregation with Dealer for
purposes of the “beneficial ownership” test under Section 13 of the Exchange Act and all persons who may form a
“group” (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) with Dealer (collectively,
“Dealer Group”) “beneficially own” (within the meaning of Section 13 of the Exchange Act)
without duplication on such day (or, to the extent that for any reason the equivalent calculation under Section 16 of the
Exchange Act and the rules and regulations thereunder results in a higher number, such higher number) and (B) the denominator
of which is the number of Shares outstanding on such day.

 

In the case of a transfer or assignment
by Counterparty of its rights and obligations hereunder and under the Agreement, in whole or in part (any such Options so transferred
or assigned, the “Transfer Options”), to any party, withholding of such consent by Dealer shall not be considered
unreasonable if such transfer or assignment does not meet the reasonable conditions that Dealer may impose including, but not limited,
to the following conditions:

 

(A) with respect to any Transfer
Options, Counterparty shall not be released from its notice and indemnification obligations pursuant to Section 8(e) or any obligations
under Section 2 (regarding Extraordinary Events) or 8(d) of this Confirmation;

 

(B) any Transfer Options shall
only be transferred or assigned to a third party that is a U.S. person (as defined in the Internal Revenue Code of 1986, as amended
(the “Code”));

 

    19

     

    

 

(C) such transfer or assignment
shall be effected on terms, including any commercially reasonable undertakings by such third party (including, but not limited
to, undertakings with respect to compliance with applicable securities laws in a manner that, in the reasonable judgment of Dealer,
will not expose Dealer to material risks under applicable securities laws) and execution of any documentation and delivery of customary
legal opinions with respect to securities laws and other matters by such third party and Counterparty as are commercially reasonably
requested and reasonably satisfactory to Dealer;

 

(D) Dealer will not, as a result
of such transfer and assignment, be required to pay the transferee or assignee on any payment date an amount or number of Shares
under Section 2(d)(i)(4) of the Agreement greater than an amount or number of Shares that Dealer would have been required to pay
to Counterparty in the absence of such transfer and assignment;

 

(E) Dealer will not, as a result
of such transfer or assignment, receive from the transferee or assignee any amount or number of Shares less than it would have
been entitled to receive (including under Section 2(d)(i)(4) of the Agreement) in the absence of such transfer or assignment;

 

(F) an Event of Default, Potential
Event of Default or Termination Event will not occur as a result of such transfer and assignment;

 

(G) without limiting the generality
of clause (B), Counterparty shall have caused the transferee or assignee to make such Payee Tax Representations and to provide
such tax documentation as may be reasonably requested by Dealer to permit Dealer to determine that results described in clauses
(D) and (E) will not occur upon or after such transfer and assignment; and

 

(H) Counterparty shall be responsible
for all commercially reasonable costs and expenses, including commercially reasonable counsel fees, incurred by Dealer in connection
with such transfer or assignment.

 

(g) Staggered Settlement.
If Dealer determines in good faith and in its commercially reasonable discretion that the number of Shares required to be delivered
to Counterparty hereunder on any Settlement Date would result in an Excess Ownership Position, then Dealer may, by notice to Counterparty
prior to such Settlement Date (a “Nominal Settlement Date”), elect to deliver any Shares due to be delivered
on two or more dates (each, a “Staggered Settlement Date”) or at two or more times on the Nominal Settlement
Date as follows:

 

(i) in such notice, Dealer will
specify to Counterparty the related Staggered Settlement Dates (each of which will be on or prior to such Nominal Settlement Date)
or delivery times and how it will allocate the Shares it is required to deliver hereunder on the Settlement Date among the Staggered
Settlement Dates or delivery times; and

 

(ii) the aggregate number of
Shares that Dealer will deliver to Counterparty hereunder on all such Staggered Settlement Dates and delivery times will equal
the number of Shares that Dealer would otherwise be required to deliver on such Nominal Settlement Date; provided that in
no event shall any Staggered Settlement Date be a date later than the Final Termination Date.

 

(h) Disclosure. Effective
from the date of commencement of discussions concerning the Transaction, Counterparty and each of its employees, representatives,
or other agents 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 Counterparty relating
to such tax treatment and tax structure.

 

(i) No Netting and Set-off. The
provisions of Section 2(c) of the Agreement shall not apply to the Transaction. Each party waives any and all rights it may have
to set-off delivery or payment obligations it owes to the other party under the Transaction against any delivery or payment obligations
owed to it by the other party, whether arising under the Agreement, under any other agreement between parties hereto, by operation
of law or otherwise.

 

(j) Equity Rights.
Dealer acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the Transaction
that are senior to the claims of common stockholders in the event of Counterparty’s bankruptcy. For the avoidance of
doubt, the parties agree that the preceding sentence shall not apply at any time other than during Counterparty’s
bankruptcy to any claim arising as a result of a breach by Counterparty of any of its obligations under this Confirmation or
the Agreement. For the avoidance of doubt, the parties acknowledge that the obligations of Counterparty under this
Confirmation are not secured by any collateral that would otherwise secure the obligations of Counterparty herein under or
pursuant to any other agreement.

 

    20

     

    

 

(k) Early Unwind. In the event
the sale of the [“Underwritten Securities”]13
[“Option Securities”]14
(as defined in the Underwriting Agreement dated as of August 11, 2020, between Counterparty and [_________], as representative
of the Underwriters party thereto (the “Underwriters”)) is not consummated with the Underwriters for any reason
by 5:00 p.m. (New York City time) on the Premium Payment Date, or such later date as agreed upon by the parties (the Premium Payment
Date or such later date, the “Early Unwind Date”), the Transaction shall automatically terminate (the “Early
Unwind”) on the Early Unwind Date and (i) the Transaction and all of the respective rights and obligations of Dealer
and Counterparty under the Transaction shall be cancelled and terminated and (ii) each party shall be released and discharged by
the other party from and agrees not to make any claim against the other party with respect to any obligations or liabilities of
the other party arising out of and to be performed in connection with the Transaction either prior to or after the Early Unwind
Date. Each of Dealer and Counterparty represents and acknowledges to the other that, upon an Early Unwind, all obligations with
respect to the Transaction shall be deemed fully and finally discharged.

 

(l) Wall Street Transparency and Accountability
Act. In connection with Section 739 of the Wall Street Transparency and Accountability Act of 2010 (“WSTAA”),
the parties hereby agree that neither the enactment of WSTAA or any regulation under the WSTAA, nor any requirement under WSTAA
or an amendment made by WSTAA, shall limit or otherwise impair either party’s otherwise applicable rights to terminate, renegotiate,
modify, amend or supplement this Confirmation or the Agreement, as applicable, arising from a termination event, force majeure,
illegality, increased costs, regulatory change or similar event under this Confirmation, the Equity Definitions incorporated herein,
or the Agreement (including, but not limited to, rights arising from Change in Law, Hedging Disruption, an Excess Ownership Position,
or Illegality (as defined in the Agreement)).

 

(m) Amendments to Equity Definitions
and the Agreement. The following amendments shall be made to the Equity Definitions:

 

(i) solely for purposes of applying
the Equity Definitions and for purposes of this Confirmation, any reference in the Equity Definitions to a Strike Price shall be
deemed to be a reference to either of the Strike Price or the Cap Price, or both, as appropriate;

 

(ii) for the purpose of any
adjustment under Section 11.2(c) of the Equity Definitions, the first sentence of Section 11.2(c) of the Equity Definitions,
prior to clause (A) thereof, is hereby amended to read as follows: “If “Calculation Agent Adjustment” is
specified as the Method of Adjustment in the related Confirmation of a Share Option Transaction, then following the
announcement or occurrence of any Potential Adjustment Event, the Calculation Agent will determine whether such Potential
Adjustment Event has, in the commercially reasonable judgment of the Calculation Agent, a material economic effect on the
theoretical value of the relevant Shares or options on the Shares (provided that such event is not based on (x) an
observable market, other than the market for Counterparty’s own stock or (y) an observable index, other than an index
calculated and measured solely by reference to Counterparty’s own operations) and, if so, will (i) make appropriate
adjustment(s), if any, determined in a commercially reasonable manner, to any one or more of:”, and the portion of such
sentence immediately preceding clause (ii) thereof is hereby amended by deleting the words “diluting or
concentrative” and the words “(provided that no adjustments will be made to account solely for changes in
volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)” and replacing such
latter phrase with the words “(provided that solely in the case of Section 11.2(e)(i), (ii)(A), and (iv), no
adjustments will be made to account for changes in volatility, expected dividends, stock loan rate or liquidity relative to
the relevant Shares as determined by the Calculation Agent in a commercially reasonable manner, but, for the avoidance of
doubt, solely in the case of Sections 11.2(e)(ii)(B) through (D), (iii), (v), (vi) and (vii), adjustments may be made to
account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant
Shares)”;

 

 

 

13
Insert for Base Call Option Confirmation.

14 Insert for Additional Call Option Confirmation.

 

    21

     

    

 

 

(iii) Section 11.2(a) of the
Equity Definitions is hereby amended by (1) deleting the words “in the determination of the Calculation Agent, a diluting
or concentrative effect on the theoretical value of the relevant Shares” and replacing these words with “in the commercially
reasonable judgment of the Calculation Agent, a material economic effect on the theoretical value of the Shares or options on such
Shares”; and (2) adding at the end thereof “; provided that such event is not based on (i) an observable
market, other than the market for Counterparty’s own stock or (ii) an observable index, other than an index calculated and
measured solely by reference to Counterparty’s own operations”;

 

(iv) Section 11.2(e)(vii) of
the Equity Definitions is hereby amended and restated as follows: “any other corporate event involving the Issuer that in
the commercially reasonable judgment of the Calculation Agent has a material economic effect on the theoretical value of the Shares
or options on the Shares; provided that such corporate event involving the Issuer is not based on (a) an observable market,
other than the market for Counterparty’s own stock or (b) an observable index, other than an index calculated and measured
solely by reference to Counterparty’s own operations.”; and

 

(v) Section 12.7(b) of the Equity
Definitions is hereby amended by deleting the words “(and in any event within five Exchange Business Days) by the parties
after” appearing after the words “agreed promptly” and replacing with the words “by the parties on or prior
to”.

 

(n) Governing Law. THE
AGREEMENT, THIS CONFIRMATION AND ALL MATTERS ARISING IN CONNECTION WITH THE AGREEMENT AND THIS CONFIRMATION SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO ITS CHOICE OF LAW DOCTRINE,
OTHER THAN TITLE 14 OF THE NEW YORK GENERAL OBLIGATIONS LAW). THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION
OF THE FEDERAL AND STATE COURTS LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY SUIT OR PROCEEDING ARISING
OUT OF OR RELATING TO THE AGREEMENT, THIS CONFIRMATION OR ANY TRANSACTIONS CONTEMPLATED HEREBY.

 

(o) Adjustments.  For
the avoidance of doubt, whenever the Calculation Agent or Determining Party is called upon to make an adjustment pursuant to the
terms of this Confirmation or the Equity Definitions to take into account the effect of an event, the Calculation Agent or Determining
Party shall make such adjustment by reference to the effect of such event on the Hedging Party, assuming that the Hedging Party
maintains a commercially reasonable hedge position.

 

(p) Delivery or Receipt of Cash.
For the avoidance of doubt, other than payment of the Premium by Counterparty, nothing in this Confirmation shall be interpreted
as requiring Counterparty to cash settle the Transaction, except in circumstances where cash settlement is within Counterparty’s
control (including, without limitation, where Counterparty elects to deliver or receive cash) or in those circumstances in which
holders of Shares would also receive cash.

 

(q) Waiver of Jury Trial.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THE AGREEMENT, THIS CONFIRMATION OR ANY TRANSACTIONS CONTEMPLATED HEREBY. 

 

(r) Amendment. This Confirmation
and the Agreement may not be modified, amended or supplemented, except in a written instrument signed by Counterparty and Dealer.

 

(s) Counterparts. This
Confirmation may be executed in several counterparts, each of which shall be deemed an original but all of which together
shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including any
electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic
Signatures and Records Act or other applicable law, e.g., DocuSign and AdobeSign (any such signature, an “Electronic
Signature”)) 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. The words “execution,” “signed,”
“signature” and words of like import in this Confirmation or in any other certificate, agreement or document
related to this Confirmation shall include any Electronic Signature, except to the extent electronic notices are expressly
prohibited under this Confirmation or the Agreement.

 

    22

     

    

 

(t) Tax Matters. For the purpose
of Sections 4(a)(i) and (ii) of the Agreement, Counterparty agrees to deliver to Dealer one duly executed and completed U.S. Internal
Revenue Service Form W-9 (or successor thereto) and Dealer agrees to deliver to Counterparty, as applicable, a U.S. Internal Revenue
Service Form [W-9][W-8ECI][ W-8BEN-E][W-8IMY] (or successor thereto). Such forms or documents shall be delivered (i) on or before
the date of execution of this Confirmation, (ii) promptly upon Counterparty or Dealer, as applicable, learning that any such tax
form previously provided by it has become obsolete or incorrect, and (iii) promptly upon reasonable request of the other party.
Additionally, Counterparty or Dealer, as applicable, shall, promptly upon request by the other party, provide such other tax forms
and documents reasonably requested by the other party that it can provide without material burden.

 

(u) Payee Tax Representations.

 

(i) For the purpose of Section
3(f) of the Agreement, Counterparty makes the representations below:

 

Counterparty is a corporation established
under the laws of the State of Washington and is a “United States person” (as that term is used in section 1.1441-4(a)(3)(ii)
of the United States Treasury Regulations) for U.S. federal income tax purposes and an exempt recipient under Treasury Regulation
Section 1.6049-4(c)(1)(ii).

 

(ii) For the purpose of Section
3(f) of the Agreement, Dealer makes the representations below:

 

[Dealer is a “United States
person” (as that term is defined in Section 7701(a)(30) and used in Section 1.1441-4(a)(3)(ii) of the Treasury Regulations)
for U.S. federal income tax purposes and an exempt recipient under Treasury Regulation Section 1.6049-4(c)(1)(ii).

 

OR

 

[Dealer] is a [corporation] established
under the laws of [ ] and is classified as a corporation for U.S. federal income tax purposes. [Dealer] is a “non-U.S. branch
of a foreign person” as that term is used in Section 1.1441-4(a)(3)(ii) of the Regulations, and it is a “foreign person”
as that term is used in Section 1.6041-4(a)(4) of the Regulations.]15

 

(v) Withholding Tax imposed on payments
to non-US counterparties under the United States Foreign Account Tax Compliance Act. “Indemnifiable Tax”, as
defined in Section 14 of the Agreement, shall not include any U.S. federal withholding tax imposed or collected pursuant to Sections
1471 through 1474 of the Code, any current or future regulations or official interpretations thereof, any agreement entered into
pursuant to Section 1471(b) of the Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental
agreement entered into in connection with the implementation of such Sections of the Code (a "FATCA Withholding Tax").
For the avoidance of doubt, a FATCA Withholding Tax is a Tax the deduction or withholding of which is required by applicable law
for the purposes of Section 2(d) of the Agreement.

 

(w) Incorporation of ISDA 2015
Section 871(m) Protocol Provisions. To the extent that either party to the Agreement with respect to this Transaction
is not an adhering party to the ISDA 2015 Section 871(m) Protocol published by the International Swaps and Derivatives
Association, Inc. on November 2, 2015 and available at www.isda.org, as may be amended, supplemented, replaced or superseded
from time to time (the “871(m) Protocol”), the parties agree that the provisions and amendments contained
in the Attachment to the 871(m) Protocol are incorporated into and apply to the Agreement with respect to this Transaction as
if set forth in full herein. The parties further agree that, solely for purposes of applying such provisions and amendments
to the Agreement with respect to this Transaction, references to “each Covered Master Agreement” in the 871(m)
Protocol will be deemed to be references to the Agreement with respect to this Transaction, and references to the
“Implementation Date” in the 871(m) Protocol will be deemed to be references to the Trade Date of this
Transaction.

 

 

15
Insert as applicable (or other appropriate dealer reps) depending on tax status of dealer.

 

    23

     

    

 

(x) Agreements and Acknowledgements
Regarding Hedging. Counterparty understands, acknowledges and agrees that: (A) at any time on or prior to the final Expiration
Date, Dealer and its affiliates may buy or sell Shares or other securities or buy or sell options or futures contracts or enter
into swaps or other derivative securities in order to adjust its hedge position with respect to the Transaction; (B) Dealer and
its affiliates also may be active in the market for Shares other than in connection with hedging activities in relation to the
Transaction; (C) Dealer shall make its own determination as to whether, when or in what manner any hedging or market activities
in securities of the Issuer shall be conducted and shall do so in a manner that it deems appropriate to hedge its price and market
risk with respect to the Relevant Prices; and (D) any market activities of Dealer and its affiliates with respect to Shares may
affect the market price and volatility of Shares, as well as the Relevant Prices, each in a manner that may be adverse to Counterparty.

 

(y) [U.S. Resolution Stay Protocol.
The parties agree that (i) to the extent that prior to the date hereof both parties have adhered to the 2018 ISDA U.S. Resolution
Stay Protocol (the “Protocol”), the terms of the Protocol are incorporated into and form a part of this Confirmation,
and for such purposes this Confirmation shall be deemed a Protocol Covered Agreement and each party shall be deemed to have the
same status as “Regulated Entity” and/or “Adhering Party” as applicable to it under the Protocol; (ii)
to the extent that prior to the date hereof the parties have executed a separate agreement the effect of which is to amend the
qualified financial contracts between them to conform with the requirements of the QFC Stay Rules (the “Bilateral Agreement”),
the terms of the Bilateral Agreement are incorporated into and form a part of this Confirmation and each party shall be deemed
to have the status of “Covered Entity” or “Counterparty Entity” (or other similar term) as applicable to
it under the Bilateral Agreement; or (iii) if clause (i) and clause (ii) do not apply, the terms of Section 1 and Section 2 and
the related defined terms (together, the “Bilateral Terms”) of the form of bilateral template entitled
“Full-Length Omnibus (for use between U.S. G-SIBs and Corporate Groups)” published by ISDA on November 2, 2018 (currently
available on the 2018 ISDA U.S. Resolution Stay Protocol page at www.isda.org and, a copy of which is available upon request),
the effect of which is to amend the qualified financial contracts between the parties thereto to conform with the requirements
of the QFC Stay Rules, are hereby incorporated into and form a part of this Confirmation, and for such purposes this Confirmation
shall be deemed a “Covered Agreement,” Dealer shall be deemed a “Covered Entity” and Counterparty shall
be deemed a “Counterparty Entity.” In the event that, after the date of this Confirmation, both parties hereto become
adhering parties to the Protocol, the terms of the Protocol will replace the terms of this paragraph. In the event of any inconsistencies
between this Confirmation and the terms of the Protocol, the Bilateral Agreement or the Bilateral Terms (each, the “QFC
Stay Terms”), as applicable, the QFC Stay Terms will govern. Terms used in this paragraph without definition shall have
the meanings assigned to them under the QFC Stay Rules. For purposes of this paragraph, references to “this Confirmation”
include any related credit enhancements entered into between the parties or provided by one to the other. In addition, the parties
agree that the terms of this paragraph shall be incorporated into any related covered affiliate credit enhancements, with all references
to Dealer replaced by references to the covered affiliate support provider. “QFC Stay Rules” means the regulations
codified at 12 C.F.R. 252.2, 252.81–8, 12 C.F.R. 382.1-7 and 12 C.F.R. 47.1-8, which, subject to limited exceptions, require
an express recognition of the stay-and-transfer powers of the FDIC under the Federal Deposit Insurance Act and the Orderly Liquidation
Authority under Title II of the Dodd Frank Wall Street Reform and Consumer Protection Act and the override of default rights related
directly or indirectly to the entry of an affiliate into certain insolvency proceedings and any restrictions on the transfer of
any covered affiliate credit enhancements.]16

 

 

16Insert preferred form of US QFC Stay Rule language for each Dealer.

 

    24

     

    

 

(z) Financial
Assistance. Counterparty represents and warrants that it and any of its subsidiaries has not applied, and
shall not, until after the first date on which no portion of the Transaction remains outstanding following any final exercise
and settlement, cancellation or early termination of the Transaction, apply, for a loan, loan guarantee, direct loan (as that
term is defined in the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”)) or other
investment, or to receive any financial assistance or relief under any program or facility (collectively “Financial
Assistance”) that (a) is established under applicable law (whether in existence as of the Trade Date or
subsequently enacted, adopted or amended), including without limitation the CARES Act and the Federal Reserve Act, as
amended, and (b) (i) requires under applicable law (or any regulation, guidance, interpretation or other pronouncement of a
governmental authority with jurisdiction for such program or facility) as a condition of such Financial Assistance, that the
Counterparty comply with any requirement not to, or otherwise agree, attest, certify or warrant that it has not, as of the
date specified in such condition, repurchased, or will not repurchase, any equity security of Counterparty, and that
Counterparty has not, as of the date specified in the condition, made a capital distribution or will make a capital
distribution, or (ii) where the terms of the Transaction would cause Counterparty to fail to satisfy any condition for
application for or receipt or retention of the Financial Assistance (collectively “Restricted Financial
Assistance”); provided, that Counterparty or any of its subsidiaries may apply for Restricted Financial Assistance
if Counterparty either (a) determines based on the advice of outside counsel of national standing that the terms of the
Transaction would not cause Counterparty or any of its subsidiaries to fail to satisfy any condition for application for or
receipt or retention of such Financial Assistance based on the terms of the program or facility as of the date of such advice
or (b) delivers to Dealer evidence or other guidance from a governmental authority with jurisdiction for such program or
facility that the Transaction is permitted under such program or facility (either by specific reference to the Transaction or
by general reference to transactions with the attributes of the Transaction in all relevant respects).

 

(aa) Designation. Notwithstanding
any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any
Shares or other securities, or make or receive any payments in cash, to or from Counterparty, Dealer may designate any of its affiliates
to purchase, sell, receive or deliver such Shares or other securities, or to make or receive such payment in cash, and otherwise
perform Dealer’s obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall
be discharged of its obligations to Counterparty solely to the extent of any such performance.

 

(bb) [Dealer
Boilerplate. Insert additional Dealer boilerplate, if applicable]

 

    25

     

    

 

Please confirm that the foregoing correctly
sets forth the terms of our agreement by sending to us a letter or telex substantially similar to this facsimile, which letter
or telex sets forth the material terms of the Transaction to which this Confirmation relates and indicates your agreement to those
terms.

 

 

	 	Yours faithfully,
	 
	 	[___________]
	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

	 	Agreed and Accepted By:
	 
	 	OMEROS CORPORATION
	 
	By	 	 
	 	Name:
	 	Title:

 

    26

     

    

 

Schedule 1

 

[Form of Guarantee]

 

    27

     

    

 

Annex A

 

For each Component of the Transaction, the Number of Options
and Expiration Date is set forth below.

 

	Component Number	Number of Options	Expiration Date
	1	 	December 2, 2025
	2	 	December 3, 2025
	3	 	December 4, 2025
	4	 	December 5, 2025
	5	 	December 8, 2025
	6	 	December 9, 2025
	7	 	December 10, 2025
	8	 	December 11, 2025
	9	 	December 12, 2025
	10	 	December 15, 2025
	11	 	December 16, 2025
	12	 	December 17, 2025
	13	 	December 18, 2025
	14	 	December 19, 2025
	15	 	December 22, 2025
	16	 	December 23, 2025
	17	 	December 24, 2025
	18	 	December 26, 2025
	19	 	December 29, 2025
	20	 	December 30, 2025
	21	 	December 31, 2025
	22	 	January 2, 2026
	23	 	January 5, 2026
	24	 	January 6, 2026
	25	 	January 7, 2026
	26	 	January 8, 2026
	27	 	January 9, 2026
	28	 	January 12, 2026
	29	 	January 13, 2026
	30	 	January 14, 2026
	31	 	January 15, 2026
	32	 	January 16, 2026
	33	 	January 20, 2026
	34	 	January 21, 2026
	35	 	January 22, 2026
	36	 	January 23, 2026
	37	 	January 26, 2026
	38	 	January 27, 2026
	39	 	January 28, 2026
	40	 	January 29, 2026
	41	 	January 30, 2026
	42	 	February 2, 2026
	43	 	February 3, 2026
	44	 	February 4, 2026
	45	 	February 5, 2026
	46	 	February 6, 2026
	47	 	February 9, 2026
	48	 	February 10, 2026
	49	 	February 11, 2026
	50	 	February 12, 2026

 

    28vcnx-ex41_475.htm

EXHIBIT 4.1

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

Original Issue Date: August 3, 2020

Original Conversion Price (subject to adjustment herein): $9.4125

 

$8,640,000

 

 

7% ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE

DUE AUGUST 3, 2021

 

THIS 7% ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued 7% Original Issue Discount Senior Secured Convertible Debentures of Vaccinex, Inc., a Delaware corporation (the “Company”), having its principal place of business at 1895 Mount Hope Avenue, Rochester, New York 14620, designated as its 7% Original Issue Discount Senior Secured Convertible Debenture due August 3, 2021 (this debenture, the “Debenture” and, collectively with the other debentures of such series, the “Debentures”).

 

FOR VALUE RECEIVED, the Company promises to pay to 3i, LP or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $8,640,000 on August 3, 2021 (the “Maturity Date”) or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions hereof.  This Debenture is subject to the following additional provisions:

 

Section 1.Definitions.  For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:

  

 

 

 

“Alternate Consideration” shall have the meaning set forth in Section 5(e).

 

“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, (g) the Company or any Significant Subsidiary thereof admits in writing that it is generally unable to pay its debts as they become due, (h) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

“Beneficial Ownership Limitation” shall have the meaning set forth in Section 4(d). 

 

“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee”  or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York are generally are open for use by customers on such day.

 

“Buy-In” shall have the meaning set forth in Section 4(c)(v).

 

“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) other than Albert D. Friedberg, FCMI Parent Co. and their respective Affiliates and Albert D. Friedberg’s heirs and any trust established by him of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in 

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excess of 60% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures and the Securities issued together with the Debentures), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 60% of the aggregate voting power of the Company or the successor entity of such transaction, or (c) the Company (and all of its Subsidiaries, taken as a whole) sells or transfers all or substantially all of its assets to another Person other than one or more of the Company’s direct or indirect wholly-owned Subsidiaries and the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, or (d) a majority of the seats (other than vacant seats) of the Board of Directors of the Company shall at any time cease to be occupied by persons (i) who were members of the Board of Directors on the Original Issue Date, (ii) who were nominated or elected to the Board of Directors, or whose nomination or election was approved, by individuals referred to in clause (i) constituting at the time of such election, nomination or approval at least a majority of the members of the Board of Directors or (iii) who were nominated or elected to the Board of Directors, or whose nomination or election was approved, by  individuals referred to in clauses (i) and (ii) above constituting at the time of such election, nomination or approval at least a majority of the Board of Directors. 

 

“Conversion” shall have the meaning ascribed to such term in Section 4. 

 

“Conversion Date” shall have the meaning set forth in Section 4(a).

 

“Conversion Price” shall have the meaning set forth in Section 4(b).

 

“Conversion Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.

 

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Debenture in accordance with the terms hereof.

 

“Effectiveness Period” shall have the meaning set forth in the Registration Rights Agreement. 

 

“Equity Condition” means, during the period in question, (a) (i) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares of Common Stock issuable pursuant to the Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future) or (ii) all of the Conversion Shares issuable pursuant to the Transaction Documents may be resold pursuant to Rule 144, (b) the Company shall have honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, and (c) there is a sufficient number of authorized but 

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unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares then issuable pursuant to the Transaction Documents.

 

“Event of Default” shall have the meaning set forth in Section 8(a).

 

“Fundamental Transaction” shall have the meaning set forth in Section 5(e).

 

“Intellectual Property” shall have the meaning ascribed to such term in the Security Agreement.

 

“Late Fees” shall have the meaning set forth in Section 2(c).

 

“Mandatory Default Amount”  means the sum of (a) 100% of the outstanding principal amount of this Debenture, plus 100% of accrued and unpaid interest hereon, provided, however, that in the event that the Event of Default directly or indirectly prevents the Holder from converting this Debenture or disposing of the Conversion Shares, instead of the foregoing the following amount shall be used if greater than the foregoing: the outstanding principal amount of this Debenture, plus all accrued and unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is either (A) demanded (if demand or notice is required to create an Event of Default) or, if not required, otherwise due, or (B) paid in full (whichever has a lower Conversion Price) multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded or, if demand is not required, otherwise due, or (y) paif in full, whichever has a higher VWAP, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture.

 

“Net Cash Proceeds” shall mean with respect to any Mandatory Redemption Financing, the gross cash proceeds received by the Company therefrom less all reasonable and customary out-of-pocket legal, underwriting and other fees and expenses incurred in connection therewith less all taxes paid or reasonably estimated to be payable as a result thereof. 

 

“New York Courts” shall have the meaning set forth in Section 9(d).

 

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

 

“Optional Redemption” shall have the meaning set forth in Section 6(a).

 

“Optional Redemption Amount” means the sum of (a) 115% of the then outstanding principal amount of the Debenture, (b) accrued but unpaid interest as of the Optional Redemption Date and (c) all costs, expenses and other amounts due as of the Optional Redemption Date in respect of the Debenture.

 

“Optional Redemption Date” shall have the meaning set forth in Section 6(a).

 

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“Optional Redemption Notice” shall have the meaning set forth in Section 6(a).

 

“Optional Redemption Notice Date” shall have the meaning set forth in Section 6(a).

 

“Optional Redemption Period” shall have the meaning set forth in Section 6(a).

 

“Original Issue Date” means the date of the first issuance of the Debentures, regardless of any transfers of any Debenture and regardless of the number of instruments which may be issued to evidence such Debentures.

 

“Permitted Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b) any Indebtedness existing on the Original Issue Date, (c) lease obligations and purchase money indebtedness of up to $500,000, in the aggregate, incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets (d) trade accounts payable incurred in the ordinary course of business, (e) endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (f) vendor payment guarantees entered into in the ordinary course of business and consistent with past practices, (g) indebtedness that (i) is expressly subordinate to the Debentures pursuant to a written subordination agreement with the Purchasers that is acceptable to each Purchaser in its sole and absolute discretion and (ii) matures at a date later than the 91st day following the Maturity Date, (h) Indebtedness in respect of obligations relating to corporate credit cards, purchase cards or bank card products, (i) Indebtedness consisting of intercompany loans and advances among the Company and its Subsidiaries, (j) guarantees of Indebtedness otherwise permitted hereunder, (k) funds or credit or other support received by the Company or any Subsidiary of the Company from, or with the credit or other support of, any governmental authority, and incurred with the intent to mitigate (in the good faith determination of the Company) through liquidity or other financial relief the impact of the COVID-19 global pandemic on the business and operations of the Company and its Subsidiaries and (l) unsecured Indebtedness in an aggregate amount not to exceed $100,000 at any one time outstanding.

 

“Permitted Licenses” means, collectively, (a) licenses of over-the-counter software that is commercially available to the public, (b) intercompany licenses or grants of rights for development, manufacture, production, commercialization (including commercial sales to end users), marketing, co-promotion, or distribution among the Company and its Subsidiaries and (c) any non-exclusive or exclusive license of (or covenant not to sue with respect to) Intellectual Property or technology or a grant of rights for development, manufacture, production, commercialization (including commercial sales to end users), marketing, co-promotion, or distribution. 

“Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not otherwise delinquent or Liens for taxes, assessments and other governmental charges or levies 

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being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company) have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Company’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien, (c) Liens incurred in connection with Permitted Indebtedness under clauses (a), (b) and (g) thereunder, (d) Liens incurred in connection with Permitted Indebtedness under clause (c) thereunder, provided that such Liens are not secured by assets of the Company or its Subsidiaries other than the assets so acquired or leased, (e) Liens existing on the Original Issue Date, (f) Permitted Licenses, (g) banker’s liens, rights of set-off and Liens in favor of financial institutions incurred in the ordinary course of business arising in connection with bank accounts and securities accounts, (h) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default, (i) easements, reservations, rights-of-way, restrictions, minor defects or irregularities in title and similar charges or encumbrances affecting real property not constituting a Material Adverse Effect, (j) any interest of title of a lessor under, and Liens arising from UCC financing statements (or equivalent filings, registrations or agreements in foreign jurisdictions) relating to, leases not prohibited by this Agreement and the filing of UCC financing statements as a precautionary measure with respect thereto, (k) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, (l) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, indemnity and performance bonds and other obligations of a like nature incurred in the ordinary course of business, (m) licenses, sublicenses, leases or subleases (other than relating to Intellectual Property) granted to others in the ordinary course of business not interfering in any material respect with the business of the Company and its Subsidiaries, (n) pledges and deposits in the ordinary course of business securing liability to insurance carriers providing property, casualty or liability insurance to the Company or any Subsidiary (including obligations in respect of letters of credit or bank guarantees for the benefit of such insurance carriers), (o) rights of first refusal, voting, redemption, transfer or other restrictions (including call provisions and buy-sell provisions) with respect to the equity interests of any joint venture, (p) to the extent constituting a Lien, cash escrow arrangements securing indemnification obligations associated with an acquisition or other investment, (q) Liens solely on cash earnest money deposits made by the Company or any of its Subsidiaries in connection with any letter of intent or purchase agreement for an acquisition or other investment and (r) other Liens securing Indebtedness or other obligations, in an aggregate amount not to exceed $50,000 outstanding at any one time.

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“Product” means any drug, antibody or drug or antibody discovery platform advertised, developed, imported, manufactured, marketed, offered for sale, promoted, sold, tested, used or otherwise distributed by the Company or any Subsidiary in connection with or that embody, in whole or in part, the Intellectual Property.

 

“Purchase Agreement” means the Securities Purchase Agreement, dated as of July 30, 2020 among the Company and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the Company and the original Holders, in the form of Exhibit B attached to the Purchase Agreement.

 

“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Underlying Shares by each Holder as provided for in the Registration Rights Agreement.

 

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

 

“Share Delivery Date” shall have the meaning set forth in Section 4(c)(ii).

 

“Successor Entity” shall have the meaning set forth in Section 5(e). 

 

“Trading Day” means a day on which the principal Trading Market is open for trading.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the New York Stock Exchange, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair 

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market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

Section 2.Interest.

 

a)Payment of Interest in Cash. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at the rate of 7% per annum, payable on each Conversion Date (as to that principal amount then being converted), on each Optional Redemption Date (as to that principal amount then being redeemed) and on the Maturity Date (each such date, an “Interest Payment Date”) (if any Interest Payment Date is not a Business Day, then the applicable payment shall be due on the next succeeding Business Day), in cash.  Notwithstanding anything herein to the contrary, in the event that all or part of this Debenture is converted or redeemed, the interest payable hereunder shall be the full amount of interest that would have otherwise accrued if this Debenture were held until the Maturity Date.

 

b)Interest Calculations.  Unless otherwise provided under this Debenture, interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made.  

 

c)Late Fee.  All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 10% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual payment in full.

 

d)Prepayment.  Subject to compliance with Section 6, the Company shall have the option to prepay all or any portion of the principal amount of this Debenture without the prior written consent of the Holder. 

 

Section 3.Registration of Transfers and Exchanges. 

 

a)Different Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by the Holder surrendering the same; provided that, each such Debenture shall be in denominations of at least $500,000 or a higher integral multiple of $100,000 (or if less, the principal amount outstanding of the Debenture being exchanged).  No service charge will be payable for such registration of transfer or exchange.

 

b)Investment Representations. This Debenture has been issued subject to certain investment representations of the original Holder set forth in the Purchase 

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Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.  

 

c)Reliance on Debenture Register. Prior to due presentment for transfer to the Company of this Debenture, the Company and any agent of the Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

 

Section 4.Conversion.

 

a)Voluntary Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 4(d) hereof).  The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Debenture to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”).  If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder.  No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required.  To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company unless the entire outstanding principal amount of this Debenture, plus all accrued and unpaid interest thereon, has been so converted in which case the Holder shall surrender this Debenture as promptly as is reasonably practicable after such conversion without delaying the Company’s obligation to deliver the shares on the Share Delivery Date. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture in an amount equal to the applicable conversion.  The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s).  The Company may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion.  In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less than the amount stated on the face hereof.

 

b)Conversion Price.  The conversion price in effect on any Conversion Date shall be equal to $9.4125, subject to adjustment herein (the “Conversion Price”).

 

	
 
	
c)
	
Mechanics of Conversion.

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i.Conversion Shares Issuable Upon Conversion of Principal Amount.  The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Debenture to be converted plus all accrued and unpaid interest thereon by (y) the Conversion Price.

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ii.Delivery of Conversion Shares Upon Conversion. Not later than the two (2) Trading Days after each Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder the Conversion Shares which, on or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, shall be free of restrictive legends and trading restrictions. On or after the earlier of (i) the six-month anniversary of the Original Issue Date or (ii) the Effective Date, the Company shall deliver any Conversion Shares required to be delivered by the Company under this Section 4(c) electronically through the Depository Trust Company or another established clearing corporation performing similar functions.

 

iii.Failure to Deliver Conversion Shares.  If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Debenture delivered to the Company and the Holder shall promptly return to the Company the Conversion Shares issued to such Holder pursuant to the rescinded Conversion Notice. 

 

iv.Obligation Absolute; Partial Liquidated Damages.  The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Debenture in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder.  In the event the Holder of this Debenture shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining 

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and or enjoining conversion of all or part of this Debenture shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Debenture, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment.  In the absence of such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion.  If the Company fails for any reason to deliver to the Holder such Conversion Shares pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifth (5th) Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Share Delivery Date until such Conversion Shares are delivered or Holder rescinds such conversion.  Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 8 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.  The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

v.Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion. In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such Conversion Shares by the Share Delivery Date pursuant to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Debenture in a principal amount equal to the principal amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements 

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under Section 4(c)(ii).  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Debenture with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000.  The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver Conversion Shares upon conversion of this Debenture as required pursuant to the terms hereof.

 

vi.Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Debentures), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Debenture and payment of interest hereunder.  The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and, if the Registration Statement is then effective under the Securities Act, shall be registered for public resale in accordance with such Registration Statement (subject to such Holder’s compliance with its obligations under the Registration Rights Agreement).

 

vii.Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Debenture.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

 

viii.Transfer Taxes and Expenses.  The issuance of Conversion Shares on conversion of this Debenture shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer 

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involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holder of this Debenture so converted and the Company shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.  The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.

 

d)Holder’s Conversion Limitations.  The Company shall not effect any conversion of this Debenture, and a Holder shall not have the right to convert any portion of this Debenture, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of this Debenture with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Debenture beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Debentures) beneficially owned by the Holder or any of its Affiliates or Attribution Parties.  Except as set forth in the preceding sentence, for purposes of this Section 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  To the extent that the limitation contained in this Section 4(d) applies, the determination of whether this Debenture is convertible (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which principal amount of this Debenture is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Debenture may be converted (in relation to other securities owned by the Holder together with any Affiliates or Attribution Parties) and which principal amount of this Debenture is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination.  In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the 

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Exchange Act and the rules and regulations promulgated thereunder.   For purposes of this Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Debenture, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Debenture held by the Holder.  The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Debenture held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(d) shall continue to apply.  Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company.  The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Debenture.

 

Section 5.Certain Adjustments.

 

a)Stock Dividends and Stock Splits.  If the Company, at any time while this Debenture is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of the Debentures), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) 

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outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re‐classification.

 

b)[RESERVED]

c)Subsequent Rights Offerings.  In addition to any adjustments pursuant to Section 5(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then upon any subsequent conversion of this Debenture, the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Debenture (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation); provided further, that if it is impractical to provide the benefit of the Purchase Rights because of the nature of the Purchase Right, then upon any subsequent conversion the Company will provide a substantially equivalent economic benefit to the Holder, measured as of the time of the grant, issuance or sale of the Purchase Right.

 

d)Pro Rata Distributions.  During such time as this Debenture is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Debenture, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Debenture (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) 

15

 

  

 

 

immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

e)Fundamental Transaction. If, at any time while this Debenture is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person in which, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction, (ii) the Company (and all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion of this Debenture), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Debenture is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in 

16

 

  

 

 

Section 4(d) on the conversion of this Debenture).  For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental Transaction.  The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Debenture and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Debenture, deliver to the Holder in exchange for this Debenture a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Debenture which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Debenture (without regard to any limitations on the conversion of this Debenture) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Debenture immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Debenture and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Debenture and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

f)Calculations.  All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.  For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

 

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g)Notice to the Holder.

 

i.Adjustment to Conversion Price.  Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.  

 

ii.Notice to Allow Conversion by Holder.  If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole) is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Debenture Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.  The Holder shall remain entitled to convert this Debenture during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein. 

  

Section 6.Redemption.

 

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a)
	
Optional Redemption at Election of Company.  Subject to the provisions of this Section 6(a), at any time, the Company may deliver a notice to the Holder (an “Optional Redemption Notice” and the date such notice is deemed delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable election to redeem some or all of the then outstanding principal amount of this Debenture for cash in an amount equal to the Optional Redemption Amount on the 10th Trading Day following the Optional Redemption Notice Date (such date, the “Optional Redemption Date”, such 10 Trading Day period, the “Optional Redemption Period” and such redemption, the “Optional Redemption”); provided that the Company’s Optional Redemption Notice may state that such notice is conditioned upon (x) a transaction in connection with the refinancing in full of the obligations under the Debentures, or (y) a transaction resulting in a Change of Control Transaction, in each case, to the extent such transaction is not consummated, in which case such Optional Redemption Notice may be revoked by the Company.  The Optional Redemption Amount is payable in full on the Optional Redemption Date.  The Company may only effect an Optional Redemption if the Equity Condition shall have been met (unless waived in writing by the Holder) on each Trading Day during the period commencing on the Optional Redemption Notice Date through to the Optional Redemption Date and through and including the date payment of the Optional Redemption Amount is actually made in full.  If the Equity Condition shall cease to be satisfied at any time during the Optional Redemption Period, then the Holder may elect to nullify the Optional Redemption Notice by notice to the Company within 3 Trading Days after the first day on which any the Equity Condition has not been met (provided that if, by a provision of the Transaction Documents, the Company is obligated to notify the Holder of the non-existence of the Equity Condition, such notice period shall be extended to the third Trading Day after proper notice from the Company) in which case the Optional Redemption Notice shall be null and void, ab initio.  The Company covenants and agrees that it will honor all Notices of Conversion tendered from the time of delivery of the Optional Redemption Notice through the date all amounts owing thereon are due and paid in full. The Company’s determination to pay an Optional Redemption in cash shall be applied ratably to all of the holders of the then outstanding Debentures based on their (or their predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement.

 

	
b)
	
Mandatory Redemption.  If the Company or any Guarantor Subsidiary thereof, as applicable, at any time while this Debenture is outstanding, shall sell, enter into an agreement to sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents (other than (i) pursuant to the Transaction Documents, (ii) pursuant to the exercise of options, rights or warrants, (iii) pursuant to the conversion of any debt securities to equity or the conversion of any class of equity securities to any other class of equity securities, (iv) any issuance of options, rights or warrants relating to its Common Stock or Common Stock Equivalents, (v) pursuant to the exercise of, any Common Stock or Common Stock Equivalents, restricted stock, stock appreciation rights, restricted stock units, options or 

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warrants solely with respect to any directors, officers or employees of the Company or its Subsidiaries, (vi) as consideration for any acquisition, joint venture, licensing arrangement or other strategic transaction other than a capital raising transaction, (vii) as dividends or distributions on existing Common Stock or Common Stock Equivalents,  (viii) pursuant to employee and/or director stock plans or employee and/or director compensation plans, and (ix) the first $6 million after the date hereof in the aggregate pursuant to the Company’s existing at-the-market offering through Jefferies LLC or equity line of credit with Keystone Capital Partners, LLC (“Mandatory Redemption Financing”), then the Holder shall have the right (“Mandatory Redemption Right”) to cause the Company to redeem the principal and interest, if any, on this Debenture subject to the Mandatory Redemption Cap, out of the Net Cash Proceeds of each Mandatory Redemption Financing at a redemption price equal to the sum of (i) 100% of all principal on this Debenture plus (ii) the amount of accrued but unpaid interest on this Debenture.  Such payment shall be made within three (3) Business Days of receipt of the Net Cash Proceeds in respect of such Mandatory Redemption Financing (each such date, a “Mandatory Redemption Date”).  At least two (2) Trading Days prior to the Mandatory Redemption Date the Company shall notify the Holder of the Mandatory Redemption Financing and the applicable Mandatory Redemption Date.  On or before 11 p.m. ET on the Trading Day immediately prior to the Mandatory Redemption Date, the Holder shall notify the Company of whether it elects to exercise the Mandatory Redemption Right as to such Mandatory Redemption Financing and the amount that it elects to have redeemed subject to the Mandatory Redemption Cap (the “Mandatory Redemption Amount”).  As to any Mandatory Redemption, the Mandatory Redemption Amount may be up to an amount or such lesser amount (at Holder’s election) equal to the Holder’s pro-rata portion of 20% of the Net Cash Proceeds raised thereunder (the “Mandatory Redemption Cap”). The Holder’s pro-rata portion shall be determined ratably to all of the holders of the then outstanding Debentures based on their (or their predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement. 

 

	
c)
	
Redemption Procedure.  The payment of cash or issuance of Common Stock, as applicable, pursuant to an Optional Redemption or Mandatory Redemption or shall be payable on the Optional Redemption Date or Mandatory Redemption Date, as applicable.  If any portion of the payment pursuant to an Optional Redemption or Mandatory Redemption shall not be paid by the Company by the applicable due date, interest shall accrue thereon at an interest rate equal to the lesser of 10% per annum or the maximum rate permitted by applicable law until such amount is paid in full.  Notwithstanding anything herein contained to the contrary, if any portion of the Optional Redemption Amount remains unpaid after such date, the Holder may elect, by written notice to the Company given at any time thereafter, to invalidate such Optional Redemption, ab initio, and, with respect to the Company’s failure to honor the Optional Redemption, the Company shall have no further right to exercise such Optional Redemption.  Notwithstanding anything to the contrary in this Section 6, the Company’s determination to redeem in cash or its elections under Section 6 shall be applied ratably among the Holders of Debentures. The Holder may elect to convert the outstanding 

20

 

  

 

 

		
principal amount of the Debenture pursuant to Section 4 prior to actual payment in cash for any redemption under this Section 6 by the delivery of a Notice of Conversion to the Company.

 

Section 7.Negative Covenants. As long as any principal amount of this Debenture remains outstanding, unless the holders of at least a majority in principal amount of the then outstanding Debentures shall have otherwise given prior written consent, the Company shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

 

a)other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including, but not limited to, a guarantee of any indebtedness for borrowed money of another person;

 

b)other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

 

c)amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;

 

d)repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents other than as to (i) the Conversion Shares as permitted or required under the Transaction Documents, (ii) repurchases of Common Stock or Common Stock Equivalents of officers, directors and employees of the Company or any of its Subsidiaries, provided that such repurchases shall not exceed an aggregate of $500,000 for all officers, directors and employees during the term of this Debenture, (iii) distributions payable solely in Common Stock or Common Stock Equivalents (including in connection with the conversion of any securities of the Company), (iv) (x) cashless repurchases of Common Stock or Common Stock Equivalents deemed to occur upon exercise of stock options or warrants of such Common Stock or Common Stock Equivalents to represent a portion of the exercise price of such options or warrants, and (y) acquisitions (or withholdings) of its Common Stock or Common Stock Equivalents pursuant to any employee stock option or similar plan in satisfaction of withholding or similar taxes payable by any present or former officer, employee, director or member of management and making deemed repurchases in connection with the exercise of stock options, (v) payments of cash in lieu of fractional shares of Common Stock or Common Stock Equivalents arising out of stock dividends, splits or combinations or in connection with exercises or conversions of options, warrants and other convertible securities and (vi) the Company and each Subsidiary may repay, repurchase or offer to repay, repurchase or otherwise acquire any of Common Stock Equivalents of a Subsidiary held by the Company, another Subsidiary or another Person; 

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e)repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than (i) the Debentures pursuant to the terms thereof, (ii) intercompany Indebtedness, (iii) Indebtedness in respect of obligations relating to corporate credit cards, purchase cards or bank card products, (iv) regularly scheduled principal and interest payments of Permitted Indebtedness, provided that such payments shall not be permitted if, at such time, or after giving effect to such payment, any Event of Default exist or has occurred and is continuing, (v) in connection with refinancings of Indebtedness and (vi) pursuant to mandatory prepayments under capital leases and purchase-money Indebtedness resulting from non-default events, including, asset sales and casualty and condemnation events;

 

f)pay cash dividends or cash distributions on any equity securities of the Company other than payments of cash in lieu of fractional shares of equity securities arising out of stock dividends, splits or combinations in connection with exercises or conversions of options, warrants and other convertible securities; 

 

g)enter into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing with the Commission after the date hereof, unless such transaction is expressly approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval); or

 

h)transfer, license, sell or otherwise dispose of any of its business or assets, except for (i) Permitted Licenses, (ii) sales or abandonment of obsolete, worn-out or surplus items, equipment or other tangible personal property or other equipment or tangible personal property that is no longer used or useful in the business of the Company and its Subsidiaries (as determined by the Company in its reasonable business judgment), (iii) the expiration, forfeiture, invalidation, cancellation or abandonment in the ordinary course of business of non-material Intellectual Property that is no longer useful to the business of the Company and its Subsidiaries (as determined by the Company in its reasonable business judgment), (iv) sales, transfers, licenses or dispositions of inventory in the ordinary course of business, (v) sales, transfers, licenses or dispositions among the Company and its Subsidiaries, (vi) sales, forgiveness or discounting in the ordinary course of business of past due and delinquent accounts, (vii) to the extent constituting a transfer, the granting of Permitted Liens, (viii) to the extent constituting a transfer, the use of cash or cash equivalents to make investments not otherwise prohibited by the Transaction Documents, (ix) to the extent constituting a transfer, payments of cash and cash equivalents in the ordinary course of business in connection with transactions not otherwise prohibited by the Transaction Documents (x) licenses, sublicenses, leases or subleases (other than relating to Intellectual Property) granted to third parties in the ordinary course of business and not interfering with the business of the Company and its Subsidiaries, (xi) any loss of, damage to or destruction of, or any condemnation or other taking for public use of, any property of the Company and its Subsidiaries, (xii) dispositions consisting of the sale, transfer, assignment or other disposition of unpaid and 

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overdue accounts receivable in connection with the collection, compromise or settlement thereof in the ordinary course of business and not as part of a financing transaction (xiii) any disposition or other transfer of any Product, without the payment or provision of consideration to the Company or any of its Subsidiaries for such Product (other than expense reimbursement), reasonably necessary for the conduct of any then on-going clinical trial or other development or regulatory activities associated with such Product, (xiv) any disposition or other transfer of any Product as promotional support in the ordinary course of business or in consideration of services in the ordinary course of business and (xv) so long as no Event of Default has occurred and is continuing, other transfers licenses, sales, or dispositions of tangible personal property in the ordinary course of business with a fair market value not to exceed $250,000 in the aggregate.

 

Section 8.Events of Default.  

 

a)“Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

	
 
	
i.
	
any default in the payment of (A) the principal amount of any Debenture or (B) interest, liquidated damages and other amounts owing to a Holder on any Debenture, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within three (3) Trading Days;

 

	
 
	
ii.
	
the Company shall fail to observe or perform any other covenant or agreement contained in this Debenture (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (xi) below) or in any Transaction Document, which failure is not cured, if possible to cure, within the earlier to occur of (A) fifteen (15) Trading Days after written notice of such failure sent by the Holder or by any other Holder to the Company and (B) twenty (20) Trading Days after an officer of the Company has become aware of such failure;

 

	
 
	
iii.
	
[reserved];

 

	
 
	
iv.
	
any representation or warranty made in this Debenture, any other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder or any other Holder pursuant to the Transaction Documents shall be untrue or incorrect in any material respect as of the date when made or deemed made;

 

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v.
	
the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;

 

	
 
	
vi.
	
the Company or any Significant Subsidiary shall default (subject to any grace or cure period provided in the applicable agreement, document, or instrument) on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than $250,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; 

 

	
 
	
vii.
	
the Company (and all of its Subsidiaries, taken as a whole) shall consummate any Change of Control Transaction; or

 

	
 
	
viii.
	
any monetary judgment, writ or similar final process shall be entered or filed against the Company, any Subsidiary or any of their respective property or other assets for more than $250,000 (excluding any amounts covered by insurance), and such judgment, writ or similar final process shall remain unpaid, unvacated, unbonded or unstayed for a period of 60 calendar days.

 

 

b)Remedies Upon Event of Default.  If any Event of Default occurs, the outstanding principal amount of this Debenture, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the election of the holders of at least a majority in principal amount of the then outstanding Debentures, immediately due and payable in cash at the Mandatory Default Amount.  Commencing 5 Business Days after the occurrence of any Event of Default that results in the eventual acceleration of this Debenture, the interest rate on this Debenture shall accrue at an interest rate equal to the lesser of 10% per annum or the maximum rate permitted under applicable law.  Upon the payment in full of the Mandatory Default Amount (other than contingent indemnification obligations for which no claim has been asserted) under this Debenture, the Holder shall promptly surrender this Debenture to or as directed by the Company.  In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law.  Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Debenture until such time, if any, as the Holder receives full payment pursuant to this Section 8(b).  No such 

24

 

  

 

 

rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

Section 9.Miscellaneous.  

 

a)Notices.  Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number, email address, or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 9(a).  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number, email address or address of the Holder appearing on the books of the Company, or if no such facsimile number or email attachment or address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the Purchase Agreement.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment to the email address set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment to the email address set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

b)Absolute Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed.  This Debenture is a direct debt obligation of the Company.  This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein. 

 

c)Lost or Mutilated Debenture.  If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, reasonably 

25

 

  

 

 

satisfactory to the Company. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

 

d)Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Debenture and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. 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 Debenture or the transactions contemplated hereby. 

 

e)Waiver.  Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture.  The failure of the Company or the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture on any other occasion.  Any waiver by the Company or the Holder must be in writing.

 

f)Severability.  If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable 

26

 

  

 

 

rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Debenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

 

g)Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.  The remedies provided in this Debenture shall be cumulative and in addition to all other remedies available under this Debenture and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Debenture.  The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. 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 the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is reasonably requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Debenture.

 

h)Next Business Day.  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

i)Headings.  The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to limit or affect any of the provisions hereof.

 

27

 

  

 

 

j)Secured Obligation.  The obligations of the Company under this Debenture are secured by the Collateral (as defined in the Security Agreement) pledged by the Company and each Subsidiary Guarantor pursuant to the Security Agreement, dated as of July 31, 2020 between the Company, the Subsidiary Guarantors party thereto from time to time and the Secured Parties (as defined therein).

 

Section 10.Disclosure.   Upon receipt or delivery by the Company of any notice in accordance with the terms of this Debenture, if the Company has determined that the matters relating to such notice constitute material, nonpublic information relating to the Company or its Subsidiaries, the Company shall publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise in accordance with applicable securities laws. In the event that the Company believes that a notice contains material, non-public information relating to the Company or its Subsidiaries, the Company so shall indicate to the Holder contemporaneously with delivery of such notice.

 

*********************

 

(Signature Page Follows)

 

28

 

  

 

 

IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly authorized officer as of the date first above indicated.

 

 

	
	
vaccinex, inc.

 

 

	
By:/s/ Scott E. Royer

     Name: Scott E. Royer

     Title: Chief Financial Officer

 

Address for Notice:

1895 Mount Hope Ave.

Rochester, NY 14620

Email: mzauderer@vaccinex.com

 

	
With a copy to (which shall not constitute notice):

	
 

Hogan Lovells US LLP

100 International Drive

Suite 2000

Baltimore, Maryland 21202

Attn: William Intner

william.intner@hoganlovells.com

 

 

29

  

 

 

ANNEX A

 

NOTICE OF CONVERSION

 

 

The undersigned hereby elects to convert principal under the 7% Original Issue Discount Senior Secured Convertible Debenture due August 3, 2021 of Vaccinex, Inc., a Delaware corporation (the “Company”), into shares of common stock (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below.  If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

 

By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Debenture, as determined in accordance with Section 13(d) of the Exchange Act.

 

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.  

 

Conversion calculations:

Date to Effect Conversion:

 

Principal Amount of Debenture to be Converted:

 

Payment of Interest in Common Stock

$_____ of Interest Accrued on Account of Conversion at Issue.

 

Number of shares of Common Stock to be issued:

 

 

Signature:

 

Name:

 

Address for Delivery of Common Stock Certificates:

 

Or

 

DWAC Instructions:

 

Broker No:

Account No:

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Schedule 1

 

CONVERSION SCHEDULE

 

The 7% Original Issue Discount Senior Secured Convertible Debentures due on August 3, 2021 in the aggregate principal amount of $8,640,000 are issued by Vaccinex, Inc., a Delaware corporation.  This Conversion Schedule reflects conversions made under Section 4 of the above referenced Debenture.

 

Dated: 

 

 

				
	
 

Date of Conversion

(or for first entry, Original Issue Date)
	
 

Amount of Conversion
	
 

Aggregate Principal Amount Remaining Subsequent to Conversion

(or original Principal Amount)
	
 

Company Attest

	
 

 

 
	
 

 
	
 

 
	
 

 

	
 

 

 
	
 

 
	
 

 
	
 

 

	
 

 

 
	
 

 
	
 

 
	
 

 

	
 

 

 
	
 

 
	
 

 
	
 

 

	
 

 

 
	
 

 
	
 

 
	
 

 

	
 

 

 
	
 

 
	
 

 
	
 

 

	
 

 

 
	
 

 
	
 

 
	
 

 

	
 

 

 
	
 

 
	
 

 
	
 

 

	
 

 

 
	
 

 
	
 

 
	
 

 

 

 

 

31

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