Document:

Q3'13 Form 10-Q - Exhibit 10.78

[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

Exhibit 10.78

SEVENTH AMENDMENT AGREEMENT

This Seventh Amendment Agreement (the “Seventh Amendment Agreement”), effective July 1, 2013 (the “Seventh Amendment Effective Date”) is entered into by and between the Institute of Organic Chemistry and Biochemistry of the Academy of Sciences of the Czech Republic, having offices at Flemingovo nam. 2, 166 10 Praha 6, Czech Republic (“IOCB”); and the K.U. Leuven Research and Development (representing the REGA Institute for Medical Research, Leuven), having offices at Waaistraat 6, B-3000 Leuven, Belgium (“REGA” and IOCB and REGA hereinafter referred to collectively as “IOCB/REGA”) on the one side, and Gilead Science, Inc., a Delaware corporation, having its principal office located at 333 Lakeside Drive, Foster City, CA 94404 U.S.A. (“Gilead”).  Gilead, IOCB and REGA are sometimes referred to in this Seventh Amendment individually as a “Party” and collectively as the “Parties”.

WITNESSETH:
WHEREAS, the Parties have entered into the License Agreement dated effective November 15, 1991 (the "1991 License Agreement"), relating to N-phosphonylmethoxyalkyl purines and pyrimidines and analogues including HPMPC as well as acyclic nucleotide analogues and other compounds; the License Agreement dated effective October 15, 1992 (the "1992 License Agreement"), relating to N-(3-fluoro-2-phosphonomethoxypropyl) derivatives of heterocyclic bases; and the License Agreement dated effective December 1, 1992 (the "1992 PMPA License Agreement"), relating to (R) PMPA and (R) PMPDAP and other compounds. The 1991 License Agreement, the 1992 License Agreement, and the 1992 PMPA License Agreement, are referred to collectively as the "License Agreements"; and
WHEREAS, the License Agreements were first amended by the Amendment Agreement dated effective October 25, 1993; and further amended by Annex 1 on April 1, 1997, by Annex 2 on March 20, 2002, and by the Letter Agreement dated April 8, 2002 (the "First Amendment Agreement"); and
WHEREAS, the License Agreements were subsequently amended by the Second Amendment Agreement dated effective January 1, 1996 (the "Second Amendment Agreement"); and further amended by the Third Amendment Agreement effective April 23, 2002 (the "Third Amendment Agreement"); and further amended by the Fourth Amendment Agreement effective August 1, 2004 (the "Fourth Amendment Agreement"); and further amended by the Fifth Amendment Agreement effective January 1, 2006 (the “Fifth Amendment Agreement”); and further amended by the Sixth Amendment effective January 1, 2006 (the “Sixth Amendment Agreement”); and

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

WHEREAS, the License Agreements were further amended by the Letter Agreement dated December 26, 2000 (the "December 2000 Letter Agreement"); and
WHEREAS, the Parties now desire to amend the License Agreements, as previously amended, in order to further clarify and update certain payment obligations and other provisions thereunder, all as described in greater detail below.

AGREEMENT
NOW, THEREFORE, in consideration for the terms and conditions contained herein, Gilead and IOCB/REGA agree as follows:

1.Definitions.  All capitalized terms not otherwise defined in this Amendment shall have the meanings assigned to them in the License Agreements, as previously amended.
2.[*].  The Parties agree to [*] on certain Licensed Products under the License Agreements as set forth in this Section 2.  
The Licensed Products for which [*] will apply include the following (the “[*] Products”):
		
	a.
	Licensed Products containing cidofovir (including Vistide®);

		
	b.
	Licensed Products containing Adefovir, as Adefovir is defined in the December 2000 Letter Agreement (including Hepsera®);

		
	c.
	Licensed Products containing Tenofovir, as Tenofovir is defined in the December 2000 Letter Agreement (including but not limited to Viread®, Truvada®, Atripla®, Complera®, Eviplera®, and Stribild®). 

(i).    Cidofovir.  With respect to the [*] Products set forth in Section 2(a) above, Sections A, B, C and D of Article IV under the 1991 License Agreement, as amended, shall not apply, and instead those Sections A, B, C and D shall be replaced with the following:
“A.    In consideration of the LICENSE granted, Gilead shall pay in favor of IOCB/REGA as follows:
		
	a)
	[*] of NET SALES of LICENSED PRODUCT containing cidofovir sold by GILEAD and its AFFILIATES and sublicensees, the manufacture, use or sale of which would, but for the LICENSE, infringe either (i) a VALID CLAIM of a LICENSED PATENT or (ii) a Gilead Valid Claim (defined below), in the country of sale, except as set forth in the following sentence.  With respect to NET SALES which would be royalty-bearing as set forth in the previous sentence, but as to which the same LICENSED COMPOUND or LICENSED PRODUCT is being sold in such country by any THIRD PARTY except under this Agreement, and as to which GILEAD or IOCB/REGA is not seeking diligently to enforce its LICENSED PATENTS, GILEAD shall pay to IOCB/REGA a total royalty of [*] of NET SALES.

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

		
	b)
	[*] of NET SALES of LICENSED PRODUCT containing cidofovir sold by GILEAD and its AFFILIATES and sublicensees that is not covered by LICENSED PATENTS or a Gilead Valid Claim but exploits the licensed TECHNICAL INFORMATION and KNOW-HOW. 

B.    The obligation for GILEAD to pay royalties to IOCB/REGA as provided in this Section 2(i) of this Seventh Amendment Agreement shall expire in all countries within the Territory upon [*].  Following [*], the obligations set forth in this Section 2(i) of this Seventh Amendment Agreement will terminate, and thereafter Gilead will pay IOCB/REGA [*].  For clarity, and solely based on information available to the Parties as of the date of this Seventh Amendment Agreement, it is anticipated that [*] will be paid to IOCB/REGA for sale of products containing cidofovir following [*].
C.    Intentionally deleted.
D.    Royalties shall be payable only once with respect to the same unit of LICENSED PRODUCT containing cidofovir sold regardless of the number of VALID CLAIMS of LICENSED PATENTS or Gilead Valid Claims, or types of TECHNICAL INFORMATION and KNOW-HOW pertaining to the same which are involved with the LICENSED PRODUCT.”
(ii).    Adefovir.  With respect to the [*] Products set forth in Section 2(b) above, Sections A, B, C and D of Article IV under the 1991 License Agreement, as amended, shall not apply, and instead those Sections A, B, C and D shall be replaced with the following:
“A.    In consideration of the LICENSE granted, Gilead shall pay in favor of IOCB/REGA as follows:
		
	a)
	[*] of NET SALES of LICENSED PRODUCT containing Adefovir sold by GILEAD and its AFFILIATES and sublicensees, the manufacture, use or sale of which would, but for the LICENSE, infringe either (i) a VALID CLAIM of a LICENSED PATENT or (ii) a Gilead Valid Claim (defined below), in the country of sale, except as set forth in the following sentence.  With respect to NET SALES which would be royalty-bearing as set forth in the previous sentence, but as to which the same LICENSED COMPOUND or LICENSED PRODUCT is being sold in such country by any THIRD PARTY except under this Agreement, and as to which GILEAD or IOCB/REGA is not seeking diligently to enforce its LICENSED PATENTS, GILEAD shall pay to IOCB/REGA a total royalty of [*] of NET SALES.

		
	b)
	[*] on NET SALES of LICENSED PRODUCT containing Adefovir sold by GILEAD and its AFFILIATES and sublicensees that is not covered by LICENSED PATENTS or a Gilead Valid Claim but exploits the licensed TECHNICAL INFORMATION and KNOW-HOW. 

B.    The obligation for GILEAD to pay royalties to IOCB/REGA as provided in this Section 2(ii) of this Seventh Amendment Agreement shall expire in all countries within the Territory upon [*].  Following [*], the obligations set forth in this Section 2(ii) of this Seventh Amendment Agreement will terminate, and thereafter Gilead will pay IOCB/REGA [*].  For clarity, and solely based on information available to the Parties as of the date of this Seventh 

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

Amendment Agreement, it is anticipated that [*] will be paid to IOCB/REGA for sale of products containing Adefovir following [*]. 
C.    Intentionally deleted.
D.    Royalties shall be payable only once with respect to the same unit of LICENSED PRODUCT containing Adefovir sold regardless of the number of VALID CLAIMS of LICENSED PATENTS or Gilead Valid Claims, or types of TECHNICAL INFORMATION and KNOW-HOW pertaining to the same which are involved with the LICENSED PRODUCT.”
(iii).    Tenofovir.  With respect to the [*] Products set forth in Section 2(c) above, Sections A, B, C and D of Article IV under the 1992 License Agreement, as amended, shall not apply, and instead those Sections A, B, C and D shall be replaced with the following:
“A.    In consideration of the LICENSE granted, Gilead shall pay in favor of IOCB/REGA as follows:
		
	a)
	[*] of NET SALES of LICENSED PRODUCT containing Tenofovir sold by GILEAD and its AFFILIATES and sublicensees, the manufacture, use or sale of which would, but for the LICENSE, infringe either (i) a VALID CLAIM of a LICENSED PATENT or (ii) a Gilead Valid Claim (defined below), in the country of sale, except as set forth in the following sentence.  With respect to NET SALES which would be royalty-bearing as set forth in the previous sentence, but as to which the same LICENSED COMPOUND or LICENSED PRODUCT is being sold in such country by any THIRD PARTY except under this Agreement, and as to which GILEAD or IOCB/REGA is not seeking diligently to enforce its LICENSED PATENTS, GILEAD shall pay to IOCB/REGA a total royalty of [*] of NET SALES.

		
	b)
	[*] on NET SALES of LICENSED PRODUCT containing Tenofovir sold by GILEAD and its AFFILIATES and sublicensees that is not covered by LICENSED PATENTS or a Gilead Valid Claim but exploits the licensed TECHNICAL INFORMATION and KNOW-HOW. 

B.    The obligation for GILEAD to pay royalties to IOCB/REGA as provided in this Section 2(iii) of this Seventh Amendment Agreement shall expire in all countries within the Territory upon [*].  Following [*], the obligations set forth in this Section 2(iii) of this Seventh Amendment Agreement will terminate, and thereafter Gilead will pay IOCB/REGA [*].  For clarity, and solely based on information available to the Parties as of the date of this Seventh Amendment Agreement, it is anticipated that [*] will be paid to IOCB/REGA for sale of products containing Tenofovir following [*].
C.    Intentionally deleted.
D.    Royalties shall be payable only once with respect to the same unit of LICENSED PRODUCT containing Tenofovir sold regardless of the number of VALID CLAIMS of LICENSED PATENTS or Gilead Valid Claims, or types of TECHNICAL INFORMATION and KNOW-HOW pertaining to the same which are involved with the LICENSED PRODUCT.”

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

For clarity, the foregoing [*] will not apply to any Licensed Product other than the [*] Products.  
For purposes of this Section 2 of this Seventh Amendment Agreement, the term “Gilead Valid Claim” shall mean a clam included in a valid, enforceable and unexpired patent and/or patent application (with issued patents to be deemed valid and enforceable unless they have been held invalid and unenforceable by decision of a court or other governmental agency of competent jurisdiction, which decision is unappealable or unappealed within the time allowed for appeal, or such patent or claim has been admitted to be invalid through reissue or disclaimer or otherwise) owned or controlled by Gilead disclosing or claiming an [*] Product, and/or methods of use in medicinal therapy and methods of preparation (which shall include both manufacture and formulation) of an [*] Product, together with any and all patents that may issue or may have issued therefrom in the Territory including any and all renewals, divisions, continuations, continuations-in-part, extensions and additions to any of the aforesaid patents and patent applications.  
3.Royalties for [*].  The Parties desire to clarify royalty payment obligations for the product designated by Gilead as [*].  
The Parties agree that the following terms shall be added as defined terms to Article I of the 1992 License Agreement, as amended. 
		
	a.
	“[*]” shall mean the product designated by Gilead as [*].

With respect to LICENSED PRODUCT containing [*], Sections A, B, C and D of Article IV under the 1992 License Agreement, as amended, shall not apply, and instead those Sections A, B, C and D shall be replaced with the following:
“A.    In consideration of the LICENSE granted, Gilead shall pay in favor of IOCB/REGA as follows:
GILEAD shall pay to IOCB/REGA a total royalty of [*] of NET SALES of LICENSED PRODUCT containing [*] sold by GILEAD and its AFFILIATES and sublicensees.  With respect to NET SALES which would be royalty-bearing as set forth in the previous sentence, but as to which the same LICENSED PRODUCT is being sold in such country by any THIRD PARTY except under this Agreement, GILEAD shall pay to IOCB/REGA a total royalty of [*] of NET SALES.
B.    Intentionally deleted.  
C.    The royalties provided herein in Article IV A. shall run, on a country by country basis, from the date of the first commercial sale in that country for a period of [*].  Such date of first commercial sale will be immediately announced by GILEAD to IOCB/REGA.
D.    Royalties shall be payable only once with respect to the same unit of LICENSED PRODUCT sold regardless of the types of TECHNICAL INFORMATION and KNOW-HOW pertaining to the same which are involved with the LICENSED PRODUCT.”
4.Royalties for [*].  The Parties desire to clarify royalty payment obligations for [*]. 
The Parties agree that the following terms shall be added as defined terms to Article I of the 1991 License Agreement, as amended.

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

		
	a.
	“[*]” shall mean the product designated by Gilead as [*].

		
	b.
	“[*]” shall mean the product designated by Gilead as [*].  

With respect to [*], Sections A, B, C and D of Article IV under the 1991 License Agreement, as amended, shall not apply, and instead those Sections A, B, C and D shall be replaced with the following:
“A.    In consideration of the LICENSE granted, Gilead shall pay in favor of IOCB/REGA as follows:
		
	a)
	[*] of NET SALES of LICENSED PRODUCT containing [*] sold by GILEAD and its AFFILIATES and sublicensees, the manufacture, use or sale of which would, but for the LICENSE, infringe a VALID CLAIM of a LICENSED PATENT in the country of sale, except as set forth in the following sentence.  With respect to NET SALES which would be royalty-bearing as set forth in the previous sentence, but as to which the same LICENSED COMPOUND or LICENSED PRODUCT is being sold in such country by any THIRD PARTY except under this Agreement, and as to which GILEAD or IOCB/REGA is not seeking diligently to enforce its LICENSED PATENTS, GILEAD shall pay to IOCB/REGA a total royalty of [*] of NET SALES.

		
	b)
	[*] of NET SALES of LICENSED PRODUCT containing [*] sold by GILEAD and its AFFILIATES and sublicensees that is not covered by LICENSED PATENTS but exploits the licensed TECHNICAL INFORMATION and KNOW-HOW. 

B.    The obligation for GILEAD to pay royalties to IOCB/REGA as provided in this Article IV A. a) shall be payable throughout the term of the relevant LICENSED PATENT a VALID CLAIM of which would have been infringed but for this LICENSE.  
C.    The royalties provided herein in Article IV A. b) shall run, on a LICENSED PRODUCT by LICENSED PRODUCT and country by country basis, from the date of the first commercial sale in that country for a period of [*].  Such date of first commercial sale will be immediately announced by GILEAD to IOCB/REGA.
D.    Royalties shall be payable only once with respect to the same unit of LICENSED PRODUCT sold regardless of the number of VALID CLAIMS of LICENSED PATENTS, or types of TECHNICAL INFORMATION and KNOW-HOW pertaining to the same which are involved with the LICENSED PRODUCT.”
5.Licensed Field of Use.  The Parties acknowledge that Gilead and its sublicensees have been developing Tenofovir for [*], that IOCB and REGA have previously consented to such use, and as such the licenses granted under the License Agreement have been extended implicitly to include products labeled for [*].  As such, each License Agreement, as amended (in particular, by the Fourth Amendment Agreement) is hereby amended formally to replace the existing definition of Licensed Product in its entirety with the following:
“LICENSED PRODUCT shall mean any product containing a LICENSED COMPOUND, for any and all uses, including without limitation [*].”

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

6.Waiver of Access Program Royalty Payments.  The Parties agree that Gilead shall have no further obligations to pay royalties to IOCB/REGA on sales of Licensed Product by Gilead, its Affiliates or its sublicensees that have been made as part of Gilead’s Access Program (as described through Gilead’s website, www.gilead.com).  In order to accomplish the foregoing objective, the Sixth Amendment Agreement is hereby deleted in its entirety and replaced with the following:
a.Gilead shall have no obligation to pay IOCB/REGA any royalty on NET SALES of ACCESS PRODUCT in any ACCESS COUNTRY. 
b.For purposes of this Section 6, (a) “ACCESS PRODUCT” shall mean any LICENSED PRODUCT that is sold by Gilead or its AFFILIATES or sublicensees at a no-profit or low-profit price, including GENERIC PRODUCT (defined below); and (b) “ACCESS COUNTRY” shall mean, at the time of any given sale, any country that is designated as a Low Income or Lower Middle Income Country (LMI) on Gilead’s website, as may be updated from time to time by Gilead. A current list of ACCESS COUNTRIES is attached hereto as Exhibit A.  Gilead agrees to provide IOCB and REGA with an updated list of ACCESS COUNTRIES on an annual basis (before the end of each calendar year) for the remaining term of the License Agreements, as amended, or until there are no sales of PRODUCT in any ACCESS COUNTRY that would be royalty bearing but for the waiver herein.  For clarity, the Parties acknowledge and agree that Gilead will not owe IOCB/REGA any royalties on NET SALES of any PRODUCT that is manufactured by or on behalf of Gilead and sold to any third party either at Gilead’s then-current published Access Price (as set forth on the Gilead website) or at Gilead’s then-current published LMI price (as set forth on the Gilead website).
c.For purposes of this Section 6, “GENERIC PRODUCT” shall mean any LICENSED PRODUCT that (a) is manufactured by a Gilead sublicensee (including indirect sublicensees that have been granted sublicenses through the Medicines Patent Pool Foundation under direct license from Gilead); and (b) is sold in an ACCESS COUNTRY at a price that is no higher than the then current price for ACCESS PRODUCT in such country; and (c) bears, or is otherwise marketed using, a trademark or tradename that is distinct from any trademark or trade name used by Gilead or its AFFILIATES in connection with their marketing of such LICENSED PRODUCT.  For the avoidance of doubt, Gilead will have no obligation to pay IOCB/REGA any royalty or other amount with respect to payments received by Gilead or its AFFILIATES from its sublicensees (such as a license fee) as consideration for Gilead’s or its AFFILIATES’ grant to such sublicensees of the right to manufacture or sell GENERIC PRODUCT.
d.Gilead agrees that at all times it shall carry out its obligations under this Section 6 in good faith and that it shall not enter into any arrangement intended to allow Gilead to evade or reduce its royalty payments or other obligations to IOCB/REGA set forth in the License Agreements, as amended.
7. Update to Combination Product Net Sales.  The Parties agree to further amend the definition of Net Sales in each License Agreement, as amended, to clarify and simplify the calculation of royalties due to IOCB/REGA for Combination Products.  Accordingly, each License Agreement, as amended (in particular, by the Fourth Amendment Agreement), is hereby amended such that the Net Sales definition shall apply to all Combination Products containing Licensed Compounds (including Combination Products containing Tenofovir, as defined herein), and is hereby amended to replace the existing definition of Net Sales in the Fourth Amendment Agreement with the following:

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

“NET SALES” shall mean the gross amount invoiced by Gilead, its AFFILIATES or sublicensees in consideration of a sale of a LICENSED COMPOUND or a LICENSED PRODUCT, including any COMBINATION PRODUCT, (each hereinafter “PRODUCT”) net of all trade, quantity or cash discounts (including, e.g. government rebates, chargebacks, distributor fees, co-pay reimbursements), and less all credits or allowances on account of rejections, returns, billing errors or retroactive price reductions, and duties, taxes and other governmental charges, all in accordance with US GAAP as consistently applied [*].
		
	(a)
	CALCULATION OF NET SALES FOR COMBINATION PRODUCTS. Net Sales for any COMBINATION PRODUCT  for purposes of determining royalties payable under this Agreement for the LICENSED COMPOUND contained in such COMBINATION PRODUCT will be calculated as follows and, where the COMBINATION PRODUCT includes more than one LICENSED COMPOUND, on a LICENSED COMPOUND-by-LICENSED COMPOUND basis:

		
	i.   
	Where each API in the COMBINATION PRODUCT is sold separately as a product containing a single API in the relevant country during the relevant calendar quarter and there is a NET SELLING PRICE available for such API sold separately in such country during such quarter, by multiplying actual NET SALES of the COMBINATION PRODUCT by the fraction A/(A+B1+B2+...) where: 

‘A’ is the NET SELLING PRICE (as defined below), as applicable, in the country during the calendar quarter for the stock keeping unit(s) most comparable in (a) the total content of API on a daily dose basis (b) formulation, and (c) dosing administration (e.g., QD 300mg) to the LICENSED PRODUCT that contains as its sole active ingredient the LICENSED COMPOUND in the COMBINATION PRODUCT.  For purposes of determining the calculation of NET SALES for COMBINATION PRODUCTS under this AGREEMENT, the term “NET SELLING PRICE” shall mean, on a calendar quarter by calendar quarter basis, the gross amount invoiced in consideration of a sale of PRODUCT, during such calendar quarter net of all trade, quantity or cash discounts (including, e.g. government rebates, chargebacks, distributor fees, co-pay reimbursements), and less all credits or allowances on account of rejections, returns, billing errors or retroactive price reductions, and duties, taxes and other governmental charges, all in accordance with US GAAP as consistently applied, with this quantity divided in its entirety by the number of units of PRODUCT sold during such calendar quarter.  For clarity, the 10% cap on total reduction referenced in the definition of NET SALES shall not apply to the NET SELLING PRICE calculation.
Each ‘B’ term, is the NET SELLING PRICE in the country during the calendar quarter for the stock keeping unit most comparable in (a) the total content of API on a daily dose basis, (b) formulation and (c) dosing administration (e.g., QD 300mg) that is used for one of the other API(s) in the COMBINATION PRODUCT, other than the LICENSED COMPOUND in the COMBINATION PRODUCT.  For those COMBINATION PRODUCTS where a ‘B’ term relates to a stock keeping unit from a third party (e.g. efavirenz or rilpivirine), the calculation of NET SALES for such COMBINATION PRODUCT that 

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

incorporates such third party stock keeping unit shall be determined in accordance with clause (ii), clause (iv) or clause (v) below, as applicable.
		
	ii.
	Where the API in the COMBINATION PRODUCT that is a LICENSED COMPOUND is sold separately and there is a NET SELLING PRICE available for the LICENSED PRODUCT in the COMBINATION PRODUCT in the relevant country during the relevant calendar quarter, but there is no NET SELLING PRICE available for the API(s) in the COMBINATION PRODUCT other than the LICENSED COMPOUND in the relevant country during the relevant calendar quarter, by multiplying actual NET SALES for such COMBINATION PRODUCT by the fraction A/C where ‘A’ shall have the same meaning as in the clause (i), and ‘C’ is the NET SELLING PRICE in the country during the calendar quarter for the COMBINATION PRODUCT.

		
	iii.
	Where there is no NET SELLING PRICE available for the LICENSED COMPOUND in the COMBINATION PRODUCT in the relevant country during the relevant calendar quarter, but the other API(s) in the COMBINATION PRODUCT are sold separately and there is a NET SELLING PRICE available for such API(s) in the relevant country during the relevant calendar quarter, by multiplying actual NET SALES of such COMBINATION PRODUCT by the quantity [1-((B1+B2_...)/C] where each ‘B’ term shall have the same meaning as in clause (i) and ‘C’ is the NET SELLING PRICE in the relevant country during the relevant calendar quarter for the COMBINATION PRODUCT.

		
	iv.
	Where there is no NET SELLING PRICE available for either the LICENSED COMPOUND or the other API(s) in the COMBINATION PRODUCT in a relevant country during a relevant calendar quarter, by multiplying the NET SELLING PRICE of the COMBINATION PRODUCT in the relevant country for the relevant calendar quarter by the fraction A/C where ‘A’ shall mean, during such calendar quarter, the average worldwide NET SELLING PRICE of the LICENSED PRODUCT that contains as its sole API the same LICENSED COMPOUND that is incorporated into the COMBINATION PRODUCT, and ‘C’ is the NET SELLING PRICE of such COMBINATION PRODUCT during such calendar quarter, on an average worldwide basis.

		
	v.
	Where (1) the API in the COMBINATION PRODUCT that is a LICENSED COMPOUND is not sold separately in any country during a relevant calendar quarter, (2) there is no average worldwide NET SELLING PRICE available for the LICENSED PRODUCT that contains as its sole API the same LICENSED COMPOUND that is incorporated into the COMBINATION PRODUCT in the relevant calendar quarter, and (3) there is no NET SELLING PRICE available for the other API(s) in the COMBINATION PRODUCT in a relevant country during the relevant calendar quarter, either (X) by multiplying actual NET SALES of such COMBINATION PRODUCT by the quantity [1-((B1+B2_...)/C] where each ‘B’ term shall have the same meaning as in clause (i) but on an average worldwide basis during the relevant calendar quarter (if an average worldwide value of ‘B’ is available), and ‘C’ is the NET SELLING PRICE in the relevant country during the relevant calendar quarter for the COMBINATION PRODUCT, or (Y) if there is no average worldwide value of ‘B’ available for each of the other API(s) in the COMBINATION PRODUCT during the relevant 

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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

calendar quarter, then by multiplying actual NET SALES of such COMBINATION PRODUCT in the country during the relevant calendar quarter by a WORKING PERCENTAGE (defined below) that has been assigned to the API in the COMBINATION PRODUCT that is a LICENSED COMPOUND during the relevant calendar quarter, in accordance with the procedure established below.  
For purposes of this subsection (a)(v), the term “WORKING PERCENTAGE” shall mean an amount that is agreed to among the Parties as being the percentage of the NET SELLING PRICE for a COMBINATION PRODUCT that is attributable to the API(s) in the COMBINATION PRODUCT that is a LICENSED COMPOUND.  The WORKING PERCENTAGE for each LICENSED COMPOUND shall be determined in accordance with the following procedures:  No less than thirty (30) days before the end of the first calendar quarter during which a COMBINATION PRODUCT is sold anywhere in the Territory for which the methodology for determining royalties payable to IOCB/REGA is subject to this subsection (a)(v)(Y) above, Gilead shall provide to IOCB/REGA a proposed percentage that is intended to reflect, in good faith, the amount of the NET SELLING PRICE for such COMBINATION PRODUCT that is attributable to the API(s) in the COMBINATION PRODUCT that is a LICENSED COMPOUND.  The Parties will then have thirty (30) days to discuss Gilead’s proposed percentage and attempt to agree on the actual percentage that will be used.  
If the Parties agree on the actual percentage before the thirty (30) day period expires, then such agreed percentage shall become the WORKING PERCENTAGE for determining the portion of the NET SELLING PRICE for that COMBINATION PRODUCT that is attributable to such API.  Such WORKING PERCENTAGE shall apply to all sales of such COMBINATION PRODUCT containing such API anywhere in the Territory for the remainder of that calendar year.  
If the Parties are unable to agree on an actual percentage before the thirty (30) day period expires, then the WORKING PERCENTAGE shall be determined by [*].  Such WORKING PERCENTAGE shall apply to all sales of such COMBINATION PRODUCT containing such API anywhere in the Territory for the remainder of that calendar year.
The WORKING PERCENTAGE that will be applied for each calendar year shall be documented between the Parties no later than December 15 of the immediately preceding calendar year    
For each subsequent calendar year, each WORKING PERCENTAGE shall remain the same as in the prior calendar year, unless no later than October 15 of the current calendar year either Gilead or IOCB/REGA submits a new proposed percentage for a particular API that is a LICENSED COMPOUND in a COMBINATION PRODUCT and prior to December 15 of that same year the Parties agree on a new WORKING PERCENTAGE for such API that would be applied in the following calendar year.  If the Parties are unable to agree on a new WORKING PERCENTAGE prior to December 15, then the WORKING 

10

[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

PERCENTAGE shall be determined using the simple fraction ‘A/C’ methodology set forth two paragraphs above.
		
	vi.
	Gilead agrees to provide IOCB/REGA with supporting information for the purpose of verifying the calculations of NET SALES of COMBINATION PRODUCTS in a manner consistent with Gilead’s past practices and in substantially the form as Exhibit B attached hereto.”

		
	8.
	General.  Except as expressly provided in this Seventh Amendment Agreement, the License Agreements, as amended previously, shall remain in full force and effect according to their terms.

[signature page follows]

11

[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

IN WITNESS WHEREOF, the parties hereto have caused this Seventh Amendment Agreement to be executed by their respective duly authorized representatives as of the Seventh Amendment Effective Date.

	
					
	INSTITUTE OF ORGANIC CHEMISTRY AND BIOCHEMISTRY 
	 
	REGA INSTITUTE FOR MEDICAL RESEARCH

	By:
	/s/ Zdenìk Hostomský
	 
	By:
	/s/ Erik De Clercq

	 
	Dr. Zdenìk Hostomský, Director
	 
	 
	Prof. Erik De Clercq

	Date:
	July 18, 2013
	 
	Date:
	July 23, 2013

	 
	 
	 
	 
	 

	K.U. LEUVEN RESEARCH AND DEVELOPMENT
	 
	GILEAD SCIENCES, INC.

	By:
	/s/ Koenraad Debackere
	 
	By:
	/s/ John F. Milligan

	 
	Prof. Koenraad Debackere, Director
	 
	 
	John F. Milligan, Ph.D.
President and Chief Operating Officer

	Date:
	July 19, 2013
	 
	Date:
	July 23, 2013

	 
	 
	 
	 
	 

	By:
	/s/ Paul Van Dun
	 
	 
	 

	 
	Paul Van Dun, Director
	 
	 
	 

	Date:
	July 19, 2013
	 
	 
	 

 

12

[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

EXHIBIT A
ACCESS COUNTRIES
[*]

13

[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

EXHIBIT B
SAMPLE ROYALTY REPORT
[*]

14IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

			
	 
	)

	 

	In re:

	)

	Chapter 11

	 
	)

	 

	SCHOOL SPECIALTY, INC., et al., 1

	)

	Case No. 13-10125 (KJC)

	 
	)

	 

	Reorganized Debtors.

	)

	Jointly Administered

	 
	)

	Related Docs No. 295, 476, 638, 734, 747, 856, 

982. 1340, 1383, 1387, 1390, 1433

	 
	)

	 

	Official Committee of Unsecured Creditors of 

	)

	 

	School Specialty, Inc. and its Affiliated Debtors,

	)

	 

	 
	)

	 

	Plaintiff,

	)

	Case No. 13-50923 (KJC)

	v.

	)

	 

	Bayside Finance, LLC, 

	)

	 

	H.I.G. Bayside Capital, and

	)

	 

	H.I.G. Bayside Debt & LBO Fund II, L.P.,

	)

	Related Docs No. 1, 3, 5, 6

	 
	 
	 

	Defendants.

	 
	 

STIPULATION APPROVING THE SETTLEMENT OF 

(I) THE CREDITORS’ COMMITTEE’S APPEAL OF THE MAKE-WHOLE ORDER 

AND (II) THE CREDITORS’ COMMITTEE’S ADVERSARY PROCEEDING

This stipulation (the “Stipulation”) is entered into by and among (i) the official committee of unsecured creditors appointed in the chapter 11 cases of School Specialty, Inc., et al. (the “Creditors’ Committee”), (ii) each of the Reorganized Debtors, and (iii) Bayside Finance, LLC and any assignee and/or successor in interest thereto, including, without limitation, BOF Holdings 

________________________

		
	1

	The “Reorganized Debtors” in these chapter 11 cases, along with the last four digits of each Reorganized federal taxpayer identification number, are: School Specialty, Inc. (Wisc.; 1239) (“SSI”), Bird-In-Hand Woodworks, Inc. (N.J.; 8811), Califone International, Inc. (Del.; 3578), Childcraft Education Corp. (N.Y.; 9818), ClassroomDirect.com, LLC (Del.; 2425), Delta Education, LLC (Del.; 8764), Frey Scientific, Inc. (Del.; 3771), Premier Agendas, Inc. (Wash.; 1380), Sax Arts & Crafts, Inc. (Del.; 6436), and Sportime, LLC (Del.; 6939).  The address of the Reorganized Debtors’ corporate headquarters is W6316 Design Drive, Greenville, Wisconsin 54942.

II, LLC2 (collectively, “Bayside” and, together with the Creditors’ Committee and the Reorganized Debtors, the “Parties”).  The Parties hereby stipulate and agree as follows:

RECITALS

A.

The Events Leading Up to, and the Commencement of, the Chapter 11 Cases

WHEREAS, On December 31, 2012, SSI breached the terms of the Term Loan Credit Agreement by failing to comply with the Minimum Liquidity Test (as defined in the Term Loan Credit Agreement).  As a result of the default, Bayside exercised its right under the Term Loan Credit Agreement to accelerate all unpaid amounts thereunder, including outstanding principal, all accrued and unpaid interest, and all other Obligations (as defined in the Term Loan Credit Agreement), including a fee payable in the event that, among other things, any Obligation was paid in advance of its maturity date or the maturity date of any Obligation was accelerated (the “Make-Whole Payment”).  On the same day, Bayside agreed to forbear from exercising all other rights and remedies arising from SSI’s default under the Term Loan Credit Agreement for a period of 30 days while the company prepared for an orderly bankruptcy filing, the terms of which agreement were reflected in a Forbearance Agreement (the “Forbearance Agreement”);

WHEREAS, on January 28, 2013 (the “Petition Date”), each of the debtors in these chapter 11 cases (collectively, the “Debtors”) commenced cases under chapter 11 of the Bankruptcy Code (the “Chapter 11 Cases”); and

WHEREAS, on February 5, 2013, the United States Trustee for the District of Delaware appointed the Creditors’ Committee [Docket No. 110].3  

________________________

		
	2

	BOF Holdings II, LLC is an affiliate of Bayside Finance, LLC and is the assignee of the interests of Bayside Finance, LLC under that certain Credit Agreement dated as of May 22, 2012 among SSI and certain affiliates, as Borrowers, the Lenders defined therein, and Bayside as administrative and collateral agent (as amended, restated, supplemented or otherwise modified from time to time, the “Term Loan Credit Agreement”).

2

B.

The Refinancing of the Obligations Under the Term Loan Credit Agreement

WHEREAS, on February 25, 2013, the Debtors sought authority to enter into that certain Senior Secured Super Priority Debtor-in-Possession Credit Agreement, dated as of February 27, 2013 (as amended, restated, supplemented or otherwise modified, the “Ad Hoc DIP Facility”) by and among SSI and the various agents and lenders party thereto from time to time.  The Debtors used the proceeds of the Ad Hoc DIP Facility to, among other things:

		
	i.

	repay $90,342,305.56 (plus certain fees and expenses), comprising (x) certain Obligations outstanding under the Term Loan Credit Agreement, other than the Make-Whole Payment, including interest accruing on such Obligations at 15.5%4 (the “Term Loan Repayment”) and (y) certain obligations outstanding under the debtor-in-possession term loan facility provided to the Debtors by Bayside; and

	 
	 

	ii.

	fund an escrow account (the “Escrow Account”) with $25 million on account of (a) the disputed Make-Whole Payment, (b) any interest calculated thereon at the Default Rate (the “Default Interest”) and (c) all other outstanding amounts, fees and expenses allowed (if any) in connection with the Term Loan Credit Agreement (together with the Make-Whole Payment and the Default Interest, the “Escrowed Payments”) until (A) a court of appropriate jurisdiction determines, by final non-appealable order, Bayside’s entitlement to the Escrowed Payments (if any) or (B) the Creditors’ Committee and Bayside settle the Committee Make-Whole Motion (as defined below) and any appeal therefrom.

C.

The Committee Make-Whole Motion

WHEREAS, also on February 25, 2013, the Creditors’ Committee filed the Motion of the Official Committee of Unsecured Creditors to Disallow Bayside Finance, LLC's Asserted Make Whole Payment [Docket No. 295] (as amended on March 6, 2013 [Docket No. 476], the “Committee Make-Whole Motion”) requesting that the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) disallow Bayside’s claim for the Make-Whole Payment;

________________________

		
	3

	The Creditors’ Committee was reconstituted on February 27, 2013 [Docket No. 330].

	 
	 

	4

	Although the applicable Default Rate under the Term Loan Credit Agreement is 17.25%, Bayside has agreed as part of this Stipulation to waive and not seek reimbursement for the Unpaid Interest (as defined below) that may have accrued at the applicable Default Rate but was not repaid in connection with the Term Loan Repayment.

3

WHEREAS, on March 22, 2013, Bayside filed the Objection of Bayside Finance, LLC to Amended Motion of the Official Committee of Unsecured Creditors to Disallow Bayside Finance, LLC’s Asserted Make Whole Payment [Docket No. 638] (the “Bayside Objection”).  The Bayside Objection asserted Bayside’s entitlement to the Make-Whole Payment in the amount, as of the date of the Bayside Objection, of $23,774,487.17, which amount would continue to accrue interest at the Default Rate until paid;

WHEREAS, on April 2, 2013, the Creditors’ Committee filed the Reply of the Official Committee of Unsecured Creditors in Further Support of its Amended Motion to Disallow Bayside Finance, LLC's Asserted Make Whole Payment [Docket No. 734]; and 

WHEREAS, this Court held a hearing on April 5, 2013 to determine Bayside’s entitlement to the Make-Whole Payment.  On April 22, 2013, this Court entered an order denying the Committee Make-Whole Motion [Docket No. 856] (the “Make-Whole Order”) and allowing the Make-Whole Payment in full.  On May 2, 2013, the Creditors’ Committee appealed the Make-Whole Order [Docket No. 982] (the “Appeal”).

D.

The Committee Adversary Proceeding

WHEREAS, on April 3, 2013, the Creditors’ Committee filed an adversary proceeding against Bayside to avoid and/or recover certain amounts SSI paid to Bayside prior to the Petition Date on account of an Early Payment Fee (as defined in and due under the Term Loan Credit Agreement) in connection with a $3 million prepayment of the term loan, styled The Official Committee of Unsecured Creditors of School Specialty, Inc. and Its Affiliated Debtors v. Bayside Finance, LLC, et al.; Adv. Pro. No. 13-50923 (KJC) [Docket No. 747] (the “Committee Adversary Proceeding”). 

4

E.

The Debtors’ Plan and the Subordination Agreement

WHEREAS, on May 23, 2013, the Debtors filed the Debtors’ Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1158] (including all exhibits thereto and as amended, modified, and/or supplemented from time to time, the “Plan”).  Also on May 23, 2013, this Court entered the Final Order Approving the Disclosure Statement and Findings of Fact, Conclusions of Law, and Order Under Section 1129 of the Bankruptcy Code and Bankruptcy Rule 3020 Confirming the Debtors’ Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1159] (as corrected on June 11, 2013 [Docket No. 1186], the “Confirmation Order”);  

WHEREAS, On June 11, 2013 (the “Effective Date”), the Plan became effective and each Debtor became a Reorganized Debtor; 

WHEREAS, in connection with their emergence from chapter 11, the Reorganized Debtors entered into that certain Third Lien Subordination Agreement, dated as of June 11, 2013, with Bayside, Bank of America, N.A., and Credit Suisse AG (the “Subordination Agreement”), pursuant to which:  (a) the Reorganized Debtors agreed to (i) deposit into the Escrow Account all accrued and unpaid interest on the Make-Whole Payment to the extent such interest (together with the amount of the Make-Whole Payment) exceeded the balance of the Escrow Account on the Effective Date, (ii) continue to pay into the Escrow Account, on a monthly basis, all interest accrued on the Make-Whole Payment at the Default Rate of 17.25% provided for under the Term Loan Credit Agreement, and (iii) directly pay the current fees and expenses incurred by Bayside’s professionals; and (b) Bayside agreed to subordinate its liens preserved under the Plan to those granted in favor of the lenders under the Reorganized Debtors’ Exit Facilities (as defined in the Plan); and

5

WHEREAS, Bayside continues to accrue professionals’ fees in connection with the Chapter 11 Cases, including with respect to the Appeal, the Committee Adversary Proceeding and the negotiation of this Stipulation. 

F.

The Creditors’ Committee’s Motion to Compel

WHEREAS, on July 18, 2013, the Creditors’ Committee filed the Motion of the Official Committee Of Unsecured Creditors for an Order Either (A) Compelling Bayside Finance, LLC to Accept the Escrowed Payments, or, in the Alternative, (B) Ordering the Discontinuation of the Payment of Default Interest and Other Fees and Expenses into the Escrow Account by the Reorganized Debtors [Docket No. 1340] (the “Motion to Compel”); 

WHEREAS, on August 5, 2013, Bayside filed the Objection of Bayside Finance, LLC to Motion of the Official Committee of Unsecured Creditors for an Order Either (A) Compelling Bayside Finance, LLC to Accept the Escrowed Payments, or, in the Alternative, (B) Ordering the Discontinuation of the Payment of Default Interest and Other Fees and Expenses into the Escrow Account by the Reorganized Debtors [Docket No. 1383]; 

WHEREAS, on August 9, the Creditors’ Committee filed the Reply to the Official Committee of Unsecured Creditors in Further Support of its Motion for an Order Either (A) Compelling Bayside Finance, LLC to Accept the Escrowed Payments, or, in the Alternative, (B) Ordering the Discontinuation of the Payment of Default Interest and Other Fees and Expenses into the Escrow Account by the Reorganized Debtors [Docket No. 1387]; 

WHEREAS, on August 9, 2013, the Reorganized Debtors filed the Reorganized Debtors’ (I) Joinder to the Motion of the Official Committee of Unsecured Creditors for an Order Either (A) Compelling Bayside Finance, LLC to Accept the Escrowed Payments, or, in the Alternative, (B) Ordering the Discontinuation of the Payment of Default Interest and Other Fees and Expenses 

6

into the Escrow Account by the Reorganized Debtors and (II) Limited Response to the Objection of Bayside Finance, LLC to the Motion [Docket No. 1390];

WHEREAS, on August 9, 2013 the Reorganized Debtors also sent a letter to Bayside expressly stating that the Reorganized Debtors were willing to unconditionally tender the Escrowed Payments to Bayside, subject to disgorgement if (i) a court of appropriate jurisdiction determines, by final non-appealable order, that Bayside is not entitled to all or a portion of the Escrowed Payments, or (ii) the parties reach a settlement with respect to the appeal of the Make-Whole Order (the “Tender Letter”);

WHEREAS, by letter dated August 12, 2013, Bayside responded to the Tender Letter (the “Bayside Letter”) and notified the Reorganized Debtors, in substance, that Bayside would accept the tender on the terms provided in the Bayside Letter;

WHEREAS, in settlement of the Motion to Compel (and the pleadings filed in response thereto), the Tender Letter and the Bayside Letter, the Creditors’ Committee, Bayside and the Reorganized Debtors entered into a stipulation [so ordered, Docket No. 1433] (the “Stipulation on Motion to Compel”) providing for, among other things: (i) the release of $26,386,739.35 (the “Stipulated Amount”) from the Escrow Account5 to Bayside; provided that in the event the Stipulated Amount were not paid to Bayside by September 3, 2013, the Stipulated Amount would increase to encompass interest accruing daily on the Make-Whole Payment at the Default Rate of 17.25%; (ii) a reservation of Bayside’s right to attempt to recover unpaid interest that accrued at the Default Rate under the Term Loan Credit Agreement on amounts that were owing from December 31, 2012 through February 27, 2013 (the “Unpaid Interest”); and (iii) the Reorganized 

________________________

		
	5

	The Stipulation on Motion to Compel provided that in the event the Escrow Account contained insufficient funds to cover the Stipulated Amount, the Reorganized Debtors would pay any shortfall to Bayside.

7

Debtors’ continued obligation to pay the current fees and expenses incurred by Bayside’s professionals in accordance with the Subordination Agreement; and

WHEREAS, in connection with the Stipulation on Motion to Compel, the Reorganized Debtors paid Bayside $26,399,382.99 (the “Paid Amount”) from the Escrow Account (or from their own funds, as applicable) in accordance with the Stipulation on Motion to Compel6.

G.

The Settlement

WHEREAS, since the Creditors’ Committee filed the Appeal, the Parties have been engaged in good faith negotiations regarding resolution of the Committee Make-Whole Motion, the Bayside Objection, the Make-Whole Order, the Appeal, the Subordination Agreement (as it relates to Bayside), the Motion to Compel, the Committee Adversary Proceeding and the Stipulation on Motion to Compel and have recently agreed to the settlement reflected in this Stipulation (the “Settlement”);

WHEREAS, in connection with the Settlement, the Parties stipulate that the amount of the Make-Whole Payment is $21,000,000 (the “Stipulated Make-Whole Amount”);

WHEREAS, in connection with the Settlement, Bayside has agreed to remit to the Reorganized Debtors $5,399,382.99 (the “Remitted Amount”), which amount constitutes the difference between (i) $26,399,382.99 (the Paid Amount) and (ii) $21,000,000 (the Stipulated Make-Whole Amount); 

WHEREAS, in connection with the Settlement, the Creditors’ Committee has agreed to withdraw with prejudice each of the Appeal, the Committee Make-Whole Motion, the Motion to Compel and the Committee Adversary Proceeding;

________________________

		
	6

	The Paid Amount comprised two separate wires from the Reorganized Debtors: on September 4, 2013, $26,387,598.93; and on September 9, 2013, $11,784.06.

8

WHEREAS, the Reorganized Debtors believe that the Settlement contained herein is in the best interests of the Reorganized Debtors’ estates and all of their stakeholders; and

WHEREAS, adequate and appropriate notice of the Stipulation has been provided to the appropriate parties.

AGREED

NOW, THEREFORE, IT IS HEREBY AGREED AND STIPULATED AS FOLLOWS:

1.

Upon entry of the order approving this Stipulation and the payment of (a) the Remitted Amount to the Reorganized Debtors by Bayside and (b) all reasonable and documented fees and expenses incurred by Bayside’s professionals through the date upon which the Last Withdrawal Paper (as defined below) is filed (to the extent that such reasonable and documented fees and expenses incurred by Bayside’s professionals are set forth in an invoice delivered to the Reorganized Debtors within seven (7) business days after the filing of the Last Withdrawal Paper), any and all claims, rights, entitlements, issues, disputes, or controversies that have arisen as of the date hereof (whether known or unknown) as among Bayside, the Creditors’ Committee and the Reorganized Debtors relating to the Chapter 11 Cases, including, without limitation, the Committee Make-Whole Motion, the Bayside Objection, the Make-Whole Order, the Appeal, the Subordination Agreement (as it relates to Bayside), the Motion to Compel, the Committee Adversary Proceeding and the Stipulation on Motion to Compel shall be deemed fully and finally resolved.

2.

Upon entry of the order approving this Stipulation and payment of the Remitted Amount to the Reorganized Debtors by Bayside, any and all claims, rights, liens, entitlements, charges, fees, penalties, expenses, obligations, causes of action and liabilities, of whatever kind or nature, whether known or unknown, whether foreseen or unforeseen, arising on 

9

or before the date hereof, which any of the Parties ever had, now have or hereafter can, shall or may have for, upon or by reason of any matter, cause or thing whatsoever, which are based upon, arise under or are related to the Prepetition Term Loan Agreement (and the other credit documents related thereto), the Forbearance Agreement, the Final Ad Hoc DIP Order, the Plan, the Confirmation Order, the Subordination Agreement, the Tender Letter, the Bayside Letter and the Stipulation on Motion to Compel, shall cease to accrue, shall be terminated and shall no longer be payable and/or shall be released, waived, discharged and no longer enforceable without any further action being required to effectuate the foregoing; provided that notwithstanding anything in this paragraph 2, the Reorganized Debtors shall continue to pay the reasonable, documented fees and expenses of Bayside’s professionals in accordance with paragraph 5 hereof.

3.

Upon entry of the order approving this Stipulation and the payment of (a) the Remitted Amount to the Reorganized Debtors by Bayside and (b) all reasonable and documented fees and expenses incurred by Bayside’s professionals through the date upon which the Last Withdrawal Paper is filed (to the extent that such reasonable and documented fees and expenses incurred by Bayside’s professionals are set forth in an invoice delivered to the Reorganized Debtors within seven (7) business days after the filing of the Last Withdrawal Paper), the Reorganized Debtors or their designee(s) shall be authorized to file UCC termination statements, intellectual property releases (if any), mortgage releases (if any) and any other documents and/or instruments required in order to evidence the termination of any liens, security interests, mortgages, pledges and guarantees granted to Bayside pursuant to the Prepetition Term Loan Agreement (and the other credit documents related thereto), the Forbearance Agreement, the Final Ad Hoc DIP Order, the Plan, the Confirmation Order, the Subordination Agreement, the Tender Letter, the Bayside Letter and the Stipulation on Motion to Compel.

10

4.

On or prior to three (3) business days after entry of the order approving this Stipulation, Bayside shall remit to the Reorganized Debtors the Remitted Amount.  Upon payment to the Reorganized Debtors of the Remitted Amount, all claims and relief asserted or sought by the Creditors’ Committee, the Debtors or the Reorganized Debtors in the Appeal, the Committee Make-Whole Motion, the Motion to Compel and the Committee Adversary Proceeding, or that could have been asserted or sought therein, shall be deemed waived, released and withdrawn in their entirety with prejudice.  Further, the Creditors’ Committee shall withdraw with prejudice all pending adversary proceedings, motions, applications and appeals and file:  (a) a stipulated dismissal with prejudice of the Appeal with both the United States District Court for the District of Delaware and the Bankruptcy Court, (b) a stipulated dismissal with prejudice of the Committee Make-Whole Motion with the Bankruptcy Court, (c) a stipulated dismissal with prejudice of the Motion to Compel with the Bankruptcy Court, and (d) a notice of dismissal with prejudice of the Committee Adversary Proceeding with the Bankruptcy Court ((a)-(d) collectively, the “Withdrawal Papers” and the Withdrawal Paper filed latest in time, the “Last Withdrawal Paper”).

5.

Notwithstanding anything contained herein to the contrary, the Reorganized Debtors shall continue to pay directly the current fees and expenses incurred by Bayside’s professionals (including, but not limited to, amounts invoiced before and after the date hereof) in accordance with the Subordination Agreement through and including the date on which the Creditors’ Committee files the Withdrawal Papers.  Upon the filing of the Last Withdrawal Paper, the Debtors and the Reorganized Debtors shall no longer be responsible for the payment of any fees and expenses incurred by Bayside’s professionals in connection with the Chapter 11 Cases and/or the Prepetition Term Loan Agreement (and the other credit documents related thereto), the 

11

Forbearance Agreement, the Final Ad Hoc DIP Order, the Plan, the Confirmation Order, the Subordination Agreement, the Tender Letter, the Bayside Letter and the Stipulation on Motion to Compel; provided that the Reorganized Debtors shall pay any reasonable and documented fees and expenses incurred by Akin Gump Strauss Hauer & Feld LLP and Pepper Hamilton LLP to the extent reasonably related to the implementation of this Settlement subsequent to the filing of the Last Withdrawal Paper; provided further that any dispute regarding the payment of such fees and expenses shall be resolved by the Bankruptcy Court.  

6.

Releases.  Upon entry of the order approving this Stipulation, except as provided herein and except with respect to the rights and obligations under this Stipulation, the Parties shall be deemed to have forever waived, released, acquitted and discharged one another, including each respective Parties’ current, former or future officers, directors, employees, stockholders, agents, servants, assigns, successors, predecessors, representatives, members, financial advisors, industry experts/advisors, attorneys, trustees, partners, subsidiaries, parent entities and affiliates, each in their capacity as such and in no other capacity, from any and all claims, demands, debts, objections to claims, obligations, damages, losses or liabilities whatsoever of any nature, type or description, whether known or unknown, suspected or unsuspected, concealed or hidden, direct or indirect, patent or latent, or fixed or contingent, arising out of or relating to any cause, matter or thing from the beginning of time through the date of this Stipulation, pertaining in any way to the Chapter 11 Cases, including, but not limited to, with respect to the Committee Make-Whole Motion, the Motion to Compel, the Appeal and the Committee Adversary Proceeding.  For the avoidance of doubt, the releases provided under this paragraph shall not affect any claim of any Party arising under this Stipulation.  With respect to the dismissal of any adversary proceedings that occur as a consequence of this Stipulation, the dismissal shall be with prejudice.  

12

7.

Choice of Law.  This Stipulation shall be governed by and construed under and in accordance with the laws of the State of New York, without regard to the conflicts of laws principles thereof.  The Bankruptcy Court shall retain jurisdiction over any action or proceeding arising out of or relating to this Stipulation, and all claims in respect of such action or proceeding may be heard and determined in such Court.  

8.

Successors and Assigns.  This Stipulation shall be binding upon and inure to the benefit of the Parties hereto, their respective heirs, affiliates, assigns and successors.

9.

Binding Authority.  Each representative signing this Stipulation represents and warrants that he or she has the authority to bind the Parties to the terms of this Stipulation.

10.

Further Assurances.  The Parties hereby agree promptly to execute and deliver any and all such further instruments and documents and to take all such further actions as may be reasonably required by the other Parties to effectuate the terms and conditions of this Stipulation.

11.

Binding Effect.  The Parties’ respective rights, obligations, remedies, and protections provided for in this Stipulation shall survive the conversion, dismissal, or closing of the Chapter 11 Cases, and the terms and provisions of this Stipulation shall continue in full force and effect notwithstanding the entry of any order effecting the foregoing.

12.

Construction.  No Party shall be deemed the drafter of this Stipulation.  The headings herein are solely for the convenience of the Parties and do not form a substantive part of this Stipulation.  

13.

Entire Agreement.  This Stipulation constitutes the entire agreement and understanding among the Parties with respect to the subject matter hereof.  Neither this Stipulation nor any terms hereof may be amended, changed, waived or discharged unless such amendment, 

13

change, waiver, or discharge is in a writing signed by the Party against whom enforcement is sought. 

14.

Representation by Counsel.  The Parties acknowledge the benefit of professional advice rendered by legal counsel of their own selection prior to entering into this Stipulation or that such Party did not elect to retain legal counsel.  The Parties further acknowledge that they have had a sufficient opportunity to discuss and review this Stipulation with their attorneys and fully understand and agree to the terms set forth herein. 

15.

Counterparts.  This Stipulation may be executed in counterparts.  Each counterpart shall be deemed an original.  All counterparts shall constitute a single agreement.  A facsimile of a signed copy of the Stipulation shall serve as an original executed copy for all purposes. 

16.

Execution by Counsel.  The undersigned counsel represent and warrant that they are fully authorized to execute this Stipulation on behalf of the persons and entities indicated below.

[Signature Pages Follow]

14

		
	Dated:  Wilmington, Delaware

	 

	             October 23, 2013

	 

	 
	VENABLE LLP

/s/ Jamie L. Edmonson

	 
	Jamie L. Edmonson (#4247)

	 
	Darek S. Bushnaq (#5596)

	 
	1201 Market Street, Suite 1400

	 
	Wilmington, Delaware 19801

	 
	Telephone: 302-298-3535

	 
	Facsimile: 302-208-3550

	 
	jledmonson@venable.com

	 
	dsbushnaq@venable.com

	 
	 

	 
	-and-

	 
	 

	 
	BROWN RUDNICK LLP

	 
	Robert J. Stark

	 
	Seven Times Square

	 
	New York, New York 10036

	 
	Telephone: (212) 209-4800

	 
	Facsimile: (212) 209-4801

	 
	rstark@brownrudnick.com

	 
	 

	 
	-and-

	 
	 

	 
	Steven D. Pohl

	 
	Thomas H. Montgomery

	 
	Brown Rudnick LLP

	 
	One Financial Center

	 
	Boston, Massachusetts 02111

	 
	Telephone: (617) 856-8200

	 
	Facsimile: (617) 856-8201

	 
	spohl@brownrudnick.com

	 
	tmontgomery@brownrudnick.com

	 
	 

	 
	Counsel for the Official Committee of Unsecured 

Creditors

15

		
	 
	DUANE MORRIS LLP

/s/ Michael R. Lastowski

	 
	Michael R. Lastowski (No. 3892)

	 
	Christopher M. Winter (No. 4163)

	 
	Jarret P. Hitchings (No. 5564)

	 
	222 Delaware Avenue, Suite 1600

	 
	Wilmington, Delaware 19801

	 
	(302) 657-4900

	 
	 

	 
	-and-

	 
	 

	 
	STROOCK & STROOCK & LAVAN LLP

	 
	Kristopher M. Hansen

	 
	Jonathan D. Canfield

	 
	180 Maiden Lane

	 
	New York, New York 10038

	 
	(212) 806-5400

	 
	 

	 
	 

	 
	Counsel for the Reorganized Debtors

16

		
	 
	PEPPER HAMILTON LLP

/s/ David B. Stratton

	 
	David B. Stratton, Esquire

	 
	David M. Fournier, Esquire

	 
	James C. Carignan (No. 4230)

	 
	Michael J. Custer, Esquire

	 
	Hercules Plaza, Suite 5100

	 
	1313 N. Market Street

	 
	P.O. Box 1709

	 
	Wilmington, Delaware 19801-1709

	 
	Telephone: (302) 777-6500

	 
	Facsimile: (302) 421-8390

	 
	 

	 
	-and-

	 
	 

	 
	AKIN GUMP STRAUSS HAUER & FELD LLP

	 
	Michael S. Stamer

	 
	Abid Qureshi

	 
	Meredith A. Lahaie

	 
	Brian T. Carney

	 
	Akin Gump Strauss Hauer & Feld LLP

	 
	One Bryant Park

	 
	New York, New York 10036

	 
	(212) 872-1000 (Telephone)

	 
	(212) 872-1002 (Facsimile)

	 
	 

	 
	Counsel for Bayside

17

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