Document:

Exhibit 10.1

 

PURCHASE AGREEMENT

 

PURCHASE AGREEMENT (the “Agreement”), dated as of September 27, 2018, by and among AXSOME THERAPEUTICS, INC., a Delaware corporation (the “Company”), and the investors identified on Schedule I hereto (each, an “Investor” and collectively, the “Investors”).

 

WHEREAS:

 

Subject to the terms and conditions set forth in this Agreement, the Company wishes to sell to the Investors, and the Investors wish to buy from the Company, the shares listed on Schedule I hereto (the “Purchase Shares”) of the Company’s common stock, $0.0001 par value per share (the “Common Stock”), at a price of $3.00 per Purchase Share, for a minimum aggregate purchase price of $3 million and no more than $10 million.

 

NOW THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Investors hereby agree as follows:

 

1.                                      CERTAIN DEFINITIONS.

 

For purposes of this Agreement, the following terms shall have the following meanings:

 

(a)                                 “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.

 

(b)                                 “Base Prospectus” means the Company’s final base prospectus, dated December 16, 2016, a preliminary form of which is included in the Registration Statement, including the documents incorporated by reference therein.

 

(c)                                  “Business Day” means any day on which the Principal Market is open for trading, including any day on which the Principal Market is open for trading for a period of time less than the customary time.

 

(d)                                 “Confidential Information” means any information disclosed by either party to the other party, either directly or indirectly, in writing, orally or by inspection of tangible objects (including, without limitation, documents, prototypes, samples, plant and equipment), which is designated as “Confidential,” “Proprietary” or some similar designation. Information communicated orally shall be considered Confidential Information if such information is confirmed in writing as being Confidential Information within ten (10) Business Days after the initial disclosure. Confidential Information may also include information disclosed to a disclosing party by third parties. Confidential Information shall not, however, include any information which (i) was publicly known and made generally available in the public domain prior to the time of disclosure by the disclosing party; (ii) becomes publicly known and made generally available after disclosure by the disclosing party to the receiving party through no action or inaction of the receiving party; (iii) is already in the possession of the receiving party without confidential restriction at the time of disclosure by the disclosing party as shown by the receiving party’s files and records immediately prior to the time of disclosure; (iv) is obtained by the receiving party from a third party without a breach of such third party’s obligations of confidentiality; (v) is independently developed by the receiving party without use of or reference to the disclosing party’s Confidential Information, as shown by documents and other competent evidence in the receiving party’s possession; or (vi) is required by law to be disclosed by the receiving party, provided that the receiving party gives the disclosing party prompt written notice of

 

 

such requirement prior to such disclosure and assistance in obtaining an order protecting the information from public disclosure.

 

(e)                                  “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

 

(f)                                   “DTC” means The Depository Trust Company, or any successor performing substantially the same function for the Company.

 

(g)                                  “DWAC Shares” means shares of Common Stock that are (i) issued in electronic form, (ii) freely tradable and transferable and without restriction on resale and (iii) timely credited by the Company to the Investor or its designee’s specified Deposit/Withdrawal at Custodian (DWAC) account with DTC under its Fast Automated Securities Transfer (FAST) Program or any similar program hereafter adopted by DTC performing substantially the same function.

 

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

 

(i)                                     “Initial Prospectus Supplement” means the prospectus supplement of the Company dated September 27, 2018 relating to the Purchase Shares, including the accompanying Base Prospectus, to be prepared and filed by the Company with the SEC pursuant to Rule 424(b)(5) under the Securities Act and in accordance with Section 5(a) hereof, together with all documents and information incorporated therein by reference.

 

(j)                                    “Material Adverse Effect” means any material adverse effect on (i) the enforceability of any Transaction Document, (ii) the results of operations, assets, business or financial condition of the Company and its Subsidiaries, taken as a whole, other than any material adverse effect that resulted primarily from (A) any change in the United States or foreign economies or securities or financial markets in general that does not have a disproportionate effect on the Company and its Subsidiaries, taken as a whole, (B) any change that generally affects the industry in which the Company and its Subsidiaries operate that does not have a disproportionate effect on the Company and its Subsidiaries, taken as a whole, (C) any change arising in connection with earthquakes, hostilities, acts of war, sabotage or terrorism or military actions or any escalation or material worsening of any such hostilities, acts of war, sabotage or terrorism or military actions existing as of the date hereof, (D) any action taken by the Investor, its affiliates or its successors and assigns with respect to the transactions contemplated by this Agreement, (E) the effect of any change in applicable laws or accounting rules that does not have a disproportionate effect on the Company and its Subsidiaries, taken as a whole, (F) any change resulting from compliance with terms of this Agreement or the consummation of the transactions contemplated by this Agreement, or (G) any change, in and of itself, in the Company’s stock price or trading volume from and after the date hereof (provided, however, that the facts and circumstances underlying any such change may, except as may be provided in subsections (A), (B), (C) (D), (E) or (F) of this definition, be considered in determining whether a Company Material Adverse Effect has occurred), or (iii) the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document to be performed as of the date of determination.

 

(k)                                 “Person” means an individual or entity including but not limited to any limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

 

(l)                                     “Principal Market” means The Nasdaq Global Market (or any nationally recognized successor thereto); provided, however, that in the event the Company’s Common Stock is ever listed or

 

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traded on The Nasdaq Capital Market, The Nasdaq Global Select Market, the New York Stock Exchange, the NYSE American, the NYSE Arca, the OTC Bulletin Board, or the OTCQX or the OTCQB operated by the OTC Markets Group, Inc. (or any nationally recognized successor to any of the foregoing), then the “Principal Market” shall mean such other market or exchange on which the Company’s Common Stock is then listed or traded.

 

(m)                             “Prospectus” means the Base Prospectus, as supplemented by any Prospectus Supplement (including the Initial Prospectus Supplement), including the documents and information incorporated by reference therein.

 

(n)                                 “Prospectus Supplement” means any prospectus supplement to the Base Prospectus (including the Initial Prospectus Supplement) filed with the SEC pursuant to Rule 424(b) under the Securities Act in connection with the transactions contemplated by this Agreement, including the documents and information incorporated by reference therein.

 

(o)                                 “Registration Statement” means the effective registration statement on Form S-3 (Commission File No. 333-214859) filed by the Company with the SEC pursuant to the Securities Act for the registration of shares of its Common Stock, including the Purchase Shares, and certain other securities, as such Registration Statement has been or may be amended and supplemented from time to time, including all documents filed as part thereof or incorporated by reference therein, and including all information deemed to be a part thereof at the time of effectiveness pursuant to Rule 430B of the Securities Act, including any comparable successor registration statement filed by the Company with the SEC pursuant to the Securities Act for the registration of shares of its Common Stock, including the Purchase Shares.

 

(p)                                 “SEC” means the U.S. Securities and Exchange Commission.

 

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

 

(r)                                    “Subsidiary” means any Person the Company wholly-owns or controls, or in which the Company, directly or indirectly, owns a majority of the voting stock or similar voting interest, in each case that would be disclosable pursuant to Item 601(b)(21) of Regulation S-K promulgated under the Securities Act.

 

(s)                                   “Transaction Documents” means, collectively, this Agreement and the schedules and exhibits hereto, and each of the other agreements, documents, certificates and instruments entered into or furnished by the parties hereto in connection with the transactions contemplated hereby and thereby.

 

(t)                                    “Transfer Agent” means American Stock Transfer & Trust Company, LLC, or such other Person who is then serving as the transfer agent for the Company in respect of the Common Stock.

 

2.                         PURCHASE OF COMMON STOCK.

 

Subject to the terms and conditions set forth in this Agreement, the Company desires to sell to the Investor, and the Investor desires to purchase from the Company, the Purchase Shares as follows:

 

(a)                                 Purchase of Common Stock.  Upon the satisfaction of the conditions set forth in Sections 7 and 8 hereof (the “Closing” and the date of satisfaction of such conditions the “Closing Date”), the Investors shall purchase the number of Purchase Shares set forth opposite their respective names on Schedule I hereto, at a price of $3.00 per Purchase Share.

 

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(b)                                 Payment of Purchase Price.   Each of the Investors shall pay the amount of cash for the number of Purchase Shares it is purchasing hereunder set forth opposite its name on Schedule I hereto to the Company as full payment for all of the Purchase Shares to be purchased by it hereunder by wire transfer of immediately available funds on the same Business Day that such Investor receives verbal or written confirmation of delivery from the Transfer Agent of all of the Purchase Shares being purchased by such Investor as DWAC Shares, if all of such Purchase Shares are so received by such Investor before 1:00 p.m., Eastern time, or, if any of such Purchase Shares are received by such Investor after 1:00 p.m., Eastern time, the next Business Day. All payments made under this Agreement shall be made in lawful money of the United States of America or wire transfer of immediately available funds to the account designated by the Company by written notice to each of the Investors prior to the date of this Agreement.

 

(c)                     Beneficial Ownership Limitation.  Notwithstanding anything to the contrary contained in this Agreement, the Company shall not issue or sell, and none of the Investors shall purchase or acquire, any shares of Common Stock under this Agreement which, when aggregated with all other shares of Common Stock then beneficially owned by such Investor and its respective affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) would result in the beneficial ownership by such Investor and its respective affiliates of more than 4.99% of the then issued and outstanding shares of Common Stock (the “Beneficial Ownership Limitation”).

 

3.                         INVESTORS’ REPRESENTATIONS AND WARRANTIES.

 

Each Investor, severally and only with respect to itself and not jointly, represents and warrants to the Company that as of the date hereof and as of the Closing Date:

 

(a)                                 Organization, Authority. Such Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder and thereunder.

 

(c)                                  Accredited Investor Status.  Such Investor is an “accredited investor” as that term is defined in Rule 501(a)(3) of Regulation D promulgated under the Securities Act.

 

(d)                                 Information.  Such Investor understands that its investment in the Purchase Shares involves a high degree of risk.  Such Investor (i) is able to bear the economic risk of an investment in the Purchase Shares including a total loss thereof, (ii) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the proposed investment in the Purchase Shares and (iii) has had an opportunity to ask questions of and receive answers from the officers of the Company concerning the financial condition and business of the Company and others matters related to an investment in the Purchase Shares.  Neither such inquiries nor any other due diligence investigations conducted by such Investor or its representatives shall modify, amend or affect such Investor’s right to rely on the Company’s representations and warranties contained in Section 4 below. Such Investor has sought such accounting, legal and tax advice from its own independent advisors as it has considered necessary to make an informed investment decision with respect to its acquisition of the Purchase Shares.

 

(e)                                  No Governmental Review.  Such Investor understands that no U.S. federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Purchase Shares or the fairness or suitability of an investment in the Purchase Shares nor have such authorities passed upon or endorsed the merits of the offering of the Purchase Shares.

 

(f)                                   Validity; Enforcement.  This Agreement has been duly and validly authorized, executed and delivered on behalf of such Investor and is a valid and binding agreement of such Investor enforceable

 

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against the Investor in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

(g)                                  Residency.  Such Investor is a resident of the state set forth opposite such Investor’s name on Schedule I hereto.

 

(h)                                 No Short Selling.  Such Investor represents and warrants to the Company that (i) at no time since the time such Investor was first contacted by the Company regarding the transactions contemplated hereby has such Investor or any of its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any (A) “short sale” (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of the Common Stock or (B) hedging transaction, which establishes a net short position with respect to the Common Stock, and (ii) neither such Investor nor any of its agents, representatives or affiliates shall engage in any of the aforementioned transactions in clause (i) hereof during the period beginning on the date of this Agreement and ending on the Closing Date.

 

(i)                                     No additional Shares.  Except as otherwise disclosed in writing by each Investor, as applicable, to the Company, none of the Investors beneficially own any securities of the Company prior to the date of this Agreement.

 

4.                                      REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and warrants to the Investors that, except as set forth in the disclosure schedules attached hereto, which exceptions shall be deemed to be a part of the representations and warranties made hereunder, as of the date hereof and as of the Closing Date:

 

(a)                                 Organization and Qualification. The Company and each of its Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any of its Subsidiaries is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and its Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a Material Adverse Effect and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.  The Company has no Subsidiaries except as set forth on Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

 

(b)                                 Authorization; Enforcement; Validity.  (i) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and each of the other Transaction Documents, and to issue the Purchase Shares in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation, the issuance of the Purchase Shares pursuant to this Agreement, have been duly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders, (iii) this Agreement has been and each of the other Transaction Document shall be on the Closing Date, duly executed and delivered by the Company and (iv) this Agreement constitutes, and each other Transaction Document upon its execution on behalf of the Company on the Closing Date, shall on the Closing Date constitute, the valid and binding obligations of

 

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the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies. The Board of Directors of the Company has approved the resolutions (the “Signing Resolutions”) substantially in the form provided to the Investor to authorize this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby.  The Signing Resolutions are valid, in full force and effect and have not been modified or supplemented in any respect.  The Company has delivered to the Investor a true and correct copy of minutes of a meeting of the Board of Directors of the Company at which the Signing Resolutions were duly adopted by the Board of Directors or a unanimous written consent adopting the Signing Resolutions executed by all of the members of the Board of Directors of the Company.  Except as set forth in this Agreement, no other approvals or consents of the Company’s Board of Directors, any authorized committee thereof, and/or stockholders is necessary under applicable laws and the Company’s Certificate of incorporation and/or Bylaws to authorize the execution and delivery of this Agreement or any of the transactions contemplated hereby, including, but not limited to, the issuance of the Purchase Shares.

 

(c)                                  Capitalization.  As of the date hereof, the authorized capital stock of the Company is set forth in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.  Except as disclosed in the SEC Documents (as defined below), (i) no shares of the Company’s capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company, (ii) there are no outstanding debt securities, (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, (iv) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the Securities Act, (v) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries, (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Purchase Shares as described in this Agreement and (vii) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement.  The Company has furnished to the Investor true and correct copies of the Company’s certificate of incorporation, as amended and as in effect on the date hereof (the “Certificate of incorporation”), and the Company’s Bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and summaries of the material terms of all securities convertible into or exercisable for Common Stock, if any, and copies of any documents containing the material rights of the holders thereof in respect thereto that are not disclosed in the SEC Documents.

 

(d)                                 Issuance of Purchase Shares.  Upon issuance and payment therefor in accordance with the terms and conditions of this Agreement, the Purchase Shares shall be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens, charges, restrictions, rights of first refusal and preemptive rights with respect to the issue thereof, and will be issued in compliance with all federal and state securities laws, with the holders being entitled to all rights accorded to a holder of shares of Common Stock. The Purchase Shares are being issued pursuant to the Registration Statement and the issuance of the Purchase Shares has been registered by the Company pursuant to the Securities Act.  Upon receipt of the Purchase Shares, the Investor will have good and marketable title to such Purchase Shares and such Purchase Shares will be immediately freely tradable.

 

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(e)                                  No Conflicts.  The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Purchase Shares) will not (i) result in a violation of the Certificate of incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the Bylaws or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the Principal Market applicable to the Company or any of its Subsidiaries) or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, except in the case of conflicts, defaults, terminations, amendments, accelerations, cancellations and violations under clause (ii), which could not reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor its Subsidiaries is in violation of any term of or in default under its Certificate of incorporation, any Certificate of Designation, Preferences and Rights of any outstanding series of preferred stock of the Company or Bylaws or their organizational charter or bylaws, respectively.  Neither the Company nor any of its Subsidiaries is in violation of any term of or is in default under any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries, except for possible conflicts, defaults, terminations or amendments that could not reasonably be expected to have a Material Adverse Effect.  The business of the Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, ordinance or regulation of any governmental entity, except for possible violations, the sanctions for which either individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect.  Except as required under the Securities Act or applicable state securities laws and the rules and regulations of the Principal Market, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents in accordance with the terms hereof or thereof.  Except as set forth elsewhere in this Agreement, all consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence shall be obtained or effected on or prior to the Closing Date.  Except as disclosed in the SEC Documents, since one year prior to the date hereof, the Company has not received nor delivered any notices or correspondence from or to the Principal Market, other than notices with respect to listing of additional shares of Common Stock and other routine correspondence. Except as disclosed in the SEC Documents, the Principal Market has not commenced any delisting proceedings against the Company.

 

(f)                                   SEC Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Documents”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Documents prior to the expiration of any such extension.  As of their respective dates and to the Company’s knowledge, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable.   None of the SEC Documents, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the

 

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time of filing.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.  Except as set forth in the SEC Documents, the Company has received no notices or correspondence from the SEC for the one year preceding the date hereof.  To the Company’s knowledge, the SEC has not commenced any enforcement proceedings against the Company.

 

(g)                                  Absence of Certain Changes.  Except as disclosed in the SEC Documents, since December 31, 2017, there has been no material adverse change in the business, properties, operations, financial condition or results of operations of the Company or its Subsidiaries.  The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any Bankruptcy Law nor does the Company or any of its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy or insolvency proceedings. The Company is financially solvent and is generally able to pay its debts as they become due.

 

(h)                                 Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company’s or its Subsidiaries’ officers or directors in their capacities as such, which could reasonably be expected to have a Material Adverse Effect.

 

(i)                                     Acknowledgment Regarding Investors’ Status.  The Company acknowledges and agrees that each of the Investors are acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby.  The Company further acknowledges that none of the Investors are acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by any of the Investors or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such Investor’s purchase of the Purchase Shares.  The Company further represents to each of the Investors that the Company’s decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives and advisors.

 

(j)                                    No Integrated Offering.  Neither the Company, nor or any of its affiliates, nor any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Purchase Shares to be integrated with prior offerings by the Company in a manner that would require stockholder approval pursuant to the rules of the Principal Market on which any of the securities of the Company are listed or designated. The issuance and sale of the Purchase Shares hereunder does not contravene the rules and regulations of the Principal Market.

 

(k)                              Intellectual Property Rights.  The Company and its Subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted.  None of the Company’s material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights have expired or terminated, or, by the terms and conditions thereof, could expire or terminate within two years from the date of this Agreement.  Except as disclosed

 

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in the SEC Documents, the Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of any material trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others, and there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge, being threatened against, the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement, which could reasonably be expected to have a Material Adverse Effect.

 

(l)                                     Environmental Laws.  The Company and its Subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where, in each of the three foregoing clauses, the failure to so comply could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(m)                             Title.  Except as set forth in the SEC Documents, the Company and its Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects (“Liens”) and, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and its Subsidiaries are in compliance with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.

 

(n)                                 Insurance.  The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged.  Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its Subsidiaries, taken as a whole.

 

(o)                                 Regulatory Permits.  The Company and its Subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

 

(p)                                 Tax Status.  The Company and each of its Subsidiaries has made or filed all federal and state income and all other material tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all

 

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taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

 

(q)                                 Transactions With Affiliates.   Except as set forth in the SEC Documents, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.

 

(r)                                    Application of Takeover Protections.  The Company and its board of directors have taken or will take prior to the Closing Date all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of Incorporation or the laws of the state of its incorporation which is or could become applicable to any of the Investors as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Purchase Shares and the Investors’ ownership of the Purchase Shares.

 

(s)                                   Disclosure.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents that will be timely publicly disclosed by the Company, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Investor’s or its agents or counsel with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed in the Registration Statement or any Prospectus Supplement.   The Company understands and confirms that each of the Investors will rely on the foregoing representation in effecting purchases and sales of securities of the Company.  All of the disclosure furnished by or on behalf of the Company to the Investor regarding the Company, its business and the transactions contemplated hereby, including the disclosure schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading.  The Company acknowledges and agrees that none of the Investors makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3 hereof and, in that case, only with respect to such Investor and not with respect to any other Investor.

 

(t)                                    Foreign Corrupt Practices.   Neither the Company, nor to the knowledge of the Company, any agent or other Person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose

 

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fully any contribution made by the Company (or made by any Person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

(u)                                 Registration Statement.  The Company has prepared and filed with the SEC in accordance with the provisions of the Securities Act the Registration Statement. The Registration Statement was declared effective by order of the SEC on December 16, 2016. The Registration Statement is effective pursuant to the Securities Act and available for the issuance of the Purchase Shares thereunder, and the Company has not received any written notice that the SEC has issued or intends to issue a stop order or other similar order with respect to the Registration Statement or the Prospectus or that the SEC otherwise has (i) suspended or withdrawn the effectiveness of the Registration Statement or (ii) issued any order preventing or suspending the use of the Prospectus or any Prospectus Supplement, in either case, either temporarily or permanently or intends or has threatened in writing to do so. The “Plan of Distribution” section of the Prospectus permits the issuance of the Purchase Shares under the terms of this Agreement. At the time the Registration Statement and any amendments thereto became effective, at the date of this Agreement and at each deemed effective date thereof pursuant to Rule 430B(f)(2) of the Securities Act, the Registration Statement and any amendments thereto complied and will comply in all material respects with the requirements of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Base Prospectus and any Prospectus Supplement thereto, at the time such Base Prospectus or such Prospectus Supplement thereto was issued and on the Closing Date, complied and will comply in all material respects with the requirements of the Securities Act and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided that this representation and warranty does not apply to statements in or omissions from any Prospectus Supplement made in reliance upon and in conformity with information relating to the Investor furnished to the Company in writing by or on behalf of the Investor expressly for use therein. The Company meets all of the requirements for the use of a registration statement on Form S-3 pursuant to the Securities Act for the offering and sale of the Purchase Shares contemplated by this Agreement in reliance on General Instruction I.B.1. of Form S-3, and the SEC has not notified the Company of any objection to the use of the form of the Registration Statement pursuant to Rule 401(g)(1) of the Securities Act. The Company hereby confirms that the issuance of the Purchase Shares to the Investor pursuant to this Agreement would not result in non-compliance with the Securities Act or any of the General Instructions to Form S-3. The Registration Statement, as of its effective date, meets the requirements set forth in Rule 415(a)(1)(x) pursuant to the Securities Act. At the earliest time after the filing of the Registration Statement that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act) relating to any of the Purchase Shares, the Company was not and is not an Ineligible Issuer (as defined in Rule 405 of the Securities Act).  The Company has not distributed any offering material in connection with the offering and sale of any of the Purchase Shares, and, until none of the Investors hold any of the Purchase Shares, shall not distribute any offering material in connection with the offering and sale of any of the Purchase Shares, to or by any of the Investors, in each case, other than the Registration Statement or any amendment thereto, the Prospectus or any Prospectus Supplement required pursuant to applicable law or the Transaction Documents. The Company has not made, and agrees that unless it obtains the prior written consent of each of the Investors it will not make, an offer relating to the Purchase Shares that would constitute a “free writing prospectus” as defined in Rule 405 under the Securities Act. The Company shall comply with the requirements of Rules 164 and 433 under the Securities Act applicable to any such free writing prospectus consented to by each of the Investors, including in respect of timely filing with the SEC, legending and record keeping.

 

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(v)                                 DTC Eligibility.  The Company, through the Transfer Agent, currently participates in the DTC Fast Automated Securities Transfer (FAST) Program and the Common Stock can be transferred electronically to third parties via the DTC Fast Automated Securities Transfer (FAST) Program.

 

(w)                               Sarbanes-Oxley. The Company is in compliance in all material respects with all provisions of the Sarbanes-Oxley Act of 2002, as amended, which are applicable to it as of the date hereof.

 

(x)                                 Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. None of the Investors shall have any obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 4(x) that may be due in connection with the transactions contemplated by the Transaction Documents.

 

(y)                                 Investment Company. The Company is not required to be registered as, and immediately after receipt of payment for the Purchase Shares will not be required to be registered as, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

(z)                                  Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock pursuant to the Exchange Act nor has the Company received any notification that the SEC is currently contemplating terminating such registration. Except as disclosed in the SEC Documents, the Company has not, in the twelve (12) months preceding the date hereof, received any notice from any Person to the effect that the Company is not in compliance with the listing or maintenance requirements of the Principal Market. Except as disclosed in the SEC Documents, the Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

 

(aa)                          Accountants.  The Company’s accountants are set forth in the SEC Documents and, to the knowledge of the Company, such accountants are an independent registered public accounting firm as required by the Securities Act.

 

(bb)                          No Market Manipulation. The Company has not, and to its knowledge no Person acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Purchase Shares, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Purchase Shares, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company.

 

(cc)                            Shell Company Status. The Company is not currently, and has never been, an issuer identified in Rule 144(i)(1) under the Securities Act.

 

5.                                      COVENANTS.

 

(a)                                 Filing of Current Report and Initial Prospectus Supplement.  The Company agrees that it shall, prior to 9:30 a.m., New York City Time, on September 28, 2018, file with the SEC a report on Form 8-K relating to the transactions contemplated by, and describing the material terms and conditions of, the Transaction Documents (the “Current Report”). The Company further agrees that it shall, within the time required under Rule 424(b) under the Securities Act, file with the SEC the Initial Prospectus Supplement pursuant to Rule 424(b)(5) under the Securities Act, which Initial Prospectus Supplement shall specifically relate to the Purchase Shares and shall describe the material terms and conditions of the Transaction

 

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Documents, contain information previously omitted at the time of effectiveness of the Registration Statement in reliance on Rule 430B under the Securities Act, and disclose all information relating to the Purchase Shares and the transactions contemplated by the Transaction Documents required to be disclosed in the Registration Statement and the Prospectus as of the date of the Initial Prospectus Supplement, including, without limitation, information required to be disclosed in the section captioned “Plan of Distribution” in the Prospectus. The Company shall provide each Investor with an opportunity to review and comment upon the final pre-filing draft versions of the Current Report and the Initial Prospectus Supplement within a reasonable time prior to their filing with the SEC and the Company shall give reasonable consideration to all such comments. Each Investor shall use its reasonable best efforts to comment upon the final pre-filing draft versions of the Current Report and the Initial Prospectus Supplement within a reasonable time after such Investor receives them from the Company. Each Investor shall furnish to the Company such information regarding itself, the Purchase Shares beneficially owned by it and the intended method of distribution thereof, including any arrangement between such Investor and any other Person relating to the sale or distribution of the Purchase Shares, as shall be reasonably requested by the Company in connection with the preparation and filing of the Current Report and the Initial Prospectus Supplement, and shall otherwise cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of the Current Report and the Initial Prospectus Supplement with the SEC.

 

(b)                                 Blue Sky. The Company shall take all such action, if any, as is reasonably necessary in order to obtain an exemption for or to register or qualify (i) the offer and sale of the Purchase Shares to the Investors under this Agreement and (ii) any subsequent resale of all Purchase Shares by the Investor, in each case, under applicable securities or “Blue Sky” laws of the states of the United States in such states as is reasonably requested by any of the Investors from time to time, and shall provide evidence of any such action so taken to each of the Investors.

 

(c)                                  Listing/DTC.  The Company shall promptly secure the listing of all of the Purchase Shares to be issued to the Investor hereunder on the Principal Market (subject to official notice of issuance) and upon each other national securities exchange or automated quotation system, if any, upon which the Common Stock is then listed, and shall use commercially reasonable efforts to maintain, so long as any shares of Common Stock shall be so listed, such listing of all such Purchase Shares. The Company shall use commercially reasonable efforts to maintain the listing of the Common Stock on the Principal Market and shall comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules and regulations of the Principal Market. Neither the Company nor any of its Subsidiaries shall take any action that would reasonably be expected to result in the delisting or suspension of the Common Stock on the Principal Market.  The Company shall promptly, and in no event later than the following Business Day, provide to each of the Investors copies of any notices it receives from any Person regarding the continued eligibility of the Common Stock for listing on the Principal Market; provided, however, that the Company shall not be required to provide the Investors copies of any such notice that the Company reasonably believes constitutes material non-public information and the Company would not be required to publicly disclose such notice in any report or statement filed with the SEC and under the Exchange Act or the Securities Act. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 5(c).  The Company shall take all action necessary to ensure that its Common Stock can be transferred electronically as DWAC Shares.

 

(d)                                 Prohibition of Short Sales and Hedging Transactions.  During the period specified in Section 3(h), neither the Investors nor any of their respective agents, representatives or affiliates shall in any manner whatsoever enter into or effect, directly or indirectly, any (i) “short sale” (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of the Common Stock or (ii) hedging transaction, which establishes a net short position with respect to the Common Stock.

 

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(e)                                  Reserved.

 

(f)                                   Non-Public Information.  Each party hereto agrees not to disclose any Confidential Information of the other party to any third party and shall not use the Confidential Information for any purpose other than in connection with, or in furtherance of, the transactions contemplated hereby.  Each party hereto acknowledges that the Confidential Information shall remain the property of the disclosing party and agrees that it shall take all reasonable measures to protect the secrecy of any Confidential Information disclosed by the other party. The Company confirms that neither it nor any other Person acting on its behalf shall provide any of the Investors or its agents or counsel with any information that constitutes or might constitute material, non-public information, unless a simultaneous public announcement thereof is made by the Company in the manner contemplated by Regulation FD. In the event of a breach of the foregoing covenant by the Company or any Person acting on its behalf (as determined in the reasonable good faith judgment of any Investor), in addition to any other remedy provided herein or in the other Transaction Documents, if such Investor is holding any Purchase Shares at the time of the disclosure of material, non-public information, such Investor shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such material, non-public information without the prior approval by the Company; provided such Investor shall have first provided notice to the Company that it believes it has received information that constitutes material, non-public information, the Company shall have at least 24 hours to publicly disclose such material, non-public information prior to any such disclosure by such Investor, the Company shall have failed to demonstrate to such Investor in writing within such time period that such information does not constitute material, non-public information, and the Company shall have failed to publicly disclose such material, non-public information within such time period. None of the Investors shall have any liability to the Company, any of its Subsidiaries, or any of their respective directors, officers, employees, stockholders or agents, for any such disclosure. The Company understands and confirms that each of the Investors shall be relying on the foregoing covenants in effecting transactions in securities of the Company.

 

(g)                                  Subsequent Equity Issuances. From and after the date of this Agreement until thirty (30) days following the Closing Date, irrespective of any earlier termination of this Agreement, neither the Company nor any Subsidiary shall issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents (or a combination of units thereof), other than in connection with an Exempt Issuance. Each of the Investors shall be entitled to seek injunctive relief against the Company and its Subsidiaries to preclude any such issuance, which remedy shall be in addition to any right to collect damages, without the necessity of showing economic loss and without any bond or other security being required. “Common Stock Equivalents” means any securities of the Company or its Subsidiaries which entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock. “Exempt Issuance” means the issuance of (i) Purchase Shares to the Investors pursuant to this Agreement, (ii) shares of Common Stock, Common Stock Equivalents or other securities to any of the Investors pursuant to any other existing or future contract, agreement or arrangement between the Company and such Investor, (iii) shares of Common Stock, Common Stock Equivalents or other securities upon the exercise, exchange or conversion of any shares of Common Stock, Common Stock Equivalents or other securities held by any of the Investor at any time, or (iv) up to $30.0 million of shares of Common Stock through Leerink Partners LLC, as sales agent, pursuant to the Sales Agreement, dated October 20, 2017, by and between the Company and Leerink Partners LLC.

 

(h)                                 Taxes.   The Company shall pay any and all transfer, stamp or similar taxes that may be payable with respect to the issuance and delivery of any shares of Common Stock to the Investor made under this Agreement.

 

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(i)                                     Securities Law Compliance. The Company shall use its reasonable best efforts to keep the Registration Statement effective pursuant to Rule 415 promulgated under the Securities Act, and to keep the Registration Statement and the Prospectus current and available for issuances and sales of all of the Purchase Shares by the Company to the Investors, and for the resale of all the Purchase Shares by the Investors, at all times until the date on which the Investor shall have sold all the Purchase Shares (the “Registration Period”). Without limiting the generality of the foregoing, during the Registration Period, the Company shall (a) take all action necessary to cause the Common Stock to continue to be registered as a class of securities under Sections 12(g) or 12(b) of the Exchange Act, shall comply with its reporting and filing obligations under the Exchange Act, and shall not take any action or file any document (whether or not permitted by the Exchange Act) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act, and (b) prepare and file with the SEC, at the Company’s expense, such amendments (including, without limitation, post-effective amendments) to the Registration Statement and such Prospectus Supplements pursuant to Rule 424(b) under the Securities Act, in each case, as may be necessary to keep the Registration Statement effective pursuant to Rule 415 promulgated under the Securities Act, and to keep the Registration Statement and the Prospectus current and available for issuances and sales of all of the Purchase Shares by the Company to the Investor, and for the resale of all of the Purchase Shares by the Investors, at all times during the Registration Period (it being hereby acknowledged and agreed that the Company shall prepare and file with the SEC, at the Company’s expense, immediately prior to the third anniversary of the initial effective date of the Registration Statement (the “Renewal Date”), a new Registration Statement relating to the Purchase Shares, in a form satisfactory to each of the Investors and its counsel, and the Company shall use its reasonable best efforts to cause such Registration Statement to be declared effective within 180 days after the Renewal Date). Each Investor shall furnish to the Company such information regarding itself, its affiliates, the Purchase Shares beneficially owned by it and the intended method of distribution thereof as shall be reasonably requested by the Company in connection with the preparation and filing of any such amendment to the Registration Statement (or new Registration Statement) or any such Prospectus Supplement, and shall otherwise cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any such amendment to the Registration Statement (or new Registration Statement) or any such Prospectus Supplement. The Company shall comply with all applicable federal, state and foreign securities laws in connection with the offer, issuance and sale by the Company of the Purchase Shares contemplated by the Transaction Documents. Without limiting the generality of the foregoing, neither the Company nor any of its officers, directors or affiliates will take, directly or indirectly, any action designed or intended to stabilize or manipulate the price of any security of the Company, or which would reasonably be expected to cause or result in, stabilization or manipulation of the price of any security of the Company.

 

(j)                                    Stop Orders.  The Company shall advise each of the Investors promptly (but in no event later than 24 hours) and shall confirm such advice in writing: (i) of the Company’s receipt of notice of any request by the SEC for amendment of or a supplement to the Registration Statement, the Prospectus, any Prospectus Supplement or for any additional information; (ii) of the Company’s receipt of notice of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or prohibiting or suspending the use of the Prospectus or any Prospectus Supplement, or of the Company’s receipt of any notification of the suspension of qualification of the Purchase Shares for offering or sale in any jurisdiction or the initiation or contemplated initiation of any proceeding for such purpose; and (iii) of the Company becoming aware of the happening of any event, which makes any statement of a material fact made in the Registration Statement, the Prospectus or any Prospectus Supplement untrue or which requires the making of any additions to or changes to the statements then made in the Registration Statement, the Prospectus or any Prospectus Supplement in order to state a material fact required by the Securities Act to be stated therein or necessary in order to make the statements then made therein (in the case of the Prospectus or any Prospectus Supplement, in light of the circumstances under which they were made) not misleading, or of the necessity to amend the Registration Statement or supplement the Prospectus or any Prospectus Supplement to comply with the Securities Act or any other law. The Company shall not be

 

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required to disclose to the Investors the substance or specific reasons of any of the events set forth in clauses (i) through (iii) of the immediately preceding sentence, but rather, shall only be required to disclose that the event has occurred. If at any time the SEC shall issue any stop order suspending the effectiveness of the Registration Statement or prohibiting or suspending the use of the Prospectus or any Prospectus Supplement, the Company shall use its reasonable best efforts to obtain the withdrawal of such order at the earliest possible time. The Company shall furnish to each of the Investors, without charge, a copy of any correspondence from the SEC or the staff of the SEC to the Company or its representatives relating to the Registration Statement or the Prospectus, as the case may be.

 

(k)                                 Amendments to Registration Statement; Prospectus Supplements. Except as provided in this Agreement and other than periodic and current reports required to be filed pursuant to the Exchange Act, the Company shall not file with the SEC any amendment to the Registration Statement or any supplement to the Base Prospectus that refers to any of the Investors, the Purchase Shares, the Transaction Documents or the transactions contemplated thereby (including, without limitation, any Prospectus Supplement filed in connection with the transactions contemplated by the Transaction Documents), in each case with respect to which (a) such Investor shall not previously have been advised and afforded the opportunity to review and comment thereon at least two (2) Business Days prior to filing with the SEC, as the case may be, (b) the Company shall not have given due consideration to any comments thereon received from such Investor or its counsel, or (c) such Investor shall reasonably object, unless the Company reasonably has determined that it is necessary to amend the Registration Statement or make any supplement to the Prospectus to comply with the Securities Act or any other applicable law or regulation, in which case the Company shall promptly (but in no event later than 24 hours) so inform such Investor, such Investors shall be provided with a reasonable opportunity to review and comment upon any disclosure referring to such Investor, the Transaction Documents or the transactions contemplated thereby, as applicable, and the Company shall expeditiously furnish to such Investor a copy thereof. In addition, for so long as, in the reasonable opinion of counsel for any of the Investors, a Prospectus is required to be delivered in connection with any acquisition or sale of Purchase Shares by such Investor, the Company shall not file any Prospectus Supplement with respect to the Purchase Shares without furnishing to such Investor as many copies of such Prospectus Supplement, together with the Prospectus, as such Investor may reasonably request.

 

(l)                                     Prospectus Delivery.  The Company consents to the use of the Prospectus (and of each Prospectus Supplement thereto) in accordance with the provisions of the Securities Act and with the securities or “blue sky” laws of the jurisdictions in which the Purchase Shares may be sold by the Investors, in connection with the offering and sale of the Purchase Shares and for such period of time thereafter as a Prospectus is required by the Securities Act to be delivered in connection with sales of the Purchase Shares. The Company will make available to each of the Investors upon request, and thereafter from time to time will furnish to each of the Investors, as many copies of the Prospectus (and each Prospectus Supplement thereto) as such Investor may reasonably request for the purposes contemplated by the Securities Act within the time during which the Prospectus is required by the Securities Act to be delivered in connection with sales of the Purchase Shares. If during such period of time any event shall occur that in the reasonable judgment of the Company and its counsel, or in the reasonable judgment of any Investor and its counsel, is required to be set forth in the Registration Statement, the Prospectus or any Prospectus Supplement or should be set forth therein in order to make the statements made therein (in the case of the Prospectus or any Prospectus Supplement, in light of the circumstances under which they were made) not misleading, or if in the reasonable judgment of the Company and its counsel, or in the reasonable judgment of any of the Investors and its counsel, it is otherwise necessary to amend the Registration Statement or supplement the Prospectus or any Prospectus Supplement to comply with the Securities Act or any other applicable law or regulation, the Company shall forthwith prepare and, subject to Section 5(k) above, file with the SEC an appropriate amendment to the Registration Statement or an appropriate Prospectus Supplement and in each case shall expeditiously furnish to each of the Investors, at the Company’s expense, such amendment to the Registration Statement or such Prospectus Supplement, as applicable, as may be necessary to reflect any

 

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such change or to effect such compliance. The Company shall have no obligation to separately advise the Investors of, or deliver copies to the Investors of, the SEC Documents, all of which the Investors shall be deemed to have notice of.

 

(m)                             Integration. From and after the date of this Agreement, neither the Company, nor any of its affiliates will, and the Company shall use its reasonable best efforts to ensure that no Person acting on any of their behalf will, directly or indirectly, make any offers or sales of any security or solicit any offers to buy any security, under circumstances that would cause this offering of the Purchase Shares to be integrated with other offerings of securities by the Company in a manner that would require stockholder approval pursuant to the rules and regulations of the Principal Market on which any of the securities of the Company are listed or designated, unless stockholder approval is obtained before the closing of such subsequent transaction in accordance with the rules of such Principal Market.

 

(n)                                 Use of Proceeds. The Company will use the net proceeds from the offering of the Purchase Shares as described in the Prospectus.

 

(o)                                 Other Transactions. The Company shall not enter into, announce or recommend to its stockholders any agreement, plan, arrangement or transaction in or of which the terms thereof would restrict, materially delay, conflict with or impair the ability or right of the Company to perform its obligations under any of the Transaction Documents to which it is a party, including, without limitation, the obligation of the Company to deliver the Purchase Shares to the Investors in accordance with the terms of this Agreement. From and after the date of this Agreement until the eighteen (18) month anniversary of the Closing Date, irrespective of any earlier termination of this Agreement, the Company shall not enter into, announce or recommend to its stockholders any agreement, plan, arrangement or transaction constituting or that may be deemed to constitute an “equity line” financing arrangement, whereby the Company may sell Common Stock or Common Stock Equivalents at a future determined price, other than with the Investor identified as the “Lead Investor” on Schedule I hereto (the “Lead Investor”). The Lead Investor shall be entitled to seek injunctive relief against the Company and its Subsidiaries to preclude any such agreement, plan, arrangement or transaction, which remedy shall be in addition to any right to collect damages, without the necessity of showing economic loss and without any bond or other security being required.

 

6.                                      TRANSFER AGENT INSTRUCTIONS.

 

On the Closing Date, the Company shall issue to the Transfer Agent (and any subsequent transfer agent) irrevocable instructions, in the form heretofore furnished to the Company, to issue the Purchase Shares in accordance with the terms of this Agreement (the “Irrevocable Transfer Agent Instructions”). All Purchase Shares to be issued to or for the benefit of the Investors pursuant to this Agreement shall be issued as DWAC Shares. The Company represents and warrants to each of the Investors that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 6 will be given by the Company to the Transfer Agent with respect to the Purchase Shares, and the Purchase Shares shall otherwise be freely transferable on the books and records of the Company. Certificates and any other instruments evidencing the Purchase Shares shall not bear any restrictive or other legend.  If any Investor effects a sale, assignment or transfer of the Purchase Shares, the Company shall permit the transfer and shall promptly instruct the Transfer Agent (and any subsequent transfer agent) to issue DWAC Shares in such name and in such denominations as specified by such Investor to effect such sale, transfer or assignment. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Investors. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 6 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 6, that each of the Investors shall be entitled, in addition to all other available

 

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remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. The Company shall cause its counsel to issue the legal opinion referred to in the Irrevocable Transfer Agent Instructions to the Transfer Agent (and any subsequent transfer agent) to the extent required or requested by the Transfer Agent (or any subsequent transfer agent). Any fees (with respect to the Transfer Agent, counsel to the Company or otherwise) associated with the issuance of such opinion shall be borne by the Company.

 

7.                                      CONDITIONS TO THE COMPANY’S OBLIGATION TO ISSUE AND SELL THE PURCHASE SHARES.

 

The obligation of the Company hereunder to issue and sell the Purchase Shares to the Investors on the Closing Date is subject to the satisfaction or, where legally permissible, the waiver of each of the following conditions:

 

(a)                                 Each of the Investors shall have executed this Agreement and delivered the same to the Company;

 

(b)                                 No stop order with respect to the Registration Statement shall be pending or threatened by the SEC; and

 

(c)                                  The representations and warranties of the Investors shall be true and correct in all material respects as of the date hereof and as of the Closing Date as though made at that time.

 

8.                                      CONDITIONS TO THE INVESTORS’ SEVERAL AND NOT JOINT OBLIGATION TO PURCHASE THE PURCHASE SHARES.

 

The several and not joint obligation of each Investor under this Agreement to purchase the number of Purchase Shares set forth opposite its name on Schedule I hereto is subject to the satisfaction or, where legally permissible, the waiver of each of the following conditions:

 

(a)                                 The Company shall have executed each of the Transaction Documents to which it is a party and delivered the same to each of the Investors;

 

(b)                                 The Common Stock shall be listed or quoted on the Principal Market, trading in the Common Stock shall not have been within the last 365 days suspended by the SEC or the Principal Market, and all Purchase Shares to be issued by the Company to the Investors pursuant to this Agreement shall have been, if applicable, approved for listing or quotation on the Principal Market in accordance with the applicable rules and regulations of the Principal Market, subject only to official notice of issuance;

 

(c)                                  Each of the Investors shall have received the opinions of the Company’s legal counsel dated as of the Closing Date substantially in the form heretofore agreed by the parties hereto;

 

(d)                                 The representations and warranties of the Company shall be true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 4 above, in which case, the portion of such representations and warranties so qualified shall be true and correct without further qualification) as of the date hereof and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Closing Date.  The Investors

 

18

 

shall have received a certificate, executed by the CEO, President or CFO of the Company, dated as of the Closing Date, to the foregoing effect in the form attached hereto as Exhibit A;

 

(e)                                  The Board of Directors of the Company shall have adopted resolutions in substantially the form previously provided to the Investors, which shall be in full force and effect without any amendment or supplement thereto as of the Closing Date;

 

(f)                                   The Irrevocable Transfer Agent Instructions shall have been delivered to and acknowledged in writing by the Company and the Company’s Transfer Agent;

 

(g)                                  The Company shall have delivered to the Investors a certificate evidencing the incorporation and good standing of the Company in the State of Delaware issued by the Secretary of State of the State of Delaware as of a date within ten (10) Business Days of the Closing Date;

 

(h)                                 The Company shall have delivered to the Investors a certified copy of the Certificate of incorporation as certified by the Secretary of State of the State of Delaware within ten (10) Business Days of the Closing Date;

 

(i)                                     The Company shall have delivered to the Investors a secretary’s certificate executed by the Secretary of the Company, dated as of the Closing Date, in the form attached hereto as Exhibit B;

 

(j)                                    The Registration Statement shall be effective and no stop order with respect to the Registration Statement shall be pending or threatened by the SEC. The Company shall have a maximum dollar amount certain of securities, including the Purchase Shares, registered under the Registration Statement which is sufficient to issue to the Investors not less than all of the Purchase Shares to be purchased under the Purchase Agreement. The Current Report and the Initial Prospectus Supplement each shall have been filed with the SEC, as required pursuant to Section 5(a), and copies of the Prospectus shall have been delivered to the Investors in accordance with Section 5(l) hereof. The Prospectus shall be current and available for the issuance and sale of all of the Purchase Shares by the Company to the Investors, and for the resale of all of the Purchase Shares by the Investors. Any other Prospectus Supplements required to have been filed by the Company with the SEC under the Securities Act at or prior to the Closing Date shall have been filed with the SEC within the applicable time periods prescribed for such filings under the Securities Act. All reports, schedules, registrations, forms, statements, information and other documents required to have been filed by the Company with the SEC at or during the 12-month period immediately preceding the Closing Date pursuant to the reporting requirements of the Exchange Act shall have been filed with the SEC within the applicable time periods prescribed for such filings under the Exchange Act, including any applicable extension periods contemplated by the Exchange Act;

 

(k)                                 The Company shall be eligible to transfer its Common Stock, including all of the Purchase Shares, electronically as DWAC Shares;

 

(l)                                     All federal, state and local governmental laws, rules and regulations applicable to the transactions contemplated by the Transaction Documents and necessary for the execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated thereby in accordance with the terms thereof shall have been complied with, and all consents, authorizations and orders of, and all filings and registrations with, all federal, state and local courts or governmental agencies and all federal, state and local regulatory or self-regulatory agencies necessary for the execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated thereby in accordance with the terms thereof shall have been obtained or made, including, without limitation, in each case those required under the Securities Act, the Exchange Act, applicable state securities

 

19

 

or “Blue Sky” laws or applicable rules and regulations of the Principal Market, or otherwise required by the SEC, the Principal Market or any state securities regulators;

 

(m)                             No statute, regulation, order, decree, writ, ruling or injunction shall have been enacted, entered, promulgated, threatened or endorsed by any federal, state, local or foreign court or governmental authority of competent jurisdiction which prohibits the consummation of or which would materially modify or delay any of the transactions contemplated by the Transaction Documents;

 

(n)                                 No action, suit or proceeding before any federal, state, local or foreign arbitrator or any court or governmental authority of competent jurisdiction shall have been commenced or threatened, and no inquiry or investigation by any federal, state, local or foreign governmental authority of competent jurisdiction shall have been commenced or threatened, against the Company, or any of the officers, directors or affiliates of the Company, seeking to restrain, prevent or change the transactions contemplated by the Transaction Documents, or seeking material damages in connection with such transactions;

 

(o)                                 No Person shall have commenced a proceeding against the Company pursuant to or within the meaning of any Bankruptcy Law;

 

(p)                                 The Company, pursuant to or within the meaning of any Bankruptcy Law, shall not have (i) commenced a voluntary case, (ii) consented to the entry of an order for relief against it in an involuntary case, (iii) consented to the appointment of a Custodian of it or for all or substantially all of its property, or (iv) made a general assignment for the benefit of its creditors or is generally unable to pay its debts as the same become due; and

 

(q)                                 A court of competent jurisdiction shall not have entered an order or decree under any Bankruptcy Law that (i) is for relief against the Company in an involuntary case, (ii) appoints a Custodian of the Company or for all or substantially all of its property, or (iii) orders the liquidation of the Company or any Subsidiary.

 

9.                                      INDEMNIFICATION.

 

In consideration of the Investors’ execution and delivery of this Agreement and acquiring the Purchase Shares, and in addition to all of the Company’s other obligations under the Transaction Documents to which it is a party, the Company shall defend, protect, indemnify and hold harmless each Investor and all of its affiliates, stockholders, officers, directors and employees and any of the foregoing Person’s agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by the Transaction Documents) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to: (a) any misrepresentation or breach of any representation or warranty made by the Company in any of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in any of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (c) any cause of action, suit or claim brought or made against such Indemnitee and arising out of or resulting from the execution, delivery, performance or enforcement of any of the Transaction Documents or any other certificate, instrument or  document contemplated hereby or thereby, (d) any violation of the Securities Act, the Exchange Act, state securities or “Blue Sky” laws, or the rules and regulations of the Principal Market in connection with the transactions contemplated by the Transaction Documents by the Company or any of its affiliates, officers, directors or employees, (e) any untrue statement or alleged untrue statement of a

 

20

 

material fact contained, or incorporated by reference, in the Registration Statement or any amendment thereto or any omission or alleged omission to state therein, or in any document incorporated by reference therein, a material fact required to be stated therein or necessary to make the statements therein not misleading, or (f) any untrue statement or alleged untrue statement of a material fact contained, or incorporated by reference, in the Prospectus, or any omission or alleged omission to state therein, or in any document incorporated by reference therein, a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that (I) the indemnity contained in clause (c) of this Section 9 shall not apply to any Indemnified Liabilities which directly and primarily result from the fraud, gross negligence or willful misconduct of an Indemnitee, (II) the indemnity contained in clauses (d), (e) and (f) of this Section 9 shall not apply to any Indemnified Liabilities of an Investor to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Investor expressly for use in any Prospectus Supplement (it being hereby acknowledged and agreed that the written information set forth on Exhibit C attached hereto with respect to the Lead Investor is the only written information furnished to the Company by or on behalf of the Lead Investor expressly for use in the Initial Prospectus Supplement), if the Prospectus was timely made available by the Company to such Investor pursuant to Section 5(l), (III) the indemnity contained in clauses (d), (e) and (f) of this Section 9 shall not inure to the benefit of an Investor to the extent such Indemnified Liabilities are based on a failure of such Investor to deliver or to cause to be delivered the Prospectus made available by the Company, if such Prospectus was timely made available by the Company pursuant to Section 5(l), and if delivery of the Prospectus by such Investor was required under the Securities Act with respect to the Purchase Shares and such delivery by such Investor would have cured the defect giving rise to such Indemnified Liabilities, and (IV) the indemnity in this Section 9 shall not apply to amounts paid in settlement of any claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.  Any required indemnification payment for any particular claim shall be made within thirty (30) days from the date an Investor makes a written request for it. A certificate containing reasonable detail as to the amount of such indemnification submitted to the Company by an Investor shall be conclusive evidence, absent manifest error, of the amount due from the Company to such Investor. If any action shall be brought against any Indemnitee in respect of which indemnity may be sought pursuant to this Agreement, such Indemnitee shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Indemnitee. Any Indemnitee shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnitee, except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material issue between the position of the Company and the position of such Indemnitee, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.

 

10.                               RESERVED.

 

11.                               TERMINATION

 

This Agreement may be terminated only as follows:

 

(a)                                 If pursuant to or within the meaning of any Bankruptcy Law, the Company commences a voluntary case or any Person commences a proceeding against the Company, a Custodian is appointed for

 

21

 

the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors, this Agreement shall automatically terminate without any liability or payment to the Company (except as set forth below) without further action or notice by any Person.

 

(b)                                 In the event that the Closing shall not have occurred on or before October 12, 2018, due to the failure to satisfy the conditions set forth in Sections 7 and 8 above with respect to the Closing, either the Company, on the one hand, or any Investor, on the other hand, shall have the option to terminate this Agreement at the close of business on such date or thereafter without liability of any party to any other party (except as set forth below); provided, however, that the right to terminate this Agreement under this Section 11(b) shall not be available to any party if such party is then in breach of any covenant or agreement contained in this Agreement or any representation or warranty of such party contained in this Agreement fails to be true and correct such that the conditions set forth in Section 7(c) or Section 8(d), as applicable, could not then be satisfied. Any termination of this Agreement pursuant to this Section 11(b) shall be effected by written notice from the Company to each of the Investors, or any Investor to the Company and each of the other Investors, as the case may be, setting forth the basis for the termination hereof.

 

The representations and warranties and covenants of the Company and the Investors contained in Sections 3, 4, 5, and 6 hereof, the indemnification provisions set forth in Section 9 hereof and the agreements and covenants set forth in Sections 10, 11 and 12, shall survive the Closing and any termination of this Agreement.  No termination of this Agreement shall be deemed to release the Company or any Investor from any liability for intentional misrepresentation or willful breach by such party of any of the Transaction Documents to which it is a party.

 

12.                               MISCELLANEOUS.

 

(a)                                 Governing Law; Jurisdiction; Jury Trial.  The corporate laws of the State of Delaware shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement and the other Transaction Documents shall be governed by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Illinois, County of Cook, for the adjudication of any dispute hereunder or under the other Transaction Documents or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, 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 any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  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 to such party at the address for such notices to it under this Agreement and the other Transaction Documents 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 manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.

 

(b)                                 Counterparts.  This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature or

 

22

 

signature delivered by e-mail in a “.pdf” format data file shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original signature.

 

(c)                                  Headings.  The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

 

(d)                                 Severability.  If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

 

(e)                                  Entire Agreement; Amendment.  This Agreement and the other Transaction Documents supersede all other prior oral or written agreements among the Investors, the Company, their respective affiliates and Persons acting on their behalf with respect to the subject matter hereof, and this Agreement, the other Transaction Documents and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor any of the Investors makes any representation, warranty, covenant or undertaking with respect to such matters.  The Company acknowledges and agrees that is has not relied on, in any manner whatsoever, any representations or statements, written or oral, other than as expressly set forth in the Transaction Documents. No provision of this Agreement or the other Transaction Documents may be amended other than by a written instrument signed by each of the parties hereto or thereto.

 

(f)                                   Notices.  Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt when delivered personally; (ii) upon receipt when sent by facsimile or email (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses for such communications shall be:

 

If to the Company:

 

Axsome Therapeutics, Inc.

25 Broadway, 9th Floor

New York, New York 10004

Telephone:                                   (212) 332-3241

Facsimile:                                         (212) 320-6270

E-mail:                                                        npizzie@axsome.com

Attention:                                         Nick Pizzie, Chief Financial Officer

 

With a copy to (which shall not constitute notice or service of process):

 

DLA Piper LLP (US)

51 John F. Kennedy Parkway, Suite 120

Short Hills, New Jersey 07078

Telephone:                                   (973) 307-3004

Facsimile:                                         (973) 520-2551

E-mail:                                                        emilio.ragosa@dlapiper.com

Attention:                                         Emilio Ragosa, Esq.

 

If to an Investor, to its address set forth opposite its name on Schedule I hereto, with copies to such Investor’s representatives as set forth on Schedule I hereto,

 

23

 

With a copy for informational purposes only to (which shall not constitute notice or service of process):

 

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

666 Third Avenue

New York, NY 10017

Telephone:                                   (212) 692-6267

Facsimile:                                         (212) 983-3115

E-mail:                                                        ajmarsico@mintz.com

Attention:                                         Anthony J. Marsico, Esq.

 

If to the Transfer Agent:

 

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

Telephone:                                   718-921-8300

Facsimile:                                         718-765-8782

Attention:                                         Ian McKay

 

or at such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change.  Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine or email account containing the time, date, and recipient facsimile number or email address, as applicable, and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or email or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

(g)                                  Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and any permitted successors and assigns of the Company.  The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of each of the Investors, including by merger or consolidation.  None of the Investors may assign its rights or obligations under this Agreement.

 

(h)                                 No Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and any permitted successors and assigns of the Company and, except as set forth in Section 9, is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

(i)                                     Publicity.  The Company shall afford each of the Investors and its counsel with the opportunity to review and comment upon the form and substance of, and shall give reasonable consideration to all such comments from such Investor or its counsel on, any press release, SEC filing or any other public disclosure by or on behalf of the Company relating to such Investor, its purchases hereunder or any aspect of the Purchase Shares, any of the Transaction Documents or the transactions contemplated thereby, not less than 24 hours prior to the issuance, filing or public disclosure thereof. Each Investor must be provided with a final version of any such press release, SEC filing or other public disclosure at least 24 hours prior to any release, filing or use by the Company thereof. The Company agrees and acknowledges that its failure to fully comply with this provision constitutes a Material Adverse Effect.  Except as contemplated in Section 5(f) hereof, no Investor shall issue a press release or any other public disclosure regarding this Agreement or the substance hereof without the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed.

 

24

 

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

 

(k)                                 No Financial Advisor, Placement Agent, Broker or Finder.    The Company represents and warrants to each of the Investors that it has not engaged any financial advisor, placement agent, broker or finder in connection with the transactions contemplated hereby.  Each Investor, severally and only with respect to itself and not jointly, represents and warrants to the Company that it has not engaged any financial advisor, placement agent, broker or finder in connection with the transactions contemplated hereby.  The Company shall be responsible for the payment of any fees or commissions, if any, of any financial advisor, placement agent, broker or finder relating to or arising out of the transactions contemplated hereby.  The Company shall pay, and hold each of the Investors harmless against, any liability, loss or expense (including, without limitation, attorneys’ fees and out of pocket expenses) arising in connection with any such claim.

 

(l)                                     No Strict Construction.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

(m)                             Remedies, Other Obligations, Breaches and Injunctive Relief.  The Investors’ remedies provided in this Agreement, including, without limitation, the Investors’ remedies provided in Section 9, shall be cumulative and in addition to all other remedies available to the Investors under this Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy of any of the Investors contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit any Investor’s right to pursue actual damages for any failure by the Company to comply with the terms of this Agreement.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Investors 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, any Investor shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

(n)                                 Enforcement Costs.  If: (i) this Agreement is placed by any Investor in the hands of an attorney for enforcement or is enforced by any Investor through any legal proceeding; (ii) an attorney is retained to represent any Investor in any bankruptcy, reorganization, receivership or other proceedings affecting creditors’ rights and involving a claim under this Agreement; or (iii) an attorney is retained to represent any Investor in any other proceedings whatsoever in connection with this Agreement, then the Company shall pay to such Investor, as incurred by such Investor, all reasonable costs and expenses including attorneys’ fees incurred in connection therewith, in addition to all other amounts due hereunder. If this Agreement is placed by the Company in the hands of an attorney for enforcement against an Investor or is enforced by the Company against an Investor through any legal proceeding, then such Investor against whom this Agreement is so enforced shall pay to the Company, as incurred by the Company, all reasonable costs and expenses including reasonable attorneys’ fees incurred in connection therewith, in addition to all other amounts due hereunder.

 

(o)                                 Waivers.  No provision of this Agreement may be waived other than in a written instrument signed by the party against whom enforcement of such waiver is sought.  No failure or delay in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial

 

25

 

exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

 

(p)                                 Independent Nature of Investors’ Obligations and Rights.  The obligations of each Investor under the Transaction Documents are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as, and the Company acknowledges that the Investors do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Investors are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by the Transaction Documents or any matters, and the Company acknowledges that the Investors are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by the Transaction Documents. The decision of each Investor to purchase Purchase Shares pursuant to the Transaction Documents has been made by such Investor independently of any other Investor. Each Investor acknowledges that no other Investor has acted as agent for such Investor in connection with such Investor making its investment hereunder and that no other Investor will be acting as agent of such Investor in connection with monitoring such Investor’s investment in the Purchase Shares or enforcing its rights under the Transaction Documents. The Company and each Investor confirms that each Investor has independently participated with the Company in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose.  The use of a single agreement to effectuate the purchase and sale of the Purchase Shares contemplated hereby was solely in the control of the Company, not the action or decision of any Investor, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Investor.  It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and an Investor, solely, and not between the Company and the Investors collectively and not between and among the Investors.

 

(q)                                 Counsel to Lead Investor.  It is expressly understood and agreed by the Company and each of the Investors that Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. has acted as counsel and has rendered legal advice only to the Lead Investor, and not to the Company, any other Investor or any other Person in connection with the transactions contemplated by the Transaction Documents, and that each of the Company and each Investor other than the Lead Investor has relied for such matters on the advice of its own respective legal counsel.

 

*     *     *     *     *

 

26

 

IN WITNESS WHEREOF, the Investors and the Company have caused this Agreement to be duly executed as of the date first written above.

 

 

	
 
    	
THE COMPANY:
    
	
 
    	
 
    
	
 
    	
AXSOME THERAPEUTICS, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name: Herriot Tabuteau,   M.D.
    
	
 
    	
Title: Chief Executive   Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
[NAME]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
[NAME]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
[NAME]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

 

SCHEDULE I

 

Investors

 

	
Name and Address of Investor
    	
 
    	
Purchase
   Shares
    	
 
    	
Purchase
   Amount
    	
 
    	
State of
   Residence
    	
 
    	
Copies of Notices to:
    
	
 

 

\
    	
 
    	
[         ]
    	
 
    	
$EX-4.1

 Exhibit 4.1 
  

 
 DISCOVER CARD EXECUTION NOTE TRUST

 Issuer 
 and 

U.S. BANK NATIONAL ASSOCIATION 

Indenture Trustee 
 CLASS B(2018-2) TERMS DOCUMENT 
 Dated as of September 27, 2018 

to 
 SECOND AMENDED AND RESTATED
INDENTURE SUPPLEMENT 
 Dated as of December 22, 2015 

for the DiscoverSeries Notes 
 to

 AMENDED AND RESTATED INDENTURE 

Dated as of December 22, 2015 
  

 

 TABLE OF CONTENTS 

 

							
	 	 	 	  	Page	 
	 ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
	  	 	1	 
			
	 Section 1.01.
	 	Definitions	  	 	1	 
	 Section 1.02.
	 	Representations and Warranties of Issuer	  	 	10	 
	 Section 1.03.
	 	Representations and Warranties of Indenture Trustee	  	 	10	 
	 Section 1.04.
	 	Limitations on Liability	  	 	11	 
	 Section 1.05.
	 	Governing Law	  	 	11	 
	 Section 1.06.
	 	Counterparts	  	 	11	 
	 Section 1.07.
	 	Ratification of Indenture and Indenture Supplement	  	 	11	 
		
	 ARTICLE II THE CLASS B(2018-2)
NOTES
	  	 	11	 
			
	 Section 2.01.
	 	Creation and Designation	  	 	11	 
	 Section 2.02.
	 	Adjustments to Required Subordinated Percentages and Amount	  	 	12	 
	 Section 2.03.
	 	Interest Payment	  	 	12	 
	 Section 2.04.
	 	Notification of LIBOR	  	 	12	 
	 Section 2.05.
	 	Payments of Interest and Principal	  	 	13	 
	 Section 2.06.
	 	Form of Delivery of Class B(2018-2) Notes; Denominations	  	 	13	 
	 Section 2.07.
	 	Delivery and Payment for the Class B(2018-2) Notes	  	 	14	 
	 Section 2.08.
	 	Targeted Deposits to the Accumulation Reserve Account	  	 	14	 
	 Section 2.09.
	 	Additional Issuances of Notes	  	 	14	 
	 Section 2.10.
	 	Designation of Additional Amounts to Be Included in the Excess Spread Amount for the DiscoverSeries Notes	  	 	15	 
	 Section 2.11.
	 	No Payments from Interest Funding Subaccount for Accretion of Principal of the Class B(2018-2) Notes	  	 	15	 
	 Section 2.12.
	 	Calculation of Class B(2018-2) Accreted Discount	  	 	15	 
	 Section 2.13.
	 	Variable Accumulation Period	  	 	15	 
	 Section 2.14.
	 	Duties of the Indenture Trustee	  	 	16	 

  

							
		 		  	Exhibit	  	
				
		 	Exhibit A	  	Form of Class B Note	  	

 THIS CLASS B(2018-2) TERMS DOCUMENT (this
“Terms Document”), by and between DISCOVER CARD EXECUTION NOTE TRUST, a statutory trust created under the laws of the State of Delaware (the “Issuer”), and U.S. BANK NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States of America, as Indenture Trustee (the “Indenture Trustee”), is made and entered into as of September 27, 2018. 

Pursuant to this Terms Document, the Issuer shall create a new Tranche of Class B Notes of the DiscoverSeries and shall specify the
principal terms thereof. 
 ARTICLE I 

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 

Section 1.01. Definitions. For all purposes of this Terms Document, except as otherwise expressly provided or unless the context
otherwise requires: 
 (1) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as
well as the singular; 
 (2) all other terms used herein which are defined in the Note Purchase Agreement, dated as of September 27,
2018, by and among Discover Card Execution Note Trust, Discover Bank, Discover Funding LLC and the Purchaser (as defined therein) (as may be amended, supplemented, restated, amended and restated or otherwise modified from time to time, the
“Note Purchase Agreement”), the Indenture Supplement or the Indenture, either directly or by reference therein, have the meanings assigned to them therein; 

(3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting
principles and, except as otherwise herein expressly provided, the term “generally accepted accounting principles” with respect to any computation required or permitted hereunder means such accounting principles as are generally accepted
in the United States of America at the date of such computation; 
 (4) all references in this Terms Document to designated
“Articles,” “Sections” and other subdivisions are to the designated Articles, Sections and other subdivisions of this Terms Document; the words “herein,” “hereof” and “hereunder” and other words of
similar import refer to this Terms Document as a whole and not to any particular Article, Section or other subdivision; 
 (5) in the event
that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Indenture Supplement or the Indenture, the terms and provisions of this Terms Document shall be controlling, but solely
with respect to the Class B(2018-2) Notes; 
 (6) each capitalized term defined herein shall
relate only to the Class B(2018-2) Notes and no other Tranche of Notes issued by the Issuer; 

 (7) “including” and words of similar import will be deemed to be followed by
“without limitation”; and 
 (8) for purposes of determining any amount or making any calculation hereunder, such amount or
calculation, (x) if specified to be as of the first day of any Due Period, shall (a) include any Notes issued during such Due Period as if such Notes had been outstanding on the first day of such Due Period and (b) give effect to any
payments, deposits or other allocations made on the Distribution Date related to the prior Due Period, and (y) if specified to be as of the close of business on the last day of any Due Period shall give effect to any payments, deposits or other
allocations made on the related Distribution Date. 
 “Accumulation Amount” means $44,166,666.67; provided,
however, if the commencement of the Accumulation Period is delayed in accordance with Section 2.13 hereof, the Accumulation Amount shall be determined in accordance with the definition of “Accumulation Amount” in the Indenture
Supplement. 
 “Accumulation Commencement Date” means March 1, 2020, or such later date as the Calculation Agent on
behalf of the Issuer determines in accordance with Section 2.13 hereof. 
 “Accumulation Period” has the meaning set
forth in the Indenture Supplement. 
 “Accumulation Period Length” means 12 months; provided, however, if the
commencement of the Accumulation Period is delayed in accordance with Section 2.13 hereof, the Accumulation Period Length shall be determined in accordance with the definition of “Accumulation Period Length” in the Indenture
Supplement. 
 “Accumulation Reserve Funding Period” shall not apply if the Calculation Agent on behalf of the Issuer
notifies the Indenture Trustee that it expects the Accumulation Period Length to be adjusted to one (1) month, and otherwise shall mean a period commencing on the first Distribution Date on which a condition in the right column of the following
table was in effect on the immediately preceding Distribution Date, if such Distribution Date is a Distribution Date described in the corresponding left column of the following table, and ending on the Distribution Date immediately preceding the
earlier to occur of: 
 (x) the Expected Maturity Date for the Class B(2018-2) Notes and 

(y) the Principal Payment Date on which the Outstanding Dollar Principal Amount of the
Class B(2018-2) Notes is paid in full. 

  
 2 

			
	 Distribution Date:
	  	 Condition:

		
	(a) The Distribution Date occurring three (3) calendar months prior to the first scheduled Distribution Date of the Accumulation Period (as adjusted in accordance with Section 2.13 hereof) and any following Distribution
Date	  	No condition.
		
	(b) The Distribution Date occurring four (4) calendar months prior to the first scheduled Distribution Date of the Accumulation Period (as adjusted in accordance with Section 2.13 hereof) and any following Distribution
Date	  	The three-month rolling average Excess Spread Percentage is less than 4%.
		
	(c) The Distribution Date occurring six (6) calendar months prior to the first scheduled Distribution Date of the Accumulation Period (as adjusted in accordance with Section 2.13 hereof) and any following Distribution
Date	  	The three-month rolling average Excess Spread Percentage is less than 3%.
		
	(d) The Distribution Date occurring twelve (12) calendar months prior to the first scheduled Distribution Date of the Accumulation Period (as adjusted in accordance with Section 2.13 hereof) and any following Distribution
Date	  	The three-month rolling average Excess Spread Percentage is less than 2%.

 provided, however, if at any point the Accumulation Reserve Funding Period has not commenced because no
condition requiring funding has occurred or the Calculation Agent has determined that the Accumulation Period Length will be shortened to one (1) month, and subsequently a condition requiring funding occurs and the Calculation Agent determines
that the Accumulation Period Length will not be so shortened, the Accumulation Reserve Funding Period shall commence on the following Distribution Date. 

“Class B(2018-2) Accreted Discount” means, for any Distribution
Date, the amount of principal accreted on the Class B(2018-2) Notes in accordance with Section 2.12 hereof through the Monthly Principal Accretion Period ending on such
Distribution Date. 
 “Class B(2018-2) Adverse Event” means the
occurrence of any of the following: (a) an Early Redemption Event with respect to the Class B(2018-2) Notes or (b) an Event of Default and acceleration of the
Class B(2018-2) Notes; provided, however, that if the only such event to have occurred is an Excess Spread Early Redemption Event for which an Excess Spread Early Redemption Cure has
occurred, a Class B(2018-2) Adverse Event shall not be treated as continuing from and after the date of such cure. 

  
 3 

 “Class B(2018-2)
Note” means any Note, in the form set forth in Exhibit A hereto, designated therein as a Class B(2018-2) Note and duly executed and authenticated in accordance with the Indenture. 

“Class B(2018-2) Noteholder” means a Person in whose name a Class B(2018-2) Note is registered in the Note Register. 
 “Class B(2018-2) Termination Date” means the earliest to occur of (a) the Principal Payment Date on which the Outstanding Dollar Principal Amount of the
Class B(2018-2) Notes is paid in full, (b) the Legal Maturity Date and (c) the date on which the Indenture is discharged and satisfied pursuant to Article VI thereof. 

“Class B Tranche Interest Allocation” means, notwithstanding anything to the contrary in the Indenture
Supplement, for the Class B(2018-2) Notes, zero; provided that, if the Outstanding Dollar Principal Amount is not paid in full on or prior to the Expected Maturity Date, for any Distribution Date after
the Expected Maturity Date, the Class B Tranche Interest Allocation shall be the Class B Interest for the Class B(2018-2) Notes plus any Interest Allocation Shortfall from the prior
Distribution Date. Following a Receivables Sale for the Class B(2018-2) Notes, the Class B Tranche Interest Allocation shall be zero. 

“Discount Amount” means initially $40,754,911; provided that following any issuance of additional Class B(2018-2) Notes in accordance with Section 2.09, the Discount Amount shall mean the amount specified in the Notice of Additional Issuance. 

“Encumbered Amount” means, for the Class B(2018-2) Notes, an amount equal to

 (a) the Nominal Liquidation Amount of the Class B(2018-2) Notes, divided by 

(b) the Nominal Liquidation Amount of all Tranches of Class B Notes in the DiscoverSeries, multiplied by 

(c) the aggregate Required Subordinated Amount of Class B Notes for all Tranches of Class A Notes in the DiscoverSeries with a
Required Subordinated Amount of Class B Notes greater than zero. 
 “Encumbered Required Subordinated Amount of
Class C Notes” means, for the Class B(2018-2) Notes, an amount equal to the product of 

(a) the Encumbered Amount for the Class B(2018-2) Notes, and 

(b) the Required Subordinated Percentage of Class C Notes (Encumbered) for the
Class B(2018-2) Notes. 
 “Encumbered Required Subordinated Amount of
Class D Notes” means, for the Class B(2018-2) Notes, an amount equal to the product of 

(a) the Encumbered Amount for the Class B(2018-2) Notes and 

  
 4 

 (b) the Required Subordinated Percentage of Class D Notes (Encumbered) for the Class B(2018-2) Notes. 
 “Excess Spread Percentage” for any Distribution Date means
a fraction, the numerator of which is the Excess Spread Amount for such Distribution Date multiplied by 12 and the denominator of which is the sum of the Nominal Liquidation Amounts of all Tranches of DiscoverSeries Notes as of the first day
of the related Due Period. 
 “Expected Maturity Date” means March 15, 2021. 

“Indenture” means the Amended and Restated Indenture, dated as of December 22, 2015, by and between the Issuer and
Indenture Trustee, as supplemented by the Indenture Supplement, as such agreement may be further amended, supplemented, restated, amended and restated, replaced or otherwise modified from time to time. 

“Indenture Supplement” means the Second Amended and Restated Indenture Supplement for the DiscoverSeries Notes, dated as of
December 22, 2015, by and between the Issuer and the Indenture Trustee, as the same may be further amended, supplemented, restated, amended and restated, replaced or otherwise modified from time to time. 

“Initial Dollar Principal Amount” means $489,245,089, or such higher amount as is specified in any Notice of Additional
Issuance under Section 2.09. 
 “Interest Accrual Period” means, with respect to any Interest Payment Date, the period
from and including the previous Interest Payment Date to but excluding such Interest Payment Date (or, in the case of the first Interest Payment Date occurring after the Expected Maturity Date, from and including the Expected Maturity Date to but
excluding such Interest Payment Date). 
 “Interest Payment Date” means, if the Outstanding Dollar Principal Amount is not
paid in full on or prior to the Expected Maturity Date, the fifteenth day of each month commencing on April 15, 2021, or if such fifteenth day is not a Business Day, the next succeeding Business Day. 

“Issuance Date” means September 27, 2018 with respect to all
Class B(2018-2) Notes issued on the date hereof and, with respect to any additional Class B(2018-2) Notes issued pursuant to Section 2.09, any Issuance
Date specified in the Notice of Additional Issuance delivered thereunder. 
 “Legal Maturity Date” means September 15,
2023. 
 “LIBOR” means, with respect to any LIBOR Determination Date, the rate for deposits in United States dollars with a
duration comparable to the relevant Interest Accrual Period which appears on Reuters Screen LIBOR01 as of 11:00 a.m., London time, on such day. If such rate does not appear on Reuters Screen LIBOR01, the rate will be determined by the Indenture
Trustee on the basis of the rates at which deposits in United States dollars are offered by major banks in the London interbank market, selected by the Calculation Agent by written notice to the Indenture Trustee, at approximately 11:00 a.m., London
time, on such day to prime banks in the London interbank market with a duration comparable to the relevant Interest Accrual Period 

  
 5 

 
commencing on that day. The Indenture Trustee will request the principal London office of four banks selected by the Calculation Agent to provide a quotation of its rate. If at least two such
quotations are provided, the rate will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate for that day will be the arithmetic mean of the rates quoted by four major banks in New York City,
selected by the Calculation Agent, at approximately 11:00 a.m., New York City time, on that day for loans in United States dollars to leading European banks with a duration comparable to the relevant Interest Accrual Period commencing on that day.
If LIBOR with respect to a LIBOR Determination Date is not determined pursuant to the foregoing, LIBOR with respect to such LIBOR Determination Date will be LIBOR with respect to the immediately prior LIBOR Determination Date. 

“LIBOR Business Day,” if applicable, shall mean a day other than a Saturday or a Sunday on which banking institutions in both
the City of London, England and in New York, New York are not required or authorized by law to be closed. 
 “LIBOR Determination
Date” means the second LIBOR Business Day immediately preceding the commencement of an Interest Accrual Period. 
 “Nominal
Liquidation Amount” means, notwithstanding anything to the contrary in the Indenture Supplement, with respect to the Class B(2018-2) Notes: 

(a) on the Issuance Date thereof, $530,000,000; 

(b) on any Distribution Date thereafter such amount as increased or decreased pursuant to Section 3.01 of the Indenture
Supplement and Section 2.09 hereof; 
 (c) on any date, other than a Distribution Date, on which Prefunding Excess
Amount are withdrawn from the applicable Principal Funding Subaccount pursuant to Section 4.04 of the Indenture Supplement, the Nominal Liquidation Amount as of the beginning of such date plus the Prefunding Excess Amount so withdrawn;
and 
 (d) on and after the date of a Receivables Sale for the Class B(2018-2)
Notes, zero. 
 “Note Interest Rate” means zero; provided that if the Outstanding Dollar Principal Amount is not paid in
full on or prior to the Expected Maturity Date, the Note Interest Rate for each Interest Accrual Period shall be LIBOR + 0.45% per annum, calculated on the basis of the actual number of days elapsed and a
360-day year; provided, further, that if the sum of LIBOR + 0.45% for such Interest Accrual Period is less than 0.00%, then the Note Interest Rate for such Interest Accrual Period will be deemed to be 0.00%.

 “Notice of Additional Issuance” has the meaning set forth in Section 2.09 hereof. 

“Outstanding Dollar Principal Amount” means, for the Class B(2018-2) Notes,
notwithstanding anything to the contrary in the Indenture Supplement, (a) prior to an issuance of additional Class B(2018-2) Notes, the sum of (i) the Initial Dollar Principal Amount of such
Notes and (ii) the Class B(2018-2) Accreted Discount as determined in accordance with Section 2.12 hereof, minus (i) the aggregate amount of principal paid with respect
to the Class B(2018-2) 

  
 6 

 
Notes as of the relevant date of determination and (ii) any net losses of principal of funds on deposit in respect of principal in the Principal Funding Account or the related Principal
Funding Subaccount, as applicable, for the Class B(2018-2) Notes and (b) following the issuance of additional Class B(2018-2) Notes, the sum of
(i) the Outstanding Dollar Principal Amount of the Class B(2018-2) Notes determined as of the date of such additional issuance and (ii) the
Class B(2018-2) Accreted Discount accreted after the date of such additional issuance, as determined in accordance with Section 2.12 hereof, minus (i) the aggregate amount, as of the
relevant date of determination, of principal paid with respect to the Class B(2018-2) Notes after the date of such additional issuance and (ii) any net losses, as of the relevant date of
determination, of principal of funds on deposit in respect of principal in the Principal Funding Account or the related Principal Funding Subaccount, as applicable, for the Class B(2018-2) Notes after the
date of such additional issuance. Notwithstanding the foregoing, if a Receivables Sale has occurred with respect to the Class B(2018-2) Notes, the Outstanding Dollar Principal Amount shall be zero. 

“Required Daily Deposit Target Finance Charge Amount” means, for any day in a Due Period,
an amount equal to the Class B Tranche Interest Allocation for the related Distribution Date; provided, however, that for purposes of determining the Required Daily Deposit Target Finance Charge Amount on any day on which the
Class B Tranche Interest Allocation cannot be determined because the LIBOR Determination Date for the applicable Interest Accrual Period has not yet occurred, the Required Daily Deposit Target Finance Charge Amount shall be the Class B
Tranche Interest Allocation determined based on a pro forma calculation made on the assumption that LIBOR will be LIBOR for the applicable period determined on the first day of such calendar month, multiplied by 1.25.  
 “Required Daily Deposit Target Principal Amount” means, for any
day in a Due Period, (i) if such day is in a Due Period in the Accumulation Period for the Class B(2018-2) Notes, and the Servicer Rating Condition is not satisfied, the Accumulation Amount,
(ii) if such day is in a Due Period in the Accumulation Period for the Class B(2018-2) Notes and the Servicer Rating Condition is satisfied, zero, (iii) if such day is on or after the occurrence
and during the continuance of a Class B(2018-2) Adverse Event, the lesser of (x) the Outstanding Dollar Principal Amount of the Class B(2018-2) Notes and
(y) the Nominal Liquidation Amount of the Class B(2018-2) Notes, and (iv) in all other circumstances, zero. 

“Required Subordinated Amount of Class C Notes” means, for the
Class B(2018-2) Notes for any date of determination, an amount equal to the sum of 

(a) the Unencumbered Required Subordinated Amount of Class C Notes for such
Class B(2018-2) Notes and 
 (b) the Encumbered Required Subordinated Amount of
Class C Notes for such Class B(2018-2) Notes; 
 provided, however, that for any date of
determination on or after the occurrence and during the continuation of a Class B(2018-2) Adverse Event, the Required Subordinated Amount of Class C Notes for the
Class B(2018-2) Notes will be the greater of 
 (x) the amount determined above
for such date of determination and 

  
 7 

 (y) the amount determined above for the date immediately prior to the date
on which such Class B(2018-2) Adverse Event shall have occurred. 
 “Required
Subordinated Amount of Class D Notes” means, for the Class B(2018-2) Notes for any date of determination, an amount equal to the sum of 

(a) the Unencumbered Required Subordinated Amount of Class D Notes for such
Class B(2018-2) Notes and 
 (b) the Encumbered Required Subordinated Amount of
Class D Notes for such Class B(2018-2) Notes; 
 provided, however, that for any date of
determination on or after the occurrence and during the continuation of a Class B(2018-2) Adverse Event, the Required Subordinated Amount of Class D Notes for the
Class B(2018-2) Notes will be the greater of 
 (x) the amount determined above
for such date of determination and 
 (y) the amount determined above for the date immediately prior to the date on which
such Class B(2018-2) Adverse Event shall have occurred. 
 “Required Subordinated
Percentage of Class C Notes (Encumbered)” means, for the Class B(2018-2) Notes, 127.27272728%, subject to adjustment in accordance with Section 2.02. 

“Required Subordinated Percentage of Class C Notes (Unencumbered)” means, for the Class B(2018-2) Notes, 8.28402367%, subject to adjustment in accordance with Section 2.02. 

“Required Subordinated Percentage of Class D Notes (Encumbered)” means, for the Class B(2018-2) Notes, 154.54545455%, subject to adjustment in accordance with Section 2.02. 

“Required Subordinated Percentage of Class D Notes (Unencumbered)” means, for the Class B(2018-2) Notes, 10.05917160%, subject to adjustment in accordance with Section 2.02. 

“Reuters Screen LIBOR01” means the display page currently so designated on the Reuters Screen (or such other page as may
replace that page on that service for the purpose of displaying comparable rates or prices). 
 “Servicer Rating Condition”
means, a condition that will be satisfied if the then current Servicer of the Accounts either (i) has a long-term rating of at least BBB- by Standard & Poor’s (if rated by
Standard & Poor’s), BBB- by Fitch (if rated by Fitch) or Baa3 by Moody’s (if rated by Moody’s) or (ii) does not have a long-term rating from any Note Rating Agency but has a
short-term debt rating of at least A-2 by Standard & Poor’s (if rated by Standard & Poor’s), F3 by Fitch (if rated by Fitch) or P-2 by
Moody’s (if rated by Moody’s). 
 “Stated Principal Amount” means $530,000,000 or such higher amount as is
specified in any Notice of Additional Issuance under Section 2.09. 

  
 8 

 “Targeted Accumulation Reserve Subaccount Deposit” means, with respect to
any Distribution Date during the Accumulation Reserve Funding Period, an amount equal to (i) 0.5% of the Outstanding Dollar Principal Amount of the Class B(2018-2) Notes as of the close of business on the
last day of the related Due Period or (ii) any other amount designated by the Calculation Agent on behalf of the Issuer. 

“Targeted Principal Deposit” means, for the Class B(2018-2) Notes,
notwithstanding anything to the contrary in the Indenture Supplement, 
 (a) During the Accumulation Period, beginning with
the Accumulation Commencement Date for the Class B(2018-2) Notes, (x) (i) the Accumulation Amount for the Class B(2018-2) Notes, plus (ii) any
Accumulation Amount that was scheduled to be deposited on any previous Distribution Date in the Accumulation Period that was not so deposited, minus (y) the amount on deposit in the Principal Funding Subaccount for the Class B(2018-2) Notes that was applied to the amount in clause (x) in accordance with Section 4.04(a), 

(b) If the Class B(2018-2) Notes have been accelerated after the occurrence of an
Event of Default, or if an Early Redemption Event with respect to the Class B(2018-2) Notes has occurred (other than an Excess Spread Early Redemption Event for which an Excess Spread Early Redemption
Cure has occurred), with respect to each Distribution Date following the Due Period in which such Event of Default or Early Redemption Event has occurred, the lesser of (x) the Outstanding Dollar Principal Amount of such Tranche and
(y) the Nominal Liquidation Amount of such Tranche, in each case as of the last day of the preceding Due Period, and 

(c) If a Receivables Sale has occurred for the Class B(2018-2) Notes, zero. 

“Unencumbered Amount” means, for the Class B(2018-2) Notes, an amount equal to
the Nominal Liquidation Amount of the Class B(2018-2) Notes minus the Encumbered Amount for the Class B(2018-2) Notes. 

“Unencumbered Required Subordinated Amount of Class C Notes” means, for the
Class B(2018-2) Notes, an amount equal to the product of 
 (a) the Unencumbered
Amount for the Class B(2018-2) Notes and 
 (b) the Required Subordinated
Percentage of Class C Notes (Unencumbered) for the Class B(2018-2) Notes. 

“Unencumbered Required Subordinated Amount of Class D Notes” means, for the
Class B(2018-2) Notes, an amount equal to the product of 
 (a) the Unencumbered
Amount for the Class B(2018-2) Notes and 
 (b) the Required Subordinated
Percentage of Class D Notes (Unencumbered) for the Class B(2018-2) Notes. 

  
 9 

 Section 1.02. Representations and Warranties of Issuer. The Issuer represents
and warrants that: 
 (a) the Issuer has been duly formed and is validly existing as a statutory trust in good standing under the laws of the
State of Delaware, and has full power and authority to execute and deliver this Terms Document and to perform the terms and provisions hereof; 

(b) the execution, delivery and performance of this Terms Document by the Issuer have been duly authorized by all necessary limited liability
company and statutory trust proceedings of the Beneficiary and the Owner Trustee, do not require any approval or consent of any governmental agency or authority, and do not and will not conflict with any material provision of the Certificate of
Trust or the Trust Agreement of the Issuer; 
 (c) this Terms Document is the valid, binding and enforceable obligation of the Issuer,
except as the same may be limited by receivership, insolvency, reorganization, moratorium or other laws relating to the enforcement of creditors’ rights generally or by general equity principles; 

(d) to the best of the Issuer’s knowledge, this Terms Document will not conflict with any law or governmental regulation or court decree
applicable to it; 
 (e) the Issuer is not required to be registered under the Investment Company Act; 

(f) all information heretofore furnished by the Issuer in writing to the Indenture Trustee for purposes of or in connection with this Terms
Document or any transaction contemplated hereby is, and all such information hereafter furnished by the Issuer in writing to the Indenture Trustee will be, true and accurate in every material respect or based on reasonable estimates on the date as
of which such information is stated or certified; and 
 (g) to the best knowledge of the Issuer, there are no proceedings or investigations
pending against the Issuer before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Issuer (A) asserting the invalidity of this Terms Document, (B) seeking to
prevent the consummation of any of the transactions contemplated by this Terms Document or (C) seeking any determination or ruling which in the Issuer’s judgment would materially and adversely affect the performance by the Issuer of its
obligations under this Terms Document or the validity or enforceability of this Terms Document. 
 Section 1.03. Representations and
Warranties of Indenture Trustee. The Indenture Trustee represents and warrants and any successor trustee shall represent and warrant that: 

(a) the Indenture Trustee is organized, existing and in good standing under the laws of the United States of America; 

(b) the Indenture Trustee has full power, authority and right to execute, deliver and perform the Indenture and this Terms Document, and has
taken all necessary action to authorize the execution, delivery and performance by it of this Terms Document; and 

  
 10 

 (c) this Terms Document has been duly executed and delivered by the Indenture Trustee. 

Section 1.04. Limitations on Liability. 

(a) It is expressly understood and agreed by the parties hereto that (i) this Terms Document is executed and delivered by the Owner
Trustee not individually or personally but solely as Owner Trustee under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (ii) each of the representations, undertakings and agreements herein made on
the part of the Issuer is made and intended not as a personal representation, undertaking or agreement by the Owner Trustee but is made and intended for the purpose of binding only the Issuer, (iii) nothing herein contained will be construed as
creating any liability on the Owner Trustee individually or personally, to perform any covenant of the Issuer either expressed or implied herein, all such liability, if any, being expressly waived by the parties to this Terms Document and by any
Person claiming by, through or under them and (iv) under no circumstances will the Owner Trustee be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Issuer under this Terms Document or any related documents. 
 (b) None of the
Indenture Trustee, the Owner Trustee, the Calculation Agent, the Beneficiary, the Depositor, any Master Servicer or any Servicer or any of their respective officers, directors, employees, incorporators or agents will have any liability with respect
to this Terms Document, and recourse may be had solely to the Collateral pledged to secure the Class B(2018-2) Notes under the Indenture, the Indenture Supplement and this Terms Document. 

Section 1.05. Governing Law. THIS TERMS DOCUMENT WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATION LAW, WITHOUT REFERENCE TO ANY CONFLICT OF LAW PROVISIONS THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANY OTHER STATE. 

Section 1.06. Counterparts. This Terms Document may be executed in any number of counterparts, each of which when so executed will
be deemed to be an original, but all such counterparts will together constitute but one and the same instrument. 
 Section 1.07.
Ratification of Indenture and Indenture Supplement. As supplemented by this Terms Document, each of the Indenture and the Indenture Supplement is in all respects ratified and confirmed and the Indenture as supplemented by the Indenture
Supplement and this Terms Document shall be read, taken and construed as one and the same instrument. 
 ARTICLE II 

THE CLASS B(2018-2) NOTES 

Section 2.01. Creation and Designation. There is hereby created a Tranche of Class B Notes to be issued pursuant to this
Terms Document, the Indenture and the Indenture Supplement to be known as the “DiscoverSeries Class B(2018-2) Notes.” 

  
 11 

 Section 2.02. Adjustments to Required Subordinated Percentages and Amount. 

(a) On any date, the Issuer may, at the direction of the Beneficiary, change the Required Subordinated Percentage of Class C Notes
(Encumbered), the Required Subordinated Percentage of Class C Notes (Unencumbered), the Required Subordinated Percentage of Class D Notes (Encumbered), and the Required Subordinated Percentage of Class D Notes (Unencumbered), in each
case for the Class B(2018-2) Notes, without the consent of any Noteholders; provided that the Issuer has received written confirmation from each applicable Note Rating Agency that the change in
such percentage will not result in a Ratings Effect for any Tranche of Outstanding DiscoverSeries Notes. 
 (b) On any date, the Issuer may,
at the direction of the Beneficiary, replace all or a portion of the Required Subordinated Amount of Class C Notes or the Required Subordinated Amount of Class D Notes, in each case for the
Class B(2018-2) Notes with a different form of credit enhancement (including, without limitation, a cash collateral account, a letter of credit, a reserve account, a surety bond, an insurance policy or a
collateral interest, or any combination thereof) and may add such definitions and other terms and make such additional amendments to this Terms Document as shall be necessary for such replacement without the consent of any Noteholders,
provided that the Issuer has received written confirmation from each applicable Note Rating Agency that such replacement, such addition and such other amendments will not result in a Ratings Effect for any Tranche of Outstanding DiscoverSeries
Notes. 
 Section 2.03. Interest Payment. For each Interest Payment Date, the amount of interest due with respect to the Class B(2018-2) Notes shall be an amount equal to 
  

	 	(i)	 (A) a fraction, the numerator of which is the actual number of days in the related Interest Accrual Period and
the denominator of which is 360, times 

  

	 	 	 (B) the Note Interest Rate in effect with respect to such related Interest Accrual Period, times

  

	 	(ii)	 the Outstanding Dollar Principal Amount of the Class B(2018-2)
Notes determined as of the first date of such related Interest Accrual Period, plus 

 any Class B Tranche Interest Allocation
Shortfall for such Class B(2018-2) Notes for the immediately preceding Distribution Date, together with interest thereon at the Note Interest Rate in effect with respect to such related Interest Accrual
Period, calculated on the basis of the actual number of days in the related Interest Accrual Period and a 360-day year. 

Section 2.04. Notification of LIBOR. On each LIBOR Determination Date, the Indenture Trustee shall send to the Issuer, the
Beneficiary, each applicable Master Servicer and any stock exchange on which the Class B(2018-2) Notes are then listed (if the rules of such exchange so require), by facsimile transmission or electronic
transmission, notification of LIBOR for the following Interest Accrual Period. 

  
 12 

 Section 2.05. Payments of Interest and Principal. 

(a) The Issuer will cause interest to be paid on each Interest Payment Date and principal to be paid on the Expected Maturity Date;
provided, however, that it shall not be an Event of Default if principal is not paid in full on such Expected Maturity Date unless funds for such payment have been allocated in accordance with Section 3.01 of the Indenture
Supplement; and provided, further, that if a Class B(2018-2) Adverse Event has occurred and is continuing, principal will instead be payable in monthly installments on each Principal Payment
Date for the Class B(2018-2) Notes in accordance with Sections 3.01 and 3.05 of the Indenture Supplement. All payments of interest and principal on the
Class B(2018-2) Notes shall be made as set forth in Section 1102 of the Indenture. 
 (b)
The right of the Class B(2018-2) Noteholders to receive payments from the Issuer will terminate on the Class B(2018-2) Termination Date. 

(c) All payments of principal, interest or other amounts to the Class B(2018-2) Noteholders will
be made pro rata based on the Stated Principal Amount of their Class B(2018-2) Notes. 

Section 2.06. Form of Delivery of Class B(2018-2) Notes; Denominations.

 (a) The Class B(2018-2) Notes shall be delivered in the form of a definitive Registered Note
as provided in Section 201 of the Indenture. The form of the Class B(2018-2) Notes is attached hereto as Exhibit A. 

(b) The Class B(2018-2) Notes shall, until such time as the laws of any jurisdiction in which
they are offered or sold no longer restrict the transfer or sale thereof, bear a legend in substantially the following form: 
 THIS NOTE (OR
ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A. THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF DISCOVER CARD EXECUTION NOTE TRUST, DISCOVER FUNDING LLC AND DISCOVER BANK THAT (A) THIS NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT OR, IN THE CASE OF THE INITIAL HOLDER HEREOF ONLY, ANOTHER APPLICABLE
EXEMPTION UNDER THE SECURITIES ACT, (2) TO DISCOVER CARD EXECUTION NOTE TRUST, DISCOVER FUNDING LLC DISCOVER BANK OR THEIR AFFILIATES OR (3) PURSUANT TO AN 

  
 13 

 
EFFECTIVE REGISTRATION STATEMENT, IF APPLICABLE, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAW OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY SUBSEQUENT PURCHASER FROM IT OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. 

No Class B(2018-2) Notes shall be transferred except in accordance with the transfer restrictions described in
the legend set forth above. 
 (c) The Class B(2018-2) Notes will be issued in minimum
denominations of $100,000 and integral multiples of $1,000 in excess of that amount. 
 Section 2.07. Delivery and Payment for the
Class B(2018-2) Notes. The Issuer shall execute and deliver the Class B(2018-2) Notes to the Indenture Trustee for authentication, and the
Indenture Trustee shall deliver the Class B(2018-2) Notes when authenticated, each in accordance with Sections 203 and 303 of the Indenture. 

Section 2.08. Targeted Deposits to the Accumulation Reserve Account. The deposit targeted to be made to the Accumulation Reserve
Subaccount for the Class B(2018-2) Notes for any Due Period during the Accumulation Reserve Funding Period will be an amount equal to the Targeted Accumulation Reserve Subaccount Deposit minus any
amount on deposit in the Accumulation Reserve Subaccount for the Class B(2018-2) Notes. 

Section 2.09. Additional Issuances of Notes. Subject to clauses (ii), (iii), (iv) and (v) of Sections 2.02 and
Section 2.03 of the Indenture Supplement, the Issuer may issue additional Class B(2018-2) Notes, so long as the following conditions precedent are satisfied: 

(a) the Issuer shall have given the Indenture Trustee written notice of such issuance of additional
Class B(2018-2) Notes (the “Notice of Additional Issuance”) at least one (1) Business Day in advance of the Issuance Date thereof, which notice shall include: 

 

	 	(i)	 the Issuance Date of such additional Class B(2018-2) Notes;

  

	 	(ii)	 the amount of such additional Class B(2018-2) Notes being offered,
the purchase price for such additional Class B(2018-2) Notes and the resulting Initial Dollar Principal Amount, Stated Principal Amount and Nominal Liquidation Amount of
Class B(2018-2) Notes; 

  

	 	(iii)	 the Outstanding Dollar Principal Amount of the Class B(2018-2)
Notes after giving effect to the issuance of the additional Class B(2018-2) Notes and all prior accretions of principal as determined in accordance with Section 2.12; 

 

	 	(iv)	 the Discount Amount after giving effect to such additional
Class B(2018-2) Notes; and 

  
 14 

	 	(v)	 any other terms that the Issuer set forth in such notice of issuance of additional Class B(2018-2) Notes to clarify the rights of Holders of such additional Class B(2018-2) Notes or the effect of such issuance of additional Class B(2018-2) Notes on any calculations to be made with respect to the Class B(2018-2) Notes, Class B, or the Issuer. 

All such terms shall be incorporated into and form a part of this Terms Document on and after the effective date of such
Class B(2018-2) Notes; and 
 (b) no
Class B(2018-2) Adverse Event has occurred and is continuing. 
 The Issuer shall not have to
satisfy the conditions set forth in Section 310 of the Indenture in connection with an issuance of additional Class B(2018-2) Notes so long as such conditions were satisfied or waived in connection
with the initial issuance of Class B(2018-2) Notes. 
 Section 2.10. Designation of
Additional Amounts to Be Included in the Excess Spread Amount for the DiscoverSeries Notes. At any time that any outstanding Series of certificates issued by the Master Trust provides that the Series Principal Collections allocated to such
Series will be deposited into the Group Finance Charge Collections Reallocation Account for the Master Trust to the extent necessary for application to cover shortfalls for other Series issued by the Master Trust, an amount equal to (x) all
Series Principal Collections allocated to such Series, multiplied by (y) a fraction, the numerator of which is the sum of the Nominal Liquidation Amounts for each outstanding Tranche of the DiscoverSeries Notes (including the Class B(2018-2) Notes) and the denominator of which is (i) the Aggregate Investor Interest for the Master Trust minus (ii) the sum of the Series Investor Interests for all such Series that
provide that the Series Principal Collections allocated to such Series will be so deposited, is hereby designated to be included in the Excess Spread Amount and shall be treated as Series Finance Charge Amounts for the DiscoverSeries. 

Section 2.11. No Payments from Interest Funding Subaccount for Accretion of Principal of the Class B(2018-2) Notes. Section 3.04(4) of the Indenture Supplement shall not apply to the Class B(2018-2) Notes. 

Section 2.12. Calculation of Class B(2018-2) Accreted Discount. The
amount of Class B(2018-2) Accreted Discount as of the end of any Due Period shall be determined on a straight-line basis and shall be equal to the product of (x) a fraction the numerator of which
shall be the number of Due Periods elapsed since the Note Issuance Date (or if additional Class B(2018-2) Notes have been issued under Section 2.09, since the Issuance Date of such additional Notes)
and the denominator of which shall be the number of Due Periods from the Note Issuance Date (or the Issuance Date of such additional Notes) to and including the Due Period related to the Expected Maturity Date and (y) the Discount Amount. 

Section 2.13. Variable Accumulation Period. Notwithstanding anything to the contrary in Section 4.02 of the Indenture
Supplement, the Calculation Agent on behalf of the Issuer shall, by written notice to the Indenture Trustee, delay the commencement of the Accumulation Period for the Class B(2018-2) Notes and determine a
new Accumulation Commencement Date, subject 

  
 15 

 
to the conditions set forth in this Section 2.13; provided, however, that the Accumulation Period shall commence no later than the first day of the Due Period related to the Expected
Maturity Date for the Class B(2018-2) Notes. Any such delay by the Calculation Agent on behalf of the Issuer shall be made no later than the last day of the Due Period immediately preceding the first day
of the first Due Period in the scheduled Accumulation Period (after giving effect to any prior delay in the commencement of the Accumulation Period pursuant to this Section 2.13). 

The Calculation Agent on behalf of the Issuer shall cause such delay if the Calculation Agent determines in good faith that each of the
following conditions will be satisfied: (i) the Calculation Agent on behalf of the Issuer delivers to the Indenture Trustee a certificate to the effect that the Calculation Agent on behalf of the Issuer reasonably believes that, based on the
payment rate and the anticipated availability of Series Principal Amounts and Reallocated Principal Amounts, the delay in the commencement of the Accumulation Period for the Class B(2018-2) Notes will not
result in any Tranche of Notes not being paid in full on the relevant Expected Maturity Date; (ii) such delay is permitted under the Series 2007-CC Series Supplement or any other applicable agreement
relating to any Additional Collateral Certificate; and (iii) the Accumulation Amount, the Accumulation Commencement Date and the Accumulation Period Length shall have been adjusted. The Calculation Agent on behalf of the Issuer shall not be
required to obtain confirmation from the applicable Note Rating Agencies that such delay in the commencement of the Accumulation Period will not result in a Ratings Effect for any Tranche of Outstanding DiscoverSeries Notes. The Calculation Agent on
behalf of the Issuer shall provide written notice to each applicable Note Rating Agency in the event that the commencement of the Accumulation Period for the Class B(2018-2) Notes is delayed pursuant to
this Section 2.13. 
 Section 2.14. Duties of the Indenture Trustee. For the avoidance of doubt, the Indenture Trustee
undertakes to perform only such duties as are specifically set forth in the Indenture, the Indenture Supplement, the Pooling and Servicing Agreement, any Series Supplement and this Agreement and as such shall have no obligation or responsibility to
monitor or enforce compliance with Regulation RR, nor shall be liable to any Person for any violation of Regulation RR; provided that nothing in this Section 2.14 shall alter the Indenture Trustee’s duties, obligations or standard of care
as set forth in the Indenture or any Indenture Supplement. It is understood and acknowledged that the Indenture Trustee has not provided any advice with respect to the acquisition of the Class B(2018-2)
Notes, and has no financial interest in the acquisition of such Class B(2018-2) Notes. 

[Remainder of page intentionally blank; signature page follows] 

  
 16 

 IN WITNESS WHEREOF, the parties hereto have caused this Terms Document to be duly executed,
all as of the day and year first above written. 
  

			
	 DISCOVER CARD EXECUTION NOTE TRUST,

as Issuer

		
	By:	 	 Wilmington Trust Company,
 not in its
individual capacity but solely
 as Owner Trustee

		
	By:	 	/s/ Dorri Costello
		 	Name: Dorri Costello
		 	Title: Vice President

  

			
	 U.S. BANK NATIONAL ASSOCIATION,

as Indenture Trustee

		
	By:	 	/s/ Julia Linian
		 	Name: Julia Linian
		 	Title: Vice President

  
 [Signature Page to Class
B(2018-2) Terms Document] 

 Exhibit A 

Form of Class B Note 

DISCOVERSERIES CLASS B(2018-2) NOTE 

THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF
THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A. THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF DISCOVER CARD EXECUTION NOTE TRUST, DISCOVER FUNDING LLC AND DISCOVER BANK THAT
(A) THIS NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT OR, IN THE CASE OF THE INITIAL HOLDER HEREOF ONLY, ANOTHER APPLICABLE EXEMPTION UNDER THE SECURITIES ACT, (2) TO DISCOVER CARD EXECUTION NOTE TRUST, DISCOVER FUNDING LLC, DISCOVER BANK OR THEIR AFFILIATES OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, IF APPLICABLE, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAW OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY SUBSEQUENT PURCHASER FROM IT OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. 
 THE
HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT AT ANY TIME INSTITUTE AGAINST THE ISSUER, ANY MASTER TRUST OR ANY SPECIAL PURPOSE ENTITY THAT ACTS AS A DEPOSITOR WITH RESPECT TO ANY MASTER TRUST OR THE ISSUER, OR JOIN IN ANY
INSTITUTION AGAINST THE ISSUER, ANY MASTER TRUST OR ANY SPECIAL PURPOSE ENTITY THAT ACTS AS A DEPOSITOR WITH RESPECT TO ANY MASTER TRUST OR THE ISSUER, ANY RECEIVERSHIP, INSOLVENCY, BANKRUPTCY OR SIMILAR PROCEEDINGS, OR OTHER PROCEEDINGS UNDER ANY
UNITED STATES FEDERAL OR STATE BANKRUPTCY OR SIMILAR LAW IN CONNECTION WITH ANY OBLIGATIONS RELATING TO THE NOTES, THE INDENTURE, ANY DERIVATIVE AGREEMENT, ANY SUPPLEMENTAL CREDIT ENHANCEMENT AGREEMENT AND ANY SUPPLEMENTAL LIQUIDITY AGREEMENT. 

THE HOLDER OF THIS NOTE, BY ACCEPTANCE OF THIS NOTE, AND EACH HOLDER OF A BENEFICIAL INTEREST IN THIS NOTE, BY THE ACQUISITION OF A BENEFICIAL
INTEREST THEREIN, AGREE TO TREAT THE NOTES AS INDEBTEDNESS FOR APPLICABLE FEDERAL, STATE AND LOCAL INCOME AND FRANCHISE TAX LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON OR MEASURED BY INCOME. 

 THIS NOTE HAS BEEN ISSUED WITH “ORIGINAL ISSUE DISCOUNT” (WITHIN THE MEANING OF
SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED). UPON WRITTEN REQUEST TO DISCOVER BANK, 12 READ’S WAY, NEW CASTLE, DELAWARE 19720, ATTENTION: TREASURER, DISCOVER BANK WILL PROMPTLY MAKE AVAILABLE TO ANY HOLDER OF THIS NOTE THE
FOLLOWING INFORMATION: (1) THE ISSUE PRICE AND ISSUE DATE OF THE NOTE, (2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THE NOTE AND (3) THE YIELD TO MATURITY OF THE NOTE. 

DISTRIBUTIONS OF PRINCIPAL AND INTEREST TO THE HOLDER OF THIS CLASS B NOTE ARE SUBORDINATE TO THE PAYMENT ON EACH DISTRIBUTION DATE OF
PRINCIPAL OF AND INTEREST ON THE CLASS A NOTES OF THE DISCOVERSERIES AND THE PAYMENT OF CERTAIN OTHER AMOUNTS, TO THE EXTENT AND AS DESCRIBED IN THE INDENTURE AND INDENTURE SUPPLEMENT REFERRED TO HEREIN. 

			
	REGISTERED	  	$[•]*
	No. [•]	  	

 DISCOVER CARD EXECUTION NOTE TRUST 

DISCOVERSERIES CLASS B(2018-2) NOTE 

DISCOVER CARD EXECUTION NOTE TRUST, a statutory trust created under the laws of the State of Delaware (herein referred to as the
“Issuer” or the “Note Issuance Trust”), for value received, hereby promises to pay to [•], or registered assigns, subject to the following provisions, a principal sum of $[•] ([•] dollars) payable on
the March 2021 Payment Date (the “Expected Maturity Date”), except as otherwise provided below or in the Indenture or the Indenture Supplement (as defined on the reverse hereof); provided, however, that the entire
unpaid principal amount of this Note shall be due and payable on the September 2023 Payment Date (the “Legal Maturity Date”). If the Outstanding Dollar Principal Amount is not paid in full on or prior to the Expected Maturity Date,
interest will accrue on this Note at the rate of one-month LIBOR + 0.45% per annum, as more specifically set forth in the Class B(2018-2) Terms Document dated as of
September 27, 2018 (the “Terms Document”), between the Issuer and U.S. Bank National Association, as Indenture Trustee (the “Indenture Trustee”, which term includes any successor Indenture Trustee under the
Indenture), and shall be due and payable on each Interest Payment Date from and including the previous Interest Payment Date to but excluding such Interest Payment Date (or, in the case of the first Interest Payment Date for the Class B(2018-2) Notes occurring after the Expected Maturity Date, from and including the Expected Maturity Date to but excluding such Interest Payment Date); provided, that if the sum of LIBOR + 0.45% is
less than 0.00%, then interest on this Note will be deemed to accrue at a rate of 0.00%. Interest will be computed on the basis of the actual number of days elapsed and a 360-day year. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse hereof. 
 The principal may be payable monthly, and may be
payable earlier or later than the Expected Maturity Date, following an Event of Default or while an Early Redemption Event has occurred and is continuing. The interest is payable monthly on each Interest Payment Date if the Outstanding Dollar
Principal Amount is not paid in full on or prior to the Expected Maturity Date. No principal or interest will be distributed on the Note following the distribution of proceeds of a Receivables Sale. 

Series Principal Amounts allocated to the Class B(2018-2) Notes will be applied first to pay
shortfalls in interest on Class A Notes, then to pay any shortfalls in Series Servicing Fees allocable to the DiscoverSeries, and then to make Targeted Principal Deposits to the Principal Funding Subaccounts for Class A Notes, including
Targeted Prefunding Deposits, before being applied to make Targeted Principal Deposits to the Principal Funding Subaccounts of Subordinate Notes, including the Class B(2018-2) Notes. Principal will not be
paid on the Class B(2018-2) Notes prior to their Legal Maturity Date unless the Class A Usage of Class B Notes is zero for each Tranche of Class A Notes of the DiscoverSeries and the
required level of subordination for the Class A Notes of the DiscoverSeries is available after giving effect to such payment. 

 The principal of and interest on this Note are payable in such coin or currency of the
United States of America as at the time of payment is legal tender for payment of public and private debts. 
 The Initial Dollar Principal
Amount of this Note is $489,245,089. 
 The Stated Principal Amount of this Note is $530,000,000. 

Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note. 
 Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name
appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture, Indenture Supplement or the Terms Document referred to on the reverse hereof, or be valid or obligatory for any purpose. 

 
  

	*	 Denominations of $100,000 and in integral multiples of $1,000 in excess thereof. 

 IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in
facsimile, by its Authorized Officer. 
  

			
	 DISCOVER CARD EXECUTION NOTE TRUST,

as Issuer

		
	By:	 	 WILMINGTON TRUST COMPANY,
 not in its
individual capacity, but solely as Owner Trustee

		
	By:	 	 
		 	Name:
		 	Title:
		
		 	Date: ___________, 20__

 INDENTURE TRUSTEE’S CERTIFICATE OF AUTHENTICATION 

This is one of the Notes designated above and referred to in the within-mentioned Indenture. 

 

			
	 US BANK NATIONAL ASSOCIATION,
 not
in its individual capacity but solely as Indenture Trustee

		
	By:	 	 
		 	Name:
		 	Title:
		
		 	Date: ___________, 20__

 REVERSE OF NOTE 

This Note is one of the Notes of a duly authorized issue of Notes of the Issuer, designated as its
Class B(2018-2) DiscoverSeries Notes (herein called the “Class B(2018-2) Notes”), all issued under an Amended and Restated
Indenture, dated as of December 22, 2015 (such Indenture, as may be further amended, restated, amended and restated, supplemented, replaced or otherwise modified from time to time, is herein called the “Indenture”), as
supplemented by a Second Amended and Restated Indenture Supplement for the DiscoverSeries Notes, dated as of December 22, 2015 (such Indenture Supplement, as may be further amended, restated, amended and restated, supplemented, replaced or
otherwise modified from time to time, is herein called the “Indenture Supplement”), between the Issuer and Indenture Trustee, to which Indenture and Indenture Supplement reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Class B(2018-2) Notes are subject to all terms of the Indenture, the Indenture Supplement and the
Terms Document. All terms used in this Class B(2018-2) Note that are defined in the Indenture, the Indenture Supplement and the Terms Document shall have the meanings assigned to them in or pursuant to
the Indenture, the Indenture Supplement and the Terms Document. 
 The Class A Notes, the Class C Notes and the Class D Notes
of the DiscoverSeries and other tranches of Class B Notes of the DiscoverSeries will also be issued under the Indenture and the Indenture Supplement. 

The Class B(2018-2) Notes are and will be equally and ratably secured by the collateral pledged
as security therefor as provided in the Indenture and the Indenture Supplement. 
 The
Class B(2018-2) Notes are subordinated in right of payment of principal and interest to the Class A Notes and provide loss protection to the Class A Notes of the DiscoverSeries, to the extent
set forth in the Indenture Supplement. Principal Amounts allocable to the Class B(2018-2) Notes may be applied to pay the Class A Interest Allocation or the Series Servicing Fees of the
DiscoverSeries, to the extent set forth in the Indenture Supplement. 
 The Stated Principal Amount of the
Class B(2018-2) Notes will be payable on the Expected Maturity Date in an amount described on the face hereof, except as otherwise provided in the Indenture or the Indenture Supplement. 

As described above, the entire unpaid Stated Principal Amount of this Class B(2018-2) Note shall
be due and payable on the Legal Maturity Date. Notwithstanding the foregoing, the entire unpaid Outstanding Dollar Principal Amount of the Class B(2018-2) Notes shall be due and payable on the date on
which an Event of Default relating to the Class B(2018-2) Notes shall have occurred and be continuing and, except in the event of an insolvency related default, the Indenture Trustee or the Majority
Holders of the applicable Series, Class or Tranche of Outstanding Dollar Principal Amount of the Outstanding Notes have declared the Class B(2018-2) Notes to be immediately due and payable in the
manner provided in Section 702 of the Indenture; provided, however, that such acceleration of the entire unpaid Outstanding Dollar Principal Amount of the Notes may be rescinded by the Majority Holders of such
applicable Series, Class or Tranche of Notes. 

 On any day occurring on or after the date on which the aggregate Nominal Liquidation Amount
of any Tranche of Notes is reduced to less than 5% of its highest Outstanding Dollar Principal Amount, the Depositor or any Affiliate thereof has the right, but not the obligation, to redeem such Tranche of Notes in whole but not in part, pursuant
to Section 1202 of the Indenture. The redemption price will be an amount equal to the Outstanding Dollar Principal Amount of such Tranche, plus accrued, unpaid and additional interest, if any, or principal accreted and
unpaid on such Tranche to but excluding the date of redemption. 
 Subject to the terms and conditions of the Indenture, the Beneficiary, on
behalf of the Note Issuance Trust, may from time to time issue, or direct the Owner Trustee, on behalf of the Note Issuance Trust, to issue, one or more Series, Classes or Tranches of Notes. 

On each Payment Date, the Paying Agent shall distribute to each Holder of Class B(2018-2) Notes
of record on the related Record Date (except for the final distribution with respect to the Class B(2018-2) Notes) the pro rata share for such Holder of
Class B(2018-2) Notes of the amounts held by the Paying Agent that are allocated and available on such Payment Date to pay interest (only if the Outstanding Dollar Principal Amount is not paid in full on
or prior to the Expected Maturity Date) and principal on the Class B Notes. 
 Payments of interest on this Class B(2018-2) Note due and payable on each Payment Date, together with any installment of principal, if any, to the extent not in full payment of this
Class B(2018-2) Note, shall be made by check mailed to the Person whose name appears as the Registered Holder of this Class B(2018-2) Note on the Note Register
as of the close of business on each Record Date, except that with respect to Class B(2018-2) Notes registered on the Record Date in the name of the nominee of a clearing agency, payments will be made by
wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Class B(2018-2) Note be submitted for notation of payment. Any reduction in the principal amount of this Class B(2018-2) Note (or
any one or more Predecessor Notes) effected by any payments made on any Payment Date shall be binding upon all future Holders of this Class B(2018-2) Note and of any
Class B(2018-2) Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of this Class B(2018-2) Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will
notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed within five days of such Payment Date and the amount then due and payable shall be payable only upon presentation and surrender
of this Class B(2018-2) Note at the Indenture Trustee’s principal Corporate Trust Office or at the office of the Indenture Trustee’s agent appointed for such purposes located in the City of New
York. 
 As provided in the Indenture and subject to certain limitations set forth therein and as set forth in the first legend on the face
hereof, the transfer of this Class B(2018-2) Note may be registered on the Note Register upon surrender of this Class B(2018-2) Note for registration of
transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture 

 
Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by a commercial bank or trust company located, or having a correspondent
located, in the City of New York or the city in which the Corporate Trust Office is located, or a member firm of a national securities exchange, and such other documents as the Indenture Trustee may require, and thereupon one or more new Class B(2018-2) Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of
transfer or exchange of this Class B(2018-2) Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such
registration of transfer or exchange. 
 To the fullest extent permitted by applicable law, each Noteholder or Note Owner, by acceptance of
a Class B(2018-2) Note or, in the case of a Note Owner, a beneficial interest in a Class B(2018-2) Note, covenants and agrees that by accepting the benefits of
the Indenture that it will not at any time institute against the Issuer, any Master Trust or any special purpose entity that acts as a depositor with respect to any Master Trust or the Issuer, or join in any institution against the Issuer, any
Master Trust or any special purpose entity that acts as a depositor with respect to any Master Trust or the Issuer of, any receivership, insolvency, bankruptcy or other similar proceedings, or other proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture, any Derivative Agreement, any Supplemental Credit Enhancement Agreement and any Supplemental Liquidity Agreement. 

Prior to the due presentment for registration of transfer of this Class B(2018-2) Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Class B(2018-2) Note (as of the day of determination or as of such other date as
may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Class B(2018-2) Note be overdue, and neither the Issuer, the Indenture Trustee nor any such agent
shall be affected by notice to the contrary. 
 The Indenture permits, with certain exceptions as therein provided, the amendment thereof
and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Holders of Notes representing not less than 66 2/3% of the Outstanding
Dollar Principal Amount of each adversely affected Series, Class or Tranche of Notes. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Dollar Principal Amount of the
Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Class B(2018-2) Note shall be conclusive and binding upon such Holder and upon all future Holders of this Class B(2018-2) Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Class B(2018-2) Note. The Indenture also permits the Indenture
Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. 

 The term “Issuer” as used in this
Class B(2018-2) Note includes any successor to the Issuer under the Indenture. 
 The Issuer is
permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Indenture Trustee and the Holders of Notes under the Indenture. 

The Class B(2018-2) Notes are issuable only in registered form in denominations as provided in
the Indenture, subject to certain limitations therein set forth. 
 THIS CLASS B(2018-2) NOTE AND
THE INDENTURE WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATION LAW, WITHOUT REFERENCE TO ANY CONFLICT OF LAW PROVISIONS
THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANY OTHER STATE. 
 No reference herein to the Indenture and no provision of this Class B(2018-2) Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this
Class B(2018-2) Note at the times, place, and rate, and in the coin or currency herein prescribed. 

No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer on the Notes or under the Indenture or any
certificate or other writing delivered in connection therewith, against (i) the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer or any successor or assign of the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed
(it being understood that the Owner Trustee has no such obligations in its individual capacity). The Holder of this Class B(2018-2) Note by the acceptance hereof agrees that, except as expressly provided
in the Indenture and the Indenture Supplement in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this
Class B(2018-2) Note. 

 ASSIGNMENT 

Social Security or taxpayer I.D. or other identifying number of assignee 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto 

(name and address of assignee) 
 the within Note and all rights
thereunder, and hereby irrevocably constitutes and appoints attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. 

 

									
	Dated:	 	 	 		 	 	 	 
		 		 		 	Signature Guaranteed:

  

	*	 NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on
the face of the within Note in every particular, without alteration, enlargement or any change whatsoever.

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