Document:

EXHIBIT
10.3

DIGITAL MUSIC
DOWNLOAD SALES AGREEMENT

This Agreement is by and between APPLE and COMPANY, as
identified in the Cover Sheet attached hereto and is entered into as of the
date this Agreement is signed by both APPLE and COMPANY (the “Effective Date”).

WHEREAS, APPLE desires to sell permanent downloads of
COMPANY’S sound recordings;

WHEREAS, COMPANY is willing to allow the sale of
permanent downloads of certain COMPANY sound recordings in exchange for APPLE’s
obligations herein;

NOW, THEREFORE, in consideration of the mutual
promises and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
APPLE and COMPANY (“Parties”) hereby agree as follows:

1.             Definitions. 
The following terms shall have the following meanings for purposes of
this Agreement:

(a)           “Content File” means each
digital file containing a single-track sound recording or multi-track album of
COMPANY Content, applicable Artwork (if any), parental advisory notices (if
any), copyright notices (if any), videos (if any, provided by COMPANY and used
by APPLE at COMPANY’S discretion), and associated metadata, e.g., core track
data and editorial content data (if any).

(b)           “Content Usage Rules” means
the usage rules applicable to sound recordings in the form of eMasters
available on the Online Store that specify the terms under which an eMaster may
be used, as set forth in Exhibit A attached hereto, and which may be modified
by APPLE from time to time, subject to prior written approval by COMPANY (such
approval or disapproval not to be unreasonably delayed) in the event of a
material change to such usage rules.

(c)           “Security Solution” means the
APPLE proprietary content protection system in effect as of the Effective Date
used to protect eMasters sold on the Online Store pursuant to this Agreement,
which content protection system shall be no less protective than, and the same
as, the protection system used to protect any third party sound recording sold
on the Online Store, and which may be modified by APPLE from time to time,
subject to prior written approval by COMPANY (such approval not to be
unreasonably withheld, delayed or conditioned) in the event of a material
change to such content protection system such that eMasters are being protected
less than before.

(d)           “eMaster” or “eMasters” means
copies of COMPANY Content in digital form and having the Security Solution,
which APPLE may sell on the Online Store pursuant to the terms and conditions
of this Agreement.

 

 

 

(e)           “Device” means any digital
player device or cellular phone having the Security Solution that can receive
music files from another device or network connection, by any means, for
playback of such music files.

(f)            “Fulfillment Activities”
means sales activities relating to the sale and delivery of Wasters, provided
by COMPANY, pursuant to the terms and conditions of this Agreement.

(g)           “Term” means the period
beginning on the Effective Date of this Agreement and ending on the first day
of the calendar quarter following the third anniversary of the Effective Date.

(h)           “Territory” means the United
States, its territories and possessions, and Canada, its territories and
possessions; and any other country or territory where COMPANY authorizes APPLE
in writing hereunder, as the case may be.

(i)            “Online Store” means an
electronic store and its storefronts branded, and owned and/or controlled by
APPLE.

(j)            “COMPANY Content” means sound
recordings owned or controlled by COMPANY that are provided by or on behalf of
COMPANY, and in which COMPANY has cleared the necessary rights to authorize
electronic sales and sound recording performances by APPLE pursuant to the
terms of this Agreement, including but not limited to sound recordings in the
form of (i) singletrack sound recordings, and (ii) multi-track albums.  Any sound recordings that are provided by or
on behalf of COMPANY to APPLE are owned or controlled by COMPANY and have been
cleared by COMPANY as described in the prior sentence.

(k)           “Artwork” means album cover
artwork and any other artwork relating to COMPANY Content that COMPANY has
cleared for use by APPLE in accordance with Section 2 below.  Any artwork that is provided by or on behalf
of COMPANY to APPLE will be deemed to have been cleared by COMPANY as described
in the prior sentence.

2.             Authorization.

(a)           Subject to the terms of this
Agreement, COMPANY hereby appoints APPLE as a reseller of eMasters.  Accordingly, COMPANY hereby grants a
non-exclusive right to APPLE, during the Term, to:

i.              reproduce and convert COMPANY
Content delivered by COMPANY or by COMPANY’S representative designated by
COMPANY in writing into eMasters;

ii.             perform and make thirty (30) second
clips of the COMPANY Content available by streaming (“Clips”) to promote the
sale of applicable eMasters on the Online Store, which Clips, if not provided
by COMPANY, may be created by APPLE by using the first thirty (30) seconds of
the applicable COMPANY Content;

 

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iii.            promote, sell, distribute, and
electronically fulfill and deliver eMasters and associated metadata to
purchasers via the Online Store;

iv.            display and electronically fulfill
and deliver Artwork for personal use solely in conjunction with the applicable
purchased eMaster; and

v.             use COMPANY Content, Artwork and
metadata as may be reasonably necessary or desirable for APPLE to exercise
APPLE’s rights under the terms of this Agreement.

(b)           APPLE shall not be authorized to
exploit COMPANY Content or Artwork in any manner or form not expressly
authorized herein.  Nothing in this
Agreement shall be construed to prevent COMPANY from marketing or selling
COMPANY Content or Artwork by any means. 
Nothing herein shall obligate APPLE to actually exercise its rights
under this Agreement.

(c)           Except for a special circumstance,
such as an exclusive, limited-time, one-off promotion for a particular COMPANY
sound recording, or for a reason beyond COMPANY’s control, COMPANY shall
otherwise make all eMasters available to APPLE hereunder for sale on the Online
Store in both a so-called “single” format and in a multi-track “album”
format.  APPLE may sell Wasters on the
Online Store in the format that APPLE believes most favorably furthers the
commercial purpose of this Agreement and otherwise in accordance with APPLE’s
then-current Online Store business practices.

(d)           Except as set forth in Section
2(a)(ii) or elsewhere herein, APPLE will not edit, change or alter any of the
COMPANY Content or Artwork without COMPANY’S prior written consent (such
consent not to be unreasonably withheld, delayed or conditioned), provided that
APPLE may modify metadata as reasonably necessary to correct errors or to
append sub-genres or like information for artist and track categories.

(e)           APPLE shall not pledge, mortgage or
otherwise encumber any part of the COMPANY Content, eMasters, or Artwork.

3.             COMPANY Obligations.

(a)           COMPANY shall use commercially
reasonable efforts to promptly obtain clearances in the Territory for all sound
recordings under its control, and related artwork, in order to enable sales of
eMasters by APPLE hereunder.

(b)           Content Files must be [*].

(c)           COMPANY shall use commercially
reasonable efforts to electronically deliver, at COMPANY’S expense, properly
encoded Content Files to APPLE using a secure FTP site address provided by
APPLE to COMPANY from time to time, or other delivery means as may be
reasonably requested by APPLE.

 

* Certain information on this page has been omitted
and filed separately with the Commission. 
Confidential treatment has been requested with respect to the omitted
portions.

 

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(d)           COMPANY, or a third party designated
by COMPANY in writing and approved by APPLE, shall commence delivery of Content
Files as soon as reasonably possible after the Effective Date, and for just
cleared COMPANY Content or new releases, no later than when COMPANY first makes
such COMPANY Content publicly available by any means (e.g., radio play, “street
date,” etc).

4.             Royalties. 
COMPANY shall be responsible for and timely pay: (i) all record
royalties to artists, producers, and other record royalty participants from
sales of eMasters, (ii) all mechanical royalties payable to publishers of
copyrighted musical compositions embodied in eMasters from sales of eMasters,
(iii) all payments that may be required under collective bargaining agreements
applicable to COMPANY or third parties other than APPLE, and (iv) any other
royalties, fees and/or sums payable with respect to the sound recordings,
Artwork, metadata and other materials provided by COMPANY and/or APPLE’s use
thereof hereunder.

5.             Wholesale Price. 
APPLE shall pay COMPANY the wholesale price for eMasters sold by APPLE
hereunder, as set forth in Exhibit B attached hereto.  COMPANY shall not increase the wholesale
price of any particular eMaster during the Term.  Apple reserves the right to determine the retail
price in its discretion.

6.             APPLE Obligations.

(a)           APPLE shall condition sale and
delivery of eMasters upon an end user’s acknowledgement of terms of use for
such eMasters (“Terms of Use”), which Terms of Use shall be no less restrictive
than the Content Usage Rules, and shall state that the sale of eMasters does
not transfer to purchaser any commercial or promotional use rights in the
eMasters.

(b)           Subject to Section 4, APPLE shall be
responsible for all costs associated with APPLE’s Fulfillment Activities.

(c)           If there is a change of circumstance
during the Term as a result of which COMPANY reasonably believes that it does
not have, or no longer has, the rights necessary to authorize APPLE to use any
COMPANY Content or Artwork as provided for herein, or COMPANY reasonably
believes that APPLE’s continued sale of any COMPANY Content or Artwork will
substantially harm COMPANY’s relations, or violates the terms of any of COMPANY’S
agreements, with any applicable copyright owner, artist, producer or distributor,
then COMPANY shall have the right to withdraw, upon written notice to APPLE’s
designated representative, authorization for the sale of such COMPANY Content
or Artwork. Following such withdrawal, APPLE shall cease to offer such COMPANY
Content or Artwork for sale within three (3) business days after APPLE’s
receipt of such notice of withdrawal, and COMPANY shall use commercially
reasonable efforts to clear such withdrawn COMPANY Content or Artwork and shall
promptly notify APPLE if and when such COMPANY Content has been cleared and is
again authorized for sale by APPLE through the Online Store.  COMPANY shall not withdraw COMPANY Content if
such COMPANY Content is still being made available by COMPANY to any other
provider of digital downloads.

 

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7.             Parental Advisory.  If COMPANY provides a parental advisory
warning about a particular sound recording in the Content File, APPLE shall
conspicuously display such parental advisory when other information about such
recording is displayed.  COMPANY shall be
responsible for determining parental advisory warning status.

8.             Payment and Reports.

(a)           APPLE shall remit payment to COMPANY
for the sale of eMasters in accordance with the following: (i) the “sale” of
each eMaster shall occur when such eMaster is successfully delivered by APPLE
to an end user; (ii) payments shall accrue at the time that such eMaster is
sold; and (iii) for each eMaster sold, APPLE shall pay to COMPANY an amount
equal to the wholesale price for the applicable eMaster (collectively “eMaster
Proceeds”).

(b)           APPLE will compute eMaster Proceeds
payable to COMPANY after the end of [*], and will send COMPANY a [*] eMaster
Proceeds statement in accordance with Apple’s standard business practices.  The eMaster Proceeds statement shall be
accompanied with payment in the amount of eMaster Proceeds due within [*].  Such payment shall constitute full
consideration for all rights granted and obligations undertaken by COMPANY
hereunder.

9.             Names and Likenesses; Promotional Use and
Opportunities.

(a)           APPLE may use the names and
likenesses of, and biographical material concerning, any eMaster artists,
bands, producers and/or songwriters, as well as track and/or album name, and
Artwork, in any APPLE marketing materials for the sale, promotion and advertising
of the applicable eMaster which is offered for sale on the Online Store under
the terms of this Agreement (e.g., an artist or band name and likeness may be
used in an informational fashion, such as textual displays or other
informational passages, to identify and represent authorship, production
credits, and performances of the applicable artist or band in connection with
the authorized exploitation of applicable eMasters). Further written approval
of COMPANY shall be required if any artist’s name is otherwise used as an
endorsement of APPLE, the Online Store, or APPLE’S products.

(b)           APPLE shall have the unrestricted
right to market, promote and advertise the Online Store and sound recordings
available for purchase on the Online Store as it determines in its
discretion.  Without limiting the
foregoing, APPLE shall have the right to determine which sound recordings,
irrespective of any particular record company or label affiliation, would best
further the commercial purpose of the Online Store, and to promote such sound
recordings more than others.

 

* Certain information on this page has been omitted
and filed separately with the Commission. 
Confidential treatment has been requested with respect to the omitted
portions.

 

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10.           Copyright Notices; Ownership.

(a)           COMPANY may provide a copyright
notice (which shall be not more than 21 characters in length) for applicable
COMPANY Content and associated Artwork in the Content File, in which case APPLE
shall include such copyright notice in a manner that can be viewed prior to
purchase of such eMaster.  APPLE shall
not knowingly defeat, impair or alter any watermark in COMPANY Content,
including any related Artwork or materials delivered by COMPANY hereunder.

(b)           As between the Parties, all right,
title and interest in and to (i) the COMPANY Content, (ii) the eMasters,
excluding the Security Solution, (iii) the Clips, (iv) all copyrights and
equivalent rights embodied therein, and (v) all materials furnished by COMPANY,
except as to any rights of APPLE (whether pre-existing or under this
Agreement), shall remain the property of COMPANY, it being understood that
under no circumstances shall APPLE have any lesser rights than it would have as
a member of the public.

11.           Press Release.  Without limiting the provisions of Section
16, COMPANY shall not make or issue any public statement or press release
regarding this Agreement or its subject matter without prior written approval
from APPLE.

12.           Data Protection.

(a)           APPLE shall use the Security
Solution, which shall be no less protective of Company Content than any other
security solution provided by APPLE for any other sound recordings on the
Online Store.  If the Security Solution
is compromised such that eMasters have been unencrypted and are being widely
used without restriction, having an adverse material effect on the commercial
intent of this Agreement, [*].  The
foregoing shall constitute APPLE’s sole obligation and COMPANY’s sole remedy
from APPLE in the event of such a security breach.

(b)           Despite anything to the contrary, in
the event that APPLE receives notice of a security breach of the servers or
network components that store COMPANY Content or Artwork on the Online Store
such that unauthorized access to COMPANY Content or Artwork becomes available
via the Online Store, [*], which shall be APPLE’s sole obligation and COMPANY’s
sole remedy from APPLE in the event of such a security breach.

(c)           COMPANY Content in APPLE’s control or
possession shall reside solely on a network server, workstation or equivalent
device owned or controlled by APPLE or its contractors, located in the U.S.A.
(for that portion of the Territory within the U.S. and Canada), and shall be
secured with restricted access.

 

* Certain information on this page has been omitted
and filed separately with the Commission. 
Confidential treatment has been requested with respect to the omitted
portions.

 

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13.           Record-Keeping and Audit.

(a)           APPLE shall maintain and keep
complete and accurate books and records concerning the amounts payable to
COMPANY arising from transactions relating to APPLE’s sale of [*].

(b)           Upon reasonable advance written
notice [*], during the Term and [*] (the “Audit Period”), COMPANY, at COMPANY’s
sole expense, may appoint an independent certified public accountant not then
engaged in any audit of APPLE or COMPANY to audit applicable books and records
of APPLE at APPLE’S principal place of business in the U.S.A. for the sole
purpose of verifying the amounts due from APPLE to COMPANY hereunder.  Such audit shall take place during regular
business hours, and shall not occur more than once during any twelve (12) month
period.  The certified public accountant
shall not be engaged on a contingency-fee basis and must sign and deliver to
APPLE a confidentiality agreement in a form acceptable to APPLE that protects
APPLE’S confidential information no less than the terms of this Agreement and
no less than COMPANY protects its own similar information.  COMPANY may audit information contained in a
particular statement only once, and no audit shall be allowed or conducted for
a period spanning less than six (6) months.

(c)           COMPANY shall be deemed to have
consented to all accountings rendered by APPLE hereunder, and said accountings
shall be binding upon COMPANY and shall not be subject to any objection by
COMPANY for any reason unless specific objections are provided to APPLE in
writing during the Audit Period.  COMPANY
agrees that APPLE’S books and records contain “Confidential Information” (as
defined below).

14.           Termination and Effect of Termination.

(a)           Either party shall have the right to
terminate this Agreement prior to the expiration of the Term in the event that
the other party (i) becomes insolvent, (ii) files a petition in bankruptcy,
(iii) makes an assignment for the benefit of creditors, or (iv) breaches any
material representation, obligation or covenant contained herein, unless such
breach is cured prospectively, no later than thirty (30) days from the date of
receipt of notice of such breach, or if not able to be so cured, then resolved
to the other party’s satisfaction, not to be unreasonably withheld.

(b)           Sections 1, 4, 6b, 8, 10b, 11, 13,
14, 15, 16, 17, and 18 shall remain in full force and effect following the
expiration or earlier termination of this Agreement.  The expiration or earlier termination of this
Agreement shall not relieve COMPANY or APPLE of its respective obligations to
make any payments with respect to the sale of eMasters in the periods prior to
such expiration or termination (and the associated accounting) in accordance
with this Agreement.

 

* Certain information on this page has been omitted
and filed separately with the Commission. 
Confidential treatment has been requested with respect to the omitted
portions.

 

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(c)           Upon the expiration or earlier
termination of this Agreement, all COMPANY Content, eMasters, Clips, and
Artwork in APPLE’S possession or control shall be promptly deleted or
destroyed, excluding any archival copies maintained in accordance with APPLE’s
standard business practices or required to be maintained by applicable law,
rule or regulation.

15.           Indemnification and Limitation of
Liability.

(a)           APPLE will indemnify and hold
harmless, and upon COMPANY’S request, defend, COMPANY and its affiliates (and
their respective directors, officers and employees) from and against any and
all losses, liabilities, damages, costs and expenses (including reasonable
attorneys’ fees and costs) arising out of a claim by a third party by reason
of: (i) any use by APPLE of the COMPANY Content or Artwork in breach of this
Agreement; (ii) a breach of any warranty, representation, covenant or
obligation of APPLE under this Agreement; or (iii) any claim that the
technology used by APPLE in the Fulfillment Activities infringes the
intellectual property rights of another party. APPLE will reimburse COMPANY and
its affiliates on demand for any payments actually made in resolution of any
liability or claim that is subject to indemnification under this Section 15,
provided that COMPANY obtains APPLE’s written consent prior to making such
payments, such consent not to be unreasonably withheld, delayed or
conditioned.  COMPANY shall promptly
notify APPLE of any such claim, and APPLE may assume control of the defense of
such claim.  COMPANY shall have the
right, at its expense, to participate in the defense thereof under APPLE’s
direction.

(b)           COMPANY will indemnify and hold
harmless, and upon APPLE’S request, defend, APPLE and its affiliates (and their
respective directors, officers and employees) from and against any and all
losses, liabilities, damages, costs or expenses (including reasonable attorneys’
fees and costs) arising out of a claim by a third party by reason of: (i) a
breach of any warranty, representation, covenant or obligation of COMPANY under
this Agreement; or (ii) any claim that a sound recording or COMPANY Content,
Artwork, metadata or any other materials provided or authorized by or on behalf
of COMPANY hereunder or APPLE’s use thereof violates or infringes the rights of
another party. COMPANY will reimburse APPLE and its affiliates on demand for
any actual payments made in resolution of any liability or claim that is
subject to indemnification under this Section 15, provided that APPLE obtains
COMPANY’s written consent prior to making such payments, such consent not to be
unreasonably withheld, delayed or conditioned. 
APPLE shall promptly notify COMPANY of any such claim, and COMPANY may
assume control of the defense of such claim. 
APPLE shall have the right, at its expense, to participate in the
defense thereof under COMPANY’s direction.

(c)           EXCEPT PURSUANT TO AN EXPRESS
INDEMNITY OBLIGATION, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES, INCLUDING
LOSS OF PROFITS OR PUNITIVE DAMAGES, EVEN IF ADVISED OF THEIR POSSIBILITY.

 

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(d)           NO WARRANTY OR TERM, EXPRESS OR
IMPLIED, STATUTORY OR OTHERWISE, AS TO THE CONDITION, QUALITY, DURABILITY,
PERFORMANCE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE ONLINE
STORE, THE SECURITY SOLUTION, OR ANY ELEMENTS OF THE FOREGOING IS GIVEN TO, OR
SHOULD BE ASSUMED BY, COMPANY, AND ANY SUCH WARRANTIES AND TERMS ARE HEREBY
EXCLUDED.

16.           Confidentiality.  Each party acknowledges that by reason of
this Agreement it may have access to certain information and materials
concerning the other party’s business plans, customers, technology and products
that are confidential and of substantial value to such party, which value would
be impaired if such information were disclosed to third parties or used for
purposes other than as expressly permitted by this Agreement (referred to in
this Agreement as “Confidential Information”). 
Each party agrees to maintain any and all Confidential Information
received from the other, in confidence, and agrees not to disclose or otherwise
make available such Confidential Information to any third party without the
prior written consent of the disclosing party. 
Each party agrees that Confidential Information shall be disclosed to
its employees and other personnel under its control and supervision for
purposes of performing under this Agreement solely on a need-to-know basis in
furtherance of this Agreement, and solely to those individuals who are bound by
a written non-disclosure agreement having terms no less restrictive than the non-disclosure
terms of this Section 16, unless required by law, or court or governmental
order.  Confidential Information shall be
deemed to include (i) information marked confidential, if conveyed in writing,
and (ii) information identified orally as confidential, if conveyed
orally.  Confidential Information shall
not be deemed to include any information which (a) is publicly known at the
time of the disclosure, (b) becomes publicly known other than by breach of the
terms of this Section 16, (c) becomes known to the disclosing party, without
restriction, from a source free of any obligation of confidentiality and
without breach of this Section 16, or (d) is independently developed by the
disclosing party.

17.           Additional Representations and
Warranties of the Parties.

(a)           Each party represents and warrants
that it has full authority to enter into this Agreement, and to fully perform
its obligations hereunder.

(b)           Each party represents and warrants
that it owns or controls the necessary rights in order to make the grant of
rights, licenses and permissions herein, and that the exercise of such rights,
licenses and permissions by the other party hereto shall not violate or
infringe the rights of any third party.

(c)           Each party represents and warrants
that it shall not act in any manner which conflicts or interferes with any
existing commitment or obligation of such party, and that no agreement
previously entered into by such party will interfere with such party’s
performance of its obligations under this Agreement.

(d)           Each party represents and warrants
that it shall perform in compliance with any applicable laws, rules and
regulations of any governmental authority.

 

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18.           General Provisions.

(a)           No Agency or Joint Venture.  The parties agree and acknowledge that the
relationship between the parties is that of independent contractors acting as
seller and purchaser.  This Agreement
shall not be deemed to create a partnership or joint venture, and neither party
is the other’s agent, partner, employee, or representative.

(b)           Contractors.  APPLE may contract with third parties to
provide Fulfillment Activities on behalf of APPLE, provided such third parties
are subject to terms no less restrictive than the terms APPLE is subject to
under this Agreement.  APPLE shall be responsible
for the performance of such third parties while under APPLE’S control and
supervision.

(c)           Entire Agreement,
Modification, Waiver.  This
Agreement, including any annexes, schedules and exhibits hereto, contains the
entire understanding of the parties relating to the subject matter hereof, and
supersedes all previous agreements or arrangements between the parties relating
to the subject matter hereof.  This
Agreement cannot be changed or modified except by a writing signed by the
parties.  A waiver by either party of any
term or condition of this Agreement in any instance shall not be deemed or
construed as a waiver of such term or condition for the future, or of any
subsequent breach thereof.  If any
provision of this Agreement is determined by a court of competent jurisdiction
to be unenforceable, such determination shall not affect any other provision
hereof, and the unenforceable provision shall be replaced by an enforceable
provision that most closely meets the commercial intent of the parties.

(d)           Binding on Successors.  This Agreement shall be binding on the
assigns, heirs, executors, personal representatives, administrators, and
successors (whether through merger, operation of law, or otherwise) of the
parties.

(e)           Notices.  Any notice, approval, request, authorization,
direction or other communication under this Agreement shall be given in writing
and shall be deemed to have been delivered and given for all purposes: (i) on
the delivery date if delivered personally to the party to whom the same is
directed or delivered; (ii) upon delivery by confirmed-receipt facsimile to the
appropriate number set forth below (and, further, confirmation of receipt is
made by telephone); (iii) one (1) business day after deposit with a commercial
overnight carrier, with written verification of receipt; or (iv) five (5)
business days after the mailing date, whether or not actually received, if sent
by certified mail, return receipt requested, postage and charges prepaid, to
the address of the party to whom the same is directed as set forth below (or
such other address as such other party may supply by written notice duly
given).

	
  If to COMPANY:

  	
  Dominion Entertainment, Inc.

  
	
   

  	
   

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

  
	
   

  
	
  If to APPLE:

  	
  APPLE Computer, Inc.

  
	
   

  	
  1 Infinite Loop,
  MS 82-EC

  
	
   

  	
  Cupertino, CA
  95014

  
	
   

  	
  Attn: Eddy Cue

  
	
   

  	
  Fax: (408)
  974-2140

  

 

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with a courtesy copy (which copy shall not constitute notice), to the
following at the same address:

	
  General Counsel

  	
  Fax: (408) 974-8530

  

 

(f)            Governing Law.  This Agreement shall be governed and
interpreted in accordance with the internal laws of the State of California
applicable to agreements entered into and wholly to be performed therein,
without regard to principles of conflict of laws.  Each party agrees that in the event it brings
a proceeding against the other party relating to this Agreement, then such
proceeding will take place in the jurisdiction and venue of such other party’s
principal place of business, e.g., No. District of California being APPLE’s
principal place of business as of the date of this Agreement, and both parties
hereby waive any objection to personal jurisdiction or venue in that forum.

(g)           Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same document.

(h)           Remedies.  To the extent permitted by applicable law,
the rights and remedies of the parties provided under this Agreement are
cumulative and in addition to any other rights and remedies of the parties at
law or equity.

(i)            Headings.  The titles used in this Agreement are for
convenience only and are not to be considered in construing or interpreting the
Agreement.

(j)            No Third-Party
Beneficiaries.  This Agreement
is for the sole benefit of the parties hereto and their authorized successors
and permitted assigns.  Nothing herein,
express or implied, is intended to or shall confer upon any person or entity,
other than the parties hereto and their authorized successors and permitted
assigns, any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.

(k)           Force Majeure.  For the purposes of this Agreement, “Force
Majeure” shall mean any event which a party hereto could not foresee, such as
fire, flood, acts of God or public enemy, Internet failures, earthquakes,
governmental or court order, national emergency, strikes or labor disputes, the
effect of which it could not reasonably prevent or predict and which renders
impossible or impractical the performance of contractual obligations either
totally or in part.  The party invoking a
Force Majeure shall notify the other party within three (3) business days of
its occurrence by accurately describing all the circumstances of the situation
involved and its effect upon the performance of its contractual
obligations.  The taking place of a Force
Majeure shall have the effect of suspending the obligations of the party which
has invoked the provisions of this Section to the extent such obligations are
affected by the Force Majeure. 
Contractual dates shall be extended for a period equal to the duration
of a Force Majeure.  The cessation of a
Force Majeure shall be communicated by notice within three (3) business days of
its occurrence by the party that invoked it.

 

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IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective officers thereunto duly
authorized.

 

	
  APPLE COMPUTER, INC.
  COMPANY:

  	
  COMPANY:

  
	
   

  	
  DOMINION ENTERTAINMENT, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Eddy Cue

  	
   

  	
  By:

  	
  /s/ P. Kives

  	
   

  
	
  Name:

  	
  Eddy Cue

  	
  Name:

  	
  Philip Kives

  
	
  Title:

  	
  V P iApps

  	
  Title:

  	
  President & CEO

  
	
  Date:

  	
  10/10/03

  	
  Date:

  	
  October 2, 2003

  
										

 

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EXHIBIT A

Content Usage
Rules

End users obtaining
eMasters from APPLE pursuant to the terms of this Agreement may:

1.                  Burn
single-track eMasters an [*] to a CD as part of a playlist.

2.                  Use
eMasters in applications using QuickTime.

3.                  Store
eMasters on up to five (5) computers at the same time.

4.                  Subject to
Paragraph 3. above, transfer eMasters to, and/or render from, a Device so long
as such Device includes the Security Solution.

5.                  Use
eMasters solely for end user’s personal use.

* Certain information on this page has been omitted
and filed separately with the Commission. 
Confidential treatment has been requested with respect to the omitted
portions.

 A-1

 

EXHIBIT B

COMPANY Schedule
of Wholesale Prices

United States and Canada

Single Tracks

Wholesale Price

US $[*] per eMaster sold
by APPLE hereunder

Multi-Track Album

**    [*]

Wholesale Price

	
  $[*]

  	
  **

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  $[*]

  	
  **

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  $[*]

  	
  **

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  $[*]

  	
  **

  	
  [*]

  

 

Others (short multi-track
albums and multi CDs)

Wholesale Price

$[*]X (# CDs) multi-CD
Sets

$Sum of # of tracks@ $[*]
CD-Single

* Certain information on
this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested
with respect to the omitted portions.

 B-1Exhibit 10.1

EXECUTION
COPY

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

ROYALTY INTEREST ASSIGNMENT AGREEMENT

ROYALTY
INTEREST ASSIGNMENT AGREEMENT (as amended, supplemented or otherwise modified from time to time,
this “Agreement”) is made and entered into as of August 23, 2006 (the “Execution Date”)
by and among DYAX CORP. (“Dyax”),
a Delaware corporation, and PAUL ROYALTY FUND
HOLDINGS II, a California general partnership (“Assignee”).

WHEREAS, Company (as defined below) is the owner of
the LFRP Intellectual Property (as hereinafter defined) with respect to the
LFRP (as hereinafter defined); and

WHEREAS, Company has the right to payments under the
License Agreements (as hereinafter defined); and

WHEREAS, Company wishes to sell, assign, convey and
transfer to Assignee, and Assignee wishes to purchase from Company, the
Assigned Interests (as hereinafter defined), upon and subject to the terms and
conditions hereinafter set forth; and

NOW,
THEREFORE, in
consideration of the mutual covenants, agreements representations and
warranties set forth herein, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01  Definitions.

The following terms, as used
herein, shall have the following meanings:

“Actual Knowledge”
shall mean, with respect to Company, as applicable, the actual knowledge of an
officer or senior manager or other person with similar responsibility,
regardless of title, of Company relating to a particular matter.  For the avoidance of doubt, a person charged
with responsibility for the aspect of the business relevant or related to the
matter at issue shall not be deemed to have actual knowledge of a matter unless
it can be shown, through written or other similarly reliable evidence
(including deposition testimony), that such person was contemporaneously and
actually aware of such matter, whether or not, in the prudent exercise of his
or her duties and responsibilities in the ordinary course of business, such
person should have known of such matter.

“Affected Licenses”
shall mean any License Agreements which are the basis of or contribute to the
LFRP Adverse Effect that is the basis for any Purchase Option Event described
in clause (vii)(A)-(C) thereof, under which there has been ******.

“Affiliate” shall
mean, with respect to any Person, any other Person that, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person.

 

“Agreement with ******”
or “****** Agreement” shall mean the ****** Agreement dated ****** and
the Company.

“Applicable Percentage”
shall have the meaning set forth on Exhibit J.

“Assigned Interests”
shall mean the (i) Applicable Percentage of (a) Gross Payments less
(b) ****** Payments, FTE Payments and Reimbursement Payments, from
January 1, 2006 for the duration of the Term; plus (ii) any
payments due to Assignee pursuant to Sections 5.11(c)(i),
5.12(c) or 5.12(f), but in any event not less than the Guaranteed
Minimum Payments. For Gross Payments received in 2006 this amount shall be
further subject to multiplication by the Proration Factor and in the final
calendar year of the Term further subject to multiplication by a factor of (One
(1) minus the Proration Factor).

“Assignee” shall have
the meaning set forth in the first paragraph hereof.

“Assignee Concentration
Account” shall mean a segregated account established for the benefit of
Assignee and maintained at the Lockbox Bank pursuant to the terms of the
Lockbox Agreement and this Agreement. 
Assignee Concentration Account shall be the account into which the funds
held in the Lockbox Account which are payable to Assignee pursuant to this
Agreement are swept in accordance with the terms of this Agreement and the
Lockbox Agreement.

“Assignee Indemnified Party”
shall have the meaning set forth in Section 8.05(a).

“Assignee Repurchase
Option” shall have the meaning set forth in Section 5.07(a).

“Assignee’s Account”
shall mean an account maintained by Assignee at any financial institution and
designated in writing by Assignee to Company, as Assignee may so designate from
time to time.

“Assignee’s Consultants”
shall mean, collectively, Assignee’s employees, officers, directors, legal and
accounting advisors, agents or other authorized representatives.

“Audit Costs” shall
mean, with respect to any audit of the books and records of Company with
respect to amounts payable or paid under this Agreement or any License Party
Audit, the cost of such audit, including all fees, costs and expenses incurred
in connection therewith.

“Audit Reports” shall
mean, with respect to a License Party Audit, any and all reports, findings and
other written information related to such License Party Audit.

“Bankruptcy Event” shall mean any of the
following:

(i)    Company shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, concerning bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or all or
substantially all of its debts, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for the Company or for all or
substantially all of its assets; or

(ii)           Company shall make a general assignment
for the benefit of its creditors; or

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 2
 

 

(iii)          there shall be commenced against Company
any case, proceeding or other action set forth in clause (i) above which
remains undismissed, undischarged or unbonded (if applicable) for a period of****** days; or

(iv)          there shall be commenced against Company
in a court of competent jurisdiction any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against (A) all or any major portion of its assets and/or
(B) any material portion of the LFRP Intellectual Property, which results
in the entry of an order for any such relief which shall not have been vacated,
discharged, stayed, satisfied or bonded (if applicable) pending appeal within ****** days from the entry thereof; or

(v)           Company (A) shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii), (iii) or (iv) above of
this definition of “Bankruptcy Event” or (B) provides Assignee with a
Bankruptcy Notice; or

(vi)          Company shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due; or

(vii)         Company shall be Insolvent.

“Bankruptcy Notice”
shall have the meaning as set forth in Section 5.11(g)(ii).

“Baxter Consent”
shall have the meaning set forth in Section 5.10.

“Business Day” shall
mean any day other than a Saturday, a Sunday, any day which is a legal holiday
under the laws of the City of New York, or any day on which banking
institutions located in the State of New York are required by law or other
governmental action to close.

“Business Report”
shall mean a report in a form agreed upon between the parties and based on Exhibit G,
providing information on current activities relating to the licensing of the
LFRP Intellectual Property as part of the LFRP.

“Call” shall have the
meaning as set forth in Section 5.07(b).

“Call Price” shall have
the meaning as set forth in Section 5.07(b).

“Change of Control”
shall mean:

(i)            the acquisition
by any Person or group (within the meaning of Sections 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934) (other than any trustee
or other fiduciary holding securities under an employee benefit plan of Company
or any entity controlled by Company) of beneficial ownership of any capital
stock of Company, if after such acquisition, such Person or group would be the “beneficial
owner” (as defined in Rule 13d-3 under the Securities Exchange Act of
1934), directly or indirectly, of securities of Company representing more than
fifty percent (50%) of the combined voting power of Company then outstanding
securities entitled to vote generally in the election of directors; or

 

Confidential
materials omitted and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 3
 

 

(ii)           Company’s
shareholders approve a merger or consolidation of Company with any other
Person, other than a merger or consolidation which would result in Company’s
voting securities outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities
of the surviving entity) more than fifty percent (50%) of the combined voting
power of Company’s voting securities or such surviving entity’s voting
securities outstanding immediately after such merger or consolidation; or

(iii)          during any
period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of Company (together with any new
directors (other than a director designated by a Person who has entered into an
agreement with Company to effect a transaction described in clause (i) or
(ii) of this definition of “Change of Control”), whose election by such
Board of Directors or nomination for election by Company’s shareholders, as
applicable, was approved by a vote of a majority of the directors then still in
office who either were directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any reason to
constitute at least a majority of the Board of Directors of Company then in
office; or,

(iv)          Company merges
or is consolidated with any other Person, other than a merger or consolidation
which would result in Company’s voting securities outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than fifty
percent (50%) of the combined voting power of Company’s voting securities or
such surviving entity’s voting securities outstanding immediately after such
merger or consolidation.

“Closing” shall have
the meaning set forth in Section 6.01.

“Closing Date” shall
mean August 23, 2006.

“Co-Developed Product”
shall mean any product or compound (whether or not derived from phage display)
which is the subject of a Co-Development Agreement and in relation to which
Company has committed on a contingent or non-contingent basis its own financial
resources and/or has committed non-reimbursed human resources to discover,
research, develop, manufacture or commercialize such product or compound.

“Co-Development Agreement”
shall mean any agreement between Company and one or more third parties relating
to the discovery, research, development, manufacturing or commercialization of
a product or compound (whether or not derived from phage display) (i) which
would be commonly viewed in the industry as being a co-development agreement,
(ii) under which Company takes a substantially different commercial role than
under an agreement forming part of the LFRP and (iii) which has two or
more of the following aspects: (A) shared ownership of product-related
intellectual property, (B) shared management control over product
development, (C) shared financial obligations, and/or (D) shared
commercialization rights to the product. 
Exhibit Q sets forth a complete list of Co-Development
Agreements in existence as of the date hereof.

“Collateral” shall
have the meaning set forth in the Security Agreement.

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 4
 

 

“Company” shall mean
Dyax and, where the context permits, its Affiliates, successors and
assigns.  By way of non-limiting example,
a reference to “a contract to which Company is a party” would include a
contract entered into by an Affiliate of Company.

“Company Concentration
Account” shall mean a segregated account established and maintained at the
Lockbox Bank pursuant to the terms of the Lockbox Agreement and this
Agreement.  Company Concentration Account
shall be the account into which funds in the Lockbox Account which are payable
to Company pursuant to this Agreement are swept in accordance with the terms of
this Agreement.

“Company Indemnified
Party” shall have the meaning set forth in Section 8.05(b).

“Company LFRP Methods and
Libraries” shall have the meaning set forth in Section 3.12(c).

“Company Physical
Libraries” shall mean the biological material comprising the LFRP Libraries
in the possession of the Company.

“Confidential Information”
shall mean trade secrets and confidential know-how.  Notwithstanding the foregoing definition,
Confidential Information shall not include information that is (i) already
in the public domain at the time the information is disclosed,
(ii) thereafter becomes lawfully obtainable from other sources,
(iii) is required to be publicly disclosed in any document to be filed
with any Governmental Authority or (iv) is required to be publicly
disclosed under securities laws, rules and regulations applicable to
Company or Assignee as the case may be, or pursuant to the rules and
regulations of any stock exchange or stock market on which securities of Company
may be listed for trading.

“Contract Party”
shall mean any party to a License Agreement or In License.

“Deposit Accounts”
shall mean, collectively, the Lockbox Account, Company Concentration Account
and the Assignee Concentration Account, each established and maintained
pursuant to the Lockbox Agreement.

“Discrepancy Notice”
shall have the meaning set forth in Section 2.02(p).

“Dollars” or “US$”
shall mean the freely transferable lawful money of the United States.

“Drug Approval” shall
mean approval of an application for the Regulatory Approval required before
commercial sale or use of a Product in a regulatory jurisdiction, including
with respect to the U.S. a new drug application (“NDA”), a supplemental
new drug application, a prior approval supplement to an NDA, a Pre-market
Approval Application, clearance of a Pre-market Notification Submission
(510(k)), as applicable, or any amendments thereto submitted to the FDA, and
with respect to the EMEA or countries outside the U.S. any foreign equivalents
thereof.

“Duplicate Libraries”
shall mean quantities of biological material comprising a complete copy of each
of the LFRP Libraries that are sufficient to be used to create a reproducible
supply of the LFRP Libraries, located as provided in the Security Agreement.

“Economic Model”
shall mean that portion of the economic model ****** that results in the
Projected Program Revenues attached hereto as Exhibit H.

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 5
 

 

“EMEA” shall mean the
European Agency for the Evaluation of Medicinal Products.

“Excluded Agreements”
shall mean Co-Development Agreements, Internally Developed Product Agreements
and Licensed Product Agreements.  Exhibit Q
sets forth a complete list of all Excluded Agreements as of the date hereof.

“Excluded Liabilities and Obligations” shall
have the meaning set forth in Section 2.04.

“Excluded Payments”
shall mean (i) payments under any Excluded Agreement (except as provided
in Sections 5.12(e) and 5.12(f)) or (ii) payments
relating to or arising out of any activities relating to the research,
development, manufacturing or commercialization of any Excluded Product (except
as provided in Sections 5.12(e) and 5.12(f).

“Excluded Product”
shall mean any product or compound (whether or not derived from phage display)
which, at any point was, is or becomes, included in Company’s “pipeline” as an
internal product candidate.  An Excluded
Product is either an Internally Developed Product, an In-Licensed Product or a
Co-Developed Product.  Exhibit R
sets forth a complete list of all Excluded Products identified as of the date
hereof.  Notwithstanding the foregoing,
Company acknowledges and agrees that under the terms of certain License
Agreements, Contract Parties and their sublicensees may develop products that
are the same as or similar to Excluded Products and that such same or similar
products shall be not be considered Excluded Products under this Agreement.

“FDA” shall mean the United
States Food and Drug Administration.

“Financial Statements”
shall mean the consolidated balance sheets of Company and its Subsidiaries,
audited at December 31, 2003, December 31, 2004 and December 31,
2005 and the related consolidated statements of operations, cash flows and
changes in stockholders’ equity of Company and its Subsidiaries audited for the
years ended December 31, 2003 December 31, 2004 and December 31,
2005, and the accompanying footnotes thereto, as filed with the SEC, including the Management’s Discussion and
Analysis of Financial Condition and Results of Operations contained therein.

“FTE Payments” shall
mean all amounts received from a Contract Party under any License Agreement in
payment for services relating specifically to the Company’s costs (or estimated
costs) for the discovery, research and/or
development of peptides, proteins and antibodies as
reasonably calculated based on the subsidization of the full cost of personnel
measured in full time equivalents, other comparable cost-based measures or any
combination of the foregoing; provided that, with respect to any Future
Licenses, the structure and amount of such payments are consistent with the
structure and amount of payments received from Contract Parties for similar
services under License Agreements executed prior to the date hereof.  For the avoidance of doubt, FTE Payments
shall not include any technical milestones that relate specifically to the
completion of services, or other related events.

“Further Make Whole Payment”
shall mean, for each calendar year, an amount equal to (i) the amounts of
the Assigned Interests based on the Projected Program Revenues for the Affected
Licenses ****** from January 1 of the applicable calendar year until
December 31 of such calendar year less (ii) the total amounts
of Assigned Interests based on amounts actually paid ****** under such Affected
Licenses for such calendar year, but in no event less than zero.

“Future Licenses”
shall mean any License Agreement entered into by Company after the date hereof
with any other Person, as the same may be amended, supplemented or otherwise
modified from time to time.

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 6
 

 

“GAAP” shall mean
generally accepted accounting principles in the United States in effect from
time to time.

“GMP Credit” shall
have the meaning set forth on Exhibit J.

“Governmental Authority”
shall mean any government, court, tribunal, arbitrator, legislative body,
regulatory or administrative agency or commission, or other governmental
authority, agency or instrumentality, of any country, supranational entity or
part thereof (including federal, state or local authorities), or other
jurisdiction, including the U.S. Patent and Trademark Office, the FDA, the U.S.
National Institutes of Health and the EMEA.

“Gross Payments”
shall mean all Royalties arising under or payable with respect to any License
Agreement or In License and any collections, recoveries, payments or other
compensation made in lieu thereof and any amounts paid or payable to Company in
respect of any License Agreement or In License pursuant to Section 365(n)
of the United States Bankruptcy Code. 
For the avoidance of doubt, the parties acknowledge and agree that Gross
Payments shall specifically exclude all Excluded Payments.

“Guaranteed
Minimum Payments” shall have
the meaning set forth on Exhibit J.

“In Licenses” shall
mean any existing or future agreement pursuant to which Company obtains rights
to LFRP Intellectual Property or other rights used in the LFRP.

“In-Licensed Product”
shall mean any product or compound (whether or not derived from phage display)
in relation to which Company has committed or budgeted to commit its own
financial and/or human resources to discover, research, develop, manufacture or
commercialize such product or compound, and to which Company acquired rights to
discover, research, develop, manufacture or commercialize such product or
compound (i) under a Licensed Product Agreement or (ii) under an
option or similar provision expressly included within any License Agreement
where the economic terms applicable to such provision are consistent with
Company’s past practices.

“IND” shall mean an
investigational new drug application as defined in 21 C.F.R.
Section 312 et seq. filed with the FDA in the United States or an
equivalent application filed with a Regulatory Agency in any country outside of
the United States.

“Indebtedness” means
with respect to any Person: (i) any liability of such Person (a) for
borrowed money, or under any reimbursement obligation relating to a letter of
credit, (b) evidenced by a bond, note, debenture, or similar instrument
(including a purchase money obligation) given in connection with the
acquisition of any businesses, properties or assets of any kind (other than a
trade payable or a current liability arising in the ordinary course of
business), or (c) for the payment of money relating to any obligations
under any capital lease of real or personal property which has been recorded as
a capitalized lease obligation; (ii) all redeemable stock issued by such
Person that is mandatorily redeemable or redeemable or required to be
repurchased at the election of the holder thereof (the amount of Indebtedness
represented by any involuntary liquidation preference plus accrued and unpaid
dividends); (iii) any liability of others described in the preceding
clause (a) that the Person has guaranteed or that is otherwise its legal
liability; and (iv) (without duplication) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of the
types referred to in clauses (i), (ii) and (iii) above.

“Independent Accountants”
shall have the meaning set forth in Section 2.02(p).

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 7
 

 

“Initial Make Whole Payment”
shall mean an amount equal to (i) the amounts of the Assigned Interests
based on the Projected Program Revenues for Affected Licenses ****** from and
including the date of the ****** event that is the initial basis for or
contribution to the LFRP Adverse Effect until the end of the calendar year in
which Assignee has provided the notice described in Section 5.07(a) less
(ii) the total amounts of Assigned Interests based on amounts actually
paid ****** under such Affected Licenses for such period, but in no event less
than zero.

“Insolvent” shall mean, with respect to a
Person, (a) a financial condition such that the sum of such Person’s debts
and liabilities is greater than the fair market value of such Person’s
property, when taken together on a consolidated basis, (b) such Person
being or becoming a debtor under the United States Bankruptcy Code, or
(c) such Person becoming insolvent, as defined in the United States
Bankruptcy Code or under the form of the Uniform Fraudulent Conveyances Act,
the Uniform Fraudulent Transfer Act or similar legislation then in effect in
the States of Delaware, New York and Massachusetts.

“Insurance Providers”
shall have the meaning set forth in Section 3.19.

“Intent” means (a) the vote by the Company’s
Board of Directors or of the shareholders, authorizing management of the
Company to do an action
or (b) the delivery to the Board of Directors, or to the shareholders by
management, whether in writing or orally, of a recommendation that the Company
take an action.

“Internally Developed
Product” shall mean any product or compound which was independently
identified by Company using its own financial and/or human resources, the
intellectual property to which product or compound is owned by the Company.

“Internally Developed
Product Agreement” shall mean any agreement between Company and one
or more third parties pursuant to which Company grants a third party(ies) a
license, or an option to obtain a license, to research, develop and/or
commercialize one or more Internally Developed Products, with or without its
phage display technology and/or library.

“IRR” shall mean
internal rate of return.

“Knowledge” shall
mean, with respect to Company, as applicable, the knowledge of an officer or
senior manager or other person with similar responsibility, regardless of
title, of Company relating to a particular matter; provided, however, that a
person charged with responsibility for the aspect of the business relevant or
related to the matter at issue shall be deemed to have knowledge of a
particular matter if, in the prudent exercise of his or her duties and
responsibilities in the ordinary course of business, such person should have
known of such matter.

“LFRP” shall mean the
program under which Company enters into License Agreements pursuant to which
third parties are granted rights to the LFRP Patents, alone or in combination
with LFRP Technology where the purpose
is to generate revenue for the Company by (i) licensing
to a third party rights to use the LFRP Patents and/or the LFRP Technology to
identify, isolate, research and/or develop antibodies, peptides and/or
proteins, or (ii) performing
research on behalf of third parties to identify, isolate, research
and/or develop antibodies, peptides and/or proteins.

“LFRP Adverse Effect”
shall mean one or more Material Adverse Effects that, individually or in the
aggregate, have the effect (or are reasonably anticipated to have the effect)
of reducing the total amount ****** anticipated to be received by Assignee with
respect to the Assigned Interests

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 8
 

 

cumulatively from the date
of the measurement through the remaining Term, to less than ****** of the
Projected Program Revenues for such period.

“LFRP Intellectual
Property” shall mean:

(i)            the LFRP Patents and LFRP Technology;

(ii)           the Webphage® Software; and

(iii)          all other know-how, materials, trademarks,
service marks, trade names and goodwill associated therewith, trade secrets,
data, formulations, processes, franchises, inventions, software, copyrights,
and all other technology and intellectual property (including biological
materials), and all registrations of any of the foregoing, or applications
therefor, that are (a) owned by, controlled by, issued to, licensed to,
licensed by Company and (b) necessary to the performance of the LFRP as
presently conducted by Company or as conducted by Company as of the Closing
Date or during the Term.

“LFRP Know-How” means any biological material, know-how, data, technical or other
information related to the LFRP Patents and/or LFRP Libraries that is owned or
controlled by Company as described in Exhibit S hereto, together
with all updates and improvements provided under any Library License Agreements
as of the Closing or during the Term.

“LFRP Libraries” means Company’s ****** libraries, ******, and Company’s ****** libraries, all of which are described
in Exhibit T hereto, together with all updates and improvements
thereto ****** that are developed or obtained by Company and are transferred
under any Library License Agreement as of the Closing or during the Term.

“LFRP Patents” means the patents and patent applications
identified on Schedule 3.12(b) and any other patent
application and patent that is: (i) owned by, controlled by, issued to,
licensed to or licensed by Company, or for which the Company has obtained the
benefit of a covenant not to sue, as of the Closing Date or during the Term
necessary to the practice of antibody or peptide phage display; or
(ii) licensed under the LFRP; and any patents issuing from such
applications, together with any reissues, re-examinations, renewals, and
extensions thereof, and all continuations, continuations-in-part and
divisionals of the applications, in each case throughout the world.

“LFRP Technology” means the LFRP Know-How and LFRP Libraries.

“License Agreement”
shall mean any existing or future agreement under which: (i) Company
licenses to a third party rights to use the technology claimed in the LFRP
Patents to identify, isolate, research and develop antibodies, peptides and/or
proteins (“Patent License Agreements”); (ii) Company licenses to a
third party rights to use the LFRP Patents and the LFRP Technology to identify,
isolate, research and develop antibodies, peptides and/or proteins (“Library
License Agreements”); and/or (iii) Company performs funded research
services for third parties using the LFRP Patents and the LFRP Technology to
identify, isolate, research and develop antibodies, peptides and/or proteins on
behalf of such third parties (“Funded Research Agreements”); in each
case as they may be amended, supplemented or otherwise modified from time to
time. Without limiting the terms of Sections 5.12(e) and (f),
License Agreements shall specifically exclude Excluded Agreements.

“License Party Audit”
shall have the meaning set forth in Section 5.02(e).

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 9
 

 

“Licensed Product
Agreement” shall mean any product agreement (but excluding phage or
phagemid or protein display technology and/or library licenses) between Company
and one or more third parties in which Company acquires the right to develop
and commercialize a product or compound (whether or not derived from phage
display).

“Liens” shall mean
any lien, hypothecation, capitalized lease, levy, assessment, attachment,
seizure, writ, distress warrant, charge, instrument, license (excluding the
License Agreements and In Licenses where applicable), preference, priority,
security agreement, security interest, interest, mortgage, option, privilege,
pledge, liability, covenant, order, tax, right of recovery, trust or deemed
trust (whether contractual, statutory or otherwise arising) or any encumbrance,
right or claim of any other Person of any kind whatsoever whether choate or
inchoate, filed or unfiled, noticed or unnoticed, recorded or unrecorded,
contingent or non-contingent, material or non-material, known or unknown.

“Lockbox Account”
shall mean, collectively, any lockbox and segregated lockbox account
established and maintained at the Lockbox Bank pursuant to a Lockbox Agreement
and this Agreement.  The Lockbox Account
shall be the account into which all payments made in respect of the sale of the
Products are to be remitted and shall be an escrow account.

“Lockbox Agreement”
shall mean any agreement entered into by a Lockbox Bank, Company and Assignee
substantially in the form attached hereto as Exhibit D, pursuant to
which, among other things, the Lockbox Account, the Assignee Concentration
Account and the Company Concentration Account shall be established and
maintained.

“Lockbox Bank” shall
mean JP Morgan Chase Bank or such other bank or financial institution approved
by each of Assignee and Company.

“Losses” shall mean
collectively, any and all claims, damages, losses, judgments, liabilities,
costs and expenses (including reasonable expenses of investigation and
reasonable attorneys’ fees and expenses in connection with any action, suit or
proceeding).

“Make Whole Payment”
shall mean any of the Initial Make Whole Payment or any Further Make Whole
Payments.

“Material Adverse Change”
shall mean, with respect to Company, a material adverse change in the business,
operations, assets, prospects or financial condition of Company and its
Subsidiaries, taken as a whole.

“Material Adverse Effect”
shall mean (i) the effect of a Material Adverse Change, (ii) a
material adverse effect on the validity or enforceability of any of the
Transaction Documents, (iii) a material adverse effect on the ability of
Company to perform any of its obligations under any of the Transaction
Documents, (iv) a material adverse effect on the rights or remedies of
Assignee under any of the Transaction Documents, (v) an adverse effect on
the right of Company to receive any material payments payable under ****** or
any other material rights and remedies of Company under******, (vi) a
material adverse effect on the right of Assignee to receive Assigned Interests
or any other payment due to Assignee hereunder, or (vii) a material
adverse effect on the Assigned Interests, including ******.

“Material Contracts”
shall mean any contract, agreement or other arrangement to which Company is a
party or any of Company’s assets or properties are bound or committed (other
than the Transaction Documents) for which breach, nonperformance, cancellation
or failure to renew could reasonably be expected to have a Material Adverse
Effect; provided, that (i) all In Licenses, (ii) any

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 10
 

 

agreement (except for
management contracts or compensatory plans with executive officers or
directors) filed with the United States Securities and Exchange Commission (the
“Commission”) (other than the Transaction Documents), and (iii) the
Material Licenses, shall be deemed to be Material Contracts.

“Material Effect on the
Assigned Interests” means a material adverse effect on the net present
value of the payments to be made to Assignee during the Term excluding the
effect on such net present value of the Guaranteed Minimum Payments.

“Material Licenses”
shall mean those License Agreements set forth on Schedule 3.11.

“NDA” shall mean a
New Drug Application, and all amendments and supplements thereto, for
regulatory approval by the FDA as defined in 21 C.F.R. § 314.50 et
seq., as such act or regulations may be amended, supplemented or replaced from
time to time.

“Net Program Sales” has the meaning set forth
in Section 2.02(c).

“Notice Event” means either (a) Company’s
Intent to cause or to take any action to cause a Bankruptcy Event,
(b) Company being advised or otherwise becoming aware that a Bankruptcy
Event (including an involuntary Bankruptcy Event) has occurred or will occur
shortly or (c) the presentation to the Board of Directors or other
governing body of Company or to any one of Company’s directors or managers by
an officer, member of senior management, director or manager of Company of a
proposal to commence a bankruptcy proceeding or otherwise cause a Bankruptcy
Event.

“Obligations” shall
mean any and all obligations of Company under this Agreement and the other
Transaction Documents.

“Offset” shall mean
any set-off, counterclaim, reduction, withholding or other tax, third-party
royalty payment or other deduction taken or allowed by any Contract Party
against any payment under a License Agreement, including any reduction from the
stated generally-applicable top line royalty under any License Agreement.

“Patent Office” shall
mean the respective patent office (foreign or domestic) for any patent.

“Payments to ******”
or “****** Payments” shall mean the specified payments that become due
and payable to ****** pursuant to the ****** Agreement, as further described in
Schedule 3.04(b).

“Person” means an
individual, corporation, partnership, association, trust or other entity or
organization, but not including a government or political subdivision or any
agency or instrumentality of such government or political subdivision.

“Performance Payment”
shall have the meaning set forth on Exhibit P.

“Performance Payment Date”
shall have the meaning set forth in Section 8.01(a).

“Permitted Liens”
shall mean tax liens or assessments and other governmental levies that are not
yet due and payable or similar liens for amounts not yet due and payable.

“POE Covenant” shall
mean the covenants contained in the Transaction Documents other than the
covenants set forth in Section (vii)(D) of the definition of
Purchase Option Event.

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 11
 

 

“POE Representation”
shall mean (i) until ****** after the later of the Closing Date or any
Performance Date, all representations and warranties set forth in Article 3
or (ii) thereafter, those representations and warranties set forth in
****** which shall survive for the Term.

“Pre-Payment” shall
have the meaning set forth in Section 2.02(k).

“Products” shall mean
the products the subject of the License Agreements.

“Projected Program
Revenues” shall mean the projected Net Program Sales from the LFRP as set
forth on Exhibit H.

“Proration Factor”
shall mean the factor the denominator of which is three hundred and sixty five
(365) and the numerator of which is number of days from and including the Closing
Date to and including December 31, 2006.

“Purchase Option Event”
shall mean any of the following events:

(i)            any Change of
Control;

(ii)           any Bankruptcy
Event;

(iii)          the Transfer by Company of all or any
part of its interests in the LFRP Intellectual Property or the License
Agreements or In-Licenses except (x) with respect to the LFRP, licensing out
LFRP Intellectual Property (including provision of LFRP Libraries or other
biological material) in the ordinary course of business of the LFRP consistent with
past practices, or (y) outside the scope of the LFRP, non-exclusive licensing
out of LFRP Intellectual Property (including the provision of LFRP Libraries or
other biological material) but limited to a scope or for a use so as to not
compete with the LFRP, provided that non-exclusive licensing of LFRP
Intellectual Property under Internally Developed Product Agreements or under
Co-Development Agreements shall not be considered in breach hereof, so long as
in no event shall any third party or Affiliate be enabled to use for funded
research or license out the LFRP Intellectual Property (including the provision
of LFRP Libraries or other biological material) in a way that would compete
with the LFRP, either under such Internally Developed Product Agreements or
Co-Development Agreements, or otherwise;

(iv)          the Transfer by
Company of a majority, calculated by reference to fair market value, of the
consolidated assets of Company, in an individual transaction or series of
transactions, that has a Material Effect on the Assigned Interests or a
material effect on the Company’s ability to pay the Guaranteed Minimum
Payments.

(v)           Company fails
to pay when due any of the amounts set forth in Section 2.02 and
such failure to pay is not cured within ****** days after notice by Assignee;

(vi)          a Notice Event;
and,

(vii)         (A) any
POE Representation given by Company shall, without giving effect to any
qualification by materiality in such POE Representation, be inaccurate and such
inaccuracy would, individually or in the aggregate with other such inaccuracies
on the part of Company, as the case may be, reasonably be expected to have an
LFRP

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 12
 

 

Adverse Effect;
(B) there has occurred a breach of or default under any POE Covenant,
without giving effect to any qualification by materiality in such POE Covenant,
by Company, which would, individually or in the aggregate with other such
breaches or defaults on the part of Company, as the case may be, reasonably be
expected to have an LFRP Adverse Effect; (C) there shall have occurred
****** or, (3) a failure by Company to enforce any material ******
provision in ******, which ****** would reasonably be expected to have an LFRP
Adverse Effect ******; (D) (I) any breach or default of Sections 2.02
******, 5.02, 5.05, 5.08, 5.09(a) and (b),
5.11(c)(i) and (ii), 5.11(k), 5.12(b) (as to
mandatory provisions only), 5.12(c), 5.12(d), 5.12(e) and
5.12(f), or (II) any breach or default of a covenant contained in either
the Security Agreement or the Lockbox Agreement that would, in either (I) or
(II) above, individually or in the aggregate with other such breaches or
defaults on the part of Company, as the case may be, reasonably be expected to
have a Material Adverse Effect, and any such breach or default in either (I) or
(II) above shall not be cured within ****** days after notice by Assignee; or
(E) ******.

“Purchase Price”
shall have the meaning set forth on Exhibit P.

“Quarterly Guaranteed
Minimum Payments” shall have the meaning set forth on Exhibit J.

“Quarterly Report”
shall mean, with respect to the relevant calendar quarter of Company:
(i) a report in a form agreed by the parties and based on Exhibit N
showing all payments made by Company and any Contract Party to Assignee under
this Agreement during such quarter, such report showing in detail the basis for
the calculation of such payments and exclusions; (ii) a reconciliation of
such report referred to in clause (i) above to all information and data
deliverable to Company by the Contract Parties to any License Agreements,
together with relevant supporting documentation, as well as a reconciliation
with the total revenues of Company prepared in accordance with GAAP; and,
(iii) such additional information as Assignee may reasonably request.

“Regulatory Agency”
shall mean a Governmental Authority with responsibility for the regulation of
the research, development, marketing or sale of drugs or pharmaceuticals in any
jurisdiction, including the FDA, the U.S. National Institutes of Health and the
EMEA.

“Regulatory Approvals”
shall mean, collectively, all INDs, NDAs and other regulatory approvals,
registrations and associated materials (including the product dossier) issued
by the FDA as to any Product or otherwise related to the LFRP, and all reports,
correspondence and other submissions related thereto and the regulatory and
clinical files and data pertaining thereto, and all information, data,
know-how, formulations, assays, goodwill or intellectual property contained in
such INDs and the NDAs, relating to such Products together with all amendments,
supplements and updates thereto and all comparable regulatory approvals,
registrations and associated materials by any other Regulatory Agency
throughout the world.

“Reimbursement Payments”
shall mean all amounts received from a Contract Party under any Funded Research
Agreements in reimbursement on a pure pass-through basis for out of pocket
costs incurred and invoiced by Company (other than Company FTE Payments) in
connection with the provision of services relating to the identifying,
isolating, and researching antibodies, peptides and or proteins; provided that,
with respect to any Future Licenses, the structure and amount of such payments
are consistent with the structure and amount of payments received from one or
more Contract Parties in

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 13
 

 

reimbursement for similar
costs incurred by Company under License Agreements executed prior to the date
hereof.

“Repurchase Event”
shall have the meaning set forth in Section 5.07(d).

“Repurchase Price”
shall have the meaning set forth in Section 5.07(c).

“Royalties” shall
mean the gross amount of all royalties, minimum royalty payments, profit
payments, license fees, settlement payments, judgments, payments, securities,
consideration or any other remuneration of any kind payable or received under
any License Agreement or In License.

“Security Agreement”
shall mean the Security Agreement dated as of the Closing Date and between
Company and Assignee providing for, among other things, the grant by Company in
favor of Assignee of a valid continuing, perfected lien on and security
interest in, the Collateral.

“Senior Officer” shall mean the chief executive officer or chief
financial officer of a Person or another officer or official of such Person
with responsibilities substantially equivalent to the customary responsibilities
of a chief executive officer or chief financial officer.

“Subsidiary” shall
mean with respect to any Person (i) any corporation of which the
outstanding capital stock having at least a majority of votes entitled to be
cast in the election of directors under ordinary circumstances shall at the
time owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.

“Term” shall mean the
term of this Agreement, which shall commence on the date hereof and terminate
on December 31, 2017 unless either (i) terminated earlier through the
consummation of a Repurchase Event or (ii) extended as described in Section 7.03.

“Term Sheet” shall
mean the Term Sheet between Paul Capital Advisors, LLC and Company dated
May 4, 2006 and executed on May 9, 2006.

“Transaction Documents”
shall mean, collectively, this Agreement, the Security Agreement and any
Lockbox Agreement.

“Transfer” or “Transferred”
shall mean any sale, conveyance, assignment, disposition or license either to a
third party or to an Affiliate.

“True-Up Amount”
shall have the meaning set forth in Section 2.02(l).

“True-Up Date” for
any calendar quarter shall mean the forty-fifth (45th)
day following the end of each such quarter, unless such date is not a Business
Day, in which case the applicable date will be the immediately succeeding
Business Day.

“UCC” shall mean the
Uniform Commercial Code (or any similar or equivalent legislation) as in effect
in any applicable jurisdiction.

“United States” or “U.S.”
shall mean the United States of America.

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such omission.

 14
 

 

 

“Webphage® Software” shall mean Company’s analysis and data
storage software for phage and phagemid library screening as embodied in the
United States copyright registration No. TX 5989121 issued May 14,
2004, and any updates, improvements or modifications thereto (in human
readable, source code and object code forms).

“Weekly Amount” shall
have the meaning set forth on Exhibit J.

ARTICLE II

PURCHASE
AND SALE OF ASSIGNED INTERESTS

Section 2.01 
Purchase and Sale.

Upon the terms and subject
to the conditions set forth in this Agreement, Company agrees to sell, assign, transfer and convey to Assignee, and
Assignee agrees to purchase from Company, free and clear of all Liens (except
those Liens created in favor of Assignee pursuant to the Security Agreement and
any other Transaction Document), all of Company’s right, title and interest in
and to the Assigned Interests.

Section 2.02  Lockbox; Payments in Respect of the
Assigned Interests.

(a)           At
the Closing, the parties hereto shall enter into a Lockbox Agreement
substantially in the form attached hereto as Exhibit D, which
Lockbox Agreement will provide for, among other things, the establishment and
maintenance of a Lockbox Account, a Company Concentration Account and an
Assignee Concentration Account in accordance with the terms herein and therein.

(b)           [Reserved].

(c)           Assignee shall be entitled to receive an
amount of cash in respect of the Assigned Interests in either the Assignee
Concentration Account or Assignee’s Account determined in accordance with the
following formula:

Amount Due to Assignee = A multiplied by
(B – C – D – E) (with B-C-D-E being defined as “Net Program Sales”) plus
F, where

A     =      the Applicable Percentage;

B     =      the Gross Payments;

C     =      ****** Payments;

D     =      FTE Payments; and

E      =      Reimbursement Payments; and,

F      =      Payments due to Assignee pursuant to Sections 5.11(c)(i),
5.12(c) or 5.12(f),

but
such amount shall in no event be less than the Guaranteed Minimum Payments.

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 15

 

(d)           The Assignee Concentration Account shall be
held solely for the benefit of Assignee, subject to the terms and conditions of
this Agreement.  Assignee shall have
immediate and full access to any funds held in the Assignee Concentration
Account and such funds shall not be subject to any conditions or restrictions
whatsoever.  The Company Concentration
Account shall be held solely for the benefit of Company, subject to the terms
and conditions of this Agreement, the Security Agreement and the other Transaction
Documents.  Subject to the terms and
conditions of this Agreement, the Security Agreement and the other Transaction
Documents, Company shall have immediate and full access to any funds held in
the Company Concentration Account and such funds shall not be subject to any
conditions or restrictions whatsoever other than those of the Lockbox Bank,
provided, however, that nothing herein shall (i) affect or reduce Company’s
obligations to pay in full all amounts due to Assignee under this Agreement, or
(ii) in any manner limit the recourse of Assignee to the assets of Company
to satisfy Company’s obligations.

(e)           Sweeps from the Lockbox Account shall be made
pursuant to Exhibit K.

(f)            Company shall pay for all fees, expenses and
charges of the Lockbox Bank by debiting the Company Concentration Account.

(g)           With respect to any existing License
Agreement or invoice entered into or issued by Company in relation thereto,
Company shall immediately upon the execution of the Lockbox Agreement
(A) notify the applicable Contract Party to remit to the Lockbox Account
when due all Royalties that are due and payable to Company in respect of or
derived from such License Agreement or invoice and (B) in each case,
provide to Assignee a copy of each such notification.

(h)           Company shall have no right to terminate the
Lockbox Account without Assignee’s prior written consent.  Any such consent, which Assignee may grant or
withhold in its discretion, shall be subject to the satisfaction of each of the
following conditions to the satisfaction of Assignee:

(i)            the successor Lockbox Bank shall be
reasonably acceptable to Assignee;

(ii)           Assignee, Company and the successor Lockbox Bank shall have entered
into a lockbox agreement substantially in the form of the Lockbox Agreement
initially entered into;

(iii)          all funds and items in the accounts subject to the Lockbox Agreement to
be terminated shall be transferred to the new accounts held at the successor
Lockbox Bank prior to the termination of the then existing Lockbox Bank; and,

(iv)          Assignee shall have received evidence that all of the applicable
parties paying Royalties have been instructed to remit all future payments to
the new accounts held at the successor Lockbox Bank.

(i)            Prior to the date on which the Lockbox
Agreement is executed by all parties thereto, Company shall, cause any payments
that would be swept into the Assignee Concentration Account pursuant to Exhibit K
but are received by Company to be paid directly to Assignee, by wire transfer
to Assignee’s Account, on Wednesday of every other week for the period ending
on the Friday of the immediately prior two weeks.

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 16
 

 

(j)            Following the date on which the Lockbox
Agreement is executed, all Gross Payments shall be paid into the Lockbox
Account, and amounts deposited therein shall be treated as described in Exhibit K.

(k)           Company shall have the option to pay monies
into the Lockbox Account on account of the Guaranteed Minimum Payment in
advance on the tenth (10th) day of any calendar quarter (or, for the
first calendar quarter hereof, on the Closing Date) (any such payment, a “Pre-Payment”).

(l)            In the event that the aggregate of the
amounts swept into the Assignee Concentration Account plus any
Pre-Payment and any payment (including, solely with respect to calculations
under Section 2.02 for the final calendar quarter of any calendar
year, any Make Whole Payment paid for such calendar year prior to the True-Up
Date for last calendar quarter of such calendar year (which, for the avoidance
of doubt, shall actually be paid in the next calendar year)) made by Company
directly to Assignee’s Account pursuant to Section 2.02(m) or Section 5.07(a)(ii) are
less than the greater of: (i) the Quarterly Guaranteed Minimum Payment for
such calendar quarter preceding the True-Up Date or (ii) the amount of the
Assigned Interests received in such calendar quarter preceding the True-Up
Date, (such difference, the “True-Up Amount”) then on the applicable
True-Up Date Company shall remit the True-Up Amount by wire transfer of
immediately available funds to the Assignee Concentration Account.  (For the avoidance of doubt, a Make
Whole Payment paid for example during the first calendar quarter of 2010 shall
not be considered in the calculation of the True-Up Amount in such quarter but
shall be applied in the calculation of the True-Up Amount for the final quarter
of 2009.)  In addition, on the first True-Up Date
following January 1, 2007, Company shall in addition so remit any amount
due, such that Assignee shall receive for the entirety of 2006 the greater of
the prorated amount specified in the definition of Assigned Interests or the
prorated annual Guaranteed Minimum Payment for 2006.

(m)          In the event at any time following the
execution of the Lockbox Agreement by all parties thereto, any party to a
License Agreement including any party to a Future License remits any Royalties
directly to Company or otherwise except to the Lockbox Account, Company shall
immediately (i) remit any such Royalties to the Lockbox Account (or, if
for some reason such account is no longer in effect or payment cannot be made
into such account, Company shall remit the Applicable Percentage of such Royalties
by wire transfer of immediately available funds directly to Assignee’s
Account), (ii) notify such party to remit any future Royalties to the
Lockbox Account and (iii) provide to Assignee a copy of such notice.

(n)           Amounts payable pursuant to this Section 2.02
shall be in addition to any amounts otherwise payable under this Agreement.

(o)           Any payments, other than from funds paid to
Assignee from the Assignee Concentration Account, to be made by Company to
Assignee hereunder or under any other Transaction Document shall be made by
wire transfer of immediately available funds to Assignee’s Account.

(p)           Within three (3) years following
delivery to Assignee by Company of the Quarterly Report for the fourth fiscal
quarter of each calendar year during the Term, to the extent that either
Assignee or Company has determined that there is a discrepancy as to the
amounts paid to Assignee hereunder for such calendar year, then the Person who
has made such determination may notify the other in writing of such discrepancy
indicating in reasonable detail its reasons for such determination (the “Discrepancy
Notice”).  In the event that either
Assignee or Company delivers to the other party a Discrepancy Notice, Assignee
and Company shall meet in person or by telephone conference as specified by
Assignee within ****** Days (or such other time as mutually agreed by the
parties) after the receiving

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 17
 

 

party has received a Discrepancy Notice to
resolve in good faith such discrepancy. 
If the discrepancy has been resolved and, as a result thereof, it is
determined that a payment is owing by Assignee to Company or by Company to
Assignee, then the party owing such payment shall promptly pay such payment to
the other party.  If, within ****** days
after receipt of the Discrepancy Notice, Company and Assignee cannot resolve
any such discrepancies, then Assignee and Company shall promptly instruct their
respective firms of independent certified public accountants to select, within
****** Days thereafter, a third internationally recognized accounting firm (the
“Independent Accountants”).  After
offering Company and its representatives and Assignee and their representatives
the opportunity to present their positions as to the disputed items, which
opportunity shall not extend for more than ****** days after the Independent
Accountants have been selected, the Independent Accountants shall review the
disputed matters and the materials submitted by Company and Assignee and, as
promptly as practicable, deliver to Company and Assignee a statement in writing
setting forth its determination of the proper treatment of the discrepancies as
to which there was disagreement, and that determination will be final and
binding upon the parties hereto without any further right of appeal.  If Company has delivered the Discrepancy
Notice that has resulted in the selection of the Independent Accountants,
Company will bear all the charges of the Independent Accountants.  If Assignee have delivered the Discrepancy
Notice that has resulted in the selection of the Independent Accountants,
Assignee will bear all the charges of the Independent Accountants unless the
Independent Accountants determine that the amounts paid to Assignee for the
applicable calendar year underpaid Assignee by an amount equal or in excess of
****** of the amounts determined to be due to Assignee for such calendar year,
in which event Company shall bear all of the charges of the Independent
Accountants.

(q)           Assignee shall remit to Company any amounts
received by Assignee from Excluded Payments.

Section 2.03  Purchase Price.

In full consideration for
the assignment by Company of the Assigned Interests, and payment of the Guaranteed
Minimum Payments, and subject to the terms and conditions set forth herein,
Assignee shall pay to Company the Purchase Price including, in the event
Company exercises its option following the procedure and subject to the
conditions set forth on Exhibit P, any applicable Performance
Payment.

Section 2.04  No Assumed Obligations.

Notwithstanding
any provision in this Agreement or any other writing to the contrary, Assignee
is acquiring only the Assigned Interests and are not assuming any liability or
obligation of Company of whatever nature, whether presently in existence or
arising or asserted hereafter, whether under any License Agreement or any other
Transaction Document or otherwise.  All
such liabilities and obligations shall be retained by and remain obligations
and liabilities of Company (the “Excluded Liabilities and Obligations”).

Confidential
materials omitted and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 18
 

 

ARTICLE III

REPRESENTATIONS
AND WARRANTIES OF COMPANY

The Company hereby
represents and warrants to Assignee the following as of the dates provided in Section 8.01:

Section 3.01  Organization.

Company is duly organized,
validly existing and in good standing under the laws of Delaware, and is duly
qualified as a foreign corporation and, where legally applicable, is in good
standing in each jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so qualified or in
good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, and has all material requisite
powers and all material licenses, authorizations, consents and approvals
required to carry on its business as now conducted and as proposed to be
conducted in connection with the transactions contemplated hereby and by the
other Transaction Documents.

Section 3.02  Authorization.

Company has all necessary
power and authority to enter into, execute and deliver this Agreement and the
other Transaction Documents to which it is a party and to perform all of the
obligations to be performed by it hereunder and thereunder and to consummate
the transactions contemplated hereunder and thereunder.  This Agreement and the other Transaction
Documents have been duly authorized, executed and delivered by Company and each
of this Agreement and each other Transaction Document to which Company is a
party constitutes the valid and binding obligation of Company enforceable
against Company in accordance with their respective terms subject, as to
enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors’ rights generally or general equitable
principles.

Section 3.03  Governmental Authorization.

The execution and delivery
by Company of this Agreement and the other Transaction Documents to which it is
a party, and the performance by Company of its obligations hereunder and
thereunder, does not require any notice to, action or consent by, or in respect
of, or filing with, any Governmental Authority, except for (a) the filing
of financing statements in the appropriate office(s) located in the
jurisdiction(s) listed on Schedule 11(b) of the Security
Agreement and (b) the filing of the Patent Security Agreement and the
Trademark Security Agreement (each as defined in the Security Agreement) with
the United States Patent and Trademark Office and the filing of the Copyright
Security Agreement (as defined in the Security Agreement) in the United States Copyright
Office and (c) filings with the United States Securities &
Exchange Commission (“SEC”).

Section 3.04  Ownership; Sufficiency.

(a)           Except as set forth on Schedule 3.12(b),
all of the LFRP Intellectual Property owned by Company is solely (and not jointly)
owned by Company and is free and clear of any and all Liens, except those Liens
created in favor of Assignee pursuant to the Transaction Documents.  Schedule 3.12(b) set forth
all of the LFRP Patents as of the Closing Date. 
The Assigned Interests and all of the rights of Company under the In
Licenses and License Agreements and all other rights in and to the LFRP are
free

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 19
 

 

and clear of any and all Liens, except those
Liens created in favor of Assignee pursuant to the Transaction Documents.

(b)           Company, immediately prior to the assignment
of the Assigned Interests, owns, and is the sole holder of, all the Assigned
Interests.  Company owns, and is the sole
holder of, and/or has and holds a valid, enforceable and subsisting license to,
all assets (including LFRP Intellectual Property) that are required to produce
or receive any payments from any Contract Party or payor under and pursuant to,
and subject to the terms of any License Agreements, except where the failure to
so own, hold or license such assets could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  Company has not transferred, sold, or
otherwise disposed of, or agreed to transfer, sell, or otherwise dispose of any
portion of its respective rights to receive payment of Royalties other than as
contemplated by this Agreement.  Except as
set forth on Schedule 3.04(b), no Person other than Company has any
right to receive the payments payable under any License Agreement in existence
on the date hereof from and after the Closing Date, other than, in respect of
the Assigned Interests, Assignee. 
Company has the full right to sell, transfer, convey and assign to
Assignee all of Company’s rights and interests in and to the Assigned Interests
being sold, transferred, conveyed and assigned to Assignee pursuant to this
Agreement without any requirement to obtain the consent of any Person.  Company has transferred, conveyed and
assigned to Assignee all of Company’s rights and interests in and to the
Assigned Interests free and clear of any Liens, except those Liens created in
favor of Assignee pursuant to the Security Agreements and any other Transaction
Documents.

Section 3.05  Financial Statements.

The Financial Statements are
complete and accurate in all material respects, were prepared in conformity
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and present fairly in all material
respects, in accordance with applicable requirements of GAAP, the consolidated
financial position and the consolidated financial results of the operations of
Company and its Subsidiaries as of the dates and for the periods covered
thereby and the consolidated statements of cash flows of Company and its
Subsidiaries for the periods presented therein. 
Except as disclosed in Company’s SEC filings, there have been no
Material Adverse Effects since December 31, 2005.

Section 3.06  No Undisclosed Liabilities.

Except for those liabilities
(a) identified in the Financial Statements or (b) incurred by Company
or its Subsidiaries in the ordinary course of business since December 31,
2005 or (c) otherwise listed and described on Schedule 3.06,
there are no material liabilities of Company or any of its Subsidiaries taken
as a whole, or Company separately, of any kind whatsoever, whether accrued,
contingent, absolute, determined or determinable and, to the Actual Knowledge
of the Company, there is no condition, situation or set of circumstances that
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

Section 3.07  Solvency.

Company is not Insolvent and
has not experienced any other Bankruptcy Event. 
Assuming consummation of the transactions contemplated by this
Agreement, (a) the present fair saleable value of Company’s assets is
greater than the amount required to pay its debts as they become due,
(b) Company does not have unreasonably small capital with which to engage
in its business and (c) Company has not incurred, or has no present plans
to or does not intend to, incur, debts or liabilities beyond its ability to pay
such debts or liabilities as they become absolute and matured.

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 20
 

 

Section 3.08  Litigation.

There is no (a) action,
suit, arbitration proceeding, claim, investigation or other proceeding pending
or, to the Actual Knowledge of Company threatened against Company or any of its
directors or officers relating to Company or (b) any governmental inquiry
pending or, to the Actual Knowledge of Company threatened against Company, or
any of its directors or officers relating to Company, in each case with respect
to clauses (a) and (b) above, which, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect and each such
action, suit, arbitration, proceeding, claim, investigation, proceeding or
governmental inquiry is set forth on Schedule 3.08.  There is no action, suit, claim, proceeding
or investigation pending or, to the Actual Knowledge of Company threatened
against Company or any other Person relating to the LFRP, the LFRP Intellectual
Property or the Assigned Interests.

Section 3.09  Compliance with Laws.

Company is not in violation
of, has not violated or received notice of any violation of or, to the
Knowledge of Company, is not under investigation by any Governmental Authority
with respect to, and to the Actual Knowledge of Company, has not been
threatened to be charged with violation of, any law, rule, ordinance or
regulation of, or any judgment, order, writ decree, permit or license entered
by any Governmental Authority applicable to Company or the Assigned Interests
except as could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.  To
the Actual Knowledge of Company, no prospective change in any applicable laws,
rules, ordinances or regulations has been proposed or adopted which, when made
effective, could individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the LFRP.

Section 3.10  Conflicts.

Except as set forth in Schedule 3.10,
neither the execution and delivery of this Agreement or any other Transaction
Document nor the performance or consummation of the transactions contemplated
hereby or thereby will: 
(i) contravene, conflict with, result in a breach or violation of,
constitute a default under, or accelerate the performance provided by, in any
material respects any provisions of: (A) any law, rule, ordinance,
regulation, permit or license of any Governmental Authority, the breach or
violation of which could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, or any judgment, order, writ or
decree of any Governmental Authority specific to the Company, to which Company
or any of its assets or properties may be subject or bound; or (B) any
Material Contract (other than to the extent that any such term contained
therein would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408
or 9-409 of the UCC); (ii) contravene, conflict with, result in a breach
or violation of, constitute a default under, or accelerate the performance
provided by, in any respects any provisions of the certificate of incorporation
or by-laws (or other organizational or constitutional documents) of Company;
(iii) give rise to any right of termination (other than existing rights
under any License Agreement for a party to terminate for convenience),
cancellation or acceleration of any right or obligation of Company or any other
Person or to a loss of any benefit relating to the Assigned Interests that
could reasonably be expected to have a Material Adverse Effect; or
(iv) result in the creation or imposition of any material Lien on
(A) the assets or properties of Company or (B) the Assigned Interests
or any other Collateral, other than, with respect to clauses (A) and
(B) above, pursuant to the Security Agreement.

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 21
 

 

Section 3.11  Material Contracts.

Company is not in material
breach of or in material default under any Material Contract.  To the Knowledge of Company, nothing has
occurred and no condition exists that would permit any other party thereto to
terminate any Material Contract (other than existing rights under any License
Agreement that is a Material Contract for a party to terminate for
convenience).  Company has not received
any notice or, to the Actual Knowledge of Company, any threat of termination of
any such Material Contract.  To the
Actual Knowledge of Company, no other party to a Material Contract to which
Company is a party is in material breach of or in material default under such
Material Contract.  All Material
Contracts to which Company is a party are valid and binding on Company, as
applicable, and, to the Knowledge of Company, on each other party thereto, and
are in full force and effect.

Section 3.12  LFRP Patents, Technology and Intellectual
Property.

(a)           Company has provided Assignee all material
information in its possession, or otherwise known to it with respect to the
LFRP Patents.

(b)           Schedule 3.12(b) sets forth an accurate and complete list of
all LFRP Patents (including all LFRP Patents not owned by the Company).  For each item of the LFRP Patents listed on Schedule 3.12(b),
Company has indicated (A) the countries in each case in which such item is
patented, registered or in which an application for patent or registration is
pending, (B) the application numbers, (C)  the registration or patent
numbers, (D) the scheduled expiration date of the issued patents, and
(E) the owner of such item of LFRP Patents.

(c)           The issued LFRP Patents owned by Company are
valid, enforceable and subsisting.  (For
the avoidance of doubt, it is agreed that a piece of prior art discovered after
the date that this representation and warranty shall be given and found to be
invalidating would result in a breach hereof). 
To the Actual Knowledge of the Company, each individual associated with
the filing and prosecution of the LFRP Patents owned by Company, including the
named inventors of such LFRP Patents, has complied in all material respects
with all applicable duties of candor and good faith in dealing with any Patent
Office, including any duty to disclose to any Patent Office all information
known to be material to the patentability of each of such LFRP Patents, in
those jurisdictions where such duties exist. 
Except as disclosed on Schedule 3.12(c), the LFRP
Intellectual Property is all the intellectual property necessary to conduct the
LFRP (including intellectual property necessary for the use of the LFRP
Libraries) as carried out by the Company as contemplated by the Funded Research
Agreements and to license the LFRP Patents and LFRP Technology under Library
License Agreements within such scope (collectively, the “Company LFRP
Methods and Libraries”).

(d)           Schedule 3.12(d) sets forth an accurate and complete list of
all LFRP Patents owned by Company that have issued with at least one claim
covering the Company LFRP Methods and Libraries.

(e)           Company has not sold or otherwise transferred
any patents or patent applications that have issued or may issue with at least
one claim covering the Company LFRP Methods and Libraries or falling within the
scope of the patents licensed under the Patent License Agreements.

(f)            There are no unpaid maintenance or renewal
fees payable by Company to any third party that are currently overdue for any
of the LFRP Patents or other LFRP Intellectual Property owned by the
Company.  To the Knowledge of Company no
material applications for LFRP Patents owned by Company in whole or in part
have lapsed or been abandoned, cancelled or expired.

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 22
 

 

(g)           Company has not undertaken and, to the Actual
Knowledge of Company, no licensee has undertaken or omitted to undertake any
acts, and no conduct, circumstances or grounds exist that would void,
invalidate, reduce or eliminate, in whole or in part, the enforceability of any
of the LFRP Intellectual Property. 
Subject to compliance with the In Licenses set forth on Schedule 3.11,
the Company LFRP Methods and Libraries do not infringe the intellectual
property rights of any third party.  (For
the avoidance of doubt, it is agreed that a finding of infringement of a third
party patent after the date that this representation and warranty shall be
given which patent was issued or published as of such date would result in a
breach hereof.)  Except as set forth on Schedule 3.12(g),
Company has not received or otherwise been the beneficiary of any written
opinions of counsel with respect to infringement, non-infringement or
invalidity of third party intellectual property with respect to the Company
LFRP Methods and Libraries that are not the subject of an In-License.

(h)           Except as set forth on Schedule 3.12(h),
to the Knowledge of Company there is, and has been, no pending, decided or
settled opposition, interference, reexamination, injunction, claim, lawsuit,
proceeding, hearing, investigation, complaint, arbitration, mediation, demand,
International Trade Commission investigation, decree, or any other dispute,
disagreement, or claim (collectively referred to hereinafter as “Disputes”),
nor, to the Actual Knowledge of Company, has any such Dispute been threatened,
challenging the scope, legality, validity, enforceability or ownership of any
LFRP Intellectual Property or which would give rise to a credit against the
payments due to Company from the applicable License Agreements for the use of
the related licensed LFRP Intellectual Property, and no such scheduled Dispute
is (or would be if adversely determined) material to the LFRP.

(i)            To the Actual Knowledge of Company, there are
no Disputes by any third party against Company, any licensor under an In
License or any licensee under a License Agreement relating to the LFRP.  Company has not received or given, and to the
Actual Knowledge of Company, no such licensee or licensor has received or given
any notice of any such Dispute and, to the Actual Knowledge of Company, there
exist no circumstances or grounds upon which any such claim could be
asserted.  Except as set forth on Schedule 3.12(i),
the LFRP Intellectual Property owned by the Company is not subject to any
outstanding injunction, judgment or other decree, ruling, charge, settlement or
other disposition of any Dispute.

(j)            There is no pending or, to the Actual
Knowledge of Company, threatened action, suit, or proceeding, or any
investigation or claim by any Government Authority to which Company or, to the
Actual Knowledge of Company, to which any licensee under any License Agreement
or any party to a In License is a party (i) that would be the subject of a
claim for indemnification, if any, by or against Company or (ii) that the
Company LFRP Methods and Libraries do or will infringe on any patent or other
intellectual property rights of any other Person.  Except as set forth on Schedule 3.12(j),
to the Actual Knowledge of Company, there are no pending published U.S.,
international or foreign patent applications owned by any other Person, which,
if issued, would limit or prohibit, in any material respect the practice of the
Company LFRP Methods and Libraries.

Section 3.13  Regulatory Approvals.

(a)           Company possesses all material certificates,
authorizations and permits issued or required by the appropriate federal,
state, local or foreign regulatory authorities, including any effective
investigational new drug application or its equivalent, necessary to conduct
their current business relating to the LFRP, including all such certificates,
authorizations and permits required by the FDA or any other federal, state,
local or foreign agencies or bodies engaged in the regulation of
pharmaceuticals or biohazardous substances or materials except where the
failure to possess such certificates, authorizations

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 23
 

 

and permits, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.  The Company has not received any
notice of proceedings relating to, and to the Knowledge of Company there are no
facts or circumstances that could reasonably be expected to lead to, the
revocation, suspension, termination or modification of any such certificate,
authorization or permit.

(b)           To
the Actual Knowledge of Company, there has been no indication that the FDA or
any other Regulatory Agency has any material concerns with any Product or may
not approve any Product, nor has any Product, to the Actual Knowledge of
Company, suffered any material adverse events in any clinical trial.

Section 3.14  Subordination.

The claims and rights of
Assignee created by this Agreement and any other Transaction Document in and to
the Collateral is senior to any Indebtedness or other obligation of Company,
with respect to such Collateral, other than the Permitted Liens.

Section 3.15  Place of Business.

Company’s principal place of
business and chief executive office are set forth on Schedule 3.15.

Section 3.16  Broker’s Fees.

Company has not taken any
action which would entitle any Person to any commission or broker’s fee in
connection with the transactions contemplated by this Agreement.

Section 3.17  Other Information.

No written representation,
warranty or statement made by Company in any Transaction Document, and no
schedule or exhibit hereto, or the disclosures pursuant to the letter
delivered in accordance with Section 3.18(l), in each case taken in
the aggregate, contains any untrue statement of a material fact or omit any
statement of material fact necessary in order to make the statements made
therein in light of the circumstances under which they were made not
misleading, except as could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.

Section 3.18  License Agreements and In Licenses.

(a)           Schedule 3.18(a) sets forth an accurate and complete list of
all agreements relating to LFRP in the following categories whether oral or
written (provided such oral agreements are to the Actual Knowledge of Company):
manufacturing and supply agreements, In Licenses and License Agreements,
options (not part of License Agreements or In Licenses), agreements not to
enforce (not part of License Agreements or In Licenses), consents, settlements,
assignments, security interests, liens and other encumbrances or mortgages, and
any amendment (s), renewal(s), novation(s) and termination(s) pertaining
thereto, true and correct copies of which have been provided to Assignee.  For each agreement specified on Schedule 3.18(a),
Company has indicated (A) whether such agreement relates to inbound
licenses of LFRP Intellectual Property to Company or outbound licenses of LFRP
Intellectual Property by Company, and (B) the specific LFRP Intellectual
Property relating to such agreement. 
Each agreement specified on Schedule 3.18(a), whether or not
terminated prior to the date hereof, constitutes a valid and binding
obligation, enforceable in accordance with its terms, subject, as to
enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors’ rights generally or

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 24
 

 

general
equitable principles.  The royalty
payment provisions of the License Agreements and those provisions of the
License Agreements prohibiting further development or commercialization after
termination thereof are fully enforceable, and no language of any other
representation or warranty contained in this Agreement shall be deemed to limit
this sentence.  (For the avoidance of
doubt, it is agreed that a court decision that such a provision of a contract
existing as of the date such representation and warranty shall be given is
unenforceable, where such court decisions is rendered after such date, would
result in a breach hereof.)  Company is
not in breach of such agreements and, to the Knowledge of Company, no circumstances
or grounds exist that would give rise to a claim of breach or right of
rescission, termination (other than existing rights under any License Agreement
for a party to terminate for convenience), revision, or amendment of any of the
agreements specified on Schedule 3.18(a), including the signing of
this Agreement.  None of the Excluded
Agreements fall within the scope of an In License or License Agreement as each
is defined (but excluding the final sentence of the definition of “License
Agreements”).  None of the Excluded
Agreements was used in the calculation of the Economic Model.

(b)           With respect to the License Agreements and In
Licenses, there has been no correspondence or other written or, to the Actual
Knowledge of Company, oral communication sent by or on behalf of Company to, or
received by or on behalf of Company from, any Contract Party, the subject
matter of which could, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.

(c)           Except as set forth on Schedule 3.18(c),
each such License Agreement or In License is in full force and effect and has
not been impaired, waived, altered or modified in any respect, whether by
consent or otherwise, and no scheduled item could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

(d)           The Contract Party under each such License
Agreement or In License has not been released, in whole or in part, from any of
its obligations under such License Agreement.

(e)           Company has not received (A) any notice
or other written or, to the Actual Knowledge of Company, oral communication of
any Contract Party’s intention to terminate such License Agreement or In
License in whole or in part, or consideration of any such termination, or
(B) except as set forth on Schedule 3.18(e), any notice or
other written or, to the Actual Knowledge of Company, oral communication
requesting any amendment, alteration or modification of such License Agreement
or In License or any sublicense or assignment thereunder, and no scheduled item
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

(f)            To the Actual Knowledge of Company, nothing
has occurred and no condition exists that would adversely impact the right of
Company to receive any payments payable under any License Agreement except
where such occurrence or condition could not reasonably be expected to result
in a Material Adverse Effect. Other than as set forth on Schedule 3.18(f),
Company, or, to the Knowledge of Company, any Contract Party has not taken any
action or omitted to take any action, that would adversely impact the right of
Assignee to receive the Assigned Interests, and no scheduled item could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

(g)           ******

(h)           Except as set forth on Schedule 3.18(h),
no License Agreement has been satisfied in full, discharged, canceled,
terminated, subordinated or rescinded, in whole or in part.  Each License Agreement is the entire agreement
between the parties thereto relating to the subject matter thereof, and

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 25
 

 

no scheduled item could, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.

(i)            The execution, delivery and performance of
each License Agreement and In License was and is within the corporate powers of
Company and, to the Actual Knowledge of Company, the Contract Party
thereto.  Each License Agreement and In
License was duly authorized by all necessary action on the part of, and validly
executed and delivered by, Company and, to the Actual Knowledge of Company, the
Contract Party thereto.  There is no
breach or default, or event which upon notice or the passage of time, or both,
could give rise to any breach or default, in the performance of such License
Agreement or In License by Company or, to the Actual Knowledge of Company, the
Contract Party thereto.

(j)            The representations and warranties made in
each existing Material License and In License by Company were as of the date
made true and correct in all material respects except where the failure to be
true and correct could not reasonably be expected to have a Material Adverse
Effect.

(k)           The
royalty rates and the duration of such royalty rates in each country under each
existing License Agreement are as set forth on Schedule 3.18(k).  There are no royalties due to Contract
Parties under In Licenses with respect to Royalties under the License
Agreements except to ******.

(l)            ******

(m)          The
Webphage® Software is not licensed from any third party
and is owned by Company.  No software is
necessary for use in the LFRP other than commercially available software.

(n)           Exhibit S
sets forth all the biological material, know-how, data, technical and other
information other than the LFRP Libraries described in Exhibit T,
that is provided to Contract Parties under Library License Agreements, other
then in oral form.

(o)           The
LFRP Libraries described in Exhibit T are all the libraries used in
the LFRP within the past twelve (12) months with the exception of affinity
maturation libraries.

Section 3.19  Insurance.

Company and the Company’s
Subsidiaries have the insurance policies with the coverages and limits set
forth on Schedule 3.19, carried with the insurance companies also
set forth therein (the “Insurance Providers”).

ARTICLE IV

REPRESENTATIONS
AND WARRANTIES OF ASSIGNEE

Assignee represents and
warrants to Company the following as of the dates provided in Section 8.01:

Section 4.01  Organization.

Assignee is a general
partnership duly organized, validly existing and, to the extent legally
applicable, in good standing under the laws of California.  Assignee has all powers and all licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 26
 

 

Section 4.02  Authorization.

Assignee has all necessary
power and authority to enter into, execute and deliver this Agreement and to
perform all of the obligations to be performed by it hereunder.  This Agreement has been duly authorized,
executed and delivered by Assignee and constitutes the valid and binding
obligation of Assignee, enforceable against Assignee in accordance with its
terms, subject, as to enforcement of remedies, to bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights
generally and general equitable principles.

Section 4.03  Broker’s Fees.

Assignee has not taken any
action which would entitle any Person to any commission or broker’s fee in
connection with the transactions contemplated by this Agreement.

Section 4.04
 Conflicts.

Neither the execution and
delivery of this Agreement or the other Transaction Documents nor the
performance or consummation of the transactions contemplated hereby or thereby
will:  (i) contravene, conflict with,
result in a breach or violation of, constitute a default under, or accelerate
the performance provided by, in any material respects any provisions of:  (A) any law, rule or regulation of
any Governmental Authority, or any judgment, order, writ, decree, permit or
license of any Governmental Authority, to which Assignee or any of its assets
or properties may be subject or bound; or (B) any material contract,
agreement, commitment or instrument to which Assignee is a party or by which
Assignee or any its assets or properties is bound or committed;
(ii) contravene, conflict with, result in a breach or violation of,
constitute a default under, or accelerate the performance provided by, in any
respects any provisions of the organizational or constitutional documents of
Assignee; or (iii) require any notification to, filing with, or consent
of, any Person or Governmental Authority.

Section 4.05  Consents.

The execution and delivery
by Assignee of this Agreement and the other Transaction Documents to which it
is a party, and the performance by Assignee of its obligations hereunder and
thereunder, does not require any notice to, action or consent by, or in respect
of, or filing with, any Governmental Authority or Person.

Section 4.06  Tax Representation.

Assignee will deliver to
Company, upon reasonable demand by Company, any form or document, including
Internal Revenue Service Form W-9, that may be required or reasonably
requested in order to allow Company to make payment under this Agreement
without any deduction or withholding for or on account of any tax.

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 27
 

 

Section 4.07
Funds Available.

Assignee will at all times
maintain or have access to sufficient funds to satisfy its obligations to make
the Performance Payment under Section 2.03 when due.

ARTICLE V

COVENANTS

The following covenants
shall apply:

Section 5.01  [Reserved].

Section 5.02  Access; Books and Records.

(a)           Promptly
after receipt by Company of notice of any action, claim, investigation or
proceeding (commenced or threatened) relating to the transactions entered into
pursuant to this Agreement or any other Transaction Document, Company shall
inform Assignee of the receipt of such notice and the substance of such action,
claim, investigation or proceeding and, if in writing shall furnish Assignee
with a copy of such notice and any related materials with respect to such
action, claim, investigation or proceeding.

(b)           Company
shall keep and maintain, or cause to be kept and maintained, at all times full
and accurate books of account and records adequate to correctly reflect all
payments paid and/or payable with respect to Assigned Interests and all
deposits made into the applicable Deposit Accounts.

(c)           Assignee
and any of Assignee’s Consultants shall have the right, upon ****** Days’ written notice given by
Assignee to Company, to visit Company’s offices and properties where Company
keeps and maintains its books and records relating or pertaining to the
Assigned Interests and the other Collateral for purposes of conducting an audit
of such books and records, and to inspect, copy and audit such books and
records, during normal business hours. 
During any such audit, Company will provide Assignee and any of Assignee’s
Consultants reasonable access to such books and records, and shall permit
Assignee and any of Assignee’s Consultants to discuss the business, operations,
properties and financial and other condition of Company relating or pertaining
to the Assigned Interests and the other Collateral with officers of such
parties, and with their independent certified public accountants (to the extent
such independent certified accountants agree to discuss such matters with
Assignee).  Assignee’s visits to Company’s
offices pursuant to this subsection (c) shall occur not more than two
(2) times per calendar year; provided, however, that
Assignee may so visit more frequently to the extent that there has occurred an
event, a reasonably foreseeable consequence of which is a Material Adverse
Effect, and Assignee’s visit or visits to Company’s offices in connection
therewith are directly related to such event. 
To the extent any License Agreement contains provisions requiring
confidential treatment of any information, including financial information,
that would prohibit Company from providing such information to the Assignee, in
connection with any audit permitted hereunder, Company shall have its
independent certified public accountants provide a summary of the relevant
information and certify that such information is true and correct in all
respects.

(d)           In
the event any audit of the books and records of Company relating to the
Assigned Interests or the other Collateral by Assignee and/or any of Assignee’s
Consultants reveals that the amounts paid to Assignee hereunder for the period
of such audit have been understated by more than ****** of the amounts determined to be due for the period
subject to such audit, then the Audit Costs in

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 28
 

 

respect of such audit shall be
borne by Company; in all other cases, such Audit Costs shall be borne by
Assignee.  Each party shall promptly pay
to the other any amount due.

(e)           To
the extent Company has the right to perform or cause to be performed
inspections or audits under any of the License Agreements regarding payments
payable and/or paid thereunder (each, a “License Party Audit”), Company
shall, at the reasonable request of Assignee, cause such License Party Audit to
be promptly performed.  In conducting a
License Party Audit, Company may engage its then retained internationally
recognized independent public accounting firm, or, if Company elects otherwise,
such other internationally recognized independent public accounting firm
reasonably acceptable to Assignee, unless the applicable License Agreement
shall require the use of another accounting firm.  Promptly after completion of any License
Party Audit (whether or not requested by Assignee), Company shall promptly
deliver to Assignee an Audit Report in respect of such License Party Audit,
that has been certified to be true and correct in all respects by the auditor.

Section 5.03  Contract Compliance.

Without limiting Company’s other obligations set forth
herein with respect to License Agreements and In Licenses, Company shall not
fail to perform under or comply with any Material Contract by which it is
bound, in each case, in such a manner, individually or in the aggregate, that
has or would have a Material Effect on the Assigned Interests.

Section 5.04  Confidentiality; Public Announcement.

(a)           Except
as set forth in Section 5.04(b), all information furnished by
Assignee to Company or by Company to Assignee, including the Confidential
Information, in connection with this Agreement and any other Transaction
Document and the transactions contemplated hereby and thereby, as well as the
terms, conditions and provisions of this Agreement and any other Transaction
Document, shall be kept confidential by the recipient thereof, and shall be
used by the recipient thereof only in connection with this Agreement and any
other Transaction Document and the transactions contemplated hereby and
thereby.  Notwithstanding the foregoing,
Assignee may disclose such information to its partners, directors, employees,
managers, officers, investors, bankers, advisors, trustees and representatives,
sources of finance, purchasers of interests and Assignee’s Consultants on a
need-to-know basis, provided that such Persons shall be informed of the
confidential nature of such information and, shall be obligated to keep such
information confidential pursuant to the terms of this Section 5.04(a) or
with respect to financial institutions, other sources of finance and
fiduciaries, according to their customary practices.

(b)           Company
and Assignee shall (i) agree, as of the Closing, upon the form and content
of the initial press release by Company with respect to the Transaction and
(ii) agree, subject to the Company’s obligation to comply with applicable
law, upon the form of the initial SEC filings by Company with respect to the
Transaction.  Any subsequent disclosures
by Company with respect to the Transaction shall, except as otherwise agreed by
Assignee, be substantially consistent in terms of content with the initial SEC
filings, provided, however, that the Company may make any subsequent
disclosures with respect to the Transaction without the consent of Assignee as
may in its reasonable judgment based on advice of outside counsel be required
by applicable law, provided further that (x) Company provides notice to
Assignee prior to such disclosure, together with the form of proposed
disclosure, with sufficient time for Assignee to comment, taking into account
the time legally required for response (which notice shall in any event be
given at least ****** Days prior
to the date the response is required by applicable law or, in the event
disclosure is required by applicable law in a period of less than ****** Days, immediately upon Company
becoming aware that such disclosure may be required) and (y) Company and

Confidential
materials omitted and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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its outside counsel only rejects
any objections or requests that Assignee may have in connection with such
disclosure on reasonable grounds.

Section 5.05  Quarterly Reports and Business Reports,
and Meetings.

Company shall, promptly after
the end of each fiscal quarter of Company (but in no event later than ****** days following the end of such
quarter), produce and deliver to Assignee a Quarterly Report and Business
Report for such quarter, together with a certificate of a senior officer of
Company, certifying that to the Actual Knowledge of the Company that such
Quarterly Report and Business Report are true, correct and accurate in all
material respects.  Following a Purchase
Option Event, to the extent that Assignee reasonably believes that current
activities as detailed in a Business Report require reports more frequently
than quarterly in the event there are activities material to the Assigned
Interests Assignee shall have the right to request or require that Company
prepare Business Reports to deliver to Assignee on a more frequent basis, but
in no event more than monthly.  Following
receipt of any Business Report, Assignee shall have the right to require a
meeting in person or by phone with management of Company to discuss matters
related to the LFRP. With each Quarterly Report, Company shall provide a copy
to Assignee of each new executed License Agreement, In License and a copy of
any amendment or other action (and notification of any action not in writing)
as described in Section 5.11(c)(ii).

Section 5.06  Consent Procedures.

Notwithstanding particular periods for consent set
forth herein, where a consent is required from Assignee hereunder, Assignee
shall use commercially reasonable efforts to provide such consent as early as
is reasonable (taking into account availability of its personnel, its
applicable approval procedures and provision of information by Company).

Section 5.07  Purchase Options.

(a)           Subject to Section 5.07(a)(ii),
in the event that a Purchase Option Event shall occur, Assignee shall have the
right, but not the obligation (the “Assignee Repurchase Option”),
exercisable from the date of the Purchase Option Event (whether or not Company
gives notice thereof) through the date ****** days after Assignee’s receipt of
written notice from Company of the Purchase Option Event, to require Company to
repurchase from Assignee the Assigned Interests by providing a written notice
to Company exercising such right.

(i)            The purchase price payable by Company in the
event of an Assignee Repurchase Option (the “Assignee Repurchase Option
Price”) shall be calculated as follows:

(A)          for
any Assignee Repurchase Option arising as a result of a Purchase Option Event
described in clauses (i) through (vi) and clause
(vii)(D) thereof, the Assignee Repurchase Option Price shall equal the greater
of (I) two hundred percent (200%) of the Purchase Price (including any
Performance Payment paid by Assignee) paid pursuant to Section 2.03;
or, (II) an amount sufficient to provide an IRR of twenty-five percent (25%) on
the Purchase Price (including any Performance Payment paid by Assignee) paid
pursuant to Section 2.03; or,

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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(B)           for
any Assignee Repurchase Option arising as a result of a Purchase Option Event
described in clause (vii)(A)-(C) and (E) thereof, the Assignee
Repurchase Option Price shall equal in each case as of the date of payment of
the Assignee Repurchase Option Price:

(I)    On of before December 31, 2010, the
greater of (a) one hundred ten percent (110%) of the Purchase Price
(including any Performance Payment paid by Assignee) paid pursuant to Section 2.03;
or, (b) an amount sufficient to provide an IRR of ten percent (10%) on the
Purchase Price (including any Performance Payment paid by Assignee) paid
pursuant to Section 2.03; or,

(II)   Following December 31, 2010 through the
end of the Term, the greater of (a) one hundred fifty percent (150%) of
the Purchase Price (including any Performance Payment paid by Assignee) paid
pursuant to Section 2.03; or, (b) an amount sufficient to
provide and IRR of fifteen percent (15%) on the Purchase Price (including any
Performance Payment paid by Assignee) paid pursuant to Section 2.03;

in
each case as of the date of payment of the Assignee Repurchase Option Price

(ii)           With respect to any Assignee Repurchase Option arising as a result of a
Purchase Option Event described in clause (vii)(A)-(C) or
(E) thereof, Company shall have the right, but not the obligation,
exercisable by providing written notice to Assignee within ****** Days
following its receipt of written notice from Assignee of such Assignee
Repurchase Option, to avoid payment of the Assignee Repurchase Option Price due
under Section 5.07(a)(i)(B) above by (x) providing a written
notice to Assignee that Company intends to make an Initial Make Whole Payment
at the end of the calendar year in which such Purchase Option Event occurred
and (y) within ****** days after the end of such calendar year, paying to
Assignee by wire transfer of immediately available funds directly to Assignee’s
Account an amount equal to the Initial Make Whole Payment, together with a
notice setting out the calculation of such amount.  In addition, Company shall be permitted to
avoid payment of the Assignee Repurchase Option Price in further consecutive
calendar years in which there is a Make Whole Payment greater than zero, by
paying any Further Make Whole Payments to be made by wire transfer of immediately
available funds directly to Assignee’s Account, and providing a written notice
setting out the calculation of such amount, no later than within ****** days
after the end of any calendar year in which there is a Further Make Whole
Payment greater than zero, for each calendar year through the end of the Term
unless either (X) in any two consecutive calendar years (but not including
calendar year 2007), the total Make Whole Payments equal or exceed fifty
percent (50%) of the Applicable Percentage of the Projected Program Revenues in
each of such two (2) consecutive calendar years, (Y) in any three
(3) consecutive calendar years (but not including calendar year 2007), the
total Make Whole Payments

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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equal
or exceed thirty-three percent (33%) of the Applicable Percentage of the
Projected Program Revenues in each of such three (3) consecutive calendar
years, ******, or (Z) ******, in each of which cases, at the end of the
calendar year in which the final such Make Whole Payment would be due, Company
shall be required to repurchase from Assignee the Assigned Interests at the
Assignee Repurchase Option Price. 
Notwithstanding anything to the contrary set forth in this Section 5.07(a)(ii),
(A) in the event the actual amounts otherwise received by Assignee related
to the Assigned Interests for any calendar year for which a Make Whole Payment
is to be calculated exceeds the Applicable Percentage of the Projected Program
Revenues for such calendar year, the Make Whole Payment for such period shall
be zero; and (B) regardless of whether Company makes a Make
Whole Payment hereunder, neither the Make Whole Payment mechanisms set forth
herein nor the payment of any such Make Whole Payment shall be deemed to be
Assignee’s sole remedy hereunder, or to operate as a waiver of any right
including with respect to any uncured breach, and Assignee shall have the right
to pursue any other remedies available at law or equity with respect to any
breach or default hereunder (provided that any amounts payable to Assignee in
connection with its pursuit of such remedies shall be reduced by the amount of
any applicable Make Whole Payment). 
Following the end of the calendar year in which the final Make Whole
Payment permitted hereunder is made, or following any failure by Company to
make a Make Whole Payment when due, with respect to any Assignee Repurchase
Option arising as a result of a Purchase Option Event described in clause
(vii)(A)-(C) or (E) thereof, including any continuing uncured
Purchase Option Event, Company shall be required to repurchase from Assignee
the Assigned Interests at the Assignee Repurchase Option Price.  For the avoidance of doubt, (i) no Make
Whole Payment shall ever be required to be made by Assignee to Company and
(ii) upon receipt of a written notice that Company intends to make an
Initial Make Whole Payment, Assignee shall be precluded from exercising its
right to require an Assignee Repurchase Option arising as a result of any
Purchase Option Event described in clause (vii)(A)-(C) or (E) thereof
for the calendar year in which such notice falls and, thereafter, in the event
Company makes the Initial Make Whole Payment and for so long as the Company
makes Further Make Whole Payments to the extent permitted herein.

(iii)          In the event that Assignee elects to exercise its rights to require an
Assignee Repurchase Option, then Company shall, within ****** days following
Company’s receipt of Assignee’s repurchase election notice if the Assignee
Repurchase Option is based on a Purchase Option Event described in clauses
(iii), (iv), (v), or (vi) thereof and otherwise within ****** days
following Company’s receipt of Assignee’s repurchase election notice (unless
Company elects to make and does make the Make Whole Payment(s) as described in Section 5.07(a)(ii) with
respect to any Assignee Repurchase Option arising as a result of a Purchase
Option Event described in clause (vii)(A)-(C) or(E) thereof),
repurchase from Assignee the Assigned Interests at the Assignee Repurchase
Option Price, the payment of which shall be made by wire transfer, in
immediately available funds, to Assignee’s

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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Account
designated by Assignee in such election notice. 
Notwithstanding anything to the contrary contained herein, immediately
upon the occurrence of a Bankruptcy Event or a Notice Event, Assignee shall be
deemed to have automatically and simultaneously elected to have Company
repurchase from Assignee the Assigned Interests for the Assignees Option
Repurchase Price and Assignee Repurchase Option Price shall be immediately due
and payable without any further action or notice by any party, with no right by
Company to avoid such Assignee Repurchase Option by making the Make Whole
Payment(s) described in Section 5.07(a)(ii).

(iv)          An
example of a Make Whole Payment timing as set forth on Exhibit A.

(b)           Company may, at its election, at any time
repurchase all, but not less than all, of the Assigned Interests (a “Call”)
for a repurchase price equal to (i) until the second anniversary of the
Closing Date, one hundred seventy-five percent (175%) of the Purchase Price
(including any Performance Payment paid by Assignee) made pursuant to Section 2.03
or (ii) thereafter, the greater of (A) two hundred percent (200%) of
the Purchase Price (including any Performance Payment paid by Assignee) paid
pursuant to Section 2.03 or (B) an amount sufficient to
provide an IRR of twenty five percent (25%) on the amount of the Purchase Price
(including any Performance Payment paid by Assignee) paid pursuant to Section 2.03
(the “Call Price”), in each case calculated as of the date of payment of the
Call Price.

(c)           The Assignee Repurchase Option Price and the
Call Price (collectively, the “Repurchase Price”) shall, in each case,
be reduced by the sum of the total payments received and retained by Assignee
under Section 2.02 and Section 5.07(a)(ii).

(d)           In connection with the consummation of an
Assignee Repurchase Option or a Call pursuant to subparagraphs (a) and
(b) above (each, a “Repurchase Event”), Assignee agrees that it
will (i) promptly execute and deliver to Company such UCC termination
statements and other documents as may be necessary to release, or evidence the
relative ranking of, Assignee’s Lien on the Collateral and otherwise give
effect to such Repurchase Event and (ii) take such other action or provide
such other assistance as may be necessary to give effect to the Repurchase
Event.

(e)           Assignee’s failure to exercise the Assignee
Repurchase Option under Section 5.07(a) upon the occurrence of
a Purchase Option Event shall not preclude Assignee from exercising the
Assignee Repurchase Option under Section 5.07(a) upon the
occurrence of a subsequent Purchase Option Event.

Section 5.08  Security Agreement.

Company shall at all times until the Obligations of
Company are paid and performed in full grant in favor of Assignee for the
duration provided in the Security Agreement, a valid, continuing, first
perfected lien on and security interest in the Collateral described in the
Security Agreement.  Company shall not
grant a security interest in any of its property pledged under the Security
Agreement to any party other than Assignee (including to Genzyme Corporation),
or create, incur, assume or suffer to exist any Lien, or exercise any right of
rescission, offset, counterclaim or defense, upon or with respect to the Collateral,
or agree to do or suffer to exist any of the foregoing, except for
(i) Permitted Liens or (ii) any Lien or agreements in favor of
Assignee granted under or pursuant to this Agreement and the other Transaction
Documents.

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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Section 5.09  Reasonable Efforts; Further Assurance;
Future Grant.

(a)           Subject
to the terms and conditions of this Agreement, each party hereto will use all
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary under applicable laws and
regulations to consummate the transactions contemplated by this Agreement and
any other Transaction Document.  Company
agrees to execute and deliver such other documents, certificates, agreements
and other writings (including any financing statement or other filings
requested by Assignee to protect and maintain the perfection of Assignee’s lien
on and security interest in the Collateral) and to take such other actions as
may be reasonably necessary in order to consummate or implement expeditiously
the transactions contemplated by this Agreement and any other Transaction
Document and to vest in Assignee good, valid and marketable rights and
interests in and to the Assigned Interests free and clear of all Liens, except
those Liens created in favor of Assignee pursuant to the Security Agreements
and any other Transaction Document. Notwithstanding the foregoing or the remainder of
this Section 5.09, Company shall not be obligated to seek an
amendment to any License Agreement.

(b)           Each
of the parties hereto shall execute and deliver such additional documents,
certificates and instruments, and perform such additional acts, as may be
reasonably requested and necessary or appropriate to carry out and effectuate
all of the provisions of this Agreement and any other Transaction Document and
to consummate all of the transactions contemplated by this Agreement and any
other Transaction Document.  Solely for
the purposes of subparagraph (vii)(D) of the definition of “Purchase
Option Event”, the words “or appropriate” shall be deemed removed from the
foregoing sentence of this Section 5.09(b).

(c)           Company
and Assignee shall cooperate and provide assistance as reasonably requested by
the other parties in connection with any litigation, arbitration or other
proceeding (whether threatened, existing, initiated, or contemplated prior to,
on or after the date hereof) to which any party hereto or any of their
respective officers or directors, is or may be a party, or have an interest in,
in each case relating to this Agreement, any other Transaction Document, the
Assigned Interests or any other Collateral, or the transactions described
herein or therein but in all cases excluding any litigation brought by Company
against Assignee or brought by Assignee against Company.

(d)           The
provisions of Section 14(e) of the Security Agreement are hereby
incorporated by reference.

Section 5.10
 Baxter Consent.

In the event, as of the Closing Date, Company has not
obtained a consent letter executed by Baxter Healthcare S.A. and Baxter
Healthcare Corporation substantially in the form of Exhibit F (the “Baxter
Consent”), Company shall use its best efforts (including, for the avoidance
of doubt, the payment of money if necessary) to obtain the Baxter Consent.

Section 5.11  Additional Covenants of Company.

(a)           ******

(b)           ******

(c)           Without
the prior written consent of Assignee, which consent shall not be unreasonably
withheld, the Company shall not:

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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(i)            ****** or,

(ii)           ******.

Consent
hereunder shall be provided or denied within ****** Days after notice and provision
of such information as may be reasonably requested by the Assignee from the
Company.

(d)           Promptly
after Company having Knowledge of any fact, circumstance or event with respect
to any License Agreement or any In License which alone or together with other
facts, circumstances or events could reasonably be expected (with or without
the giving of notice or passage of time or both) to have a Material Adverse
Effect, Company shall give a written notice to
Assignee by confirmed email notifying Assignee of the relevant facts,
circumstances or events, which notice shall depending on Company’s reasonable
judgment of the materiality of and/or urgency of the situation either be
promptly given within a matter of days or alternatively included in the next
Quarterly Report, provided that in any situation where Company knows a press
release or other public disclosure is to be made, Company shall use all
reasonable efforts to provide such information to Assignee as early as possible
but in no event later than simultaneously with such release or other public
disclosure.

(e)           ******

(f)            ******

(ii)   Company
shall exercise its rights to
obtain reports showing the calculations of Royalties due and any other material
reports from each Contract Party as required under their License Agreements.

(g)           After becoming aware of any of the following,
Company shall provide Assignee with immediate written notice as to items
(i) and (ii) below, and written notice within ****** Days for items
(iii) and (iv) below:

(i)            the
occurrence of a Purchase Option Event;

(ii)           the
intent of Company to take any of the actions set forth in clauses (i) or
(ii) of the definition of Bankruptcy Event (a “Bankruptcy Notice”);
or,

(iii)          any
material breach or default by Company of any covenant or other provision of
this Agreement or any other Transaction Document;

(iv)          any
representation or warranty made or deemed made by Company in any of the
Transaction Documents or in any certificate delivered to Assignee pursuant
hereto shall prove to be untrue, inaccurate or incomplete in any material
respect on the date as of which made or deemed made.

(h)           Company
shall, at Company’s sole cost and expense, (A) take any and all actions
and make all payments, which are necessary and desirable to diligently maintain
the LFRP Patents owned by it, and (B) ******.

(i)            Company
shall maintain insurance policies with the same or better coverages and limits
as those set forth on Schedule 3.19 with the Insurance Providers or
with insurance companies rated at least as high as the Insurance Providers as
of the Execution Date (according to A.M. Best Company, Inc.).

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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(j)            Company
shall not Transfer all or any part of its interests in any License Agreements
or In Licenses or any LFRP Intellectual Property, except for licenses of LFRP
Intellectual Property and transfers of LFRP Libraries and biological material
within the scope permitted under paragraph (iii) of the definition of “Purchase
Option Event.”

(k)           Company
shall ensure that the claims and rights of Assignee created by this Agreement
and any other Transaction Document in and to the Assigned Interests and any
other Collateral are and shall remain senior to any obligations of Company to
any other Person.

(l)            Company
shall cause each of its officers, employees, consultants and other agents to
assign, to Company all improvements of or to the LFRP Intellectual Property
that arise on or after the Closing Date, and agrees to cause such Persons to
execute and deliver, all instruments, documents and agreements as are
reasonably required to effectuate such assignment.

(m)          Company shall not use any current or future
protein, peptide or antibody selection technology to establish a business or
business unit competing with the LFRP or enable a third party to use for funded
research or license out any such technology in a way that would compete with
the LFRP.

Section 5.12  LFRP; Future Licenses.

(a)           Company
and Assignee shall promptly following the Closing discuss and attempt in good
faith to reach agreement upon Assignee’s suggestions for structures and terms
to include in Future Licenses. In addition, Future Licenses shall incorporate
certain key terms, as such key terms are described in Exhibit B.  ******  Company shall provide Assignee, following
execution of a Future License by Company and any Contract Party, a copy of the
Future License.

(b)           If
Company at any time and from time to time during the term of this Agreement,
proposes to materially change the terms contained in any Future License from
those mandatory and desirable agreed to pursuant to Section 5.12(a) and
Exhibit B, then at an appropriate point in the negotiations
allowing realistic input by Assignee (and without limiting Company’s obligation
to obtain consent from Assignee with respect to any mandatory term) but in any
event at least ****** Days prior
to the execution and delivery of any License Agreement that includes such a
material deviation, Company shall give written notice by confirmed email to
Assignee indicating that Company proposes to enter into such a License
Agreement and the anticipated date of execution of such proposed License
Agreement.

(c)           ******

(d)           With
respect to any Future License or invoice entered into or issued by Company
under any License Agreement, Company shall include as a term of such Future
License or in the payment instructions of any such invoice that any party
thereto or recipient thereof remit when due all Royalties that are due and
payable to Company in respect of or derived from such License Agreement or
invoice during the Term to the Lockbox Account.

(e)           ******

(f)            In the event that a License Agreement is
converted by (A) amendment, (B) extension, (C) termination and
entry into a new agreement, (D) succession, (E) acquisition, or
otherwise, into a Co-Development Agreement, (i) such conversion shall be
structured such that Company shall be liable to Assignee for making payments to
the Lockbox Account in the amounts of the Royalties that would be due, with
such payments being made at the times as and when such Royalties would be due,
had such Excluded Agreement remained a License Agreement under its terms as of
the date of conversion (and

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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with
Assignee’s security interest continuing to cover any payments from the Contract
Party to Company); and (ii) Company shall be responsible for any payments
to third parties that may be due with respect to any such Co-Development
Agreement and no payments to Assignee shall be subject to any incremental
Offsets arising in connection with such conversion.  ******

(g)           In the event that Company shall enter into
any future In License under which any LFRP Patents shall be licensed to
Company, such In License shall be assignable in connection with the LFRP and
shall expressly permit the grant of a security interest in favor of Assignee, unless
Company shall first obtain Assignee’s consent. 
Consent hereunder shall be provided or denied within ****** Days after notice and provision
of such information as may be reasonably requested by the Assignee from the
Company.

Section 5.13  Financial Statements.

Company shall maintain
systems of internal accounting controls sufficient to provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset accountability.  Company shall deliver to Assignee the
following financial statements:

(a)           Within
****** days after the end of
each calendar quarter, copies of the unaudited consolidated financial
statements of Company and its Subsidiaries for the prior fiscal quarter.

(b)           Within
****** days after the end of
each calendar year, copies of the audited consolidated financial statements of
Company and its Subsidiaries for the prior calendar year.

(c)           Within
****** days prior to the end of
each calendar year, a certificate of the chief financial officer of Company in
a form satisfactory to Assignee pursuant to which such officer attaches and
certifies the operating budget and plan respecting the LFRP for the next
calendar year.

Section 5.14  Tax Treatment.

Notwithstanding any accounting treatment thereof,
Company and Assignee shall treat the transactions contemplated by the
Transaction Documents as a debt transaction for United States federal, state,
and local tax purposes.

ARTICLE VI

THE CLOSING; CONDITIONS TO CLOSING AND FUNDING

Section 6.01  Closing.

Subject to the closing
conditions set forth in Sections 6.02 and 6.03, the closing of the
purchase and sale of the Assigned Interests (the “Closing”) shall take
place at the offices of Kirkland & Ellis LLP, 555 California Street,
Suite 2700, San Francisco, California 94104, on the Closing Date.

Section 6.02  Conditions Applicable to Assignee.

The obligations of Assignee
to effect the Closing and the payment of the Purchase Price due on the Closing
shall be subject to the satisfaction of each of the following conditions, any
of which may be waived by Assignee in its sole discretion:

Confidential materials omitted
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Commission.  Asterisks denote such
omission.

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(a)           Accuracy of Representations and Warranties.  The
representations and warranties of Company set forth in this Agreement and the
other Transaction Documents shall be true, correct and complete in all material
respects as of the Closing Date.

(b)           No Adverse Circumstances. 
There shall not have occurred or be continuing any event or circumstance
(including any development with respect to the LFRP Intellectual Property or
the use or expected future use of the same in the LFRP or the anticipated level
of Royalties) that could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

(c)           Litigation.  No action, suit, litigation,
proceeding or investigation shall have been instituted, be pending or
threatened (i) challenging or seeking to make illegal, to delay or
otherwise directly or indirectly to restrain or prohibit the consummation of
the transactions contemplated by this Agreement, or seeking to obtain damages
in connection with the transactions contemplated by this Agreement, or (ii) seeking
to restrain or prohibit Assignee’s acquisition or future receipt of the
Assigned Interests.

(d)           Officer’s Certificates. 
Assignee shall have received at the Closing a certificate of a Senior
Officer of Company pursuant to which such officer certifies that the conditions
set forth in Sections 6.02(a), (b) and (c) have been
satisfied in all respects as of the Closing Date.

(e)           Legal Opinions.

(i)            Assignee shall have received an opinion of
Edwards Angell Palmer & Dodge LLP, counsel to Company, dated as of the
Closing Date, in form and substance satisfactory to Assignee and its counsel,
to the effect set forth on Exhibit E(i).

(ii)           Assignee shall have received an opinion of Fish and Richardson, counsel
to Company, dated as of the Closing Date, in form and substance satisfactory to
Assignee and its counsel, to the effect set forth on Exhibit E(ii).

(iii)          Assignee shall have received an opinion of Wolf Greenfield, counsel to
Company, dated as of the Closing Date, in form and substance satisfactory to
Assignee and its counsel, to the effect set forth on Exhibit E(iii).

(iv)          Assignee shall have received an opinion of
its General Counsel, dated as of the Closing Date, in form and substance
satisfactory to Assignee and its counsel, to the effect set forth in Exhibit E(iv).

(f)            [Reserved].

(g)           Security Agreement.  The
Security Agreement shall have been duly executed and delivered by all the
parties thereto and shall be in form of Exhibit C hereto, together
with proper financing statements (including Form UCC-1s) for filing under
the UCC and/or any other applicable law, rule, statute or regulation relating
to the perfection of a security interest in filing offices in the jurisdictions
listed on Schedule 6.02(g), as well as a collateral security
agreements for filing in the US Patent and Trademark Office and Copyright
Office.

(h)           Lockbox Agreement.  The
Lockbox Agreement shall have been duly executed and delivered by all the
parties thereto and shall be in the form of Exhibit D hereto.

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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(i)            Genzyme Release. 
Assignee shall have received a release of any interest of Genzyme
Corporation in the Collateral, in form and substance satisfactory to Assignee.

(j)            Corporate Documents of Company. 
Assignee shall have received on the Closing Date, a certificate, dated
the Closing Date, of a Senior Officer of Company (the statements made in which
shall be true and correct on and as of the Closing Date):  (i) attaching copies, certified by such
officer as true and complete, of Company’s certificate of incorporation or
other organizational documents (together with any and all amendments thereto)
certified by the appropriate Governmental Authority as being true, correct and
complete copies; (ii) attaching copies, certified by such officer as true
and complete, of resolutions of the Board of Directors of Company authorizing
and approving the execution, delivery and performance by Company of this Agreement,
the other Transaction Documents and the transactions contemplated herein and
therein; (iii) setting forth the incumbency of the officer or officers of
Company who have executed and delivered this Agreement and the other
Transaction Documents including therein a signature specimen of each such
officer or officers; and (iv) attaching copies, certified by such officer
as true and complete, of certificates of the appropriate Governmental Authority
of the jurisdiction of formation, stating that Company is in good standing
under the laws of such jurisdiction.

(k)           Lack of Purchase Option Event. 
There shall not have occurred a Purchase Option Event.

(l)            Covenants.  Company shall have complied in
all material respects with the covenants set forth in this Agreement and each
other Transaction Document.

Section 6.03  Conditions Applicable to Company.

The obligations of Company
to effect the Closing shall be subject to the satisfaction of each of the
following conditions, any of which may be waived by Company in their sole
discretion:

(a)           Accuracy of Representations and Warranties.  The
representations and warranties of Assignee set forth in this Agreement shall
have been true, correct and complete as of the Closing Date.

(b)           Litigation.  No action, suit, litigation,
proceeding or investigation shall have been formally instituted, be pending or
threatened (i) challenging or seeking to make illegal, to delay or
otherwise directly or indirectly to restrain or prohibit the consummation of
the transactions contemplated by this Agreement, or seeking to obtain damages
in connection with the transactions contemplated by this Agreement, or
(ii) seeking to restrain or prohibit Assignee’ acquisition or future
receipt of the Assigned Interests.

(c)           Officer’s Certificate. 
Company shall have received at the Closing a certificate of a Senior
Officer of Assignee certifying that the conditions set forth in Sections 6.03(a) and
(b) have been satisfied, in all respects as of the Closing Date.

(d)           General
Counsel Letter.  The Company shall
have received a letter with respect to the liability of its General Counsel in
form and substance satisfactory to the Company, the General Counsel and
Assignee.

Section 6.04  Full Payment.

The amount of the Purchase
Price payable pursuant to Section 2.03 (not including any
Performance Payment that may become due after the Closing Date) shall be paid
to Company by

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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Assignee no later than August 29, 2006, provided
that (A) Assignee shall have received a revised opinion of Wolf
Greenfield & Sachs, P.C., as required pursuant to
Section 6.02(e)(iii), dated as of the Closing Date, in the form provided
as of the date hereof, except that it shall unambiguously identify the matters
on which that firm has acted for Company and the documents reviewed by the firm
and specify the finally resolved disputes referred to in paragraph 8 thereof;
(B) Assignee shall have received a revised opinion of Fish &
Richardson P.C., as required pursuant to Section 6.02(e)(ii), in the form
provided as of the date hereof but dated as of the Closing Date, and including
an Appendix A listing matters on which that firm has acted for Company;
(C) financing statements shall have been filed as required under
Section 6.02 (g); and (D) there shall not have occurred a Purchase
Option Event.

ARTICLE VII

TERMINATION

Section 7.01  Termination Date.

This Agreement shall,
subject to Section 7.03, terminate following receipt by Assignee of
its Assigned Interests earned through December 31, 2017; provided, however,
with respect to any Obligations under this Agreement that remain unpaid and any
payments that are required to be made by one of the parties hereunder after
that date, this Agreement shall remain in full force and effect until any and
all such payments have been made in full, and solely for that purpose.  In addition, this Agreement shall sooner
terminate if Assignee or Company shall have exercised their right under Section 5.07(a) or
(b), respectively, with the termination date in that event being the date
on which Company completes the repurchase in full of the Assigned Interests and
pays in full in cash the Assignee Repurchase Option Price or the Call Price or
other applicable amount, as the case may be. 
Furthermore, this Agreement shall sooner terminate if Assignee does not
make the payment described in Section 6.04, with the termination
date in that event being August 30, 2006.

Section 7.02  Effect of Termination.

In the event of the
termination of this Agreement pursuant to Section 7.01, this
Agreement shall forthwith become void and have no effect without any liability
on the part of any party hereto or its Affiliates, directors, officers or
stockholders other than the provisions of this Section 7.02 and Sections 2.02 (Lockbox; Payment
in Respect of the Assigned Interests) (to the extent necessary to implement
Section 7.01), 2.04 (No Assumed Obligations), 5.02
(Access, Books and Records), 5.04 (Confidentiality, Public Announcement),
8.01 (Survival), 8.02 (Specific Performance), 8.03
(Notices), 8.04 (Successors and Assigns), 8.05 (Indemnification),
8.09 (Amendments; No Waivers), 8.14 (Governing Law;
Jurisdiction) and 8.15 (Waiver of Jury Trial; Exclusion of Punitive
Damages) hereof, which shall survive any termination as set forth in Section 8.01;
provided, that the foregoing shall not impair any right or obligation
that accrued prior to such termination or that is intended to survive such
termination in accordance with Section 7.01.  Nothing contained in this Section 7.02
shall relieve any party from liability for any breach of this Agreement.

Section 7.03  Term Extension.

In the event that as of
December 31, 2017, Assignee has not received amounts into Assignee’s
Account equal to at least two hundred twenty-five percent (225%) of the
Purchase Price

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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(including any Performance
Payment) paid pursuant to Section 2.03, the Term shall be extended
until December 31, 2019, subject to any termination described in Section 7.01.

ARTICLE VIII

MISCELLANEOUS

Section 8.01  Survival.

(a)           All representations and warranties made
herein and in any other Transaction Document and in any certificates delivered
pursuant hereto or in connection herewith shall survive the execution and
delivery of this Agreement and the closing and shall continue to survive
indefinitely, except that the following representations and warranties shall
terminate at the end of two (2) years after the later of
the Closing or any Performance Payment Date: 3.05, 3.06, 3.07, 3.08, 3.09,
3.15, 3.16 and 3.19.  The
representations and warranties in Articles III and IV hereof
are made as of the Execution Date and again as of the Closing hereof except as
expressly set forth therein, provided that in the event of a Performance
Payment, the representations and warranties in Article III shall be
made again as of the Performance Payment Date as set forth in Exhibit P.  The fact that a representation or warranty
shall have been made as of the Execution Date and/or Performance Payment Date
shall not limit a later claim where a set of facts or a legal issue existed as
of the date when the representation or warranty was made but such set of facts
or legal issue was not known at such date. 
Notwithstanding anything in this Agreement or implied by law to the
contrary, all the agreements contained in Sections 2.02 (to the extent
necessary to implement Section 7.01), 2.04, 5.02, 5.04,
8.02, 8.03, 8.04, 8.05, 8.09, 8.14, 8.15
and this Section 8.01
shall survive indefinitely following the execution and delivery of this
Agreement and the Closing and the termination of this Agreement.

(b)           Any investigation or other examination that
may have been made or may be made at any time by or on behalf of the party to
whom representations and warranties are made shall not limit, diminish or in
any way affect the representations and warranties in this Agreement and the
other Transaction Documents, and the parties may rely on the representations
and warranties in this Agreement and the other Transaction Documents
irrespective of any information obtained by them by any investigation,
examination or otherwise.

Section 8.02  Specific Performance.

Each of the parties hereto
acknowledges that the other party will have no adequate remedy at law if it
fails to perform any of its obligations under this Agreement or any of the
other Transaction Documents.  In such event,
each of the parties agrees that the other party shall have the right, in
addition to any other rights it may have (whether at law or in equity), to
specific performance of this Agreement.

Section 8.03  Notices.

All notices, consents,
waivers and communications hereunder given by any party to the other shall be
in writing (including facsimile transmission) and delivered personally, by
e-mail or facsimile (provided in each case that receipt is confirmed and that a
copy is provided in addition by personal delivery, by courier or by mail as
provided herein), by a recognized overnight courier, or by dispatching the same
by certified or registered mail, return receipt requested, with postage
prepaid, in each case addressed:

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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If to Assignee to:

c/o Paul Capital Advisors, L.L.C.

50 California Street

Suite 3000

San Francisco, California 94111

Attention:  Chief Financial Officer

Facsimile:  (415) 283-4301

E-mail: pjensen@paulcap.com

with a copy to:

Lionel Leventhal

Paul Capital Advisors, L.L.C.

140th East
45th Street, 44th Floor

New York, New York 10017

Facsimile:  (646) 264-1101

E-mail: lleventhal@paulcap.com

And:

Gregory Brown, M.D.

Paul Capital Advisors, L.L.C.

140th East
45th Street, 44th Floor

New York, New York 10017

Facsimile:  (646) 264-1101

E-mail: gbrown@paulcap.com

And:

Kirkland & Ellis LLP

555 California Street, Suite 2700

San Francisco, CA 94104

Attention: Stephen Johnson

Facsimile:  (415) 439-1500

E-mail: sjohnson@kirkland.com

If to Company to:

Dyax Corp.

300 Technology Square

Cambridge, MA 02139

Attention:  Chief Financial Officer

Facsimile:  (617) 374-3773

E-mail: ssg@dyax.com

with a copy to:

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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Dyax Corp.

300 Technology Square

Cambridge, MA 02139

Attention:  General Counsel

Facsimile:  (617) 225-7708

E-mail: imagovcevic@dyax.com

And:

Dyax Corp.

300 Technology Square

Cambridge, MA 02139

Attention:  Senior Corporate Counsel

Facsimile:  (617) 225-7708

E-mail: aashe@dyax.com

And:

Edwards Angell Palmer & Dodge LLP

111 Huntington Avenue

Boston, MA 02199

Attention:  Stacie S. Aarestad

Facsimile:  (617) 227-4420

E-mail:  saarestad@eapdlaw.com

or to such other address or addresses as
Assignee or Company may from time to time designate by notice as provided
herein, except that notices of changes of address shall be effective only upon
receipt.  All such notices, consents,
waivers and communications shall: (a) when posted by certified or
registered mail, postage prepaid, return receipt requested, be effective three
(3) Business Days after dispatch, unless such communication is sent
trans-Atlantic, in which case shall be deemed effective five (5) Business
Days after dispatch, (b) when telegraphed, telecopied, telexed or
facsimiled, be effective upon receipt by the transmitting party of confirmation
of complete transmission, (c) when delivered by a recognized overnight
courier or in person, be effective upon receipt when hand delivered or when
delivery is confirmed by such courier’s tracking system or (d) when sent
by e-mail, upon receipt of a confirmatory return e-mail from the recipient.

Section 8.04  Successors and Assigns.

The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, and any reference herein to a
party shall be deemed a reference to such party’s successors and assigns, if
any.  Company shall not be entitled to
assign any of its obligations and rights hereunder or any other Transaction
Documents either to a third party or to an Affiliate without the prior written
consent of Assignee, such consent to be provided or denied within ****** Days after
notice from the Company and provision of such information as may be reasonably
requested by the Assignee from the Company. 
Assignee may assign this Agreement and any of its rights hereunder
without restriction; provided that, in the event Assignee assigns this
Agreement to any Person that is not an Affiliate of Assignee (other than either
Company or one of its Affiliates or successors-in-interest), the definition of
Purchase Option Event shall automatically and immediately be amended to delete
clause (vii)(A)-(C) thereof.

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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Section 8.05  Indemnification.

(a)           Company hereby indemnifies and holds Assignee
and its Affiliates and any of their respective partners, directors, managers,
officers, employees and agents (each an “Assignee Indemnified Party”)
harmless from and against any and all Losses (including all Losses in
connection with any product liability claims or claims of infringement or
misappropriation of any intellectual property rights of any third parties)
incurred or suffered by any Assignee Indemnified Party arising out of any
breach of any representation, warranty or certification made by Company in any
of the Transaction Documents or certificates given by Company in writing
pursuant hereto or thereto or any breach of or default under any covenant or
agreement by Company pursuant to this Agreement or any Transaction Document,
including any failure by Company to satisfy any of the Excluded Liabilities and
Obligations, or any claim relating to the Excluded Liabilities and Obligations.

(b)           Assignee hereby indemnifies and holds
Company, its Affiliates and any of their partners, directors, managers,
officers, employees and agents (each an “Company Indemnified Party”)
harmless from and against any and all Losses incurred or suffered by an Company
Indemnified Party arising out of any breach of any representation, warranty or
certification made by Assignee in any of the Transaction Documents or
certificates given by Assignee in writing pursuant hereto or thereto or any
breach of or default under any covenant or agreement by Assignee pursuant to
this Agreement or any Transaction Document.

(c)           If any claim, demand, action or proceeding
(including any investigation by any Governmental Authority) shall be brought or
alleged against an indemnified party in respect of which indemnity is to be
sought against an indemnifying party pursuant to the preceding paragraphs, the
indemnified party shall, promptly after receipt of notice of the commencement
of any such claim, demand, action or proceeding, notify the indemnifying party
in writing of the commencement of such claim, demand, action or proceeding,
enclosing a copy of all papers served, if any; provided, that,
the omission to so notify such indemnifying party will not relieve the
indemnifying party from any liability that it may have to any indemnified party
under the foregoing provisions of this Section 8.05 unless, and
only to the extent that, such omission results in the forfeiture of substantive
rights or defenses by the indemnifying party. 
In case any such action is brought against an indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section 8.05 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof.  In any such proceeding, an
indemnified party shall have the right to retain its own counsel, but the
reasonable fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel,
(ii) the indemnifying party has assumed the defense of such proceeding and
has failed within a reasonable time to retain counsel reasonably satisfactory
to such indemnified party or (iii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the same
counsel would be inappropriate due to actual or potential conflicts of
interests between them based on the advice of such counsel.  It is agreed that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate law firm (in addition to local counsel where necessary) for all such
indemnified parties.  The indemnifying
party shall

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.  No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such proceeding.

(d)           No indemnification payment shall be payable
by Company with respect to any Losses otherwise payable under Section 8.05
unless and until such time as all such Losses shall aggregate to more than two
hundred and fifty thousand dollars ($250,000).

(e)           Company
acknowledges that the fact that Assignee as part of the Assigned Interests has
assumed the risk of certain
Offsets against royalties under the License Agreements shall not limit any
claim for breach of representation or warranty hereunder, except to the extent
of each such specific offset under each such License Agreement as disclosed
under Section 3.18(l) hereof.

Section 8.06  Expenses; Currency.

Each party hereto will pay
all of its own fees and expenses in connection with entering into and
consummating the transactions contemplated by this Agreement, except that
Company shall at the Closing reimburse Assignee for its reasonable and
documented due diligence, legal and other costs and expenses in addition to the
****** already paid to Assignee; provided, that the aggregate of such
additional reimbursements shall not itself exceed ******, and Assignee shall
submit an itemized invoice setting out all such costs and expenses.  All amounts under this agreement shall be
calculated, due and payable in Dollars.

Section 8.07  Independent Nature of Relationship.

(a)           Neither Assignee nor Company has any
fiduciary or other special relationship with the other.  Nothing contained herein or in any other
Transaction Document shall be deemed to constitute Company and Assignee as a
partnership, an association, a joint venture or other kind of entity or legal
form.

(b)           No officer or employee of Assignee will be
located at the premises of Company, except in connection with an audit
performed pursuant to Sections 2.02(p) and 5.02.  No officer or employee of Assignee shall
engage in any commercial activity with Company or any of its Affiliates other
than as contemplated herein and in the other Transaction Documents.

(c)           Company shall not at any time obligate
Assignee, or impose on Assignee any obligation, in any manner or respect to any
Person not a party hereto.

(d)           Company is not transferring to Assignee any
ownership interest in any LFRP Patents or other LFRP Intellectual Property of
Company.

Section 8.08  Entire Agreement.

This Agreement, together
with the Exhibits and Schedules hereto (which are incorporated herein by
reference), and the other Transaction Documents constitute the entire agreement
between the

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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parties with respect to the
subject matter hereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties or their Affiliates
with respect to the subject matter of this Agreement, including the Term Sheet.  No representation, inducement, promise,
understanding, condition or warranty not set forth herein (or in the Exhibits,
Schedules or other Transaction Documents) has been made or relied upon by
either party hereto.  Neither this
Agreement, nor any provision hereof, is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.

Section 8.09  Amendments; No Waivers.

(a)           This Agreement or any term or provision
hereof may not be amended, changed or modified except with the written consent
of the parties hereto.  No waiver of any
right hereunder shall be effective unless such waiver is signed in writing by
the party against whom such waiver is sought to be enforced.

(b)           No failure or delay by either party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

Section 8.10  Interpretation.

When a reference is made in
this Agreement to Articles, Sections, Schedules or Exhibits, such reference
shall be to an Article, Section, Schedule or Exhibit to this
Agreement unless otherwise indicated. 
The words “include,” “includes” and “including” when used herein shall
be deemed in each case to be followed by the words “without limitation.”  Neither party hereto shall be or be deemed to
be the drafter of this Agreement for the purposes of construing this Agreement
against one party or the other.

Section 8.11  Headings and Captions.

The headings and captions in
this Agreement are for convenience and reference purposes only and shall not be
considered a part of or affect the construction or interpretation of any
provision of this Agreement.

Section 8.12  Counterparts; Effectiveness.

This Agreement may be
executed in two or more counterparts, each of which shall be an original, but
all of which together shall constitute one and the same instrument.  This Agreement shall become effective when
each party hereto shall have received a counterpart hereof signed by the other
parties hereto.

Section 8.13  Severability.

If any provision of this
Agreement is held to be invalid or unenforceable, the remaining provisions
shall nevertheless be given full force and effect.

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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Section 8.14
 Governing Law; Jurisdiction.

(a)           THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW
THEREOF THAT WOULD REQUIRE THE APPLICATION OF LAWS OTHER THAN THOSE OF THE
STATE OF NEW YORK.

(b)           ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK.  BY EXECUTION AND DELIVERY
OF THIS AGREEMENT, EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO AND
ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS.  EACH PARTY HERETO HEREBY FURTHER IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT.

(c)           EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS
TO THE SERVICE OF PROCESS OUT OF ANY OF THE COURTS REFERRED TO IN
SUBSECTION (b) ABOVE OF THIS SECTION 8.14 IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN THIS
AGREEMENT.  EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING
COMMENCED HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT THAT SERVICE OF
PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. 
NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY TO SERVE PROCESS ON THE
OTHER PARTY IN ANY OTHER MANNER PERMITTED BY LAW.

(d)           Except
as provided in (e) below,
any dispute arising out of or relating to this Agreement shall be resolved by
arbitration as provided below:

(i)            All
arbitrations shall be conducted in New York, New York, in accordance with the
rules for commercial arbitration, as then in effect, of the American
Arbitration Association, subject to the terms as herein provided.

(ii)           Within
****** days following a demand
for arbitration submitted to the American Arbitration Association, or within
such other time period as the parties may agree, each party shall each
designate one arbitrator that is a partner in a law firm engaged in the full
time practice of law.  Within ****** days after the appointment of
the two (2) arbitrators, the two (2) arbitrators shall designate a
third arbitrator mutually acceptable to them who has similar professional
experience and is not affiliated with any party in interest to such
arbitration.  If the arbitrator chosen by
Company and the arbitrator chosen by Assignee fail to agree upon the third
arbitrator within such ****** day
period, a third arbitrator with professional experience as aforesaid shall be

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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appointed by the
American Arbitration Association as soon as practicable and shall not be
affiliated with any party in interest to such arbitration.

(iii)          The
arbitrators shall interpret the terms and provisions of this Agreement but
shall not have the authority to modify any term or provision of this
Agreement.  The arbitrators may proceed
to an award notwithstanding the failure of the other party to participate in
the proceedings.  The arbitration
proceeding shall be held in private and shall include an opportunity for the
parties to conduct discovery in advance of the proceeding, which discovery may
be limited by rules established by the arbitrators.  The parties agree that they will attempt and
they intend that they and the arbitrators shall use their best efforts in that
attempt, to conclude the arbitration proceeding and have a final decision from
the arbitrators within ****** days
from the date of selection of the three arbitrators; provided, however,
that the arbitrators shall be entitled to extend such period one or more times,
if mutually agreed by the parties.  The
arbitrators shall immediately deliver a written decision with respect to the
dispute to each of the parties, who shall promptly act in accordance therewith.

(iv)          All
fees, costs and expenses (including attorneys’ fees and expenses) incurred by
the party that prevails in any such arbitration commenced pursuant to this
Agreement or any judicial action or proceeding seeking to enforce the agreement
to arbitrate disputes as set forth in this Agreement or seeking to enforce any
order or award of any arbitration commenced pursuant to this Agreement may be
assessed (in whole or in part) against the party or parties that do not prevail
in such arbitration in such manner as the arbitrators or the court in such
judicial action, as the case may be, may determine to be appropriate under the
circumstances.  All costs and expenses
attributable to the arbitrators shall be allocated among the parties to the
arbitration in such manner as the arbitrators shall determine to be appropriate
under the circumstances.

(v)           Disputes about arbitration procedure shall be resolved by the
arbitrators, or failing agreement, by the American Arbitration Association.

(e)           (i) In
the event that a dispute shall arise under Section 5.12(e) concerning
whether there has been a breach thereof, including a claim by Assignee that
payments have been over-allocated to FTE’s or potential License Agreements
structured as Co-Development Agreements or otherwise in violation of Section 5.12(e),
or whether what is claimed to be a Co-Development Agreement should more
properly be classified as a License Agreement (a “Section 5.12(e) Dispute”),
then such Dispute shall be resolved by the Referee (as defined below) pursuant
to the terms of this Section 8.14(e).

(x)            Promptly following a
Section 5.12(e) Dispute shall arise and following a reasonable period
not to exceed ****** days in which the parties try to reach agreement on such
Dispute, the parties shall jointly seek to retain one or more individuals with
expertise in licensing and product development agreements in the
biopharmaceutical industry, and in the absence of Agreement of the parties
appointed by the Center for Public Resources or another mutually agreed neutral
dispute resolution body (the “Referee(s)”). The role of the Referees
shall be to determine whether there has been a

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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breach
of Section 5.12(e). The Referee shall rely on the definitions found
in this Agreement, the information the Referee requires with respect to the
LFRP and Company’s current and past agreements and business practices, the
submissions of the parties, and the Referee’s industry expertise.

(y)           In the event that Assignee believes that there has been a breach of Section 5.12(e),
then a Referee shall be promptly appointed. Company shall promptly provide a
copy of the relevant agreement to the Referee. Within ****** days thereafter,
the parties shall send a statement of no more than ten
(10) pages describing the decision in issue and such party’s position
as to the correct outcome (a “Party Position”). Company shall not
include in its Party Position any information or documents not provided to
Assignee with reasonable time for Assignee to consider and comment upon such
information and Assignee’s Party Position may be delayed to take account of
such information. The Referee may in his or her discretion seek more
information from the parties. The Referee shall make a decision in writing
within ****** days of the last submission of the Party Positions and may
require presentations by the parties with both parties present.  The Referee shall not have ex parte communications with either party.

(z)            All costs and expenses attributable to the
Referee shall be borne by Assignee unless such Referee determines that Company
has breached Section 5.12(e) of this Agreement, in which case,
Company shall be responsible for all such costs and expenses.  Company shall promptly pay by wire transfer
into Assignee’s Account any amounts determined by the Referee to be due to
Assignee at the time of determination and to the Lockbox Account on an ongoing
basis as also determined by the Referee.

(ii)           In
the event that any dispute
arising out or relating to this Agreement shall also relate to either or both
of the Security Agreement or Lockbox Agreement, then such disputes shall not be
subject to arbitration but shall be subject to jurisdiction of a court as
provided in such Agreements.

Section 8.15  Waiver of Jury Trial; Exclusion of
Punitive Damages.

EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT.  IN ADDITION, WITHOUT LIMITING
COMPANY’S OBLIGATION TO INDEMNIFY ASSIGNEE FOR ANY THIRD PARTY CLAIM FOR
PUNITIVE DAMAGES, IN ANY LITIGATION OR ARBITRATION BETWEEN THE PARTIES
HEREUNDER NEITHER PARTY SHALL BE ENTITLED TO SEEK PUNITIVE DAMAGES FROM THE
OTHER PARTY.

[REMAINDER
OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS]

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

 49

 

IN WITNESS
WHEREOF, the parties
hereto have caused this Agreement to be duly executed by their respective
authorized officers as of the date first above written.

	
  COMPANY:

  	
  DYAX CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Henry E.
  Blair

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Henry E. Blair 

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  ASSIGNEE:

  	
  PAUL ROYALTY FUND
  HOLDINGS II

  
	
   

  	
   

  
	
   

  	
  By: Paul Royalty Fund II, L.P., its Managing Partner

  
	
   

  	
   

  
	
   

  	
  By: Paul Capital Royalty Management, LLC, its
  General Partner

  
	
   

  	
   

  
	
   

  	
  By: Paul Capital Advisors, L.L.C., its Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lionel Leventhal

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Lionel Leventhal

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Manager

  
						

 

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Exhibit A

Make Whole Payment Timing Example

******

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 1

 

Exhibit B

Key Terms
for Future Agreements

******

 

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 2

 

Exhibit C

Company-Assignee Security Agreement

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

SECURITY AGREEMENT

Dated as of August 23, 2006

between

PAUL ROYALTY FUND HOLDINGS II

and

DYAX CORP.

(in favor
of PAUL ROYALTY FUND HOLDINGS II)

 

 

Confidential
materials omitted and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

TABLE OF CONTENTS

	
  

  	
  

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 1.

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 2.

  	
  Grant of Security

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 3.

  	
  Security for Obligations

  	
  2

  
	
   

  	
   

  	
   

  
	
  Section 4.

  	
  Company to Remain Liable

  	
  2

  
	
   

  	
   

  	
   

  
	
  Section 5.

  	
  Promissory Notes and Tangible Chattel Paper

  	
  3

  
	
   

  	
   

  	
   

  
	
  Section 6.

  	
  Pledged Deposit Accounts

  	
  3

  
	
   

  	
   

  	
   

  
	
  Section 7.

  	
  Investment Property

  	
  3

  
	
   

  	
   

  	
   

  
	
  Section 8.

  	
  Collateral in the Possession of a Bailee

  	
  3

  
	
   

  	
   

  	
   

  
	
  Section 9.

  	
  Electronic Chattel Paper and Transferable Records

  	
  3

  
	
   

  	
   

  	
   

  
	
  Section 10.

  	
  Letter-of-credit Rights

  	
  3

  
	
   

  	
   

  	
   

  
	
  Section 11.

  	
  Representations and Warranties

  	
  4

  
	
   

  	
   

  	
   

  
	
  Section 12.

  	
  Further Assurances

  	
  5

  
	
   

  	
   

  	
   

  
	
  Section 13.

  	
  Certain Covenants of Company

  	
  6

  
	
   

  	
   

  	
   

  
	
  Section 14.

  	
  Special Covenants With Respect to the Collateral

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section 15.

  	
  Paul Appointed Attorney-in-Fact

  	
  10

  
	
   

  	
   

  	
   

  
	
  Section 16.

  	
  Standard of Care

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 17.

  	
  Remedies Upon Event of Default

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 18.

  	
  Application of Proceeds

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 19.

  	
  Expenses

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 20.

  	
  Continuing Security Interest; Termination and Release

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 21.

  	
  Miscellaneous

  	
  13

  

 

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

 

	
  Schedules

  	
   

  	
   

  
	
  Schedule 1

  	
  Definitions

  	
   

  
	
  Schedule 2(b)(i)

  	
  LFRP Patents

  	
   

  
	
  Schedule 2(b)(ii)

  	
  LFRP Know-How

  	
   

  
	
  Schedule 2(b)(iii)

  	
  Webphage Software

  	
   

  
	
  Schedule 2(c)

  	
  License Agreements

  	
   

  
	
  Schedule 2(d)

  	
  Co-Development Agreements

  	
   

  
	
  Schedule 2(e)

  	
  In-Licenses

  	
   

  
	
  Schedule 2(f)

  	
  Books, Records and Databases

  	
   

  
	
  Schedule 2(j)(i) and (ii)

  	
  Pledged Deposit Accounts

  	
   

  
	
  Schedule 11(b)

  	
  Filing Jurisdictions

  	
   

  
	
  Schedule 11(c)(ii)

  	
  Perfection Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibits

  	
   

  	
   

  
	
  Exhibit A

  	
  Special Power of Attorney

  	
   

  
	
  Exhibit B

  	
  Copyright Security Agreement

  	
   

  
	
  Exhibit C

  	
  Patent Security Agreement

  	
   

  
	
  Exhibit D

  	
  Trademark Security Agreement

  	
   

  
	
  Exhibit E

  	
  Letter Agreement with Fisher Clinical Services

  	
   

  
				

 

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

SECURITY AGREEMENT

This SECURITY AGREEMENT (the “Agreement”) is made and
entered into as of August 23, 2006 (the “Effective Date”) by and between
Dyax Corp., a Delaware corporation (including its successors and assigns, “Company”),
and Paul Royalty Fund Holdings II, a California general partnership (including
its successors and assigns, “Paul”).

W I T N E S S E T H:

WHEREAS, Company and Paul are parties to that certain
Royalty Interest Assignment Agreement dated of even date herewith (as amended,
supplemented and otherwise modified from time to time, the “Royalty Agreement”);

WHEREAS, Company has covenanted pursuant to the terms
of the Royalty Agreement to enter into this Agreement, under which Company
grants to Paul a security interest in and to the Collateral as general and
continuing security for the due performance and payment of all of Company’s
obligations to Paul under the Transaction Documents;

NOW, THEREFORE, in consideration of the foregoing and
of the mutual covenants hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:

Section 1.               Definitions.  For purposes of this Agreement, capitalized
terms and certain other terms used herein shall have the meanings set forth in
Schedule 1 hereto.  Capitalized
terms used herein and not otherwise defined herein or in Schedule 1 shall
have the meanings given such terms in the Royalty Agreement.  Terms used herein and defined in the UCC
shall have the meaning ascribed to such terms in the UCC unless the context
clearly requires otherwise.

Section 2.               Grant
of Security.  Company hereby grants
Paul a security interest in of the Company’s right, title and interest in and
to the following personal property, whether now or hereafter existing, and
wherever the same may be located (all such property, collectively, the “Collateral”):

(a)           the Gross
Payments and Assigned Interests;

(b)           the LFRP
Patents including those set forth on Schedule 2(b)(i) and LFRP Know-How
including that described in Schedule 2(b)(ii), the Webphage® Software as
further described in Schedule 2(b)(iii), and all other know-how,
materials, trademarks, service marks, trade names and goodwill associated
therewith, trade secrets, data, formulations, processes, franchises,
inventions, software, copyrights, and all intellectual property (including
biological materials), and all registrations of any of the foregoing, or
applications therefor, that are (i) owned by, controlled by, issued to,
licensed to, licensed by Company and (ii) used in the performance of the
LFRP as presently conducted by Company or as conducted by Company as of the
Closing Date or during the Term (but specifically excluding the biological
material comprising the Company Physical Libraries, it being the intent of the
parties that while intellectual property covering or embodied in the LFRP
Libraries be within the scope of the Collateral, all biological material
comprising the LFRP Libraries except for the Duplicate Libraries is excluded
from the Collateral);

(c)           the
License Agreements, including those set forth on Schedule 2(c);

(d)           payments
to Company under and proceeds of sale of products under any Co-Development
Agreements resulting from conversion of any License Agreement into a
Co-Development

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Agreement pursuant to Section 5.12(f) of the Royalty
Agreement, including any Co-Development Agreement to be listed on
Schedule 2(d);

(e)           the
In-Licenses including those set forth on Schedule 2(e);

(f)            books,
records, data bases, and information related to the LFRP as set forth on
Schedule 2(f);

(g)           all
general intangibles, including all payment intangibles and all documents
(notwithstanding any other provisions herein, as that term is defined in the
UCC), instruments (including promissory notes), accounts, letter-of-credit
rights (whether or not the letter of credit is evidenced by a writing),
commercial tort claims, securities and all other investment property,
supporting obligations, any other contract rights or rights to the payment of
money, insurance claims and proceeds, in each case related to the Gross
Payments and Assigned Interests;

(h)           any other
intangible assets necessary to the performance of or forming part of the LFRP;

(i)            [Reserved.]

(j)            (i) the
Company’s interests in the Lockbox Account, details of which are provided on
Schedule 2(j)(i), and any successor account, (ii) the Company
Concentration Account, details of which are provided on Schedule 2(j)(ii),
and any successor account, and (iii) any other deposit account or
securities account containing proceeds of Collateral and into which a party to
a License Agreement has remitted Royalties (collectively, the “Pledged Deposit
Accounts”), all funds on deposit in each such account, all investments arising
out of such funds, all claims thereunder or in connection therewith and special
purpose subaccounts maintained therein, and all monies and credit balances from
time to time held in the Pledged Deposit Accounts or such subaccounts; all
notes, certificates of deposit, deposit accounts, checks and other instruments
from time to time hereafter delivered to or otherwise possessed by Company in
substitution for or in addition to any or all of the then existing items
described in this subsection (j); and all interest, dividends, cash,
securities, rights, instruments and other property at any time and from time to
time received, receivable or otherwise distributed in respect of such accounts,
such funds, or such investments or received in exchange for any or all of the
items described in this subsection;

(k)           all money
now or at any time in the possession or under the control of, or in transit to,
the Lockbox Bank, or the Company relating to any of the foregoing in this
Section 2;

(l)            quantities
of biological material comprising a complete copy of each of the LFRP Libraries
that are sufficient to be used to create a reproducible supply of the LFRP
Libraries (the “Duplicate Libraries”); and

(m)          all
Proceeds.

Section 3.               Security
for Obligations.  This Agreement
secures, and the Collateral pledged by Company is collateral security for, the
due and punctual payment or performance in full (including the payment of amounts
that would become due but for the operation of the automatic stay under
Subsection 362(a) of the United States Bankruptcy Code) of all
Secured Obligations of Company.

Section 4.               Company
to Remain Liable.  Notwithstanding
anything to the contrary contained herein, (a) Company shall remain liable
to perform all of its duties and other obligations under the Royalty Agreement
to the same extent as if this Agreement had not been executed, and (b) the

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 2
 

 

exercise by Paul of any of its rights hereunder shall not release
Company from any of its duties or other obligations under the Royalty
Agreement.

Section 5.               Promissory
Notes and Tangible Chattel Paper.  If
Company at any time shall hold or acquire any promissory notes or tangible
chattel paper constituting Collateral having a face value greater than
twenty-five thousand dollars ($25,000), Company shall forthwith endorse, assign
and deliver the same to Paul, accompanied by such instruments of transfer or
assignment duly executed in blank as Paul may from time to time specify.

Section 6.               Pledged
Deposit Accounts.  Company shall
follow the procedures and payment mechanisms relating to the Pledged Deposit
Accounts set forth in Section 2 of the Royalty Agreement.

Section 7.               Investment
Property.  If Company shall at any
time hold or acquire any certificated securities constituting Collateral,
Company shall forthwith endorse, assign and deliver the same to Paul,
accompanied by such instruments of transfer or assignment duly executed in
blank as Paul may from time to time specify. 
If any securities constituting Collateral now or hereafter acquired by
Company are uncertificated and are issued to Company or its nominee directly by
the issuer thereof, Company shall promptly notify Paul thereof and, at Paul’s
request, pursuant to an agreement in form and substance satisfactory to Paul in
its discretion reasonably exercised, cause the issuer to agree to comply with
instructions from Paul as to such securities, without further consent of
Company or such nominee.  If any
securities constituting Collateral, whether certificated or uncertificated, or
other investment property now or hereafter acquired by Company are held by
Company or its nominee through a securities intermediary or commodity
intermediary, Company shall promptly notify Paul thereof and, at Paul’s
request, pursuant to an agreement in form and substance satisfactory to Paul in
its discretion reasonably exercised, cause such securities intermediary or (as
the case may be) commodity intermediary to agree to comply with entitlement
orders or other instructions from Paul to such securities intermediary as to
such securities or other investment property, or (as the case may be) to apply
any value distributed on account of any commodity contract as directed by Paul
to such commodity intermediary, in each case without further consent of Company
or such nominee.

Section 8.               Collateral
in the Possession of a Bailee.  If
any property constituting Collateral is at any time in the possession of a
bailee, Company shall promptly notify Paul thereof and, if requested by Paul,
shall promptly obtain an acknowledgement from the bailee, in form and substance
satisfactory to Paul in its discretion reasonably exercised, that the bailee
holds such Collateral for the benefit of Paul and shall act upon the
instructions of Paul, without the further consent of Company.

Section 9.               Electronic
Chattel Paper and Transferable Records. 
If Company at any time holds or acquires an interest in any electronic
chattel paper or any “transferable record,” as that term is defined in
Section 201 of the federal Electronic Signatures in Global and National
Commerce Act, or in §16 of the Uniform Electronic Transactions Act as in effect
in any relevant jurisdiction, constituting Collateral, Company shall promptly
notify Paul thereof and, at the request of Paul, shall take such action as Paul
may reasonably request to vest in Paul control under UCC §9-105 of such
electronic chattel paper or control under Section 201 of the federal
Electronic Signatures in Global and National Commerce Act or, as the case may
be, §16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction,
of such transferable record.

Section 10.             Letter-of-credit
Rights.  If Company is at any time a
beneficiary under a letter of credit now or hereafter issued in favor of
Company constituting Collateral, Company shall promptly notify Paul thereof
and, at the request of Paul, Company shall, pursuant to an agreement in form
and substance satisfactory to Paul in its discretion reasonably exercised,
arrange for the issuer and any

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 3
 

 

confirmer of such letter of credit to consent to an assignment to Paul
of the proceeds of any drawing under the letter of credit.

Section 11.             Representations
and Warranties.  Company represents
and warrants to Paul as of the date hereof, Company (or any predecessor by
merger or otherwise) has not, within the four (4) month period preceding
the date hereof, had a different name from the name listed on the signature
pages hereof.

(b)           Company
represents and warrants to Paul as of the date hereof, and represents and
warrants to Paul in all material respects on each date it acquires rights in
Collateral in which a security interest is purported to be granted hereunder,
as follows:

(i)            Ownership
of Collateral.  Company has the power to
grant a lien and security interest in each item of Collateral upon which it
purports to grant a lien or security interest hereunder and the grant of such
security interest shall not constitute or result in (A) the abandonment,
invalidation or unenforceability of any right, title or interest of Company
under any lease, license or contract to which it is a party or (B) a
breach or termination pursuant to the terms of, or a default under, any such
lease, license, contract or agreement (other than to the extent that any such
term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or
9-409 of the UCC).  Other than such as
may have been filed in favor of Paul relating to this Agreement or as
contemplated by the Royalty Agreement, no effective UCC financing statement or
other instrument similar in effect covering all or any part of the Collateral
or the Patents is on file in any filing or recording office.

(ii)           Validity.  This Agreement creates a valid security
interest in the Collateral, and upon the filing of the appropriate UCC
financing statements naming Paul as secured party and describing the Collateral
in the applicable filing office(s) in the jurisdiction(s) listed in
Schedule 11(b), such security interest will be perfected in all Collateral
in which a security interest can be perfected by the filing of a UCC-1 Uniform
Commercial Code financing statement. 
Other than Permitted Liens which have priority under law, the security interest
in the Collateral granted herein is prior to any and all other Liens.

(iii)          Authorization,
Approval.  No authorization, approval, or
other action by, and no notice to or filing with, any government or agency of
any government or other Person is required either (A) for the assignment,
pledge and grant by Company of the security interest granted hereby or for the
execution, delivery and performance of this Agreement by Company; or
(B) for the perfection of, the pledge, assignment and grant of the
security interest created hereby or the exercise by Paul of its rights and
remedies hereunder (provided, however, that the exercise by Paul of certain
rights and remedies relating to certain licenses or leases of the Company may
require the consent of the other parties to such licenses or leases), other
than (X) the filing of financing statements in the appropriate office(s)
located in the jurisdiction(s) listed on Schedule 11(b) and (Y) the
filing of the Patent Security Agreement and the Trademark Security Agreement
with the United States Patent and Trademark Office and the filing of the
Copyright Security Agreement in the United States Copyright Office and any
supplements or amendments thereto.

(iv)          Enforceability.  This Agreement is the legally valid and
binding obligation of Company, enforceable against Company in accordance with
its terms, subject, as to enforcement of remedies, to bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights
generally or general equitable principles.

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 4
 

 

(c)           Other
Representations and Warranties.  As
of the Closing Date and as of the earlier of the date on which the Quarterly
Report is delivered or the date on which such Quarterly Report is due in each
fiscal quarter:

(i)            Schedules. 
(i) (A) Schedule 2(b)(i) shall set forth all of the
LFRP Patents, (B) Schedule 2(b)(ii) shall set forth a
description of the LFRP Know-How; (C) Schedule 2(b)(iii) shall
set forth a description of the Webphage® Software;
(D) Schedule 2(c) shall set forth all of the License Agreements;
(E) Schedule 2(d) shall set forth all of the Co-Development
Agreements resulting from a conversion of a License Agreement into a
Co-Development Agreement (which, for the avoidance of doubt, shall not consist
of any agreements as of the Closing Date);
(F) Schedule 2(e) shall set forth all of the In-Licenses;
(G) Schedule 2(f) shall set forth a description of all books, records,
data bases, and information related to the Collateral; and
(H) Schedule 2(j)(i) and (ii) shall set forth details of
the Pledged Deposit Accounts; and

(ii)           Perfection
Certificate.  (A) Company’s exact
legal name is that indicated on the Perfection Certificate and on the signature
page thereof; (B) Company is an organization of the type and
organized in the jurisdiction set forth in the Perfection Certificate;
(C) the Perfection Certificate accurately sets forth Company’s
organizational identification number or accurately states that Company has
none; (D) the Perfection Certificate accurately sets forth each place of
Company’s business or, if more than one, its chief executive office as well as
its mailing address (if different) and where Collateral is located;
(E) Company’s FEIN is accurately set forth in the Perfection Certificate;
and, (F) all other information set forth on the Perfection Certificate is
accurate and complete in all material respects.

Section 12.             Further
Assurances.  Company agrees that,
from time to time, at its cost and expense, Company will promptly execute and
deliver all further instruments and documents, and take all further action that
may be necessary or desirable, or that Paul may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable Paul to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. 
Without limiting the generality of the foregoing, Company will:  (a) (i) execute and file such
financing or continuation statements, or amendments thereto, as well as
documents for filing in the Unites States Patent Office and United States
Copyright Office (ii) execute and deliver, and cause to be executed and
delivered, agreements establishing that Paul has control of specified items of
Collateral, including the Lockbox Agreement, and (iii) deliver such other
instruments or notices, in each case, as may be necessary or desirable, or as
Paul may reasonably request, in order to perfect and preserve the security interests
granted or purported to be granted hereby; (b) furnish to Paul from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as Paul may
reasonably request, all in reasonable detail; (c) at Paul’s reasonable
request, appear in and defend any action or proceeding that may affect Company’s
title to or Paul’s security interest in all or any part of the Collateral,
including any proceeding in which the issue is whether any property in which
Company has rights constitutes Collateral; and (d) use commercially
reasonable efforts to obtain any necessary consents of third parties to the
assignment and perfection of a security interest to Paul with respect to any
Collateral.  Company hereby authorizes
Paul to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral without the signature of
Company. Company agrees that a carbon, photographic or other reproduction of
this Agreement or of a financing statement signed by Company shall be
sufficient as a financing statement and may be filed as a financing statement
in any and all jurisdictions.  
Notwithstanding the foregoing, so long as there exists no Event of Default,
the Company shall not be required to obtain the consent of the other parties to
the existing License Agreements and In-Licenses other than those consents
required upon closing of the Royalty Agreement.

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 5
 

 

Section 13.             Certain
Covenants of Company.  Company shall:

(a)           not use or
permit any Collateral to be used unlawfully or in violation any applicable
statute, regulation or ordinance or any policy of insurance covering the
Collateral to the extent the same are reasonably anticipated to have a Material
Adverse Effect;

(b)           at its own
cost and expense, with respect to each property that it leases, obtain, at Paul’s
request, an agreement satisfactory to Paul with the landlord of such leased
property, (i) subordinating such landlord’s lien in any Collateral to the
security interest purported to be granted hereunder and (ii) granting
access to such leased property;

(c)           maintain
insurance as provided in the Royalty Agreement;

(d)           notify
Paul of any change in its name, identity or corporate structure at least
fifteen (15) days prior to such change;

(e)           give Paul
thirty (30) days’ prior written notice of any change in its chief place of
business, chief executive office or residence or the office where Company keeps
its records regarding the Collateral or a reincorporation, reorganization or
other action that results in a change of the jurisdiction of organization of
Company;

(f)            pay promptly
when due all taxes, assessments and governmental charges or levies imposed
upon, and all claims against, the Collateral, except to the extent the validity
thereof is being contested in good faith; provided, however, that Company shall
in any event pay such taxes, assessments, charges, levies or claims not later
than five (5) days prior to the date of any proposed sale under any
judgment, writ or warrant of attachment entered or filed against Company or any
of the Collateral as a result of the failure to make such payment;

(g)           except for
licenses of LFRP Intellectual Property and In-Licenses in effect on the date
hereof, not suffer to exist any license, lease, contract or agreement to which
it is a party forming part of or used in the LFRP that contains any provision
that purports to prohibit Company from granting to Paul a security interest in
any item of Collateral including any such license, lease, contract or agreement
itself;

(h)           comply
with all of its obligations with respect to any personal property owned or
leased by it and used in the LFRP, including capital leases, operating leases
and purchase money indebtedness except to the extent non-compliance is not
reasonably anticipated to have a Material Adverse Effect;

(i)            from and
after the date that the Duplicate Libraries are delivered to the location
specified in Section 14(f), in the event that there are any updates or
improvements to the LFRP Libraries, or other libraries as set forth in the
definition of LFRP Libraries, promptly deliver sufficient quantities of such
updated, improved or other LFRP Libraries as necessary to maintain the
Duplicate Libraries as a duplicate reproducible supply of the LFRP Libraries at
such location; and

(j)            not
transfer, sell, convey, assign, dispose of or license the Company Physical
Libraries, except (x) in the ordinary course of business of the LFRP consistent
with past practices, or (y) outside the scope of the LFRP the non-exclusive
licensing of the Company Physical Libraries but limited to a scope or for a use
so as to not compete with the LFRP, provided that non-exclusive licensing of
the Company Physical Libraries under Internally Developed Product Agreements or
under Co-Development Agreements shall not be considered in breach hereof, so
long as in no event shall any third party or

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 6
 

 

Affiliate be enabled to use for funded research or license out the
Company Physical Libraries in a way that would compete with the LFRP, either
under such Internally Developed Product Agreements or Co-Development
Agreements, or otherwise.

Section 14.             Special
Covenants With Respect to the Collateral. 
Company shall:

(i)            diligently
keep records in reasonable detail respecting the Collateral at its chief
executive office or principal place of business;

(ii)           not
locate any Collateral in any location other than (1) those owned by
Company or for which it has delivered an agreement described in
Section 13(b) hereof, (2) the deposit accounts as contemplated
by the Lockbox Agreement, or (3) in the locations as contemplated in
Section 14(f), and shall not relocate any collateral from its location as
of the Effective Date to another such location without first notifying Paul in
writing of such relocation;

(iii)          give
thirty (30) days’ prior written notice to Paul in the event that of an
establishment of any additional place of business;

(iv)          other
than items deposited for collection in the Lockbox Account, forthwith turn over
(with any required endorsement and assignment requested by Paul), any
instrument or cash constituting Collateral;

(v)           not
create, incur, assume or suffer to exist any Lien, other than Permitted Liens,
on the Collateral;

(vi)          not
Transfer the Collateral, other than the Proceeds the Company is permitted to
receive in accordance with the Lockbox Agreement, except (x) with respect to
the LFRP, licensing out in the ordinary course of business of the LFRP
consistent with past practices, or (y) outside the scope of the LFRP,
non-exclusive licensing out of LFRP Intellectual Property (including the
provision of LFRP Libraries or other biological material) but limited to a
scope or for a use so as not to compete with the LFRP, provided that
non-exclusive licensing of LFRP Intellectual Property under Internally
Developed Product Agreements or under Co-Development Agreements shall not be
considered in breach hereof, so long as in no event shall any third party or
Affiliate be enabled to use for funded research or license out the LFRP
Intellectual Property (including the provision of LFRP Libraries or other
biological material) in a way that would compete with the LFRP, either under
such Internally Developed Product Agreements or Co-Development Agreements, or
otherwise;

(vii)         in
the event that Company has rights to a commercial tort claim constituting
Collateral, notify Paul and provide a detailed description of the claim and
shall grant Paul a security interest therein in a manner specified by Paul; and

(viii)        in
the event that Company shall have a security interest securing any Collateral,
promptly execute an assignment of such security interest to Paul.

(b)           Company
shall comply with the obligations relating to the LFRP Patents set forth in
Section 5.11(h) of the Royalty Agreement.

(c)           Company
shall, concurrently with the execution and delivery of this Agreement, execute
and deliver to Paul five (5) originals of a Special Power of Attorney in
the form of Exhibit A annexed hereto for execution of an assignment of the
Collateral to Paul, or the implementation of the sale

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 7
 

 

or other disposition of the Collateral pursuant to Paul’s good faith
exercise of the rights and remedies granted hereunder; provided, however, Paul
agrees that it will not exercise its rights under such Special Power of
Attorney unless an Event of Default has occurred and is continuing.

(d)           Company
shall, concurrently with the execution and delivery of this Agreement, execute
and deliver to Paul the Patent Security Agreement, the Trademark Security
Agreement, the Copyright Security Agreement and all other documents,
instruments and other items as may be necessary for Paul to file such
agreements with the United States Patent and Trademark Office and United States
Copyright Office and any similar domestic or foreign office, department or
agency.  Company shall upon and after the
occurrence of an Event of Default, use its commercially reasonable efforts to
obtain any consents, waivers and agreements requested by Paul that are
necessary to enable Paul to exercise its remedies with respect to the
Collateral.

(e)           Certain
Rights upon an Event of Default before and following a Foreclosure.

(i)            Upon
the occurrence and during the continuance of an Event of Default but prior to
Paul’s exercise of the foreclosure remedies hereunder and upon notice by Paul
(the “Notice Event”):

(1)           Company
hereby agrees to grant and hereby grants to Paul effective upon the Notice
Event an exclusive worldwide royalty-free license, with the right to
sublicense, under the Shared Intellectual Property (other than the trademarks
that are the subject of the Trademark Security Agreement (the “Marks”)) to the
extent permitted under the In Licenses solely to carry out the LFRP program
(including through a designee other than a phage-display company that competes
with Company) in the same general manner as carried out by Company immediately
prior to any such Event of Default; provided that such license shall be subject
to any licenses granted by Company to third parties (not in violation of the
Royalty Agreement) prior to the date of the grant to Paul hereunder;

(2)           Company
hereby agrees to grant and hereby grants to Paul effective upon the Notice
Event an exclusive royalty-free limited license to use and display the Marks,
solely in association with any product or service used or provided in
connection with the LFRP in the same general manner and at least as high a level
of quality as carried out by Company immediately prior to any such Event of
Default; provided that (I) Company shall have the right to monitor any such
product or service for the purpose of protecting and maintaining the level of
quality established by Company prior to any such Event of Default; (II) Paul
acknowledges that the goodwill and other benefits associated with such Marks
shall inure to the benefit of Company; and (III) Paul shall not use or omit use
of the Marks in any manner which would injure or destroy their value or
diminish Company’s property rights, and provided further that, in the event
Company advises Paul of any discrepancy in the level of quality of such
products or services, Company shall have the right to terminate the use and
display of the Marks by Paul (but not the other rights licensed hereunder)
until such time as the discrepancy is corrected; and

(3)           For the
avoidance of doubt, the Parties agree and acknowledge that (A) Paul shall
not practice the licenses set forth in this Section 14(e)(i) unless
and until the occurrence of an Event of Default and only for so long as such
Event of Default continues prior to Paul’s exercise of the foreclosure remedies
hereunder; provided that such licenses shall immediately terminate on the date
that the security interest granted under this Agreement is terminated in
accordance with Section 20 hereof, and (B) subject to the grant of
the security interest under and the other provisions of this Agreement and the
Royalty Agreement, Company shall retain ownership of its rights under the
Shared Intellectual Property (including the Marks) and shall be free to
practice, exploit and license the Shared Intellectual Property on a
non-exclusive basis outside the scope of the LFRP but limited to a scope or for
a use so as to not compete with the LFRP, provided that non-exclusive licensing
of Shared

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 8
 

 

Intellectual Property under Internally Developed Product Agreements or
under Co-Development Agreements shall not be considered in breach hereof, so
long as in no event shall any third party or Affiliate be enabled to use for
funded research or license out the Shared Intellectual Property in a way that
would compete with the LFRP, either under such Internally Developed Product
Agreements or Co-Development Agreements, or otherwise.

(ii)           Upon
the occurrence and during the continuance of an Event of Default, following
Paul’s exercise of the foreclosure remedies hereunder:

(1)           Paul
hereby agrees to grant and hereby grants to Company a non-exclusive, perpetual,
royalty-free worldwide license, with the right to sublicense, under the Shared
Intellectual Property (other than the Marks) to the extent permitted under the
In Licenses, for any purpose outside the LFRP on a non-exclusive basis, but
limited to a scope or for a use so as to not compete with the LFRP, provided
that non-exclusive licensing of Shared Intellectual Property under Internally
Developed Product Agreements or under Co-Development Agreements shall not be
considered in breach hereof, so long as in no event shall any third party or
Affiliate be enabled to use for funded research or license out the Shared
Intellectual Property in a way that would compete with the LFRP, either under
such Internally Developed Product Agreements or Co-Development Agreements, or
otherwise.

(2)           Paul
hereby agrees to grant and hereby grants to Company a non-exclusive, perpetual,
royalty-free limited license to use and display the Marks in association with
any product or service used or provided in connection with the Company’s
business outside of the LFRP, within the scope permitted under
Section 14(e)(ii)(1), above, in the same general manner and at least as
high a level of quality as carried out by Company immediately prior to any such
foreclosure; provided that (I) Paul shall have the right to monitor any such
product or service for the purpose of protecting and maintaining the level of
quality established by Company prior to any such foreclosure; (II) Company
acknowledges that the goodwill and other benefits associated with such Marks
shall inure to the benefit of Paul; and (III) Company shall not use or omit use
of the Marks in any manner which would injure or destroy their value or
diminish Paul’s property rights, and provided further that, in the event Paul
advises Company of any discrepancy in the level of quality of such products or
services, Paul shall have the right to terminate the use and display of the Marks
(but not the other rights licensed hereunder) by Company until such time as the
discrepancy is corrected; and

(3)           Paul
hereby agrees, at Company’s sole cost and expense, to make, or to permit
Company to make, copies of all books, records, data bases, and information
(including the handbooks, manuals and sequence information) related to the LFRP
and to use all Shared Intellectual Property (including the Webphage® Software)
solely for the purpose of the conduct of the business of Company outside the LFRP
within the scope permitted under Section 14(e)(ii)(1), above.

For avoidance of doubt, the licenses granted to the Company in
Section 14(e)(ii) shall survive the termination of this Agreement.
The parties acknowledge that such licenses are licenses of “intellectual
property” for the purposes of Section 365 (n) of the Bankruptcy Code.

(f)            Company
shall, within ninety (90) days after the date hereof, prepare the Duplicate
Libraries and shall thereafter promptly deliver the Duplicate Libraries to
Fisher Clinical Services, 631 Lofstrand Lane, Rockville, MD 20850 (phone: (301)
315-2238) or such other secure location or locations as are reasonably
acceptable to Company and Paul, clearly identified as the Duplicate Libraries
prepared for the benefit of Paul, and segregated from property of Company.  The Duplicate Libraries shall be subject to
storage and access on conditions substantially similar to those set forth in
Exhibit E.

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 9
 

 

(g)           Company
shall, within sixty (60) days after the date hereof, execute and deliver to
Paul a source code escrow arrangement in a form and with a source code escrow
agent reasonably acceptable to Paul with respect to the Webphage®
Software.  Until such time as a source
code escrow arrangement is executed by all parties thereto and the source code
of the Software deposited in accordance therewith, Company shall: (i) maintain
copies of all source and object codes for all Software at one or more safe and
secure locations reasonably acceptable to Paul, (ii) keep Paul fully
informed of each such location, and (iii) maintain the currency of all
such Software stored thereat. At Paul’s option Company shall register with the
United States Copyright Office the most recent version of the Webphage®
Software.

(h)           Company
shall, concurrently with the execution and delivery of this Agreement, execute
and deliver to Paul the Perfection Certificate.

(i)            Company
agrees that a breach of any of the covenants contained in this Agreement will
cause irreparable injury to Paul, that Paul has no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained herein shall be specifically enforceable against Company, and Company
hereby waives and agrees not to assert any defenses against an action for
specific performance of such covenants.

(j)            The
Company shall:  (a) notify in
reasonable detail Paul promptly, but in no event later than quarterly (on the
earlier of the date on which the Quarterly Report is delivered by the Company
or the date on which such Quarterly Report is due in each fiscal quarter) after
the acquisition, execution or filing thereof, of any (i) License
Agreements, LFRP Patents, Co-Development Agreements payments under which form
part of the Collateral, and In-Licenses, and (b) on the last day of each
quarter provide, in reasonable detail, updates to Schedules 2(b)(i),
2(b)(ii) (c), (d), (e), (j)(i) and (j)(ii), which would make the
representations and warranties contained in Section 11(c)(i) true,
correct and complete as of such date of the delivery of such Quarterly
Report.  Upon the delivery and acceptance
of such updated schedules by Paul, such schedules will be automatically deemed
to amend and restate Schedules 2(b)(i), 2(b)(ii), (c), (d), (e),
(j)(i) and (j)(ii) hereto.

Section 15.             Paul
Appointed Attorney-in-Fact.  Company
hereby irrevocably appoints Paul, or any person or agent as Paul may designate
as such, Company’s attorney-in-fact, with full authority in the place and stead
of Company and in the name of Company, Paul or otherwise, from time to time in
Paul’s discretion to take any action and to execute any instrument that Paul
may in its good faith sole discretion deem necessary or advisable to accomplish
the following:

(a)           upon the
occurrence and during the continuance of an Event of Default, to ask for,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for monies due and to become due under or in respect of any of the
Collateral, and to manage the LFRP, including taking actions under the License
Agreements and In-Licenses;

(b)           upon the
occurrence and during the continuance of an Event of Default, to receive,
direct payment of, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (a) above;

(c)           upon the
occurrence and during the continuance of an Event of Default, to file any
claims or take any action or institute any proceedings that Paul may in its
good faith sole discretion deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of Paul with respect
to any of the Collateral;

 

Confidential materials omitted
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Commission.  Asterisks denote such
omission.

 10
 

 

(d)           upon the
occurrence and during the continuance of an Event of Default, to pay or
discharge taxes or liens levied or placed upon or threatened against the
Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by Paul in its sole discretion, any such
payments made by Paul to become obligations of Company to Paul, due and payable
immediately without demand;

(e)           upon the
occurrence and during the continuance of an Event of Default, to sign and
endorse any invoices, drafts against debtors, assignments, verifications,
notices and other documents relating to the Collateral; and

(f)            upon the
occurrence and during the continuance of an Event of Default, to perform any
obligations of the Company under the Transaction Documents with the Company
which the Company has not performed.

(g)           upon and
at any time after the occurrence and during the continuance of an Event of
Default, to prepare, file and sign Company’s name on an assignment document in
such form as Paul may in its sole discretion deem necessary or desirable to
transfer ownership of the Collateral to Paul or an assignee or transferee of
Paul, which transfer expressly shall be subject to the rights of the Company in
such Collateral set forth in Section 14(e) hereof.

Section 16.             Standard
of Care.  The powers conferred on
Paul hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers.  Except for the exercise of good faith and of
reasonable care in the accounting for monies actually received by Paul
hereunder, Paul shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral. 
Paul shall be deemed to have exercised reasonable care in the custody
and preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which Paul accords its own property.

Section 17.             Remedies
Upon Event of Default.  If, and only
if, any Event of Default shall have occurred and be continuing, Paul may
exercise in respect of the Collateral (i) all rights and remedies provided
for herein, under the Royalty Agreement or otherwise available to it,
(ii) all the rights and remedies of a secured party on default under the
UCC (whether or not the UCC applies to the Collateral), in all relevant
jurisdictions, and (iii) the rights to:

(i)            require
Company to, and Company hereby agrees that it will at its cost and expense and
upon request of Paul forthwith, assemble all or part of the Collateral as
directed by Paul and make it available to Paul at a place to be designated by
Paul that is reasonably convenient to both parties;

(ii)           personally
or by agents or attorneys, immediately take possession of the Collateral or any
part thereof, from Company or any other person who has possession of any part
thereof, with or without notice or process of law, and for that purpose may
enter upon Company’s premises where any of the Collateral is located and remove
same;

(iii)          foreclose
or otherwise enforce Paul’s security interest in any manner permitted by law or
provided for in this Agreement;

(iv)          without
notice except as may be required by applicable law and that cannot be waived,
sell the Collateral or any part thereof in one or more parcels at public or
private

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 11
 

 

sale, at any place or
places for cash, on credit, or for future delivery, and upon such other terms
as Paul may deem commercially reasonable; and

(v)           without
notice, exercise any right to set-off or offset provided by law.

(b)           Until an
Event of Default has occurred and is continuing, Company shall, subject to the
provisions of the Royalty Agreement and the Lockbox Agreement, continue to
collect, at its own cost and expense, all amounts due or to become due Company
in respect of the Collateral; it being understood and agreed that any and all
such collections shall be held in trust for, and be for the benefit of,
Paul.  In connection with such
collections, provided no Event of Default shall have occurred and be
continuing, Company may, subject to the provisions of the Royalty Agreement,
take such action as Company reasonably may deem necessary or advisable to
enforce collection of the Collateral.  At
any time after an Event of Default has occurred and is continuing, Paul shall have
the right to notify the account debtors or obligors under any Collateral of the
security interest of Paul in such Collateral and to direct such account debtors
or obligors to make payment to Paul (or its designee) of any amounts due or to
become due thereunder and enforce collection of any of the Collateral by suit
or otherwise and surrender, release or exchange all or any part thereof, or
adjust, settle or compromise or extend or renew for any period (whether or not
longer than the original period) any indebtedness thereunder or evidence
thereby.  If an Event of Default has
occurred and is continuing, upon the request of Paul, Company shall, at its own
cost and expense, notify any parties obligated on any of the Collateral to make
payment to Paul (or its designee) of any amounts due or to become due
thereunder, and in such event, Paul is authorized to endorse, in the name of
Company, any item representing any payment on or other proceeds of any of the
Collateral. Company irrevocably directs and requires all licensees and account
debtors to honor Paul’s request for direct payment and comply with any such
request, notwithstanding any directions or instructions to the contrary that
may be given by Company and agrees that the compliance by such licensee or account
debtor with the provisions of this Section shall not be deemed a violation
of such party’s contractual agreements with Company.

(c)           After
delivery to Company by Paul of a notice that an Event of Default has occurred
and so long as such Event of Default is continuing:  (i) all amounts and proceeds (including
instruments) received by Company in respect of any Collateral shall be received
in trust for the benefit of Paul hereunder, shall be segregated from other
funds of Company, and shall be forthwith paid over to Paul in the same form as
so received (with any necessary endorsements) to be held as cash collateral and
applied as provided by this Security Agreement; and (ii) subject to
Article 2 of the Revenue Interest Agreement, Company shall not adjust,
settle, or compromise the amount or payment of any Collateral, or release
wholly or partly any account debtor or obligor thereof, or allow any credit or
discount thereon.

(d)           After the
occurrence and during the continuation of an Event of Default, (i) Paul
may in its own name or in the name of others communicate with account debtors
(including Contract Parties to License Agreements) in order to verify with them
to Paul’s reasonable satisfaction the existence, amount and terms of any
Collateral and (ii) Paul shall have the right, at Company’s cost and
expense, to make test verifications of the Collateral in any reasonable manner
and through any medium that it considers advisable, and Company agrees to
furnish all such assistance as Paul may reasonably require in connection
therewith.

(e)           Anything
contained herein to the contrary notwithstanding, upon the occurrence and
during the continuation of an Event of Default, Paul shall have the right (but
not the obligation) to bring suit, in the name of Company, Paul or otherwise,
to enforce any Collateral, in which event Company shall, at the request of
Paul, do any and all lawful acts and execute any and all documents required by
Paul in aid of such enforcement and Company shall promptly, upon demand,
reimburse and

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 12
 

 

indemnify Paul as provided in the Royalty Agreement and Section 19
hereof, as applicable, in connection with the exercise of its rights under this
Section 17.

Section 18.             Application
of Proceeds.  Except as expressly
provided elsewhere in this Agreement, all proceeds received by Paul in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral shall be applied in good faith to satisfy (to the extent of the
net cash proceeds received by Paul) such item or part of the Secured
Obligations as Paul may designate (with the right to reapply such proceeds to
such other items or part of the Secured Obligations as Paul may see fit).

Section 19.             Expenses.  Company agrees to pay to Paul upon demand the
amount of any and all costs and expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that Paul may incur in
connection with (i) the custody, preservation, management, enforcement,
use or operation of, or the sale of, collection from, or other realization
upon, any of the Collateral, (ii) the exercise or enforcement of any of
the rights of Paul hereunder, or (iii) the failure by Company to perform
or observe any of the provisions hereof. 
Any costs and expenses payable hereunder shall be deemed to be Secured
Obligations and entitled to the security interest hereunder.

(b)           The
obligations of Company in this Section 19 shall survive the termination of
this Agreement and the discharge of Company’s other obligations under this
Agreement and the Royalty Agreement.

Section 20.             Continuing
Security Interest; Termination and Release. 
This Agreement shall (i) create a continuing security interest in
the Collateral, (ii) remain in full force and effect until the later of
the indefeasible payment and performance in full of the Secured Obligations and
the expiration or termination of the Royalty Agreement (other than indemnification
obligations that are unasserted at the time of expiration or termination of
Royalty Agreement and other contingent obligations that, by their terms,
survive the termination hereof and thereof), (iii) be binding upon Company
and its respective successors and assigns, and (iv) inure, together with
the rights and remedies of Paul hereunder, to the benefit of Paul and its
successors, transferees and assigns.

(b)           Upon the
payment and performance in full of all Secured Obligations (other than
indemnification obligations that are unasserted as of the expiration or
termination of the Royalty Agreement and other contingent obligations that, by
their terms, survive the termination hereof), the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to
Company.  Upon any such termination Paul
will, at Company’s cost and expense, execute and deliver to Company such
documents as Company shall reasonably request to evidence such termination.

Section 21.             Miscellaneous.  Notices.  All notices, consents, waivers and
communications hereunder given by any party to any other party shall be in
writing (including facsimile transmission) and delivered personally, by
telegraph, telecopy, telex or facsimile, by a recognized overnight courier, or
by dispatching the same by certified or registered mail, return receipt
requested, with postage prepaid, in each case addressed to the appropriate
notice address of Paul or Company, as applicable, provided in Section 8.03
of the Royalty Agreement or to such other address or addresses as the parties
may from time to time designate by notice as provided herein, except that
notices of changes of address shall be effective only upon receipt.  All such notices, consents, waivers and
communications shall: (a) when posted by certified or registered mail,
postage prepaid, return receipt requested, be effective three (3) Business
Days after dispatch,  (b) when
telegraphed, telecopied, telexed or facsimiled, be effective upon receipt by
the transmitting party of confirmation of complete transmission, (c) when
delivered by a recognized overnight courier or in person, be effective upon
receipt when hand delivered or when delivery is confirmed by such courier’s
tracking system or (d) when sent by e-mail, upon receipt of a confirmatory
return e-mail from the recipient.

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 13
 

 

(b)           Entire
Agreement.  This Agreement, together
with the other Transaction Documents and the Annexes and Schedules hereto and
thereto (which are incorporated herein by reference), constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both written
and oral, among the parties with respect to the subject matter of this
Agreement.  No representation,
inducement, promise, understanding, condition or warranty not set forth herein (or
in the Annexes or Schedules hereto) has been made or relied upon by any party
hereto.  None of this Agreement, nor any
provision hereof, is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.

(c)           Amendments;
No Waivers.  

(i)            This
Agreement or any term or provision hereof may not be amended, changed or
modified except with the written consent of the parties hereto.  No waiver of any right hereunder shall be
effective unless such waiver is signed in writing by the party against whom
such waiver is sought to be enforced.

(ii)           No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. 
The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.

(d)           Successors
and Assigns.  The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, and any reference herein to a
party shall be deemed a reference to such party’s successors and assigns, if
any.  Company shall not be entitled to
assign any of its obligations and rights hereunder or any other Transaction
Documents without the prior written consent of Assignee.  Assignee may assign this Agreement and any of
its rights hereunder without restriction.

(e)           Severability.  If any provision of this Agreement is held to
be invalid or unenforceable, the remaining provisions shall nevertheless be
given full force and effect.

(f)            Interpretation.  When a reference is made in this Agreement to
Sections, subsections, Annexes or Schedules, such reference shall be to a Section,
subsection, Annex or Schedule to this Agreement unless otherwise
indicated.  The terms “Agreement”, “herein”,
“hereto”, “hereof” and words of similar import shall, unless the context
otherwise requires, mean this Agreement, as amended, supplemented or otherwise
modified from time to time.  The words “include”,
“includes” and “including” when used herein shall be deemed in each case to be
followed by the words “without limitation”. 
No party hereto shall be or be deemed to be the drafter of this Agreement
for the purposes of construing this Agreement against any other party.

(g)           Headings
and Captions.  The headings and
captions in this Agreement are for convenience and reference purposes only and
shall not be considered a part of or affect the construction or interpretation
of any provision of this Agreement.

(h)           Governing
Law; Jurisdiction.

(i)            THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 14
 

 

CONFLICTS OF LAW THEREOF
THAT WOULD REQUIRE THE APPLICATION OF LAWS OTHER THAN THOSE OF THE STATE OF NEW
YORK.

(ii)           ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK.  BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO AND ACCEPTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY THE NON-EXCLUSIVE
JURISDICTION OF SUCH COURTS.  EACH PARTY
HERETO HEREBY FURTHER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING
IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT.

(iii)          EACH
PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY
OF THE COURTS REFERRED TO IN SUBSECTION (ii) ABOVE OF THIS
SECTION 21(h) IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS
ADDRESS SET FORTH IN THIS AGREEMENT. 
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH
SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR
CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER THAT SERVICE OF PROCESS
WAS IN ANY WAY INVALID OR INEFFECTIVE. 
NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY TO SERVE PROCESS ON THE
OTHER PARTY IN ANY OTHER MANNER PERMITTED BY LAW.

(i)            Waiver
of Jury Trial; Exclusion of Punitive Damages.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.  IN ADDITION, WITHOUT LIMITING COMPANY’S
OBLIGATION TO INDEMNIFY ASSIGNEE FOR ANY THIRD PARTY CLAIM FOR PUNITIVE
DAMAGES, IN ANY LITIGATION OR ARBITRATION BETWEEN THE PARTIES HEREUNDER NEITHER
PARTY SHALL BE ENTITLED TO SEEK PUNITIVE DAMAGES FROM THE OTHER PARTY.

(j)            Counterparts;
Effectiveness.  This Agreement may be
executed in two or more counterparts, each of which shall be an original, but
all of which together shall constitute one and the same instrument.  This Agreement shall become effective when
each party hereto shall have received a counterpart hereof signed by the other
parties hereto.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE
FOLLOWS]

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 15

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective authorized officers as
of the date first above written.

	
  COMPANY:

  	
  DYAX CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
  PAUL:

  	
  PAUL ROYALTY FUND HOLDINGS II

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Paul Royalty Fund II, L.P., its Managing Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Paul Capital Royalty Management, LLC, its General
  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Paul Capital Advisors, L.L.C., its Manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					

 

Confidential
materials omitted and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

SCHEDULE 1

TO

SECURITY AGREEMENT

Definitions

Unless otherwise defined herein or the context
otherwise requires, terms for which meanings are provided in the UCC are used
in this Security Agreement, including its preamble and recitals, with such
meanings; provided, however, that the term “instrument” shall be such term as
defined in Article 9 of the UCC rather than Article 3 of the UCC.

“Collateral” has the meaning set forth in
Section 2 of this Agreement.

“Copyright Security Agreement” means an agreement substantially
in the form set forth in Exhibit B and suitable for filing with the United
States Copyright Office.

“Event of Default” means:

(a)           Any
Purchase Option Event under the Royalty Agreement (except to the extent delayed
through payment of a Make Whole Payment as permitted thereunder);

(b)           Company
creates or permits to exist any Lien (other than the Lien created in favor of
Paul under this Agreement and Permitted Liens) on the Collateral;

(c)           Company
breaches this Agreement and such breach is not cured within thirty (30) days or
any warranties contained herein by Company prove to be materially false or
incorrect.

“Obligations” means indebtedness, obligations,
promises, covenants, responsibilities, duties and liabilities (actual or
contingent, direct or indirect, matured or unmatured, now existing or arising
hereafter), whether arising by agreement or statute, at law, in equity or
otherwise, and “obliged”, “obligation” and “obligated” shall have corresponding
meanings.

“Patent Security Agreement” means an agreement
substantially in the form set forth in Exhibit C and suitable for filing
with the United States Patent and Trademark Office.

“Perfection Certificate” means a document in the form
set forth on Exhibit 11(c)(ii) hereto.

“Permitted Liens” means tax liens or assessments and
other governmental levies that are not yet due and payable or similar liens for
amounts not yet due and payable.

“Proceeds” or “proceeds” includes whatever is
receivable or received when Collateral is sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary.

“Secured Obligations” means any and all Obligations of
Company under the Transaction Documents including all amounts owing under the
Royalty Agreement, including Guaranteed Minimum Payments, the payment to Paul
of the amounts of the Assigned Interests with respect to any Royalties received
by the Company, payment of the Assignee Repurchase Option Price, the Call
Price, any Make Whole Payments, damages, interest (including interest that, but
for the filing of a petition in bankruptcy with respect to Company, would
accrue on such obligations, whether or not a claim is allowed against Company
for such interest in the related bankruptcy proceeding), reimbursement of fees,
costs, expenses,

 

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Commission.  Asterisks denote such
omission.

 1
 

 

indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion
of such liabilities and other obligations that are paid, to the extent all or
any part of such payment is avoided or recovered directly or indirectly from
Paul as a preference, fraudulent transfer or otherwise, and all obligations of
every nature of Company now or hereafter existing under this Agreement.

“Shared Intellectual Property” means, collectively,
those items identified in Sections 2(b), 2(e), 2(f), and 2(h) hereof.

“Trademark Security Agreement” means an agreement
substantially in the form set forth in Exhibit D and suitable for filing
with the United States Patent and Trademark Office.

“UCC” means the Uniform Commercial Code as in effect
in the State of New York or Delaware, as applicable

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 2

 

Exhibit D

Lockbox Agreement

[ATTACHED]

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

LOCKBOX AGREEMENT

This LOCKBOX AGREEMENT (as amended, supplemented or
otherwise modified from time to time, this “Agreement”) is dated as of
August 23, 2006 and entered into by and among Dyax Corp., a Delaware
corporation, both in its individual capacity (as such, “Company”) and as
initial calculation agent hereunder (as such, the “Lockbox Calculation Agent”),
Paul Royalty Fund Holdings II, a California general partnership (“Assignee”)
and JPMorgan Chase Bank, N.A., both in its capacity as a depositary bank and in
its capacity as a “bank” (as defined in Section 9-102(a)(8) of the
UCC) (in such capacities, the “Financial Institution”), and in its
capacity as escrow agent hereunder (the “Lockbox Escrow Agent”).

RECITALS

WHEREAS, Company
and Assignee are parties to that certain Royalty Interest and Assignment
Agreement, dated as of August 23, 2006 (as amended, supplemented or
otherwise modified from time to time, the “Royalty Agreement”), pursuant
to which Company has agreed, inter alia, to
sell, transfer and convey to Assignee the Assigned Interests (as defined in the
Royalty Agreement) subject to the terms of the Royalty Agreement, and in
connection therewith to make certain payments to Assignee, including, where
applicable, payments of Guaranteed Minimum Payments (as defined in the Royalty
Agreement) and to provide Assignee with certain collateral to secure Company’s
payment and performance obligations under the Royalty Agreement and related
documents;

WHEREAS, the Royalty Agreement
provides that Assignee shall receive a certain amount of cash in respect of the
Assigned Interests, the calculation of which is set forth in the Royalty
Agreement, including as a result of the Guaranteed Minimum Payments;

WHEREAS, Company and Assignee
wish to (i) appoint the Lockbox Escrow Agent to serve as escrow agent
hereunder and, in such capacity, to administer the Lockbox Account in
accordance with the terms hereof; (ii) authorize the Lockbox Escrow Agent
to appoint Company to serve as the initial calculation agent hereunder and, in
such capacity, to calculate the portions of amounts deposited in the Lockbox
Account to be paid into the Company Concentration Account and the Assignee
Concentration Account in accordance with the terms of this Agreement, and to
provide the Lockbox Escrow Agent with the information necessary for the Lockbox
Escrow Agent to make such transfers in accordance with the terms of this
Agreement; and (iii) provide for the establishment with the Financial
Institution of each of the Lockbox Account, the Company Concentration Account
and the Assignee Concentration Account;

WHEREAS, all Gross Payments are
to be distributed from the Lockbox Account by the Lockbox Escrow Agent to the
Company Concentration Account and the Assignee Concentration Account in
accordance with the terms hereof;

WHEREAS, Company
and Assignee are parties to the Security Agreement, dated as of August 23,
2006 (as amended, supplemented or otherwise modified from time to time, the “Security
Agreement”), pursuant to which, inter
alia, Company granted in favor of Assignee a security interest in an
undivided interest in the Company Concentration Account and all Deposit Funds
held therein or credited thereto from time to time, and Company’s interest in
the Lockbox Account;

WHEREAS, each of
the Financial Institution and the Lockbox Escrow Agent acknowledges the grant
by Company in favor of Assignee of the above described security interests; and

WHEREAS, since
Assignee is a secured party and holds a security interest in certain property
of Company pursuant to the Security Agreement, the Company and Assignee intend
to enter into this Agreement in order (i) to perfect Assignee’s security
interest in the Company Concentration Account by

 

Confidential materials omitted
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Commission.  Asterisks denote such
omission.

 

“control” pursuant to Section 9-104 and Section 8-106 of the
UCC, and (ii) to set forth their respective rights and obligations with
respect to the Deposit Accounts;

NOW, THEREFORE, in
consideration of the foregoing and of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:

Section 1.              Certain Terms. 
Capitalized terms when used in this Agreement, including its preamble,
recitals and schedules, shall have the meanings set forth in Annex A
attached hereto.  Other capitalized terms
have the meanings set forth in the Royalty Agreement.

Section 2.              Appointment of Agents; Establishment of
Accounts.

(a)           Each of Company and Assignee hereby
appoints the Lockbox Escrow Agent to act as escrow agent hereunder in
accordance with the terms hereof, to establish the Lockbox Account in the name
of the Lockbox Escrow Agent, as escrow agent for Assignee and Company, and
under the sole dominion and control of the Lockbox Escrow Agent, to receive,
hold, invest and disburse funds on deposit therein from time to time pursuant
to the terms hereof and to otherwise perform the duties assumed by the Lockbox
Escrow Agent hereunder.  The Lockbox
Escrow Agent hereby accepts such appointment and agrees to be bound by the
terms and conditions of this Agreement.

(b)           Each of Company and Assignee hereby
authorizes the Lockbox Escrow Agent to appoint, and the Lockbox Escrow Agent
hereby appoints, the Lockbox Calculation Agent as the sub-agent of the Lockbox
Escrow Agent, to provide calculations in relation to amounts on deposit in the
Lockbox Account from time to time pursuant to the terms hereof and to otherwise
perform the duties assumed by the Lockbox Calculation Agent hereunder.  The Lockbox Calculation Agent hereby accepts
such appointment and agrees to be bound by the terms and conditions of this
Agreement.

(c)           The Lockbox Escrow Agent hereby confirms
that it has established a special escrow account in its name as Escrow Agent,
designated as the “Lockbox Account”, and bearing account number                   (the
“Lockbox Account”), which account shall be non interest-bearing.  The Lockbox Escrow Agent shall keep the
Lockbox Account separate and apart from all other funds and moneys held by it,
and shall hold all funds on deposit therein from time to time for the benefit
of Company and Assignee, in accordance with their respective interests.  The Lockbox Escrow Agent shall administer the
Lockbox Account in accordance with the terms hereof.

(d)           Company and Assignee have caused the
Financial Institution to establish, and the Financial Institution hereby
confirms that the Financial Institution has established, the following deposit
accounts at the Financial Institution (collectively, the “Concentration
Accounts”; each a “Concentration Account”; and together with the
Lockbox Account, the “Deposit Accounts” and each, a “Deposit Account”)
designated as indicated below:

(i)      the account in the name of Company,
bearing account number                   (the
“Company Concentration Account”), which account shall be
interest-bearing; and

(ii)     the account in the name of Assignee,
bearing account number                   (the
“Assignee Concentration Account”), which account shall be
interest-bearing.

 

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and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 2
 

 

(e)           Neither the Financial Institution nor the
Lockbox Escrow Agent shall change the name or account number of any Deposit
Account without the prior written consent of (x) Company and Assignee, in
the case of the Lockbox Account, (y) Company and Assignee, in the case of the
Company Concentration Account, and (z) Assignee, in the case of the Assignee
Concentration Account.

(f)            The parties hereto acknowledge and agree
that each Deposit Account is a “deposit account” within the meaning of
Section 9-102(a)(29) of the UCC and that the Financial Institution’s
jurisdiction for purposes of the Deposit Accounts under the UCC shall be New
York.

(g)           Lockbox Escrow Agent shall furnish to
Company and Assignee periodic reports, which account for all such investments
and interest and income earned thereon. 
Such reports shall be furnished monthly or, more frequently, upon the
request of Company and Assignee.

(h)           Each of Company and Assignee acknowledges
and agrees that (i) the Lockbox Account is being established for the
benefit of Company and Assignee, (ii) the Lockbox Account and all Deposit
Funds relating thereto are the property of the Lockbox Escrow Agent, for the
benefit of the Company and Assignee in accordance with their respective
interests and (iii) it shall, at its own cost and expense, defend the
Lockbox Account (and all Deposit Funds relating thereto) against any and all
claims of its creditors, whether threatened or actual.

(i)            The Deposit Funds in each Concentration
Account shall be invested by Financial Institution in Permitted
Investments.  All Permitted Investments
shall be registered in the name of Financial Institution for the benefit of
Assignee or Company, as applicable, and held by Financial Institution as part
of such Concentration Account.  Financial
Institution may make investments through its investment division or short-term
investment department.  Financial
Institution shall sell and reduce to cash a sufficient amount of Permitted
Investments whenever the cash balance of the Concentration Accounts is
insufficient to pay the amounts required to be paid therefrom.  Financial Institution shall, without further
direction from any person, sell such investments as and when required to make
any payments from the Concentration Accounts. 
Financial Institution shall not be responsible or liable for any loss
suffered in connection with any investment of moneys made by Financial
Institution in accordance with this Section 2(i).

Section 3.              Operation of and Disbursements from the
Lockbox Account.

(a)           The parties acknowledge and agree that
the Gross Payments (as defined in the Royalty Agreement) shall be paid into the
Lockbox Account.

(b)           The Lockbox Escrow Agent will provide the
Lockbox Calculation Agent with a daily report showing each payment received in
the Lockbox Account on the previous Business Day.  From time to time, at a period to be defined
by Company but in any event no less frequently than once per week, the Lockbox
Calculation Agent shall submit a report to the Lockbox Escrow Agent and the
Financial Institution (with a copy to Company) in respect of the amounts on
deposit in the Lockbox Account as of the end of the relevant calculation period
(each, a “Lockbox Calculation Report”), which Lockbox Calculation Report
shall specify the portion thereof which is allocable to Assignee and Company,
respectively, by way of allocations between the Assignee Concentration Account
and the Company Concentration Account. 
Such allocations shall be calculated by the Lockbox Calculation Agent as
set forth on Schedule 5. 
Company shall provide immediately to Lockbox Calculation Agent, on
request, any data or information requested by Lockbox Calculation Agent to
prepare the Lockbox Calculation Report.

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 3
 

 

The Lockbox
Calculation Agent shall be responsible for preparing the Lockbox Calculation
Report in good faith and in a consistent and reasonable manner in accordance
with the terms of the Royalty Agreement.

(c)           At the time the Lockbox Calculation Agent
submits any Lockbox Calculation Report in relation to the Lockbox Account, the
Lockbox Calculation Agent shall also provide the Lockbox Escrow Agent with
supporting calculations and other back-up information in reasonable detail, certified
by a senior financial officer of the Lockbox Calculation Agent.

(d)           Following receipt of a Lockbox
Calculation Report, the Lockbox Escrow Agent shall, within one
(1) Business Day thereof, (i) allocate among the applicable
Concentration Accounts the amounts received in the Lockbox Account that are
covered by such Lockbox Calculation Report and (ii) make corresponding
wire transfers of such amounts from the Lockbox Account in accordance with the
terms hereof.  Only the Lockbox Escrow
Agent will have the authority to make transfers from the Lockbox Account and
only in accordance with the terms of this Agreement.  Within five (5) days of the close of any
calendar quarter, the Lockbox Escrow Agent will provide Assignee copies of each
Lockbox Calculation Report and any other information or certificates received
from the Lockbox Calculation Agent during the preceding quarter.

(e)           In the event the Lockbox Calculation
Agent determines that a Lockbox Calculation Report contains any incorrect
calculations, the Lockbox Calculation Agent shall promptly notify the Lockbox
Escrow Agent, and provide a revised Lockbox Calculation Report to the Lockbox
Escrow Agent together with information of the type specified in Section 3(c) above.  If the revised Lockbox Calculation Report is
received by the Lockbox Escrow Agent prior to its distribution of the sums
covered thereby, then the Lockbox Escrow Agent shall distribute such sums in
accordance with the revised Lockbox Calculation Report; if not, then the
Lockbox Escrow Agent will make appropriate offsets/credits with respect to
future distributions from the Lockbox Account, based on information provided to
it by the Lockbox Calculation Agent (which the Lockbox Calculation Agent
undertakes to do on a prompt basis).

(f)            The Lockbox Escrow Agent shall rely on
the information contained in any Lockbox Calculation Report provided to it from
time to time by the Lockbox Calculation Agent, and shall, on the next Business
Day after receipt thereof, transfer amounts on deposit in the Lockbox Account
in accordance with the information contained in any such Lockbox Calculation
Report, without any duty to investigate. 
The Lockbox Escrow Agent shall have no liability to any party hereto on
account of disbursing funds in the Lockbox Account on the basis of information
contained in any such Lockbox Calculation Report.

Section 4.              Control of the Concentration Accounts.

(a)           In order to perfect Assignee’s security
interest in the Company Concentration Account (and any and all Deposit Funds
held therein or credited thereto from time to time) by “control” pursuant to
Section 9-104 of the UCC, Company, Assignee and the Financial Institution
agree as follows: So long as no Event of Default or Termination Event shall
have occurred and be continuing, Company shall be entitled to give Account
Instructions to the Financial Institution directing the disposition, transfer,
withdrawal, disbursement, investment or redemption of any Deposit Funds in or
credited to the Company Concentration Account,
and the Financial Institution shall comply with such Account Instructions from
Company (without any consent being required from Assignee).  Upon
receiving notice from Assignee, however (which, for the avoidance of doubt, may
be given by Assignee upon the occurrence and during the continuance of an Event
of Default or a Termination Event), the Financial Institution shall cease
complying with any and all Account Instructions from Company pertaining to or
concerning the Company Concentration Account or
any Deposit Funds therein or credited thereto. At such time, only

 

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Commission.  Asterisks denote such
omission.

 4
 

 

Assignee shall be
entitled to give Account Instructions to the Financial Institution directing
the disposition, transfer, withdrawal, disbursement, investment or redemption
of any Deposit Funds in or credited to the Company Concentration Account until
such time as Assignee otherwise advises in writing (which, for the avoidance of
doubt, shall be given promptly following the cure or waiver of such Event of
Default or Termination Event).

(b)           (1)  Only
Assignee shall be entitled to give Account Instructions directing the
disposition, transfer, withdrawal, disbursement, investment or redemption of
any Deposit Funds in or credited to the Assignee Concentration Account, and the
Financial Institution shall comply with such Account Instructions from Assignee
from time to time.  The parties
acknowledge that the Assignee Concentration Account is the unencumbered
property of the Assignee.

(2)           Only Company shall
be entitled to give Account Instructions directing the disposition, transfer,
withdrawal, disbursement, investment or redemption of any Deposit Funds in or
credited to the Company Concentration Account prior to an Event of Default and
the Financial Institution shall comply with such Account Instructions from
Company from time to time.

(c)           The Financial Institution shall not, and
shall not agree with any third party to, comply with any Account Instructions
or other instructions, orders or directions from a third party pertaining to or
concerning any Concentration Account or any Deposit Funds therein or credited
thereto, without the prior written consent of Assignee and Company (in the case
of the Company Concentration Account, prior to an Event of Default) and
Assignee (in the case of the Assignee Concentration Account and, from and after
an Event of Default that has not been cured or waived, the Company
Concentration Account).

Section 5.              Financial Institution’s Obligations with
respect to the Deposit Accounts.

(a)           The Financial Institution agrees to
maintain each Deposit Account separately, in accordance with the terms of this
Agreement and agrees not to commingle the Deposit Funds in or credited to, or
designated for deposit in, any Deposit Account with any other Deposit Funds
held on behalf of Company, Assignee or any other person or entity.  The Financial Institution shall not apply any
Deposit Funds received in the Deposit Accounts and not to make disbursements
from or debits to the Deposit Accounts other than in accordance with this
Agreement.

(b)           The Financial Institution acknowledges
that the Company Concentration Account and the Company’s interest in the
Lockbox Account, and any Deposit Funds therein or credited thereto, are subject
to the security interest of Assignee therein. 
Each of the Lockbox Escrow Agent and the Financial Institution
acknowledges that the Company has granted Assignee a security interest over the
Company Concentration Account and Company’s interest in the Lockbox Account.

(c)           The parties hereto acknowledge and agree
that items deposited in any Deposit Account shall be deemed to bear the valid
and legally binding endorsement of the payee and to comply with all of the Financial
Institution’s requirements for the supplying of missing endorsements, now or
hereafter in effect.  Any deposit made
into any Deposit Account shall be deemed deposited therein when the funds in
respect of such deposit shall become cleared funds.

(d)           The Financial Institution shall redeposit
with advice any item returned for any reason. 
If any item is returned a second time, the Financial Institution will
charge the amount of such item against the Lockbox Account if the same contains
sufficient funds to pay the amount of the returned item.  If the balance in the Lockbox Account is not
sufficient to pay the amount of the returned item, the Financial Institution
shall notify Company and Assignee. 
Company agrees to reimburse the Financial Institution for the same
promptly after such notification.  The
Financial Institution shall also notify Company and

 

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Commission.  Asterisks denote such
omission.

 5
 

 

Assignee of its
current standard charges for returned items and Company agrees to pay the
Financial Institution such charges promptly after such notification.  The Financial Institution shall return the
item along with the debit advice to Company, with a copy to Assignee.  The Financial Institution is granted the
further right to debit from any Deposit Account any amounts deposited therein
in error or as necessary to correct processing errors.

(e)           Each week that the Financial Institution
receives any Deposit Funds in any Deposit Account, the Financial Institution
shall notify Company and Assignee in writing that it has received such Deposit
Funds into such account or accounts, and the Financial Institution shall set
forth in such writing (i) the names of the accounts into which such
Deposit Funds were received, if such payments have been received, (ii) the
date of receipt of such Deposit Funds, (iii) the amount of such receipt
and (iv) the name of the payor.

(f)            The Financial Institution shall at all
times provide the parties hereto with online computer access, in a format or
formats reasonably acceptable to Company and Assignee, to account balances,
collection and remittance information relative to the Deposit Accounts and
within five (5) Business Days following the end of each month, shall cause
to be made available to Company and Assignee by means of online computer
access, and within ten (10) Business Days following the end of each month
shall send or cause to be sent a statement for such month to Company and
Assignee in each case outlining a list of (i) the amounts, if any,
transferred into or from any Deposit Account during the preceding month, the
dates of each such transfer and the accounts into which such transfers were
made, (ii) the balance, if any, in each Deposit Account as of the end of
such month, and (iii) any other debits or credits made during the month to
each Deposit Account together with a description thereof.

(g)           Any transfer of funds from the Lockbox
Account to the Company Concentration Account shall be made by wire transfer or
similar method of transfer of immediately available funds, unless otherwise
agreed to in writing by Company.  Any
transfer of funds from the Lockbox Account to the Assignee Concentration
Account shall be made by wire transfer or similar method of transfer of
immediately available funds, unless otherwise agreed to in writing by Assignee.

Section 6.              Resignation and Replacement of Lockbox
Escrow Agent.

(a)           The Lockbox Escrow Agent shall have the
right at any time, by giving written notice to the Financial Institution,
Company and Assignee, to resign and be discharged of the responsibilities
hereby created, such resignation to become effective upon (i) the
appointment of a successor Lockbox Escrow Agent by Company and Assignee and
(ii) the acceptance of such appointment by such successor Lockbox Escrow
Agent.  If no successor Lockbox Escrow
Agent shall be appointed and shall have accepted such appointment within ninety
(90) days after the date the Lockbox Escrow Agent gives the aforesaid notice of
resignation, the Lockbox Escrow Agent may apply to any court of competent
jurisdiction to appoint a successor Lockbox Escrow Agent to act until such
time, if any, as a successor Lockbox Escrow Agent shall have been appointed as
provided in this Section.  Any successor
so appointed by such court shall immediately and without further act be
superseded by any successor Lockbox Escrow Agent appointed by Company and
Assignee.

(b)           The Company and
Assignee shall have the right, upon mutual agreement, at any time, to remove
the Lockbox Escrow Agent and appoint a successor Lockbox Escrow Agent, such
removal to be effective upon the acceptance of such appointment by the
successor Lockbox Escrow Agent.

 

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Commission.  Asterisks denote such
omission.

 6
 

 

(c)           Any resigning
or removed Lockbox Escrow Agent shall be entitled to the fees and indemnities
set forth herein to the extent incurred or arising, or relating to events
occurring, before
such resignation or removal.

Section 7.              Resignation and Replacement of Lockbox
Calculation Agent.

(a)           The Lockbox Calculation Agent shall have
the right, at any time, by giving written notice to the Financial Institution,
Company and Assignee, to resign and be discharged of the responsibilities
hereby created, such resignation to become effective upon (i) the
appointment of a successor Lockbox Calculation Agent by Assignee and Company,
and (ii) the acceptance of such appointment by such successor Lockbox
Calculation Agent.  If no successor
Lockbox Calculation Agent shall be appointed and shall have accepted such
appointment within ninety (90) days after the date the Lockbox Calculation
Agent gives the aforesaid notice of resignation, the Lockbox Calculation Agent
or Assignee may apply to any court of competent jurisdiction to appoint a
successor Lockbox Calculation Agent to act until such time, if any, as a
successor Lockbox Calculation Agent shall have been appointed as provided in
this Section.  Any successor so appointed
by such court shall immediately and without further act be superseded by any
successor Lockbox Calculation Agent appointed by Assignee and Company.

(b)           Upon the determination by Assignee or, if
the Lockbox Calculation Agent at such time is not Company or an Affiliate
thereof, Company (in each case, whether Assignee or Company, acting reasonably
and in good faith), that a Termination Event has occurred (or, where Company is
acting as Lockbox Calculation Agent, an Event of Default has occurred), Assignee
or Company, as the case may be, shall have the right to remove the Lockbox
Calculation Agent by providing written notice of such determination to the
other parties hereto; provided that, at Assignee’s option, the Lockbox
Calculation Agent may immediately be suspended pending the resolution of any
dispute regarding the provision of such a notice as described in this Section 7(b).  In the event such a determination is made,
Assignee or Company, as the case may be, may dispute such determination by providing
written notice to the other party within ten (10) Business Days of receipt
of the removal notice.  If no such
dispute notice is so provided, the Lockbox Calculation Agent shall be removed
and a successor Lockbox Calculation Agent shall be selected in accordance with Section 7(c).  If such a dispute notice is timely provided,
then the relevant parties shall first attempt to reach an amicable settlement
through mutual consultations and negotiations. 
If the parties are unable to reach an amicable settlement within ten
(10) Business Days from the date on which the dispute was first notified
in writing, then any party shall be entitled to submit the dispute to
litigation proceedings in accordance with the terms hereof.  Pending the resolution of any such dispute,
(unless the Lockbox Calculation Agent has been suspended as described above)
the party then serving as Lockbox Calculation Agent may continue to serve in
such role, provided that, during the pendency of any such dispute, it delivers
Lockbox Calculation Reports no less frequently than once per week to each of
the Lockbox Escrow Agent, Company and Assignee. 
If, following the commencement of any dispute regarding the existence of
a Termination Event, Company and Assignee agree to remove the Lockbox Calculation
Agent or it is finally determined by a court of competent jurisdiction that a
Termination Event has in fact occurred, then the Lockbox Calculation Agent
shall be removed and a replacement selected in accordance with Section 7(c).  In all events, removal of the Lockbox
Calculation Agent shall only become effective upon the acceptance by the
successor Lockbox Calculation Agent of its appointment.  Any resigning or removed Lockbox Calculation
Agent shall be entitled to the fees and indemnities set forth herein to the
extent incurred or arising, or relating to events occurring, before such
resignation or removal.

(c)           In connection with removal of the Lockbox
Calculation Agent pursuant to Section 7(b), a successor Lockbox
Calculation Agent shall be selected by Assignee and Company, unless the removed
Lockbox Calculation Agent shall be Company or an Affiliate thereof, in which
event such Agent

 

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shall be chosen by
Assignee; provided, however,
that such successor shall be chosen from the list on Schedule 6 to
this Agreement or be a similar entity with a national reputation in the United
States.  When required to mutually agree,
in the event that Company and Assignee do not agree upon a successor within
thirty (30) days of the date on which a party notified the others of its
decision to remove the Lockbox Calculation Agent (or, if such removal is
disputed in accordance with Section 7(b) hereof, within thirty
(30) days of the resolution of such dispute), Company, using its reasonable
discretion, shall promptly appoint a successor Lockbox Calculation Agent from
among those persons listed on Schedule 6 or a similar entity with a
national reputation in the United States (excluding, for those purposes, any
Person previously removed as Lockbox Calculation Agent or any Person that is
the subject of a pending dispute).

Section 8.              Subordination of Lien;
Waiver of Set-Off. 
In the event that the Financial Institution has obtained or
subsequently obtains by agreement, by operation of law or otherwise a security
interest in, lien on, or encumbrance, claim or (except as provided in the next
sentence) right of set-off against, any Deposit Account or any security
entitlement or any Deposit Funds therein or credited thereto, the Financial
Institution hereby agrees that such security interest, lien, encumbrance,
claim, and right of set-off shall be subordinate to any security interest or
other interest of Assignee therein and the security entitlement or any Deposit
Funds therein or credited thereto.  The
Financial Institution agrees not to exercise any present or future right of
recoupment or set-off against any Deposit Account or to assert against any
Deposit Account any present or future security interest, banker’s lien or any
other lien or claim (including claim for penalties) that the Financial
Institution may at any time have against or in any Deposit Account or any
security entitlement or any Deposit Funds therein or credited thereto; provided,
however, that, the Financial Institution may set-off against the Lockbox
Account the face amount of any checks which have been credited to any Deposit
Account but are subsequently returned unpaid because of uncollected or
insufficient funds in accordance with Section 5(d).

Section 9.              Certain Matters Affecting the Financial
Institution, Lockbox Escrow Agent and Lockbox Calculation Agent.

(a)           Each of the Financial Institution, the
Lockbox Escrow Agent and the Lockbox Calculation Agent (in its capacity as
such) shall perform only such duties and obligations as are expressly set forth
herein with respect to it and no implied duties or obligations shall be read
into this Agreement (it being understood that the foregoing shall not otherwise
limit any duty or obligation of Company in its individual capacity).  None of the Financial Institution, the
Lockbox Escrow Agent or the Lockbox Calculation Agent (in its capacity as such)
shall have any liability under any agreement other than this Agreement, nor
shall the Financial Institution or the Lockbox Calculation Agent have any duty
to inquire as to the provisions of any agreement other than this Agreement.

(b)           Each of the Financial Institution and the
Lockbox Escrow Agent may rely upon, and shall not be liable for acting in
accordance with this Agreement upon, any written notice, instruction or request
furnished to it hereunder and reasonably believed by it to be genuine and to
have been signed or presented by the proper party or parties, or for refraining
from acting if and to the extent that such written notice, instruction or
request requires it to refrain from acting. 
Neither the Financial Institution nor the Lockbox Escrow Agent shall be
under a duty to inquire into or investigate the validity, accuracy or content
of any such document.

(c)           In the event any Account Instruction,
Lockbox Calculation Report or other notice is given to the Lockbox Escrow Agent
or Financial Institution by Company or Assignee, whether in writing, by
facsimile or telecopier, or otherwise, each of the Lockbox Escrow Agent and
Financial Institution is authorized to seek confirmation thereof by telephone
call-back to, as applicable, from one or more of such Person’s Authorized
Representatives, and each of the Financial Institution and Lockbox Escrow Agent
may rely upon the confirmation of anyone purporting to be the Authorized
Representative so designated.

 

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The Authorized
Representatives and telephone numbers for call-backs may be changed only in a
writing actually received and acknowledged by the Financial Institution and the
Lockbox Escrow Agent.  The parties to
this Agreement acknowledge and agree that such security procedures are
commercially reasonable.

(d)           Neither the Financial Institution nor the
Lockbox Escrow Agent shall be liable for any action taken or omitted by it in
good faith except to the extent that a court of competent jurisdiction
determines that the Financial Institution’s or the Lockbox Escrow Agent’s (as
applicable) gross negligence or willful misconduct was the cause of any loss,
expense, cost, damage or liability to either or both of Company or Assignee.

(e)           Each of the Financial Institution and the
Lockbox Escrow Agent (i) shall have the right to execute any of its powers
and perform any of its duties hereunder directly or through agents or attorneys
(which, in the case of the Lockbox Escrow Agent, may be in addition to the
Lockbox Calculation Agent), the appointment of which will be approved in
writing by Company and Assignee (and the Financial Institution or Lockbox
Escrow Agent (as applicable) shall be liable only for the careful selection of
any such agent or attorney) and (ii) shall have the right to consult with
counsel, accountants and other skilled persons to be selected and retained by
it.

(f)            Any legal entity into which the Financial
Institution or the Lockbox Escrow Agent, in each case in its individual
capacity, may be merged or converted or with which it may be consolidated, or
any legal entity resulting from any merger, conversion or consolidation to
which the Financial Institution or the Lockbox Escrow Agent, in each case in
its individual capacity, shall be a party, or any legal entity to which
substantially all the corporate trust business of the Financial Institution or
the Lockbox Escrow Agent may be transferred, shall be the Financial Institution
or Lockbox Escrow Agent, as applicable, under this Agreement without further
act or notice, other than that the Financial Institution or Lockbox Escrow
Agent, as applicable, shall endeavor to give prompt notice thereof to the other
parties hereto (it being understood that it shall not have any liability for
failure to do so).

(g)           In the event that the Financial
Institution or the Lockbox Escrow Agent is unable to perform its obligations
under the terms of this Agreement (x) because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
any other cause reasonably beyond its control, or (y) because, upon advice of
its counsel, performance would violate any applicable guideline, rule or
regulation of any governmental authority having jurisdiction over it, then, in
each case with respect to the foregoing clauses (x) and (y) in this
subsection (g), the Financial Institution or the Lockbox Escrow Agent, as
applicable, shall promptly notify Company and Assignee thereof in writing and
shall not be liable for damages to the other parties for any unforeseeable
damages resulting from such failure to perform or otherwise from such
causes.  Performance under this Agreement
by the Financial Institution shall resume when it is able to perform
substantially its duties hereunder.

(h)           Anything in this Agreement to the
contrary notwithstanding, in no event shall any of the Financial Institution,
Lockbox Escrow Agent or Lockbox Calculation Agent (in its capacity as such) be
liable for any special, indirect, exemplary or consequential loss or damage of
any kind whatsoever (including, but not limited to, lost profits), even if it
has been advised of the likelihood of such loss or damage and regardless of the
form of action (it being understood that the foregoing shall not otherwise
limit any duty or obligation of Company in its individual capacity).

(i)            If Company and Assignee shall be in a
disagreement about the interpretation of this Agreement, or about the rights
and obligations, or the propriety of any action contemplated by the Lockbox
Escrow Agent hereunder, the Lockbox Escrow Agent may, but shall not be required
to, file an appropriate civil action to resolve the disagreement.  The Lockbox Escrow Agent shall be
indemnified,

 

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jointly and
severally, by Company and Assignee for all costs, including, reasonable
attorneys’ fees, in connection with such civil action, and shall continue, and
be fully protected in continuing, to perform its responsibilities under this
Agreement until a final judgment, without any further right of appeal, is
received or the Lockbox Escrow Agent is replaced pursuant to Section 6
of this Agreement.  If there is any disagreement
as to the propriety of any action of the Lockbox Escrow Agent, the Company and
Assignee shall meet promptly to discuss and, if so agreed, to initiate the
procedure to replace the Lockbox Escrow Agent in accordance with Section 6
of this Agreement.

Section 10.            Conflict with Other Agreements; Adverse
Claims.

(a)           In the event of any conflict between this
Agreement (or any portion hereof) and any other agreement now existing or
hereafter entered into, the terms of this Agreement shall prevail; provided,
that Company and Assignee confirm to each other that nothing herein is intended
to expand, modify or limit the rights and/or obligations of Company and
Assignee under the Royalty Agreement and/or the Security Agreement; and provided,
further, that in the event of any inconsistency between this Agreement
and the terms of the Royalty Agreement and/or
the Security Agreement, the terms and provisions of the Royalty Agreement
and/or the Security Agreement, as applicable, shall control as between Company
and Assignee, with the Royalty Agreement taking priority over the Security
Agreement.

(b)           The Financial Institution hereby confirms
that:

(i)            there are no agreements entered into
between the Financial Institution and any other person or entity with respect
to any Deposit Account except for this Agreement;

(ii)           it has not entered into, and until the
termination of this Agreement will not enter into, any agreement with any
person or entity (other than Lockbox Escrow Agent, Company and Assignee)
relating to the Deposit Accounts and/or any Deposit Funds therein or credited
thereto pursuant to which it has agreed to comply with any “entitlement orders”
(as defined in Section 8-102(a)(8) of the UCC), orders, directions or
any instructions of such person or entity concerning any of the Deposit
Accounts or the disposition, withdrawal or disbursement of any Deposit Funds
therein or credited thereto; and

(iii)          except for the claims and interests of
Lockbox Escrow Agent, Company and Assignee in the Deposit Accounts and the Deposit
Funds therein or credited thereto, the Financial Institution does not know of
any security interest in, lien on, claim to, or interest in any Deposit Account
or in any “financial asset” (as defined in Section 8-102(a)(9) of the
UCC), funds, monies, checks or other items in or credited to the Deposit
Accounts.  If any person or entity
asserts any security interest, lien, encumbrance or adverse claim (including
any writ, garnishment, judgment, warrant of attachment, execution or similar
process) against any of the Deposit Accounts or any Deposit Funds therein or
credited thereto, other than the security interest of Assignee therein, the
Financial Institution will promptly notify Lockbox Escrow Agent, Company and
Assignee thereof in writing.

Section 11.            Authorized
Representatives.  Each individual designated as an authorized
representative of Company or of Assignee, respectively (an “Authorized
Representative”), is authorized to give and receive notices, requests and
instructions and to deliver certificates and documents in connection with this
Agreement on behalf of Company or Assignee, as the case may be.  The specimen

 

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signature for each
Authorized Representative of Company initially authorized hereunder is set
forth on Schedule 2.  The
specimen signature for each Authorized Representative of Assignee initially
authorized hereunder is set forth on Schedule 3.  The specimen signature for each Authorized
Representative of the Lockbox Calculation Agent initially authorized hereunder
is set forth on Schedule 4. 
From time to time, Company, Assignee or the Lockbox Calculation Agent
may, by delivering to each other, the Lockbox Escrow Agent and the Financial
Institution a revised Schedule 2 or 3 or 4 (as
applicable), change the information previously given pursuant to this Section 11,
but each of the parties hereto shall be entitled to rely conclusively on the
then current Schedule until receipt of a superseding Schedule.

Section 12.            Representations, Warranties and
Covenants.

(a)           Representations,
Warranties and Covenants of the Financial Institution.  The Financial Institution hereby
represents, warrants and covenants to Company and Assignee that:

(i)            the Deposit Accounts have each been
established as set forth in Section 2, and the Financial
Institution covenants that the Deposit Accounts will be maintained in the
manner set forth herein until termination of this Agreement;

(ii)           it has not assigned, pledged or granted a
security interest in any of the Deposit Accounts or any Deposit Funds in or
credited in such Deposit Accounts; and

(iii)          this Agreement constitutes the legal,
valid and binding obligation of the Financial Institution, enforceable against
the Financial Institution in accordance with its terms, except as enforcement
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting the
enforcement of creditors’ rights generally or by general equitable principles
(regardless of whether enforcement is sought in a proceeding in equity or at
law).

(b)           Representations,
Warranties and Covenants of the Lockbox Escrow Agent.  The Lockbox Escrow Agent hereby represents,
warrants and covenants to Company and Assignee that:

(i)            the Lockbox Account has been established
as set forth in Section 2, and the Lockbox Escrow Agent covenants
that the Lockbox Account will be maintained in the manner set forth herein
until termination of this Agreement;

(ii)           it has not assigned, pledged or granted a
security interest in the Lockbox Account or any Deposit Funds therein or
credited thereto; and

(iii)          this Agreement constitutes the legal,
valid and binding obligation of the Lockbox Escrow Agent, enforceable against
the Lockbox Escrow Agent in accordance with its terms, except as enforcement
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting the enforcement
of creditors’ rights generally or by general equitable principles (regardless
of whether enforcement is sought in a proceeding in equity or at law).

(c)           Representations,
Warranties and Covenants of the Lockbox Calculation Agent.  The Lockbox Calculation Agent
hereby represents, warrants and covenants to Lockbox Escrow Agent, Company and
Assignee that:

 

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(i)            solely in its capacity as Lockbox
Calculation Agent hereunder, it does not have, hereby waives, and shall not
assert, any ownership interest or other right or interest in and to the Lockbox
Account or Deposit Amounts relating thereto;

(ii)           this Agreement constitutes the legal,
valid and binding obligation of the Lockbox Calculation Agent, enforceable
against the Lockbox Calculation Agent in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors’ rights generally or by general
equitable principles (regardless of whether enforcement is sought in a
proceeding in equity or at law).

(iii)          the execution, delivery and performance
by Lockbox Calculation Agent of its obligations under this Agreement do not and
will not constitute or result in a breach of (A) Lockbox Calculation Agent’s
organizational documents, or (B) the provisions of any material contract
to which Lockbox Calculation Agent is a party or by which Lockbox Calculation
Agent is bound; and

(iv)          all approvals and authorizations required
to permit the execution, delivery and performance by Lockbox Calculation Agent
of this Agreement have been obtained.

(d)           Representations,
Warranties and Covenants of Company.  Company hereby represents,
warrants and covenants to the Financial Institution, Lockbox Escrow Agent,
Lockbox Calculation Agent and Assignee that:

(i)            the execution, delivery and performance
by Company of this Agreement have been duly authorized by all necessary action;

(ii)           this Agreement has been duly executed and
delivered by Company;

(iii)          this Agreement constitutes the legal,
valid and binding obligation of Company, enforceable against Company in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors’ rights generally or
by general equitable principles (regardless of whether enforcement is sought in
a proceeding in equity or at law);

(iv)          the execution, delivery and performance
by Company of its obligations under this Agreement do not and will not
constitute or result in a breach of (A) Company’s organizational
documents, or (B) the provisions of any material contract to which Company
is a party or by which Company is bound (other than any such provisions that
have been waived by the other parties thereto); and

(v)           all approvals and authorizations required
to permit the execution, delivery and performance by Company of this Agreement
have been obtained.

(e)           Representations,
Warranties and Covenants of Assignee.  Assignee hereby represents,
warrants and covenants to the Financial Institution, Lockbox Escrow Agent,  Lockbox Calculation Agent and Company that:

 

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(i)            the execution, delivery and performance
by Assignee of this Agreement have been duly authorized by all necessary
action;

(ii)           this Agreement has been duly executed and
delivered by Assignee;

(iii)          this Agreement constitutes the legal,
valid and binding obligation of Assignee, enforceable against Assignee in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors’ rights generally or
by general equitable principles (regardless of whether enforcement is sought in
a proceeding in equity or at law);

(iv)          the execution, delivery and performance
by Assignee of its obligations under this Agreement do not and will not
constitute or result in a breach of (A) Assignee’s partnership agreement
or other organizational documents, or (B) the provisions of any material
contract to which Assignee is a party or by which Assignee is bound; and

(v)           all approvals and authorizations required
to permit the execution, delivery and performance by Assignee of this Agreement
have been obtained.

Section 13.            Termination of this Agreement.

(a)           Except as otherwise provided in this Section 13,
this Agreement shall continue in effect until Assignee confirms in writing that
all amounts payable under the Royalty Agreement and all of the other
Transaction Documents (as defined in the Royalty Agreement) have been
indefeasibly paid in full (other than indemnification obligations and other
contingent obligations that, by their terms, survive the termination of this
Agreement).

(b)           Assignee may terminate this Agreement at
any time upon its delivery of written notice of such termination to the
Financial Institution, the Lockbox Escrow Agent and Company.

(c)           Company may not terminate this Agreement
for any reason without the prior written consent of Assignee.

(d)           Prior to any termination of this
Agreement, the Financial Institution hereby agrees that it shall promptly take,
at the expense of Company, all reasonable actions necessary to facilitate the
transfer of any Deposit Funds in or credited to the Deposit Accounts as
follows: (i) in the case of a termination of this Agreement under Section 13(a),
to the depository institution designated in writing by Company; and
(ii) in all other cases, to the depository institution jointly designated
in writing by Company and Assignee, which depository institution will (in all
cases) be so designated prior to termination hereof.

(e)           No termination of this Agreement shall
impair the rights of any party hereto with respect to checks processed prior to
the effective date of termination.

Section 14.            Fees and Expenses. 
Any Lockbox Calculation Agent, other than Company or its Affiliate, will
receive a monthly fee for its services hereunder, which shall be paid by
Company and charged, on a pro rata basis, against amounts on deposit in the
Lockbox Account which would otherwise be transferred to the Company
Concentration Account.  Each of the
Lockbox Escrow Agent, Lockbox Calculation Agent and Financial Institution
agrees to look solely to Company Concentration Account (or

 

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omission.

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to Company or amounts
which are otherwise payable to or for the benefit of Company or to Company
Concentration Account) for payment of its applicable fee referred to below and
any other fees in connection with its services hereunder, and Company agrees to
pay such fees on demand therefor; provided, however, that the
fees which such parties may charge Company shall not exceed the fees and
charges customarily charged by them for comparable services, and will be
adjusted upon replacement of any such party hereunder.  Company acknowledges and agrees that it solely
shall be, and at all times remain, liable to the Lockbox Escrow Agent, Lockbox
Calculation Agent and Financial Institution in connection with its payment of
such amounts.  The fees of the Lockbox
Escrow Agent are five thousand dollars ($5,000) per annum without pro-ration
for partial years.

Section 15.            Indemnity.

(a)           Each of Company and Assignee agrees that
it shall be jointly and severally liable to indemnify and hold harmless each of
the Lockbox Escrow Agent and the Financial Institution and its respective
directors, officers, agents and employees (collectively, the “Indemnitees”)
from and against any and all Liabilities incurred by any Indemnitee arising out
of or in connection with (i) this Agreement or (ii) the Financial
Institution or Lockbox Escrow Agent’s performance of its obligations and
services under this Agreement, including, without limitation, the compliance
with any Account Instruction, Lockbox Calculation Report or other instructions,
orders, directions or notices given hereunder, other than those Liabilities
that are due to or caused by the gross negligence or willful misconduct of any
Indemnitee.

(b)           Company and Assignee each agrees that it
shall be jointly and severally liable to indemnify and hold harmless any
Lockbox Calculation Agent from and against any and all Liabilities incurred by
the Lockbox Calculation Agent arising out of or in connection with
(i) this Agreement or (ii) the Lockbox Calculation Agent’s
performance of its obligations and services under this Agreement, other than
those Liabilities that are due to or caused by the Lockbox Calculation Agent’s
gross negligence or willful misconduct; provided, however, that
Assignee shall not have any obligation under this subsection with respect
to any Lockbox Calculation Agent which is the same Person as, or which is an Affiliate
of, Company.

(c)           The parties hereto acknowledge and agree
that the foregoing indemnities shall survive the resignation or removal of the
Financial Institution or any agent hereunder and the termination of this
Agreement until the expiration of the applicable statute of limitations.

Section 16.            TINs and Account Opening
Information.

(a)           Company and Assignee each represent to
the Lockbox Escrow Agent and Financial Institution and to each other that its
respective correct taxpayer identification number (“TIN”) assigned by
the Internal Revenue Service or any other taxing authority is set forth in Schedule 1.  Upon execution of this Agreement, each of
Company and Assignee shall deliver to the Lockbox Escrow Agent and Financial
Institution a W-8 or W-9 Internal Revenue Service form or any other similar
form issued by the relevant taxing authority duly executed by it.

(b)           All interest or other income earned in
the Lockbox Account (i) shall be allocated and/or paid in accordance with
the allocations made in accordance with this Agreement and (ii) shall be
reported to the Internal Revenue Service or any other applicable taxing
authority by Lockbox Escrow Agent. 
Notwithstanding such written directions, the Financial Institution shall
report and, if required, withhold any taxes as it reasonably determines may be
required by any law or regulation in effect at the time of the
distribution.  In the event that any
earnings in the Lockbox Account remain undistributed at the end of any calendar
year, the Financial Institution shall report to the Internal Revenue Service or
such

 

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 14

 

other taxing
authority such earnings as it deems appropriate or as required by any
applicable law or regulation or, to the extent consistent therewith, as
directed in writing by Assignee.  In
addition, the Financial Institution shall withhold from the Lockbox Account any
taxes required by law to be withheld and shall remit such taxes to the
appropriate authorities.  Any taxes
withheld by the Financial Institution shall be included in the statement
required by Section 5(f).

(c)           All items of income, gain, expense and
loss recognized in the Company Concentration Account shall be reported to the
Internal Revenue Service and all state and local taxing authorities under the
name and TIN of Company.  All items of
income, gain, expense and loss recognized in the Assignee Concentration Account
shall be reported to the Internal Revenue Service and all state and local
taxing authorities under the name and TIN of Assignee.

(d)           IMPORTANT INFORMATION ABOUT PROCEDURES
FOR OPENING A NEW ACCOUNT: To help the government fight the funding of
terrorism and money laundering activities, Federal law requires all financial
institutions to obtain, verify, and record information that identifies each
person who opens an account.  When an
account is opened, the Financial Institution will ask for information that will
allow it to identify relevant parties.

Section 17.            Specific Performance. 
Each of the parties hereto acknowledges that the other party will have
no adequate remedy at law if it fails to perform any of its obligations under
this Agreement or any of the other Transaction Documents.  In such event, each of the parties agrees
that the other party shall have the right, in addition to any other rights it
may have (whether at law or in equity), to specific performance of this Agreement.

Section 18.            Notices. 
All notices, consents, waivers and communications hereunder given by any
party to any other party shall be in writing (including facsimile transmission)
and delivered personally, by telegraph, telecopy, telex or facsimile, by a recognized
overnight courier, or by dispatching the same by certified or registered mail,
return receipt requested, with postage prepaid, in each case addressed to the
appropriate notice address set forth on Schedule 1 or to such other
address or addresses as the parties may from time to time designate by notice
as provided herein, except that notices of changes of address shall be
effective only upon receipt.  All such
notices, consents, waivers and communications shall: (a) when
posted by certified or registered mail, postage prepaid, return receipt
requested, be effective three (3) Business Days after dispatch,  (b) when telegraphed, telecopied,
telexed or facsimiled, be effective upon receipt by the transmitting party of
confirmation of complete transmission, (c) when delivered by a recognized
overnight courier or in person, be effective upon receipt when hand delivered
or when delivery is confirmed by such courier’s tracking system or
(d) when sent by e-mail, upon receipt of a confirmatory return e-mail from
the recipient.

Section 19.            Entire Agreement. 
This Agreement, together with the other Transaction Documents and the
Annexes and Schedules hereto and thereto (which are incorporated herein by
reference), constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all prior agreements, understandings
and negotiations, both written and oral, among the parties with respect to the
subject matter of this Agreement.  No
representation, inducement, promise, understanding, condition or warranty not
set forth herein (or in the Annexes or Schedules hereto) has been made or
relied upon by any party hereto.  None of
this Agreement, nor any provision hereof, is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.

Section 20.            Amendments; No Waivers.

(a)           This Agreement or any term or provision
hereof may not be amended, changed or modified except with the written consent
of the parties hereto.  No waiver of any
right hereunder shall be

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 15
 

 

effective unless
such waiver is signed in writing by the party against whom such waiver is
sought to be enforced.

(b)           No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

Section 21.            Successors
and Assigns.  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, and any reference herein to a party shall be
deemed a reference to such party’s successors and assigns, if any.  Company, Financial Institution and Lockbox
Escrow Agent shall not be entitled to assign any of their obligations and
rights hereunder or any other Transaction Documents without the prior written
consent of Assignee.  Assignee may assign
this Agreement and any of its rights hereunder without restriction.

Section 22.            Severability.  If any provision of this Agreement is held to
be invalid or unenforceable, the remaining provisions shall nevertheless be
given full force and effect.

Section 23.            Recharacterization.  The parties
intend that this Agreement (in so far as it relates to the Lockbox Account)
constitute an escrow agreement for all purposes, including, without limitation,
for purposes of Sections 541 and 544 of the United States Bankruptcy Code,
Title 11, United States Code (the “Bankruptcy Code”).  To the extent that a court shall,
notwithstanding such intent, construe this Agreement (insofar as it relates to
the Lockbox Account) as constituting a security arrangement, the following
provisions shall be deemed to apply:

(a)           The Company hereby grants to Assignee a
security interest in the Lockbox Account and all funds, monies, checks and
other items from time to time credited thereto or on deposit therein, to secure
the Secured Obligations as defined in the Security Agreement;

(b)           The Lockbox Escrow Agent shall hold funds
in the Lockbox Account as bailee for Assignee for purposes of perfecting such
security interest by control of such accounts.

Section 24.            Interpretation. 
When a reference is made in this Agreement to Sections, subsections,
Annexes or Schedules, such reference shall be to a Section, subsection, Annex
or Schedule to this Agreement unless otherwise indicated.  The terms “Agreement”, “herein”, “hereto”, “hereof”
and words of similar import shall, unless the context otherwise requires, mean
this Agreement, as amended, supplemented or otherwise modified from time to
time.  The words “include”, “includes”
and “including” when used herein shall be deemed in each case to be followed by
the words “without limitation”.  No party
hereto shall be or be deemed to be the drafter of this Agreement for the
purposes of construing this Agreement against any other party.

Section 25.            Headings and Captions. 
The headings and captions in this Agreement are for convenience and
reference purposes only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement.

Section 26.            Governing Law; Jurisdiction.

(a)           THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 16
 

 

THEREOF THAT WOULD
REQUIRE THE APPLICATION OF LAWS OTHER THAN THOSE OF THE STATE OF NEW YORK.

(b)           ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT MAY BE BROUGHT
IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY
AND CITY OF NEW YORK.  BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO
AND ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS.  EACH PARTY HERETO HEREBY FURTHER IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT.

(c)           EACH PARTY HERETO HEREBY IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE COURTS REFERRED TO IN
SUBSECTION (b) ABOVE OF THIS SECTION 26 IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN THIS
AGREEMENT.  EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING
COMMENCED HEREUNDER THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR
INEFFECTIVE.  NOTHING HEREIN SHALL AFFECT
THE RIGHT OF A PARTY TO SERVE PROCESS ON THE OTHER PARTY IN ANY OTHER MANNER
PERMITTED BY LAW.

Section 27.            Waiver of Jury Trial;
Exclusion of Punitive Damages.  EACH PARTY
HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.  THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT.  IN ADDITION, WITHOUT
LIMITING COMPANY’S OBLIGATION TO INDEMNIFY ASSIGNEE FOR ANY THIRD PARTY CLAIM
FOR PUNITIVE DAMAGES, IN ANY LITIGATION OR ARBITRATION BETWEEN THE PARTIES
HEREUNDER NEITHER PARTY SHALL BE ENTITLED TO SEEK PUNITIVE DAMAGES FROM THE
OTHER PARTY.

Section 28.            Counterparts;
Effectiveness.  This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. 
This Agreement shall become effective when each party hereto shall have
received a counterpart hereof signed by the other parties hereto.

 

[REMAINDER
OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS]

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 17

 

IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the date first above written.

 

	
  FINANCIAL INSTITUTION:

  	
  JPMORGAN CHASE BANK, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Rola Tseng

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
  COMPANY:

  	
  DYAX CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  ASSIGNEE:

  	
  PAUL ROYALTY FUND HOLDINGS II

  
	
   

  	
   

  
	
   

  	
  By:  Paul
  Royalty Fund II, L.P., its Managing Partner

  
	
   

  	
   

  
	
   

  	
  By:  Paul
  Capital Royalty Management, LLC, its General Partner

  
	
   

  	
   

  
	
   

  	
  By:  Paul
  Capital Advisors, L.L.C., its Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
  LOCKBOX ESCROW

  	
  JPMORGAN CHASE BANK, N.A.

  
	
  AGENT:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Rola Tseng

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
					

 

 

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

 

	
  INITIAL LOCKBOX

  	
  DYAX CORP.

  
	
  CALCULATION
  AGENT:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Confidential
materials omitted and filed separately with the Securities and Exchange

Commission.  Asterisks denote such omission.

 

ANNEX A

to Agreement

DEFINITIONS

“Account Instruction” shall mean, with respect
to any Deposit Account, any entitlement order, order, direction or instruction
concerning or directing the disposition, transfer, withdrawal, disbursement or
redemption of any Deposit Funds in or credited to such Deposit Account, or
otherwise relating to any matters pertaining to or concerning such Deposit
Account, and/or any Deposit Funds therein or credited thereto.

“Agreement” shall have the meaning set forth in
the preamble (first paragraph) of this Agreement.

“Assignee Concentration Account” shall have the
meaning set forth in Section 2(d).

“Authorized Representative” shall have the
meaning set forth in Section 11.

 “Business
Day” shall mean any day other than (a) a Saturday (b) a Sunday or
(c) any other day on which the Financial Institution located at the
address set forth on Schedule 1 is authorized or required by law or
executive order to remain closed.

“Company Concentration Account” shall have the
meaning set forth in Section 2(d).

“Concentration Accounts” shall have the meaning
set forth in Section 2(d).

“Deposit Account” and “Deposit Accounts”
shall have the meaning set forth in Section 2.

“Deposit Funds” shall mean any and all
financial assets, funds, monies, checks or other items, including all Permitted
Investments.

“Event of Default” shall have the meaning set
forth in the Security Agreement.

“Financial Institution” shall have the meaning
set forth in the preamble (first paragraph) of this Agreement.

“Fiscal Year” shall mean the calendar year.

“Indemnitees” shall have the meaning set forth
in Section 15.

“Liabilities” shall mean any and all losses,
liabilities, damages, claims, suits, actions, costs or expenses (including the
reasonable fees and expenses of in-house counsel and of outside counsel) (each
a “Liability”).

“Lockbox Calculation Agent” shall have the
meaning set forth in the preamble to this Agreement.

“Lockbox Calculation Report” shall have the
meaning set forth in Section 3(b).

“Lockbox Escrow Agent” shall have the meaning
set forth in the preamble to this Agreement.

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

“Lockbox Account” shall have the meaning set
forth in Section 2(c).

“Permitted Investments” shall mean either
(i) the investments in the JPMorgan Chase Bank, N.A. “cash escrow product”
at an average thirty (30) day LIBOR rate less thirty-five (35) basis points or
(ii) subject to Section 2 of this Agreement, such other
investments as Company or Assignee, as applicable, may select from time to
time, in each case together with all interest and other earnings thereon.  As used herein “LIBOR” shall mean the
following:

(a)           the
London Interbank Offered Rate per annum equal to the rate determined by the
Financial Institution to be the offered rate for one month that appears on the
Bloomberg Page BBA LIBOR USD 1 Month that displays an average British
Bankers Association Interest Settlement Rate for deposits in Dollars, determined
as of approximately 11:00 a.m. (London time) each day; or

(b)           if
the rate referenced in the preceding clause (a) does not appear on such
page or service or such page or service shall not be available, the
rate per annum equal to the rate determined by the Financial Institution to be
the offered rate for one month on such other page or other service that
displays an average British Bankers Association Interest Settlement Rate for
deposits in Dollars, determined as of approximately 11:00 a.m. (London
time) each day.

“Person” shall have the meaning set forth in
the Royalty Agreement.

“Royalty Agreement” shall have the meaning set
forth in the Recitals to this Agreement.

“Security Agreement” shall have the meaning set
forth in the Recitals to this Agreement.

“Termination Event” shall mean the occurrence
or existence of any of the following events: (a) the Lockbox Calculation
Agent’s material failure to comply with its agreements and duties under this
Agreement in accordance with the terms hereof and such failure continues for
more than thirty (30) Business Days after written notice from Assignee to the
Lockbox Calculation Agent or (b) such a material failure occurs in any
four (4) calendar quarters regardless of the duration for which such
failure continues.

“Third
Party” shall mean any person or entity other than Company or
Assignee.

“TIN” shall have the meaning set forth in Section 16.

“UCC” shall mean the Uniform Commercial Code as
in effect from time to time in the State of New York.

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 2

 

Exhibit E(i)

Legal Opinion of Company Counsel

[ATTACHED]

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

August 23, 2006

 

Paul Royalty Fund
Holdings II

c/o Paul Capital Partners

Two Grand Central Tower

140 East 45th Street, 44th Floor

New York, NY 10017

Re:  Dyax Corp.

Ladies and Gentlemen:

We are furnishing this
opinion to you pursuant to Section 6.02(e)(i) of the Royalty Interest
Assignment Agreement dated as of August 23, 2006 (the “Royalty Interest
Assignment Agreement”) by and between Dyax Corp., a Delaware corporation
(the “Company”), and Paul Royalty Fund Holdings II, a California general
partnership (“PRF”).  Capitalized
terms that are defined in the Royalty Interest Assignment Agreement and not
otherwise defined in this opinion are used in this opinion as so defined.  Terms used herein and defined in New York
Article 9 or Delaware Article 9 (each as defined below) shall have
the meaning ascribed to such terms in New York Article 9 or Delaware
Article 9, as applicable, unless the context clearly requires otherwise.
The term “security interest” shall have the meaning ascribed to it in
Section 1-201(37) of the Uniform Commercial Code as in effect on the date
hereof in the State of New York.

We have acted as counsel
to the Company in connection with the preparation of the following agreements
and documents:

(a)           the Royalty Interest Assignment
Agreement;

(b)           the Lockbox Agreement;

(c)           the Security Agreement;

(d)           the Copyright Security Agreement
dated as of the date hereof between the Company and PRF (the “Copyright
Security Agreement”);

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 2
 

 

(e)           the Patent Security Agreement dated
as of the date hereof between the Company and PRF (the “Patent Security
Agreement”);

(f)            the Trademark Security Agreement
dated as of the date hereof between the Company and PRF (the “Trademark
Security Agreement”); and

(g)           the UCC-1 financing statement
attached hereto as Exhibit A naming the Company as debtor and PRF
as secured party (the “Financing Statement”) to be filed in the Uniform
Commercial Code records of the Secretary of State of the State of Delaware (the
“Filing Office”).

The Agreements listed in
clauses (a) through (f) above are collectively referred to herein as
the “Transaction Documents”).  The
Agreements listed in clauses (d) through (f) above are collectively
referred to herein as the “IP Security Agreements”).

We have reviewed such
documents and made such examination of law as we have deemed appropriate to
give the opinions set forth below.  We
have relied, without independent verification, on certificates of public officials
and, as to matters of fact material to our opinions, on representations made in
the Transaction Documents and certificates and other inquiries of officers of
the Company.  We have not searched the dockets or records of any court, government
agency or other office in any jurisdiction for purposes of this opinion.

We have assumed the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals and the conformity to original documents of all documents
submitted to us as copies.  For purposes
of this opinion, we have assumed that the Transaction Documents constitute the
valid and binding obligations of the parties thereto other than the Company.

When used in this
opinion, the phrase “to our knowledge” or an equivalent phrase limits the
statements it qualifies to the actual knowledge of the lawyers in this firm
responsible for preparing this opinion after such inquiry as they deemed
appropriate.

The opinions set forth
below are limited to New York law (including the Article 9 of the Uniform
Commercial Code as in effect on the date hereof in the State of New York (“New
York Article 9”), Article 9 of the Uniform Commercial Code as in
effect on the date hereof in the State of Delaware (“Delaware Article 9”),
the Delaware General Corporation Law, the federal law of the United States and,
with respect to our opinions in paragraph 1, Massachusetts law.

We
express no opinion with respect to:

the
effect of any provision of the Transaction Documents that increases the amount
of the payments thereunder upon any default, or imposes prepayment fee, to the
extent the same is determined to be a penalty;

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 3
 

 

the
enforceability of any provision of the Transaction Documents purporting to
establish evidentiary standards;

the
effect of any provision of the Transaction Documents waiving any legal right to
the extent such waiver would violate public policy;

the
effect of any provision of the Transaction Documents to the extent that it
provides for recourse or exercise of any remedial rights in the absence of
notice and a hearing;

the
grant of powers of attorney which is against public policy;

any
exculpation or indemnification which is against public policy;

other
than with respect to the New York General Obligations of Law §5-1402, the
enforceability of any provision providing for the exclusive choice of venue;

the
enforceability of any provisions asserting that Collateral is owned by or is
property of a secured party prior to such secured party’s foreclosure of such
Collateral in accordance with New York Article 9;

local
or state laws governing licenses, permits
and approvals necessary for the conduct of the Company’s business or federal or
state securities and blue sky laws, or, except for the opinions set
forth in paragraph 9 below, the Investment Company Act of 1940, as amended;

the
title to any Collateral and the perfection of any Lien or security interest as
it relates to any Collateral to which New York Article 9 does not apply;

the
priority or, except for the opinions set forth in paragraph 7 below, the
perfection of, any Lien or security interest in any Collateral;

the
perfection of any security interest (1) in any Collateral of a type
represented by a certificate of title, (2) in any proceeds of any
Collateral to the extent such security interest becomes unperfected pursuant to
Section 9-315 of New York Article 9, (3) in any Collateral
consisting of money, (4) in any insurance policy or the proceeds thereof
to which New York Article 9 does not apply, (5) in any fixtures, or
(6) in any commercial tort claim (due to the fact that no commercial tort
claims have been identified by the Company in the Transaction Documents); or

the
effect of Section 552 of the Bankruptcy Code (11 U.S.C. 552) (relating to
property acquired by a pledgor after the commencement of a case under the
United States Bankruptcy Code with respect to such pledgor) and
Section 506(c) of the Bankruptcy Code (11 U.S.C. 506(c)) (relating to
certain costs and expenses of a trustee in preserving or disposing of
collateral).

As
used herein, “Collateral” means the property identified in
Section 2 of the Security Agreement and in the IP Security Agreements in
which a security interest can be granted under New York Article 9.  For purposes of this opinion, we have, with
your permission, assumed without independent investigation that (a) ”value”
(as defined in Section 1-201(44) of the Uniform Commercial Code as in
effect on the date hereof in the State of New York) has been given for the
security interests and other rights in the Collateral, (b) the Company
will have

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 4
 

 

rights
in those portions of Collateral in which a security interest may be perfected
under New York Article 9, (c) the Company will have rights in any
additional property which becomes Collateral after the date hereof,
(d) the Collateral is correctly identified in the IP Security Agreements,
(e) each of the bank accounts at JPMorgan Chase Bank, N.A. (the “Depository
Bank”) purported to be covered by the Lockbox Agreement (the “Accounts”) is
properly categorized as a deposit account within the meaning of
Section 9-102(a)(29) of New York Article 9, and (f) the Lockbox
Agreement will remain in full force and effect and continue to provide that the
Depository Bank will comply with the instructions originated by PRF directing
disposition of the funds in the Accounts without further consent by the
Company.

Our
opinions below as to the enforceability of the Transaction Documents are
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws of general application affecting the rights and
remedies of creditors and to general principles of equity.

Based
upon and subject to the foregoing and subject to the additional qualifications
set forth below, we are of the opinion that:

1.             The Company is validly existing as
a corporation and in good standing under Delaware law, and is qualified to do
business as a foreign corporation in Massachusetts.  The Company has the corporate power to
execute and deliver the Transaction Documents and to perform its obligations
thereunder.

2.             The Company has duly authorized,
executed and delivered the Transaction Documents, and each of the Transaction
Documents constitutes its valid and binding obligations enforceable against it
in accordance with its terms.

3.             The execution and delivery by the
Company of the Transaction Documents do not and the performance by it of its
obligations thereunder will not (i) violate New York or federal law,
(ii) violate any court order, judgment or decree applicable to it and
known to us, (iii) result in a breach of, or constitute a default under,
or result in the creation of a Lien or a right of acceleration under, any agreement or instrument to
which the Company is a party that is filed as an exhibit to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2005 and
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006
and June 30, 2006, or (iv) violate its charter or by-laws.

4.             No consent, approval, license or
exemption by, order or authorization of, or filing, recording or registration
with any governmental authority is required to be obtained or made by the
Company in connection with the execution and delivery of the Transaction
Documents to which it is a party or the performance by it of its obligations
thereunder, other than filings necessary to create, record or perfect, or
maintain the perfection of, the security interest created by the Security
Agreement and the IP Security Agreements.

5.             To our knowledge (based solely upon
inquiries directed to officers of the Company and the certificate executed and
delivered to us by an officer of the Company), there are no actions, suits or
proceedings pending or threatened in writing against the Company that

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 5
 

 

challenge the validity or
enforceability of, or seeks to enjoin the performance of, the Transaction
Documents.

6.             The Security Agreement and IP
Security Agreements create in favor of PRF a valid and enforceable security
interest in the Collateral.

7.             Upon (a) the filing of the
Financing Statement in the Filing Office and the IP Security Agreements in the
United States Copyright Office and the United States Patent and Trademark
Office, as applicable, (b) the due recording and indexing of the IP
Security Agreements in the United States Copyright Office and United States
Patent and Trademark Office, as applicable, and (c) upon the payment of
applicable recording fees, PRF will have a perfected security interest in the
Collateral to the extent that a security interest in such Collateral may be
perfected by the filing of a Uniform Commercial Code financing statement and
recording of the IP Security Agreements in the United States Copyright Office
and United States Patent and Trademark Office, as applicable.

8.             Upon the establishment of the
Accounts, PRF will
have a perfected security interest in the Accounts, perfected by control.

9.             The Company is not, and as a result
of the transactions contemplated by the Transaction Documents, will not be, an “investment
company,” as such term is defined in the Investment Company Act of 1940, as
amended.

We
call your attention to the following:

i.              A security interest in accounts
and general intangibles will be subject to the rights of account debtors,
except to the extent provided in §9-406 through §9-408 of New York
Article 9.

ii.             Federal and state securities laws
may limit the right to transfer or dispose of any investment property.

iii.            The effectiveness of each Uniform
Commercial Code financing statement terminates five (5) years after the
date of filing unless a continuation statement is filed within the period of
six (6) months prior to the expiration of such financing statements.

iv.            Section 9-507(c) of
Delaware Article 9 provides that if the debtor so changes its name that
the filed financing statement becomes seriously misleading under
Section 9-506 thereof, the filing is not effective to perfect a security
interest in collateral acquired by the debtor more than four (4) months after
such change unless a new appropriate financing statement is filed before the
expiration of that period.

v.             If the debtor changes its location
to a new state or jurisdiction as determined pursuant to Section 9-307 of
New York Article 9 or Delaware Article 9, Section 9-316 thereof
requires that a new appropriate financing statement be filed in such new state
or jurisdiction within four (4) months after such change to continue
perfection of the security interest.

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 6
 

 

vi.            Each security interest referred to
above may be affected in the future by circumstances covered by Sections 9-210
and 9-625(g) of New York Article 9 and Delaware Article 9.

vii.           Under certain circumstances described
in (i) Sections 9-321, 9-323 and 9-330 of New York Article 9 or
Delaware Article 9, purchasers, and (ii) Section 2A-307 of the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, lessees, of collateral may take the same free of a perfected security
interest.

viii.          A “licensee in the ordinary course of
business” (as defined in Section 9-321 of New York Article 9 or
Delaware Article 9) pursuant to Section 9-321 of New York
Article 9 or Delaware Article 9 may take its rights under a license
of general intangibles from the Company free of the security interests under
the Security Agreement and IP Security Agreements.

ix.            A lessee in the ordinary course of
business pursuant to Section 9-321 of New York Article 9 or Delaware
Article 9 may take its rights under a leasehold interest from the Borrower
free of the security interests under the Security Agreement.

This
opinion speaks only as of its date, and we undertake no obligation to update it
for any subsequent events or legal developments.  This opinion is being furnished only to you
in connection with the transactions contemplated herein and may not be relied
on without our prior written consent for any other purpose or by anyone else.

Very
truly yours,

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 7

 

Exhibit E(ii)

Legal Opinion of Patent Counsel

Fish and Richardson

******

 

Confidential
materials omitted and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Exhibit E(iii)

Legal Opinion of Patent Counsel

Wolf Greenfield

******

 

Confidential
materials omitted and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Exhibit E(iv)

Legal Opinion of General Counsel

[ATTACHED]

 

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

August 23, 2006

 

Paul Royalty Fund
Holdings II

c/o Paul Capital Partners

Two Grand Central Tower

140 East 45th Street, 44th Floor

New York, NY 10017

Re:  Dyax Corp.

Ladies
and Gentlemen:

I am General Counsel of
Dyax Corp., a Delaware corporation (the “Company”) and have advised the Company in connection with the
Royalty Interest Assignment Agreement (the “Royalty Interest Assignment
Agreement”), dated August 23,
2006, by and between the Company and Paul Royalty Fund Holdings II (“PRF”),
a California general partnership, pursuant to which the Company will sell,
assign, convey and transfer to PRF, and PRF will purchase from the Company, the
Assigned Interests, and Company will undertake certain other obligations, all
as set forth therein.  Capitalized terms
used herein without definition shall have the meanings ascribed to them in the
Royalty Interest Assignment Agreement. 
This opinion is rendered to you pursuant to Section 6.02(e)(iv) of
the Royalty Interest Assignment Agreement.

I.

I have based my opinion upon my review of the
following:

(a)                                  the
Royalty Interest Assignment Agreement;

(b)                                 the
Lockbox Agreement;

(c)                                  the
Security Agreement;

(d)                                 collateral assignment and security agreements
executed by the Company with respect to the patents, copyrights and trademarks
described therein (the “Collateral Assignments”); and

(e)                                  the
Material Contracts (as such term is defined in the Royalty Interest Assignment
Agreement), except for those agreements as to which Edwards Angell
Palmer & Dodge LLP has provided an opinion.

The Royalty Interest Assignment Agreement, the
Security Agreement, the Lockbox Agreement, and the Collateral Assignments are
collectively referred to in this opinion as the “Transaction Documents”.  I am admitted to practice law in the
Commonwealth of Massachusetts and the opinion set forth below is limited to
Massachusetts law.

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

 

II.

Based
upon the foregoing and my examination of such questions of law as I have deemed
necessary or appropriate for the purpose of this opinion, and subject to the
limitations and qualifications expressed below, it is my opinion that the
execution and delivery of the Transaction Documents on behalf of the Company
and the consummation by the Company of the transactions contemplated by the
Transaction Documents (i) do not and will not result in a breach or
violation of, or constitute a default under, any term of any Material Contract
or (ii) do not and will not result in a breach or violation of, or constitute
a default under, any judgment, order, writ or decree of any Governmental
Authority specific to the Company, to which the Company or any of its assets or
properties may be subject or bound, or (iii) do not and will not result in
the creation or imposition of any material Lien on (A) the assets or
properties of the company, (B) the Assigned Interests or any other
Collateral, other than, with respect to clauses (A) and (B) above,
pursuant to the Security Agreement.

III.

This opinion is
rendered to you in connection with the Royalty Interest Assignment Agreement
and the transactions contemplated thereby and is solely for the benefit of PRF
and its successors and assigns of the Assigned Interests.  Except as aforesaid, this opinion may not be
relied upon by you for any other purpose, or relied upon by any other person,
firm, corporation or other entity for any purpose without my prior consent, but
without limiting the terms of any Transaction Document.  I disclaim any obligation to advise you of
any change of law that occurs, or any facts of which I may become aware, after
the date of this opinion.

	
  

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Ivana Magovcevic-Liebisch, Ph.D. J.D.

  
	
   

  	
  General Counsel

  
	
   

  	
  Dyax Corp.

  

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 2

 

Exhibit F

Form of Baxter Consent

******

 

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Exhibit G

Business Report Format

******

 

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Exhibit H

Projected Program Revenues (Amount of Royalties in
US$ Millions)

******

 

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Exhibit I

[Reserved]

 

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Exhibit J

Certain Financial Definitions

“Applicable
Percentage” shall mean, as of any date of determination from
January 1, 2006 and throughout the Term:

(a)           For existing License Agreements and Future
Licenses (except as provided in (b) below):

(i)    Seventy percent (70%) (or eighty-one and
two-thirds percent (81.67%) following any Performance Payment) of annual Net
Program Sales up to and including Fifteen Million Dollars (US$15,000,000) of
annual Net Program Sales (“First Tier Net Program Sales”); plus,

(ii)   Twenty percent (20%) (or twenty-three and
one-third percent (23.33%) following any Performance Payment) of annual Net
Program Sales in excess of Fifteen Million Dollars (US$15,000,000) up to and
including Twenty Million Dollars (US$20,000,000) of annual Net Program Sales (“Second
Tier Net Program Sales”); plus,

(iii)  One percent (1%) (or one and one-sixth
percent (1.167%) following any Performance Payment) of annual Net Program Sales
in excess of Twenty Million Dollars (US$20,000,000) of annual Net Program Sales
(“Third Tier Net Program Sales”).

(b)           For Future Licenses entered into after the
Closing, for the periods set forth below but reverting to the percentages set
forth above thereafter:

(i)    Solely for calendar years 2006 through 2010,
forty five percent (45%) (or fifty-two and one-half percent (52.5%) following
any Performance Payment) of First Tier Net Program Sales in excess of Projected
Program Revenues for such Future Licenses and fifteen percent (15%) (or
seventeen and one-half percent (17.5%) following any Performance Payment) of
Second Tier Net Program Sales in excess of Projected Program Revenues for such
Future Licenses.

(ii)   Solely for calendar year 2011 for Second Tier
Net Program Sales, fifteen percent (15%) (or seventeen and one-half percent
(17.5%) following any Performance Payment) of Net Program Sales in excess of
Projected Program Revenues for such Future Licenses.

For the purposes of
determining the Applicable Percentage, Future Licenses with existing Contract
Parties that are amendments, extensions or successors to License Agreements
existing as of the Closing Date shall be subject to paragraph (a) hereof.
The foregoing definition of the Applicable Percentage is to be interpreted in
accordance with the illustrative examples set forth on Schedule 1.01(i).  Notwithstanding the foregoing, during
calendar year 2006 payments shall be made on the basis of a payment of a flat
fifty-three percent (53%) subject to true-up to the percentages set forth in
paragraphs (a)(i)-(iii) and b(i) above.

In the event that, at any
point during the Term, Assignee has received amounts into Assignee’s Account
(A) equal to at least two hundred percent (200%) of the Purchase Price
(including any Performance Payment) paid pursuant to Section 2.03
and (B) sufficient to provide an IRR of at least twenty-five percent (25%)
on the Purchase Price (including any Performance Payment) paid pursuant to Section 2.03,

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 1
 

 

the future Applicable Percentage set forth in
paragraphs (a)(i)-(iii) and (b)(i)-(ii) above for all License
Agreements shall be reduced to zero, regardless of whether or not any
Performance Payment has been made.

“GMP Credit” shall mean the total
Pre-Payments made in any calendar year plus any amounts received in the
Assignee Concentration Account or, pursuant to Section 2.02(i) or
Section 2.02(m), Assignee’s Account.

“Guaranteed Minimum Payments” shall mean,
(i) One Million Seven Hundred Fifty Thousand dollars (US$1,750,000) (or
Two Million Forty-One Thousand Six Hundred Sixty-Six dollars and Sixty-Six
cents (US$2,041,666.67) following any Performance Payment) in each of the
calendar years 2006 and 2007; (ii) Three Million Five Hundred Thousand
dollars (US$3,500,000) (or Four Million Eighty-Three Thousand Three Hundred
Thirty-Three dollars and Thirty-Three cents (US$4,083,333.33) following any
Performance Payment) in each of the calendar years 2008 and 2009;
(iii) Six Million dollars (US$6,000,000) (or Seven Million dollars
(US$7,000,000) following any Performance Payment) in each of the calendar years
2010 through 2013; (iv) Seven Million dollars (US$7,000,000) (or Eight
Million One Hundred Sixty-Six Thousand Six Hundred Sixty-Six dollars and
Sixty-Seven cents (US$8,166,666.67) following any Performance Payment) in each
of the calendar years 2014 through 2017; and, (v) zero thereafter.
Guaranteed Minimum Payments for 2006 shall be subject to proration by the
Proration Factor and any in the final calendar year of the Term shall be
subject to proration by a factor of (One (1) minus the Proration Factor).

“Quarterly Guaranteed Minimum Payment” shall
mean, for any calendar quarter, including the first calendar quarter hereof
which shall end on March 31, 2006, twenty-five percent (25%) of the
Guaranteed Minimum Payment for the applicable calendar year, as follows:

	
  Calendar Year

  	
   

  	
  Quarterly Guaranteed

  Minimum Payment

  	
   

  	
  Quarterly Guaranteed

  Minimum Payment

  Following any

  Performance Payment

  	
   

  
	
  2006

  	
   

  	
  US$             437,500

  	
   

  	
  US$        510,416.66

  	
   

  
	
  2007

  	
   

  	
  US$             437,500

  	
   

  	
  US$        510,416.66

  	
   

  
	
  2008

  	
   

  	
  US$             875,000

  	
   

  	
  US$     1,020,833.33

  	
   

  
	
  2009

  	
   

  	
  US$             875,000

  	
   

  	
  US$     1,020,833.33

  	
   

  
	
  2010

  	
   

  	
  US$          1,500,000

  	
   

  	
  US$          1,750,000

  	
   

  
	
  2011

  	
   

  	
  US$          1,500,000

  	
   

  	
  US$          1,750,000

  	
   

  
	
  2012

  	
   

  	
  US$          1,500,000

  	
   

  	
  US$          1,750,000

  	
   

  
	
  2013

  	
   

  	
  US$          1,500,000

  	
   

  	
  US$          1,750,000

  	
   

  
	
  2014

  	
   

  	
  US$          1,750,000

  	
   

  	
  US$     2,041,666.67

  	
   

  
	
  2015

  	
   

  	
  US$          1,750,000

  	
   

  	
  US$     2,041,666.67

  	
   

  
	
  2016

  	
   

  	
  US$          1,750,000

  	
   

  	
  US$     2,041,666.67

  	
   

  
	
  2017

  	
   

  	
  US$          1,750,000

  	
   

  	
  US$     2,041,666.67

  	
   

  
	
  Thereafter

  	
   

  	
  US$                        0

  	
   

  	
  US$                        0

  	
   

  

Confidential
materials omitted and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 2
 

 

“Weekly Amounts”
shall mean amounts of Gross Payments as received from time to time in the
Lockbox Account.

Confidential materials omitted
and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 3

 

Exhibit K

Lockbox Instructions

During each calendar quarter, Weekly Amounts deposited into the Lockbox
Account shall be treated in the following priority with sweeps to occur on a
weekly basis with Company to act as Calculation Agent as provided in the Lockbox
Agreements:

I.              Any Weekly Amounts shall be
swept into the Company Concentration Account until Company shall have received
an amount equal to the ****** Payments, and which Company shall pay to ******
when due;

II.            Any remaining Weekly Amounts shall be
swept into the Assignee Concentration Account until Assignee shall have
received the total of the Quarterly Guaranteed Minimum Payments for such
calendar quarter and the calendar year to date, less any GMP Credit;

III.           Any remaining Weekly Amounts shall be
swept into the Company Concentration Account for the payment of any FTE
Payments and Reimbursement Payments in the amounts received from Contract
Parties in reimbursement of FTE’s and Reimbursement Payments;

IV.           Any remaining Weekly Amounts shall be
swept into the Company Concentration Account until Company shall have received
an amount equal to (A) the total of the Quarterly Guaranteed Minimum
Payments for such calendar quarter and the calendar year to date divided
by the Applicable Percentage less (B) the total of the
Quarterly Guaranteed Minimum Payments for such calendar quarter and the
calendar year to date; and,

V.            Any remaining Weekly Amounts shall be
swept as follows:

A.            The remaining Weekly Amounts shall be
swept into the Assignee Concentration Account until Assignee shall have
received an amount equal to the sum of (i) the Applicable Percentage of (A) Gross
Payments less (B) ****** Payments, FTE Payments and Reimbursement
Payments plus (ii) any amounts due under Sections 5.11(c)(i),
5.12(c) or 5.12(f); and,

B.            The remainder of the remaining Weekly
Amounts shall be swept into the Company Concentration Account.

For the avoidance of doubt, on the first day of any calendar quarter,
that process above shall be reset and repeated.

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 1

 

Exhibit L

[Reserved]

 

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Exhibit M

[Reserved]

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Exhibit N

Quarterly Report Format

******

 

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Exhibit O

[Reserved]

 

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Exhibit P

Purchase Price and Performance Payment Option

DEFINITIONS

“Performance Certificate” shall mean that certificate of a
Senior Officer of Company certifying that the Performance Conditions have been
satisfied in all respects delivered by Company to Assignee on or after the
Performance Payment Date.

“Performance Payment Date” shall mean December 31, 2007 in
the event Company exercises its option to receive the Performance Payment
pursuant to paragraph (A)(i), below, or December 31, 2008 in the event Company
exercises its option to receive the Performance Payment pursuant to paragraph
(A)(ii), below.

“Purchase Price” shall mean the aggregate
purchase price, composed of:

(a)          Thirty Million Dollars
(US$30,000,000) on the Closing Date; plus

(b)         Any applicable
Performance Payment.

PERFORMANCE PAYMENT OPTION

Company shall have the right to request, at its
option exercisable according to the procedures set forth below, a further
payment of Five Million Dollars (US$5,000,000) (the “Performance Payment”),
in the event that all of the following are true (collectively, the “Performance
Conditions”):

(A)                              (i)            There has been received in the
Lockbox Account in total amounts after applicable deductions (as set forth in
the definition of Net Program Sales) equal to at least ****** in Net Program Sales for 2007; or,

(ii)           There has been received in the
Lockbox Account in total amounts after applicable deductions (as set forth in
the definition of Net Program Sales) equal to at least ****** in Net Program Sales for 2007
and 2008;

AND,

(B)                                the representations and warranties set forth
in Article 3 are true, correct and complete in all material
respects as of the Performance Payment Date (with the same force and effect as
if such representations and warranties were made anew at and as of the
Performance Payment Date, except to the extent that any such representations or
warranties which by its terms is made as of a specified date, in which case
such representations or warranties shall have been true, correct and complete
in all material respects as of such specified date) (the “Material
Correctness Requirement”); provided, however, that
(i) in the event that any representations and warranties set forth in Article 3
shall not otherwise be true, correct and complete, Company shall deliver
revised Schedules to update such representations and warranties upon the date
Company makes the request to exercise its option, and Assignee shall take into
account the updated Schedules in evaluating whether such representations and
warranties satisfy the Material Correctness Requirement and (ii) any such
revised Schedules shall not limit or alter the Material Correctness
Requirement;

AND,

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 1
 

 

(C)                                Company is not in material breach or default
of any covenant set forth in the Transaction Documents as of the Performance
Payment Date;

AND,

(D)                               Company shall have obtained the Baxter
Consent.

In order to exercise its option to receive the Performance Payment,
Company shall comply with the following two conditions:

(I)                                    Company shall deliver a written notice to
Assignee, on or prior to the date that is at least ****** but no more than
****** days prior to the applicable Performance Payment Date, containing any
updates to the Schedules and specifying that (i) the amount of Net Program
Sales set forth in paragraph (A)(i) or (A)(ii) above, as applicable,
is expected to be received as of the Performance Payment Date and (ii) the
statements set forth in paragraphs (B), (C) and (D) above are
expected to be true and correct as of such date, and Company does not have
Actual Knowledge that the Performance Conditions shall not be met as of the
applicable Performance Payment Date. 
Following Assignee’s receipt of such notice, Assignee shall establish an
escrow account with the Lockbox Bank (and provide Company with details of such
escrow account), which escrow account shall provide that any monies in such
account shall be released to Company in the event that, after the applicable
Performance Payment Date, Assignee provides the Lockbox Bank with the notice as
and on the terms set forth in paragraph (II) below.  Following Assignee’s receipt of such notice,
Assignee shall fund the escrow account with the Performance Payment prior to
the applicable Performance Payment Date.

(II)                                On or after the Performance Payment Date,
Company shall deliver to Assignee a Performance Certificate, any updates to the
Schedules not included in the notice provided pursuant to paragraph (I) and an
accounting of the amounts received in the Lockbox Account.  In the event that Company delivers the
Performance Certificate to Assignee, Assignee shall review the Performance
Certificate, along with any updates to the Schedules provided by Company on or
prior to the Performance Payment Date, and unless Assignee determines that (w)
the Material Correctness Requirement has not been met, (x) Company is in
material breach or default of any covenant set forth in the Transaction
Documents, (y) the necessary amount has not been received in Lockbox Account or
(z) the Baxter Consent shall not have been obtained, Assignee shall notify the Lockbox Bank to release the funds in
the escrow account to Company; otherwise, or in the event that Company does not deliver the Performance Certificate
to Assignee on or within ****** days after the Performance Payment Date,
Assignee shall notify the Lockbox Bank to release the Performance Payment in
the escrow account to Assignee.

In the event that Company
exercises its option to receive a Performance Payment, the Applicable
Percentage and Guaranteed Minimum Payments shall be subject to increase as
provided in Exhibit J.

Confidential
materials omitted and filed separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 2

 

Exhibit Q

Existing Excluded
Agreements

******

 

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Exhibit R

Excluded Products

******

 

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Exhibit S

LFRP Know-How

******

 

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

Exhibit T

LFRP Libraries

******

 

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

 

SCHEDULES

*******

 

Confidential materials omitted and filed
separately with the Securities and Exchange

Commission.  Asterisks denote such
omission.

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