TABLE OF CONTENTS

 

 

ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.01.	Definitions	1
SECTION 1.02.	Interpretation; Headings	17
ARTICLE II
COMMITMENT; DISBURSEMENT; FEES
SECTION 2.01.	Commitment to Lend	18
SECTION 2.02.	Notice of Borrowing	18
SECTION 2.03.	Disbursement	18
SECTION 2.04.	Commitment Not Revolving	18
ARTICLE III
REPAYMENT
SECTION 3.01.	Amortization	18
SECTION 3.02.	Optional Prepayment; Mandatory Prepayment	19
SECTION 3.03.	Illegality	19
ARTICLE IV
INTEREST; EXPENSES
SECTION 4.01.	Interest Rate	20
SECTION 4.02.	Lockbox Account	21
SECTION 4.03.	Interest on Late Payments	24
SECTION 4.04.	Initial Expenses	24
SECTION 4.05.	Administration and Enforcement Expenses	24
ARTICLE V
TAXES
SECTION 5.01.	Taxes	24
SECTION 5.02.	Receipt of Payment	26
SECTION 5.03.	Other Taxes	26
SECTION 5.04.	Indemnification	26
SECTION 5.05.	Loans Treated As Indebtedness	26
SECTION 5.06.	Allocation of Issue Price	26
SECTION 5.07.	Registered Obligation	27

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

 

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ARTICLE VI
PAYMENTS; COMPUTATIONS
SECTION 6.01.	Making of Payments	27
SECTION 6.02.	Setoff or Counterclaim	28
ARTICLE VII
CLOSING DOCUMENTATION
SECTION 7.01.	Tranche A Loan Closing Documentation	28
SECTION 7.02.	Tranche B Loan Closing Documentation	30
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
SECTION 8.01.	Representations and Warranties of Borrower	32
SECTION 8.02.	Survival of Representations and Warranties	40
ARTICLE IX
AFFIRMATIVE COVENANTS
SECTION 9.01.	Maintenance of Existence	40
SECTION 9.02.	Use of Proceeds	40
SECTION 9.03.	Financial Statements and Information	40
SECTION 9.04.	Books and Records	41
SECTION 9.05.	Inspection Rights; Access	41
SECTION 9.06.	Maintenance of Insurance and Properties	42
SECTION 9.07.	Governmental Authorizations	42
SECTION 9.08.	Compliance with Laws and Contracts	42
SECTION 9.09.	Plan Assets	42
SECTION 9.10.	Notices	42
SECTION 9.11.	Payment of Taxes	43
SECTION 9.12.	Waiver of Stay, Extension or Usury Laws	43
SECTION 9.13.	Additional Covenants of Borrower	43
SECTION 9.14.	[*****]	43
SECTION 9.15.	Further Assurances	44
ARTICLE X
NEGATIVE COVENANTS
SECTION 10.01.	Activities of Borrower	44
SECTION 10.02.	Merger; Sale of Assets	44

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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SECTION 10.03.	Liens	45
SECTION 10.04.	Investment Company Act	46
SECTION 10.05.	Limitation on Additional Indebtedness	46
SECTION 10.06.	Limitation on Transactions with Controlled Affiliates	47
SECTION 10.07.	ERISA	47
SECTION 10.08.	Restricted Payments	48
ARTICLE XI
EVENTS OF DEFAULT
SECTION 11.01.	Events of Default	48
SECTION 11.02.	Default Remedies	50
SECTION 11.03.	Right of Set-off; Sharing of Set-off	50
SECTION 11.04.	Rights Not Exclusive	51
ARTICLE XII
INDEMNIFICATION
SECTION 12.01.	Funding Losses	51
SECTION 12.02.	Increased Costs	52
SECTION 12.03.	Other Losses	52
SECTION 12.04.	Assumption of Defense; Settlements	53
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01.	Assignments	53
SECTION 13.02.	Participations	54
SECTION 13.03.	Successors and Assigns	55
SECTION 13.04.	Notices	55
SECTION 13.05.	Entire Agreement	56
SECTION 13.06.	Modification	57
SECTION 13.07.	No Delay; Waivers; etc.	57
SECTION 13.08.	Severability	57
SECTION 13.09.	Determinations	57
SECTION 13.10.	Replacement of Note	57
SECTION 13.11.	Governing Law	57
SECTION 13.12.	Jurisdiction	57
SECTION 13.13.	Waiver of Jury Trial	58
SECTION 13.14.	Waiver of Immunity	58
SECTION 13.15.	Counterparts	58
SECTION 13.16.	Limitation on Rights of Others	58

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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SECTION 13.17.	No Partnership	58
SECTION 13.18.	Survival	58
SECTION 13.19.	Patriot Act Notification	58

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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Exhibits

 

Exhibit A		Business Report Format
Exhibit B		Form of Tranche B Promissory Note
Exhibit C		Quarterly Report Format
Exhibit D		Form of Security Agreement
Exhibit E		Form of Notice of Borrowing
Exhibit F		Lockbox Instructions
Exhibit G		Form of Certificate of Borrower
Exhibit H		Form of Edwards, Angell Palmer & Dodge LLP Opinion
Exhibit I		Form of Wolf Greenfield Opinion
Exhibit J		Form of Lowrie, Lando & Anastasi, LLP Opinion
Exhibit K		Tranche B Warrant Agreement
Exhibit L		Form of Assignment and Acceptance

 

Schedules

 

Schedule A		[*****]
Schedule B		[*****]
Schedule C		[*****]
Schedule D		[*****]
Schedule 8.01(l)		Indebtedness
Schedule 8.01(n)		Subsidiaries
Schedule 8.01(s)(i)		[*****]
Schedule 8.01(s)(ii)		[*****]
Schedule 8.01(u)		Borrower’s Principal Place of Business and Chief Executive Office
Schedule 8.01(v)(ii)		[*****]
Schedule 8.01(v)(iii)		[*****]
Schedule 8.01(v)(iv)		[*****]
Schedule 8.01(v)(vii)		[*****]
Schedule 8.01(v)(viii)		[*****]
Schedule 8.01(v)(ix)		[*****]
Schedule 8.01(v)(x)		[*****]
Schedule 8.01(v)(xi)		[*****]
Schedule 8.01(w)(i)		[*****]
Schedule 8.01(w)(iii)		[*****]
Schedule 8.01(w)(v)		[*****]
		[*****]
Schedule 8.01(w)(vi)		[*****]
Schedule 8.01(w)(vii)		[*****]
Schedule 8.01(w)(viii)		[*****]
Schedule 8.01(w)(x)		[*****]
Schedule 8.01(w)(xi)		[*****]
Schedule 8.01(x)		[*****]
Schedule 10.03(a)		[*****]

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

 

This LOAN AGREEMENT (the “Amended Agreement”), dated as of August 5, 2008 and amended and restated as of March 18, 2009, is entered into by and between COWEN HEALTHCARE ROYALTY PARTNERS, L.P., a Delaware limited partnership (the “ Lender ”), as Lender, and DYAX CORP., a Delaware corporation, as Borrower.  The Lender and Borrower are hereinafter referred to collectively as the “ Parties ” or individually as a “ Party .”

 

W I T N E S S E T H:

 

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

 

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

 

WHEREAS, on August 5, 2008, the Parties executed a Loan Agreement (the “ Original Loan Agreement ”) pursuant to which Borrower borrowed from Lender an aggregate principal amount of $50,000,000;

 

WHEREAS, in order to induce the Lender to enter into the Original Loan Agreement and to extend credit thereunder, Borrower agreed to grant Lender a security interest in the LFRP Intellectual Property (as defined in the Original Loan Agreement);

 

WHEREAS, Borrower desires to create a new tranche of Loans in an aggregate principal amount of $15,000,000;

 

WHEREAS, in connection with such new tranche of Loans the Parties desire to amend and restate the Original Loan Agreement as set forth in this Amended Agreement;

 

NOW, THEREFORE, in consideration of the mutual promises of the Parties, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed by the Parties as follows:

 

ARTICLE I
CERTAIN DEFINITIONS

 

SECTION 1.01.         Definitions .  As used herein:

 

“ Affiliate ” means any Person that controls, is controlled by, or is under common control with another Person.  For purposes of this definition, “ control ” shall mean (i) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (ii) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entities.

 

“ Agent ” means, (i) if only one Lender is party to this Amended Agreement, such Lender or (ii) otherwise, Cowen Healthcare Royalty Partners, L.P. or another Lender reasonably acceptable to Borrower.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

 

“ Amended Agreement ” means this Loan Agreement (as amended, restated, supplemented or otherwise modified from time to time).

 

“ Applicable Included Receipts ” means (i) prior to June 30, 2013, the sum of (a) 75.0% of the first $10.0 million in annual Included Receipts, (b) 50.0% of annual Included Receipts greater than $10.0 million and up to and including $15.0 million, and (c) 25.0% of annual Included Receipts greater than $15.0 million and (ii) after June 30, 2013, 90.0% of all Included Receipts until the earlier of the Maturity Date or the complete amortization of the Loans under Section 3.01.  “Applicable Included Receipts” shall exclude FTE Payments so long as the principal amount of the Loans prepaid pursuant to Section 3.01(a) exceeds any principal amount added to the Loans pursuant to Section 4.01(a) (as calculated on an annual basis for each calendar year) which shall be determined at the end of any applicable calendar year and shall be applied to amortization in accordance with Section 3.01(a); provided that Borrower may, at its option, include such costs in Applicable Included Receipts on a quarterly basis to pay scheduled amortization in accordance with Section 3.01(a).

 

“ Assignee ” has the meaning specified in Section 13.01(b).

 

“ Assignment and Acceptance ” has the meaning specified in Section 13.01(c).

 

“ Borrower ” means Dyax Corp.

 

“ Borrower Documents ” means the certificate of incorporation of Borrower certified by the Delaware Secretary of State and the by-laws of Borrower (and any similar documentation of any Subsidiary of Borrower which becomes party to the Loan Documents).

 

“ Business Day ” means any day, except a Saturday, Sunday or other day on which commercial banks in New York are required or authorized by law to close.

 

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

 

“ Capital Stock ” of any Person means any and all shares, interests, ownership interest units, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, but excluding any debt securities convertible into such equity.

 

[*****]

 

 “[*****] Agreement ” means the [*****] Agreement dated [*****] between [*****] and Borrower.

 

“[*****] Payments ” means the specified payments that become due and payable to [*****] pursuant to the [*****] Agreement, as further described in Schedule 8.01(s)(ii) .

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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“ Change of Control ” means:

 

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

 

(ii)    any transaction permitted under Section 10.02(a); or

 

(iii)   during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of Borrower (together with any new directors (other than a director designated by a Person who has entered into an agreement with Borrower 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 Borrower’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 Borrower then in office.

 

“ Closing Date ” means August 5, 2008.

 

“ Code ” means the Internal Revenue Code of 1986, as amended.

 

“ Co-Development Agreement ” means any agreement between Borrower and/or any of its Subsidiaries 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 Borrower and/or any of its Subsidiaries 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 or sole ownership of product-related intellectual property by one party with an exclusive license to the product-related intellectual property to the other party, (B) shared management control over product development, (C) shared financial obligations, and/or (D) shared commercialization rights to the product.  Schedule A sets forth a complete list of Co-Development Agreements in existence as of the Tranche B Closing Date.

 

“ Co-Developed Product ” means 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 Borrower has committed on a contingent or non-contingent basis its own financial re-

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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sources and/or has committed non-reimbursed human resources to discover, research, develop, manufacture or commercialize such product or compound.

 

“ Collateral ” has the meaning specified in the Security Agreement.

 

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

 

“ Company LFRP Methods and Libraries ” shall have the meaning set forth in Section 8.01(v)(iii).

 

“ Confidentiality Agreement ” means that certain confidentiality agreement, dated
March 3, 2009, between Borrower and Lender.

 

“ Contract ” has the meaning specified in Section 8.01(e).

 

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

 

“ Controlled Affiliate ” with respect to any Person means any Person directly or indirectly controlling, controlled by or under common control with, such Person.  For the purposes of this Amended Agreement, “ control ” (including, with correlative meaning, the terms “ controlling ” and “ controlled ”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

 “ Default ” means any condition or event which constitutes an Event of Default or which, with the giving of notice or the lapse of time or both would, unless cured or waived, become an Event of Default.

 

“ Default Rate ” means, for any period for which an amount is overdue, a rate per annum equal for each day in such period to the lesser of (i) 2% plus the rate otherwise applicable to the Loans as provided the Section 4.01 and (ii) the maximum rate of interest permitted under applicable Law.

 

“ Deficiency Amount ” has the meaning specified in Section 4.01(a).

 

“ Discrepancy Notice ” has the meaning specified in Section 4.02(m).

 

“ Dispute ” has the meaning specified in Section 8.01(v)(ix).

 

“ Disqualified Capital Stock ” of any Person means any class of Capital Stock of such Person that, by its terms, or by the terms of any related agreement or of any security into which it is convertible, puttable or exchangeable, is, or upon the happening of any event or the

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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passage of time would be, required to be redeemed by such Person, whether or not at the option of the holder thereof, or matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, in whole or in part, on or prior to the date which is 91 days after the final maturity date of the Loans; provided , however , that any class of Capital Stock of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to the payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or otherwise by the delivery of Capital Stock that are not Disqualified Capital Stock, and that is not convertible, puttable or exchangeable for Disqualified Capital Stock or Indebtedness, will not be deemed to be Disqualified Capital Stock so long as such Person satisfies its obligations with respect thereto solely by the delivery of Capital Stock that are not Disqualified Capital Stock.

 

“ Dollars ” or “ $ ” means lawful money of the United States of America.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

 

“ ERISA Affiliate ” at any time means each trade or business (whether or not incorporated) that would, at any time, be treated, together with Borrower or any of their respective Subsidiaries, as a single employer under Title IV or Section 302 of ERISA or Section 412 of the Code.

 

“ Event of Default ” has the meaning specified in Section 11.01.

 

“ Exchange Act ” means the Securities Exchange Act of 1934 and the regulations promulgated thereunder.

 

“ Excluded Agreements ” means Co-Development Agreements, Internally Developed Product Agreements and Licensed Product Agreements.  Schedule B sets forth a complete list of all Excluded Agreements in existence as of the Tranche B Closing Date.

 

“ Excluded Payments ” means (i) payments under any Excluded Agreement or (ii) payments relating to or arising out of any activities relating to the research, development, manufacturing or commercialization of any Excluded Product.

 

“ Excluded Product ” means any product or compound (whether or not derived from phage display) which, at any point, was, is or becomes included in Borrower’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.  Schedule B  sets forth a complete list of all Excluded Products in existence as of the Tranche B Closing Date.  Notwithstanding the foregoing, Borrower 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 Amended Agreement.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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“ Excluded Taxes ” means (i) any Taxes imposed on (or measured by) net income (including branch profits Taxes) of the Lender, or any franchise or similar Taxes imposed in lieu thereof, by any Governmental Authority or taxing authority by the jurisdiction under the laws of which the Lender is organized or any jurisdiction in which the Lender is a resident, has an office, conducts business or has another connection and (ii) in the case of a Foreign Lender, any withholding tax that is imposed on amounts payable to such Foreign Lender (a) under law in effect at the time such Foreign Lender becomes a party to this Amended Agreement (or designates a new Lending Office), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from Borrower with respect to such withholding tax pursuant to Section 5.01(a) or (b) that is attributable to such Foreign Lender’s failure to comply with Section 5.01(b).

 

“ FDA ” means the United States Food and Drug Administration.

 

“ Financial Statements ” means the consolidated balance sheets of Borrower and its Subsidiaries, audited at December 31, 2006, December 31, 2007 and December 31, 2008 and the related consolidated statements of operations and comprehensive loss, cash flows and changes in stockholders’ equity of Borrower and its Subsidiaries audited for the years ended December 31, 2006, December 31, 2007 and December 31, 2008, 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.

 

“ Foreign Lender ” has the meaning specified in Section 5.01(c).

 

“ FTE ” means a full-time equivalent included in FTE Payment costs.

 

“ FTE Payments ” means all amounts received from a Contract Party under any License Agreement in payment for services relating specifically to Borrower’s and/or any of its Subsidiaries’ 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.  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.

 

“ Funded Research Agreements ” has the meaning specified in the definition of License Agreement.

 

“ Future Licenses ” means any License Agreement entered into by Borrower and/or any of its Subsidiaries after the date hereof with any other Person, as the same may be amended, supplemented or otherwise modified from time to time.

 

“ GAAP ” means the generally accepted accounting principles in the United States of America in effect from time to time.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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“ Governmental Authority ” means any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, government.

 

“ Gross Payments ” means 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 Borrower and/or any of its Subsidiaries 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.

 

“ Guarantee ” means, as to any Person:  (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “ primary obligor ”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part); or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person.

 

“ In-Licensed Product ” means any product or compound (whether or not derived from phage display) in relation to which Borrower expends a substantial amount of the financial resources to used to discover, research, and develop or commercialize such product or compound, and to which Borrower 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 Borrower’s past practices and would be recognized in the industry as being a bona fide payment for rights.

 

“ In Licenses ” means any existing or future agreement pursuant to which Borrower and/or any of its Subsidiaries obtains rights to LFRP Intellectual Property or other rights used in the LFRP.

 

“ Included Receipts ” means (a) the Gross Payments less (b) [*****] Payments and Reimbursement Payments, from the first day of the fiscal quarter of Borrower in which the Closing Date occurs; provided that for the first fiscal quarter after the Closing Date the “Included Receipts” were prorated by dividing such Included Receipts by 90 and multiplying by the number of days from and including the Closing Date through the end of such quarter.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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“ Indebtedness ” with respect to any Person means any amount (absolute or contingent) payable by such Person as debtor, borrower, issuer, guarantor or otherwise (i) pursuant to an agreement or instrument involving or evidencing money borrowed, the advance of credit, a conditional sale or a transfer with recourse or with an obligation to repurchase, (ii) pursuant to a lease with substantially the same economic effect as any such agreement or instrument, (iii) pursuant to any equity interest with a mandatory obligation to repurchase, (iv) pursuant to indebtedness of a third party secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on assets owned or acquired by such Person, whether or not the indebtedness secured thereby has been assumed, (v) pursuant to an interest rate protection agreement, foreign currency exchange agreement or other hedging arrangement, (vi) pursuant to a letter of credit issued for the account of such Person, or (vii) all Guarantees with respect to Indebtedness of the types specified in clauses (i) through (vi) above of another Person.  For the avoidance of doubt, the Indebtedness of any Person shall include the Indebtedness of any other entity to the extent such Person is directly liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

 

 “ Indemnified Liabilities ” means, collectively, any and all liabilities, obligations, losses, damages, penalties, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses actually incurred by Indemnitees in enforcing the indemnity provided herein), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations), on common law or equitable cause or on contract or otherwise, imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of this Amended Agreement or the other Loan Documents or the transactions contemplated hereby or thereby (including any enforcement of any of the Loan Documents (including any sale of, collection from, or other realization upon any of the Collateral).

 

“ Indemnified Taxes ” has the meaning specified in Section 5.01(a).

 

“ Indemnitee ” has the meaning specified in Section 12.03(a).

 

“ Independent Accountants ” has the meaning specified in 4.02(m).

 

“ Insurance Providers ” has the meaning specified in Section 9.06.

 

“ Interest Payment Date ” means quarterly on October 15, January 15, April 15 and July 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day, beginning on October 15, 2008.

 

“ Interest Rate ” means (i) with respect to Tranche A Loans, 16.00% per annum and (ii) with respect to Tranche B Loans, 21.50% per annum.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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“ Internally Developed Product ” means any product or compound or molecule which was independently identified by Borrower using its own financial and/or human resources, the intellectual property to which product or compound is owned by Borrower and/or any of its Subsidiaries.

 

“ Internally Developed Product Agreement ” means any agreement between Borrower and/or any of its Subsidiaries and one or more third parties pursuant to which Borrower and/or any of its Subsidiaries 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.

 

“ Knowledge ” means, with respect to Borrower, as applicable, the knowledge of an officer or senior manager or other person with similar responsibility, regardless of title, of Borrower and/or any of its Subsidiaries 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.

 

“ Law ” means any federal, state, local or foreign law, including common law, and any regulation, rule, requirement, policy, judgment, order, writ, decree, ruling, award, approval, authorization, consent, license, waiver, variance, guideline or permit of, or any agreement with, any Governmental Authority.

 

“ Lender ” means the Lender (as defined in the first paragraph hereof) and any assignee under Section 13.01(b).

 

“ Lender Bank Account ” means Cowen Healthcare Royalty Partners, L.P.’s account at JP Morgan Chase Bank, N.A.

 

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

 

“ Lending Office ” means, with respect to the Lender, its Stamford, Connecticut office, and with respect to any other Lender, the office of such Lender designated as its “Lending Office” in an Assignment and Acceptance, or such other office as may be otherwise designated in writing from time to time by such Lender to Borrower.

 

“ LFRP ” means the program under which Borrower and any of its Subsidiaries 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 Borrower and/or any of its Subsidiaries by (i) licensing to a third party rights to use the LFRP

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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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 Intellectual Property ” means:

 

(i)            the LFRP Patents and LFRP Technology; and

 

(ii)           all 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 Borrower and any of its Subsidiaries and (b) necessary to the performance of the LFRP as presently conducted by Borrower and any of its Subsidiaries or as conducted by Borrower and any of its Subsidiaries as of the Closing Date or during the term of the Loans.

 

“ 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 Borrower and any of its Subsidiaries as described in Schedule C hereto, together with all updates and improvements provided under any Library License Agreements as of the Closing Date or during the term of the Loans.

 

“ LFRP Libraries ” means Borrower’s and/or any of its Subsidiaries’ [*****], Borrower’s and/or any of its Subsidiaries’ [*****], and Borrower’s and any of its Subsidiaries’ [*****], all of which are described in Schedule D hereto, together with all updates and improvements thereto and any other [*****] that are developed or obtained by Borrower and any of its Subsidiaries and are transferred under any Library License Agreement as of the Closing Date or during the term of the Loans.

 

 “ LFRP Patents ” means the patents and patent applications identified on Schedule 8.01(v)(ii)  and any other patent application and patent that is:  (i) owned by, controlled by, issued to, licensed to or licensed by Borrower and any of its Subsidiaries, or for which Borrower and any of its Subsidiaries has obtained the benefit of a covenant not to sue, as of the Closing Date or during the term of the Loans necessary to the practice of [*****]; or (ii) licensed under the LFRP; and any patents issuing from such applications, together with any reissues, reexaminations, renewals, and extensions thereof, and all continuations, continuations-in-part and divisionals of the applications, in each case throughout the world.

 

“ LFRP Product ” means any product owned by one or more third parties that incorporates an antibody, protein or peptide that was identified through the use of LFRP Technology and with respect to which Borrower or any of its Subsidiaries is entitled, under the terms of a License Agreement or In License, to receive Royalties.

 

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

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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“ Liabilities ” means the liabilities of Borrower excluding deferred revenue.

 

“ Library License Agreements ” has the meaning specified in the definition of License Agreement.

 

“ License Agreement ” means any existing or future agreement under which:  (i) Borrower and/or any of its Subsidiaries 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) Borrower and/or any of its Subsidiaries 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) Borrower and/or any of its Subsidiaries 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.  License Agreements shall specifically exclude Excluded Agreements and In Licenses.

 

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

 

“ Lien ” means any mortgage or deed of trust, pledge, hypothecation, lien, charge, attachment, set-off, encumbrance or other security interest in the nature thereof (including any conditional sale agreement, equipment trust agreement or other title retention agreement, a lease with substantially the same economic effect as any such agreement or a transfer or other restriction) or other encumbrance of any nature whatsoever.

 

“ Loans ” means the Tranche A Loan and the Tranche B Loan.  References in the Tranche A Note and the Tranche A Warrant Agreement to “Loan” shall be deemed to refer to the Tranche A Loan.

 

“ Loan Documents ” means this Amended Agreement, the Notes, the Security Agreement and the Lockbox Agreement.

 

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

 

“ Lockbox Agreement ” means the agreement entered into by JPMorgan Chase Bank, N.A., Borrower and Lender, dated as of August 5, 2008 (as the same may be amended, restated or otherwise modified from time to time), pursuant to which, among other things, the Lockbox Account, the Lender Concentration Account and the Company Concentration Account

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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shall be established and maintained and any agreement with a successor Lockbox Bank entered into in accordance with Section 4.02(f)(ii).

 

“ Lockbox Bank ” means JPMorgan Chase Bank, N.A. or such other bank or financial institution approved by each of Lender and Borrower.

 

“ Material Adverse Effect ” means (i) a material adverse effect on the business, results of operations, assets or financial condition of Borrower and its Subsidiaries, taken as a whole, (ii) a material reduction or other material impairment of the value of the [*****] or (iv) an impairment of the ability of Borrower and/or any of its Subsidiaries to perform its obligations under, or affecting the validity or enforceability of, any Loan Document, Borrower Document or the Warrant Agreements.   The Parties acknowledge and agree that any delay in, or denial of, regulatory approval for Dyax’s proprietary kallikrein inhibitor, known as DX-88, shall not be deemed to constitute a Material Adverse Effect on the Tranche B Funding Date.

 

“ Material Licenses ” means those License Agreements set forth on Schedule 8.01(w)(x).

 

“ Maturity Date ” means the earlier of (i) the eighth anniversary of the Closing Date and (ii) the date of any prepayment in full of the Loan.

 

“ No-Call Date ” means August 21, 2012.

 

“ Notes ” means the Tranche B Note(s) and the Tranche A Note(s).

 

“ Notice of Borrowing ” has the meaning specified in Section 2.02.

 

“ Notices ” has the meaning specified in Section 13.04.

 

“ Obligations ” means, without duplication, the Loans and all present and future Indebtedness, taxes, liabilities, obligations, covenants, duties, and debts, owing by Borrower to the Lender, arising under or pursuant to the Loan Documents, including all principal, interest, charges, expenses, fees and any other sums chargeable to Borrower hereunder and under the other Loan Documents (and including any interest, fees and other charges that would accrue but for the filing of a bankruptcy action with respect to Borrower, whether or not such claim is allowed in such bankruptcy action).

 

“ Original Loan Agreement ” has the meaning specified in the recitals hereto.

 

 “ Original Loan Documents ” means the Loan Documents as such term was defined under the Original Loan Agreement.

 

“ Original Security Agreement ” means the Security Agreement as such term was defined under the Original Loan Agreement.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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“ Original Transaction Documents ” means the Loan Documents, the Warrant Agreements, the License Agreements and the Borrower Documents, as such terms were defined under the Original Loan Agreement.

 

“ Participant ” has the meaning specified in Section 13.02.

 

“ Party ” and “ Parties ” have the meanings specified in the first paragraph hereof.

 

“ Patent License Agreements ” has the meaning specified in the definition of License Agreement.

 

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

 

“ Patriot Act ” has the meaning specified in Section 13.19.

 

“ Permitted Collateralization ” means any asset securitization, sale, transfer or other disposition by Borrower or any of its Subsidiaries, individually or when taken together with other Permitted Collateralizations, generating cash proceeds of $25.0 million or less since the Closing Date which involves in whole or in part Collateral to the extent simultaneously with the release of the Collateral in accordance with the Security Agreement Borrower or any of its Subsidiaries receives cash proceeds no less than the fair market value thereof, which determination shall be made in good faith by Borrower’s Board of Directors.  Proceeds of “Permitted Collateralizations” (whether received on the release thereof or subsequent thereto) shall be applied in accordance with Section 3.02(c).

 

“ Permitted Liens ” has the meaning specified in Section 10.03.

 

“ Person ” means an individual, corporation, association, limited liability company, limited liability partnership, partnership, estate, trust, unincorporated organization or a government or any agency or political subdivision thereof.

 

“ Plan ” has the meaning specified in Section 10.07(a).

 

“ Plan Assets ” means assets of any (i) employee benefit plan (as defined in Section 3(3) of ERISA) subject to Title I of ERISA, (ii) plan (as defined in Section 4975(e)(1) of the Code) subject to Section 4975 of the Code or (iii) entity whose underlying assets include assets of any such employee benefit plan or plan by reason of the investment by an employee benefit plan or other plan in such entity.

 

“ Prepayment Premium ” means with respect to any Loan on any date the Loan (or any portion thereof) is required to be prepaid pursuant to the proviso at the end of Section 3.02(b) or any payment made to amortization prior to the No-Call Date pursuant to Section 3.02(c), the aggregate amount of all required interest payments due on the Loan (or the applicable portion) through the No-Call Date less all interest payments paid in cash through the date of prepayment.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

13

 

“ Proceeding ” has the meaning specified in Section 13.12.

 

“ Product ” means the products that are the subject of the License Agreements.

 

“ Qualified Capital Stock ” of any Person means Capital Stock of such Person other than Disqualified Capital Stock; provided that such Capital Stock shall not be deemed Qualified Capital Stock to the extent sold or owed to a Subsidiary of such Person or financed, directly or indirectly, using funds (i) borrowed from such Person or any Subsidiary of such Person until and to the extent such borrowing is repaid or (ii) contributed, extended, guaranteed or advanced by such Person or any Subsidiary of such Person (including, without limitation, in respect of any employee stock ownership or benefit plan).  Unless otherwise specified, Qualified Capital Stock refer to Qualified Capital Stock of Borrower.

 

“ Quarterly Report ” means, with respect to the relevant calendar quarter of Borrower:  (i) a report in a form agreed by the parties and based on Exhibit C showing all payments made by Borrower and/or any of its Subsidiaries and any Contract Party to the Lender under this Amended 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 Borrower and/or any of its Subsidiaries by the Contract Parties to any License Agreements, together with relevant supporting documentation, as well as a reconciliation with the consolidated total revenues of Borrower prepared in accordance with GAAP; and (iii) such additional information as the Lender may reasonably request.

 

“ Register ” has the meaning set up in Section 5.07.

 

“ Regulatory Agency ” means 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.

 

“ Reimbursement Payments ” means 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 Borrower and/or any of its Subsidiaries (other than FTE Payments) in connection with the provision of services relating to the identifying, isolating, and researching antibodies, peptides and or proteins.

 

“ Restricted Payment ” means any of the following:

 

(i) the declaration or payment of any dividend or any other distribution on Capital Stock of Borrower or any Subsidiary or any payment made to the direct or indirect holders (in their capacities as such) of Capital Stock of Borrower or any Subsidiary, including, without limitation, any payment in connection with any merger or consolidation involving Borrower but excluding (a) dividends or distributions payable solely in Qualified Capital Stock or through accretion or accumulation of such dividends on such Capital Stock and (b) in the case of Subsidiaries, dividends or distributions payable to Borrower or to a Subsidiary and pro rata dividends or distributions payable to minority stockholders of any Subsidiary; or

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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(ii)           the redemption of any Capital Stock of Borrower or any Subsidiary, including, without limitation, any payment in connection with any merger or consolidation involving Borrower but excluding any such Capital Stock held by Borrower or any Subsidiary.

 

“ Royalties ” means 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 any In License (but in the case of an In License only to the extent such royalties, payments and fees relate to the LFRP) and all accounts (as such term is defined in the New York Uniform Commercial Code) evidencing or giving rise to any of the foregoing.

 

“ SEC ” has the meaning set forth in Section 8.01(d).

 

“ Security Agreement ” means the Amended and Restated Security Agreement, dated the Tranche B Closing Date, substantially in the form of Exhibit D hereto, between the Lender and Borrower securing the Obligations of Borrower hereunder as supplemented by any amendments or joinders thereto.

 

“ Significant Subsidiary ” means any Subsidiary of Borrower which would constitute a “significant subsidiary” as defined in Rule 1.02 of Regulation S-X under the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended.

 

“ Subsidiary ” means, with respect to any Person, at any time, any entity of which more than fifty percent (50%) of the outstanding Voting Stock or other equity interest entitled ordinarily to vote in the election of the directors or other governing body (however designated) is at the time beneficially owned or controlled directly or indirectly by such Person, by one or more such entities or by such Person and one or more such entities.

 

“ Surviving Person ” means, with respect to any Person involved in or that makes any disposition, the Person formed by or surviving such disposition or the Person to which such disposition is made.

 

“ Taxes ” has the meaning specified in Section 5.01(a).

 

“ Tranche ” means, with respect to any Loan, whether such Loan is a Tranche A Loan or a Tranche B Loan.

 

“ Tranche A Aggregate Accrual ” has the meaning specified in Section 4.01(d).

 

“ Tranche A Deficiency Amount ” has the meaning specified in Section 4.01(a).

 

“ Tranche A Loan ” means the Tranche A Loan made by the Lender on the Closing Date pursuant to Section 2.01 of the Original Loan Agreement.

 

“ Tranche A Loan Percentage ” means [*****]

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

15

 

“ Tranche A Maximum Accrual ” has the meaning specified in Section 4.01(d).

 

“ Tranche A Note ” means the note issued by Borrower to Lender evidencing the Tranche A Loans made on the Closing Date to Borrower and any replacement(s) thereof issued in accordance with Section 13.10.

 

“ Tranche A Warrant ” has the meaning ascribed to “Warrant” in the Tranche A Warrant Agreement.

 

“ Tranche A Warrant Agreement ” means the Warrant Agreement between Borrower and Lender dated the Closing Date.

 

“ Tranche B Aggregate Accrual ” has the meaning specified in Section 4.01(e).

 

“ Tranche B Commitment ” means $15,000,000.

 

“ Tranche B Closing Date ” means March 18, 2009.

 

“ Tranche B Deficiency Amount ” has the meaning specified in Section 4.01(a).

 

“ Tranche B Funding Date ” means the date on which the Lender makes the Tranche B Loan, which Tranche B Loan shall be made on or before March 31, 2009.

 

“ Tranche B Loan ” means the Tranche B Loan to be made by the Lender pursuant to Section 2.02 of this Amended Agreement.

 

“ Tranche B Loan Percentage ” means [*****]

 

“ Tranche B Maximum Accrual ” has the meaning specified in Section 4.01(e).

 

“ Tranche B Note ” means a promissory note, substantially in the form set forth in Exhibit B , in the amount of the Tranche B Loan, evidencing such Tranche B Loan.

 

“ Tranche B Warrant ” has the meaning ascribed to “Warrant” in the Tranche B Warrant Agreement.

 

“ Tranche B Warrant Agreement ” means the Warrant Agreement between Borrower and Lender substantially in the form attached hereto as Exhibit K .

 

“ Transaction Documents ” means the Loan Documents, the Warrant Agreements, the License Agreements and the Borrower Documents.

 

“ U.S .” means the United States of America.

 

“ Voting Stock ” means Capital Stock issued by a company, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such contingency.

 

“ Warrant Agreements ” means the Tranche A Warrant Agreement and the Tranche B Warrant Agreement.

 

“ Webphage ®  Software ” means Borrower’s analysis and data storage software for [*****] 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).

 

“ Wholly Owned Subsidiary ” means, as to any person, (a) any corporation 100% of whose capital stock (other than directors’ qualifying shares) is at the time owned by such person and/or one or more Wholly Owned Subsidiaries of such person and (b) any partnership, association, joint venture, limited liability company or other entity in which such person and/or one or more Wholly Owned Subsidiaries of such person have a 100% equity interest at such time.

 

SECTION 1.02.               Interpretation; Headings .  Each term used in any Exhibit to this Amended Agreement and defined in this Amended Agreement but not defined therein shall have the meaning set forth in this Amended Agreement.  Unless the context otherwise requires, (a) “including” means “including, without limitation” and (b) words in the singular include the plural and words in the plural include the singular.  A reference to any party to this Amended Agreement, any other Transaction Document or any other agreement or document shall include such party’s successors and permitted assigns.  A reference to any agreement or order shall include any amendment of such agreement or order from time to time in accordance with the terms herewith and therewith.  A reference to any legislation, to any provision of any legislation or to any regulation issued thereunder shall include any amendment thereto, any modification or re-enactment thereof, any legislative provision or regulation substituted therefore and all regulations and statutory instruments issued thereunder or pursuant thereto.  Unless otherwise indicated, all references to the Original Credit Agreement in any Loan Document or other document or instrument delivered in connection therewith shall be deemed to refer to this Amended Agreement and the provisions hereof.  The headings contained in this Amended Agreement are for convenience and reference only and do not form a part of this Amended Agreement.  Section, Article and Exhibit references in this Amended Agreement refer to sections or articles of, or exhibits to, this Amended Agreement unless otherwise specified.  Borrower acknowledges and agrees that it was represented by counsel in connection with the execution and delivery of the Loan Documents to which it is a party, that it and its counsel reviewed and participated in the preparation and negotiation hereof and thereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation hereof or thereof.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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ARTICLE II
COMMITMENT; DISBURSEMENT; FEES

 

SECTION 2.01.               Commitment to Lend .  On the terms set forth herein, the Lender shall, on the Tranche B Funding Date, make a loan hereunder to Borrower in a principal amount equal to the Tranche B Commitment.

 

SECTION 2.02.               Notice of Borrowing .  Subject to Section 2.01, Borrower shall, simultaneous with the execution of this Amended Agreement, give the Lender notice, substantially in the form set forth in Exhibit E (the “ Notice of Borrowing ”) that Borrower wishes to borrow a principal amount equal to the Tranche B Commitment on the Tranche B Funding Date.  The Tranche B Commitment shall automatically terminate upon funding of the Tranche B Loan on the Tranche B Funding Date.

 

SECTION 2.03.               Disbursement .  On the terms set forth herein, the Lender shall, on the Tranche B Funding Date, credit, in same day funds, an amount equal to the Tranche B Commitment to the account of Borrower which Borrower shall have designated for such purpose in the Notice of Borrowing less the initial expenses referred to in Section 4.04 for which invoices have been received by Borrower.

 

SECTION 2.04.               Commitment Not Revolving .  The Lender’s commitment to lend hereunder is not revolving in nature, and any amount of the Loans repaid or prepaid may not be reborrowed.

 

ARTICLE III
REPAYMENT

 

SECTION 3.01.               Amortization .

 

(a)           On each Interest Payment Date (except as otherwise expressly provided herein), Borrower shall (A) repay the portion of the outstanding principal amount of the Tranche A Loans at par which is equal to the product of (i) the difference between (x) Applicable Included Receipts for the prior fiscal quarter less (y) any portion of such Applicable Included Receipts used to pay cash interest on the Loans pursuant to Section 4.01(a), (ii) multiplied by the Tranche A Loan Percentage and (B) repay the portion of the outstanding principal amount of the Tranche B Loans at par which is equal to the product of (i) the difference between (w) Applicable Included Receipts for the prior fiscal quarter less (z) any portion of such Applicable Included Receipts used to pay cash interest on the Loans pursuant to Section 4.01(a), (ii) multiplied by the Tranche B Loan Percentage.

 

(b)           The balance of the outstanding principal amount of the Loans, together with any accrued and unpaid interest, shall be due and payable in cash on the Maturity Date.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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SECTION 3.02.               Optional Prepayment; Mandatory Prepayment .

 

(a)           Borrower may, subject to Section 12.01, prepay the Loans in whole or in part, together with accrued and unpaid interest on the amount prepaid at any time after the No-Call Date; provided that (i) the outstanding principal balance of the Loans after giving effect to a voluntary partial prepayment shall be not less than [*****], (ii)  each prepayment shall be in an amount that is an integral multiple of [*****] and not less than [*****] or, if less, the outstanding principal amount of the applicable Tranche of the Loans and (iii) Borrower shall not be permitted to prepay the Tranche B Loans until all payments of principal and any other amounts owing to the Lender in respect of the Tranche A Loans have been paid in full in cash.  If Borrower wishes to make such a prepayment, it shall give the Lender Notice to that effect not later than the 30th day before the date of the prepayment, specifying the date on which the prepayment is to be made and the amount to be prepaid.  Such Notice shall constitute Borrower’s irrevocable commitment to prepay that amount on that date, together with interest accrued on the amount prepaid to but excluding the prepayment date.

 

(b)           If a Change of Control or any transaction permitted by Section 10.02(a) hereof occurs then, at the option of the Lender, any or all of the Loans as requested by the Lender to be prepaid (including all accrued and unpaid interest) shall be due and payable hereunder, to the extent permitted by law, and shall be deemed part of the amounts due and payable hereunder subject to acceleration (either declared or immediate as provided in Section 11.02); provided that if the Change of Control or any transaction permitted by Section 10.02(a) hereof occurs prior to the No-Call Date, then such prepayment shall be accompanied by the Prepayment Premium with respect to that portion of the Loans requested by the Lender to be so prepaid.  The Prepayment Premium in respect of the Tranche A Loans shall be paid prior to any Prepayment Premium with respect to the Tranche B Loans.

 

(c)           With respect to Permitted Collateralizations, Borrower shall apply (or cause to be applied): (A) [*****] of all proceeds of Permitted Collateralizations (the “ Sweep Proceeds ”) to amortize (i) principal (including all accrued and unpaid interest in respect thereof) on the Tranche A Loans equal to the Sweep Proceeds multiplied by the Tranche A Loan Percentage and (ii) principal (including all accrued and unpaid interest in respect thereof) on the Tranche B Loans equal to the Sweep Proceeds multiplied by the Tranche B Loan Percentage, in each case, by making a cash payment to the Lender which cash payment shall also include the Prepayment Premium in respect of such amortized amount if such Permitted Collateralization is consummated prior to the No-Call Date (which Prepayment Premium shall not affect the principal or interest on the Loan) and (B) [*****] of the cash proceeds shall be paid to the Lenders (without affecting the principal or interest payable on any Loan).  The Prepayment Premium in respect of the Tranche A Loans shall be paid prior to any Prepayment Premium with respect to the Tranche B Loans.

 

SECTION 3.03.               Illegality .  If the Lender determines at any time that any Law or treaty or any change therein or in the interpretation or application thereof makes or will make it unlawful for the Lender to fulfill its commitment in accordance with Section 2.01, to maintain the Loans (including additional amounts pursuant to Section 4.01(a)) or to claim or receive any

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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amount payable to it hereunder, the Lender shall give Notice of that determination to Borrower, whereupon the obligations of the Lender hereunder shall terminate.  If any such Notice is given after the disbursement of the Loans, Borrower shall prepay the Loans in full on the Interest Payment Date following the date the Notice is given; provided , however , that if the Lender certifies to Borrower that earlier prepayment is necessary in order to enable the Lender to comply with the relevant Law, treaty or change and specifies an earlier date for the prepayment, Borrower shall make the prepayment on the date so specified.  Prepayment pursuant to this Section 3.03 shall be made together with interest accrued and unpaid on the Loans to the date of prepayment and all other amounts then payable to the Lender hereunder.  Each Notice delivered pursuant to this Section 3.03 shall be effective when sent.

 

ARTICLE IV
INTEREST; EXPENSES

 

SECTION 4.01.               Interest Rate .

 

(a)           Except as otherwise expressly provided in Section 4.03, (i) the Tranche A Loans shall bear interest at a rate per annum equal to 16.00% and the Tranche B Loans shall bear interest at a rate per annum equal to 21.50% and, in each case, shall be paid in cash as provided in Section 4.01(c); provided that Borrower shall be required to pay interest in cash only to the extent of the Applicable Included Receipts for the immediately preceding fiscal quarter and shall apply such cash to the interest on the Tranche A Loans prior to making interest payments on the Tranche B Loans.  If Borrower is unable to pay the cash interest payments required under the first sentence of this Section 4.01(a) out of Applicable Included Receipts or otherwise pursuant to the last sentence of this Section 4.01(a) because (i) the then Applicable Included Receipts are less than 16.00% per annum, paid quarterly, of the principal amount of the Tranche A Loans (such deficiency, the “ Tranche A Deficiency Amount ”) or (ii) the difference between (A) the then Applicable Included Receipts and (B) the cash payments made in respect of accrued interest on the Tranche A Loans on such Interest Payment Date, is less than 21.50% per annum, paid quarterly, of the principal amount of the Tranche B Loans (such deficiency, the “ Tranche B Deficiency Amount ” and, each of (x) the Tranche B Deficiency Amount and (y) the Tranche A Deficiency Amount, a “ Deficiency Amount ”), then, in each case, any Deficiency Amount shall be paid in kind, on a quarterly basis, and on each such date, the Lender shall be deemed to have made an additional term loan of the applicable Tranche in a principal amount equal to the aggregate amount of interest so paid on its outstanding Loans.  Each such Loan shall (A) be deemed to be a Loan for all purposes under this Amended Agreement and (B) accrue interest in accordance with this Section 4.01.  Borrower shall deliver to each Lender all original issue discount information relating to the Loans as may be required by applicable law.  Notwithstanding any other provision herein, Borrower may, at its option, pay all or any portion of any Deficiency Amount when due out of other funds held by Borrower.

 

(b)           All interest hereunder shall be computed on the basis of a 360-day year of twelve 30-day months.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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(c)           Accrued interest on each Loan shall be payable to the Lender at the Lockbox Account or as otherwise notified to Borrower in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued pursuant to Section 4.04 shall be payable on demand, in the same form as interest payable on the next Interest Payment Date, and (ii) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment.

 

(d)           On each Interest Payment Date commencing with the first Interest Payment Date following the fifth (5th) anniversary of the Closing Date, if the aggregate amount that would be includible in income with respect to the Tranche A Note for periods ending on or before such Interest Payment Date (within the meaning of Section 163(i) of the Code) (the “ Tranche A Aggregate Accrual ”) would exceed an amount equal to the sum of (i) the aggregate amount of interest to be paid (within the meaning of Section 163(i) of the Code) under the Tranche A Note on or before such Interest Payment Date (determined without regard to the amounts payable on such Interest Payment Date under this Section 4.01(d)), and (ii) the product of (A) the issue price (as defined in Sections 1273(b) and 1274(a) of the Code) of the Tranche A Note and (B) the yield to maturity (interpreted in accordance with Section 163(i) of the Code) of the Tranche A Note (such sum, the “ Tranche A Maximum Accrual ”), then Borrower shall pay to the Lender in cash an amount equal to the excess, if any, of the Tranche A Aggregate Accrual over the Tranche A Maximum Accrual, and the amount of such payment shall be treated for any period ending after such Interest Payment Date as an amount of interest to be paid (within the meaning of Section 163(i) of the Code) under the Tranche A Note.

 

(e)   On each Interest Payment Date commencing with the first Interest Payment Date following the fifth (5th) anniversary of the Tranche B Funding Date, if the aggregate amount that would be includible in income with respect to the Tranche B Note for periods ending on or before such Interest Payment Date (within the meaning of Section 163(i) of the Code) (the “ Tranche B Aggregate Accrual ”) would exceed an amount equal to the sum of (i) the aggregate amount of interest to be paid (within the meaning of Section 163(i) of the Code) under the Tranche B Note on or before such Interest Payment Date (determined without regard to the amounts payable on such Interest Payment Date under this Section 4.01(e)), and (ii) the product of (A) the issue price (as defined in Sections 1273(b) and 1274(a) of the Code) of the Tranche B Note and (B) the yield to maturity (interpreted in accordance with Section 163(i) of the Code) of the Tranche B Note (such sum, the “ Tranche B Maximum Accrual ”), then Borrower shall pay to the Lender in cash an amount equal to the excess, if any, of the Tranche B Aggregate Accrual over the Tranche B Maximum Accrual, and the amount of such payment shall be treated for any period ending after such Interest Payment Date as an amount of interest to be paid (within the meaning of Section 163(i) of the Code) under the Tranche B Note.

 

SECTION 4.02.               Lockbox Account .

 

(a)           On the Closing Date, the Parties entered into the Lockbox Agreement with the Lockbox Bank.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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(b)           The Lender Concentration Account shall be held solely for the benefit of the Lender, subject to the terms and conditions of this Amended Agreement.  The Lender shall have immediate and full access to any funds held in the Lender 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 Borrower, subject to the terms and conditions of this Amended Agreement, the Security Agreement and the other Transaction Documents.  Subject to the terms and conditions of this Amended Agreement, the Security Agreement and the other Transaction Documents, Borrower 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 Borrower’s obligations to pay in full all amounts due to the Lender under this Amended Agreement, or (ii) in any manner limit the recourse of the Lender to the assets of Borrower to satisfy Borrower’s obligations.

 

(c)           Sweeps from the Lockbox Account shall be made pursuant to Exhibit F .

 

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

 

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

 

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

 

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

 

(ii)           Lender, Borrower and the successor Lockbox Bank shall have entered into a lockbox agreement substantially in the form of the Lockbox Agreement initially entered into and such agreement shall be considered the “Lockbox Agreement” under this Amended Agreement and the other Loan Documents;

 

(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)          Borrower 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.

 

(g)           [Intentionally Omitted]

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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(h)           All Gross Payments shall be paid into the Lockbox Account or to any other account(s) designated in writing by the Lender(s) to Borrower, and amounts deposited therein shall be treated as described in Exhibit F .

 

(i)            Borrower shall pay voluntary prepayments made at the election of Borrower in accordance with Section 3.02(a) or any payment made in accordance with the last sentence of Section 4.01(a) to the Lockbox Account.

 

(j)            In the event any party to a License Agreement including any party to a Future License remits any Royalties directly to Borrower or otherwise except to the Lockbox Account, Borrower 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, Borrower shall remit such Royalties by wire transfer of immediately available funds directly to Lender Bank Account), (ii) notify such party to remit any future Royalties to the Lockbox Account and (iii) provide to Lender a copy of such notice.

 

(k)           Amounts payable pursuant to this Section 4.02 shall be in addition to any amounts payable under Section 4.02(d) of this Amended Agreement.

 

(l)            Any payments, other than from funds paid to Lender from the Lender Concentration Account, to be made by Borrower to Lender hereunder or under any other Transaction Document shall be made by wire transfer of immediately available funds to Lender Bank Account.

 

(m)          Within [*****] following delivery to Lender by Borrower of the Quarterly Report for the fourth fiscal quarter of each calendar year during the term of the Loans, to the extent that either Lender or Borrower has determined that there is a discrepancy as to the amounts paid to Lender 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 Agent or Borrower delivers to the other party a Discrepancy Notice, Lenders and Borrower shall meet in person or by telephone conference as specified by Lender within [*****] (or such other time as mutually agreed by the parties) after the receiving 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 Lender to Borrower or by Borrower to Lender, then the Party owing such payment shall promptly pay such payment to the other Party.  If, within [*****] after receipt of the Discrepancy Notice, Borrower and Lender cannot resolve any such discrepancies, then Lender and Borrower shall promptly instruct their respective firms of independent certified public accountants to select, within [*****] thereafter, a third internationally recognized accounting firm (the “ Independent Accountants ”).  After offering Borrower and its representatives and Lender and their representatives the opportunity to present their positions as to the disputed items, which opportunity shall not extend for more than [*****] after the Independent Accountants have been selected, the Independent Accountants shall review the disputed matters and the

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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materials submitted by Borrower and Lender and, as promptly as practicable, deliver to Borrower and Lender 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 without any further right of appeal.  If Borrower has delivered the Discrepancy Notice that has resulted in the selection of the Independent Accountants, Borrower will bear all the charges of the Independent Accountants.  If Agent has delivered the Discrepancy Notice that has resulted in the selection of the Independent Accountants, Lenders will bear all the charges of the Independent Accountants unless the Independent Accountants determine that the amounts paid to Lender for the applicable calendar year underpaid Lender by an amount equal or in excess of [*****] of the amounts determined to be due to Lender for such calendar year, in which event Borrower shall bear all of the charges of the Independent Accountants.

 

SECTION 4.03.               Interest on Late Payments .  If any amount payable by Borrower to the Lender hereunder is not paid when due (whether at stated maturity, by acceleration or otherwise), interest shall accrue on any such unpaid amounts, both before and after judgment during the period from and including the applicable due date, to but excluding the day the overdue amount is paid in full, at a rate per annum equal to the Default Rate.  Interest accruing under this Section 4.03 shall be payable from time to time on demand of the Lender.

 

SECTION 4.04.               Initial Expenses .  Borrower shall reimburse the Lender, on the Tranche B Closing Date as provided in Section 2.03, for all (a) actual, documented out-of-pocket fees and expenses incurred by the Lender (including all fees and expenses of outside counsel to the Lender), supported by reasonable documentation, in connection with the negotiation, preparation, execution and delivery of this Amended Agreement and the other Transaction Documents including any amendment or waiver with respect thereto and (b) reasonable fees and expenses, supported by reasonable documentation, of due diligence conducted by the Lender or other parties (including outside counsel to the Lender) at the request of the Lender; provided that Borrower shall not be required to reimburse any amounts pursuant to this Section 4.04 in excess of [*****] in the aggregate.

 

SECTION 4.05.               Administration and Enforcement Expenses .  Borrower shall promptly reimburse the Lender on demand for all reasonable costs and expenses incurred by the Lender (including the reasonable fees and expenses of one outside counsel to the Lenders) as a consequence of or in connection with any Default or Event of Default.

 

ARTICLE V
TAXES

 

SECTION 5.01.               Taxes .

 

(a)           Except as otherwise required by Law, any and all payments by Borrower under this Amended Agreement or the Notes (including payments with respect to the Loans) shall be made free and clear of and without deduction for any and all present and future taxes, levies, duties, imposts, deductions, charges, fees or withholdings, and all interest, penalties and other liabilities with respect thereto (collectively, “ Taxes ”) imposed by any Governmental Authority

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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or taxing authority in any jurisdiction.  If any Taxes other than Excluded Taxes (“ Indemnified Taxes ”) shall be required by Law to be deducted from or in respect of any sum payable under this Amended Agreement or the Notes to a Lender, (i) the sum payable by Borrower shall be increased as may be necessary so that after making all required deductions of Indemnified Taxes the Lender shall receive an amount equal to the sum it would have received had no such deductions been made and (ii) Borrower shall make such deductions and pay the full amount deducted to the relevant Governmental Authority or taxing authority in accordance with applicable Law.

 

(b)           Any Lender claiming additional amounts payable pursuant to Section 5.01(a) shall use its reasonable efforts (consistent with its internal policies and applicable Law) to change the jurisdiction of its lending office if such a change would reduce any such additional amounts (or any similar amount that may thereafter accrue) and would not, in the sole discretion of such Lender, be otherwise disadvantageous to such Lender.

 

(c)           If a Lender is not a “United States person” within the meaning of Section 7701(a)(30) of the Code (a “ Foreign Lender ”), then such Foreign Lender shall provide to Borrower (i) in the case of a Foreign Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest,” (x) two accurate and complete original signed copies of IRS Form W-8BEN (or a successor form) properly completed and duly executed by such Foreign Lender and (y) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of Borrower within the meaning of Section 881(c)(3)(B) of the Code or (C) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code, (ii) if the payments receivable by the Foreign Lender are effectively connected with the conduct of a trade or business in the United States, two accurate and complete original signed copies of IRS Form W-8ECI (or a successor form), (iii) in the case of a Foreign Lender that is entitled to benefits under an income tax treaty to which the United States is a party that reduces the rate of withholding tax on payments of interest, two accurate and complete original signed copies of IRS Form W-8BEN (or a successor form) indicating that such Foreign Lender is entitled to receive payments under this Amended Agreement and the Notes with reduced or no deduction of any United States federal income withholding tax or (iv) in the case of a Foreign Lender acting as an intermediary, two accurate and complete original signed copies of IRS Form W-8IMY (or a successor form).  Such forms shall be delivered by such Foreign Lender on or prior to the date that it becomes a Lender under this Amended Agreement, at any time thereafter when a change in the Foreign Lender’s circumstances renders an existing form obsolete or invalid or requires a new form to be provided, and within fifteen Business Days after a reasonable written request of Borrower from time to time thereafter.  Notwithstanding any other provision of this Section 5.01(c), no Foreign Lender shall be required to deliver any form pursuant to this Section 5.01(c) that such Foreign Lender is not legally able to deliver.

 

(d)           Each Lender that is not a Foreign Lender shall provide two properly completed and duly executed copies of Form W-9 (or successor form) at the times specified for delivery of forms under Section 5.01(c).

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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(e)           Each Lender having assigned its rights and obligations hereunder in whole or in part or having granted a participating interest in its Loans shall collect from such assignee or participant the documents described in Sections 5.01(c) and (d) as applicable.

 

(f)            The Lender shall not file any IRS form under Section 6050P of the Code reporting any cancellation of indebtedness income of the Borrower as a result of the transactions contemplated by this Amended Agreement and the other Transaction Documents.

 

SECTION 5.02.               Receipt of Payment .  Within thirty days after the date of any payment of Taxes withheld by Borrower in respect of any payment to the Lender, Borrower shall furnish to the Lender the original or a certified copy of a receipt evidencing payment thereof or other evidence reasonably satisfactory to the Lender.

 

SECTION 5.03.               Other Taxes .  Borrower shall promptly pay any registration or transfer taxes, stamp duties or similar levies, and any penalties or interest that may be due with respect thereto, that may be imposed in connection with the execution, delivery, registration or enforcement of this Amended Agreement, the Notes issued hereunder or any other Transaction Document or the filing, registration, recording or perfecting of any security interest contemplated by this Amended Agreement.

 

SECTION 5.04.               Indemnification .  If the Lender pays any Taxes that Borrower is required to pay pursuant to this Article V, Borrower shall indemnify the Lender on demand in full in the currency in which such Taxes are paid, whether or not such Taxes were correctly or legally asserted, together with interest thereon from and including the date of payment to, but excluding, the date of reimbursement at the Default Rate.  The Lender shall promptly notify Borrower if any claim is made against the Lender for any Taxes for which Borrower would be responsible to indemnify the Lender pursuant to this Section 5.04.

 

SECTION 5.05.               Loans Treated As Indebtedness .  The Parties agree to treat the Loans as indebtedness for borrowed money of Borrower for all tax purposes.  The Parties agree not to take any position that is inconsistent with the provisions of this Section 5.05 on any tax return or in any audit or other administrative or judicial proceeding unless (i) the other Party has consented to such actions, or (ii) the Party that contemplates taking such an inconsistent position has been advised by nationally recognized tax counsel in writing that it is more likely than not that (x) there is no “reasonable basis” (within the meaning of Treasury Regulation Section 1.6662-3(b)(3)) for the position specified in this Section 5.05 or (y) taking such a position would otherwise subject the Party to penalties under the Code.

 

SECTION 5.06.               Allocation of Issue Price .  The Tranche A Note and the Tranche A Warrant, taken together, constitute an “investment unit” for purposes of Section 1273(c)(2) of the Code.  In accordance with Sections 1273(c)(2)(A) and 1273(b)(2) of the Code, the issue price of the investment unit is the purchase price of the Tranche A Note, with $431,761 thereof representing the fair market value of the Tranche A Warrant.  The Tranche B Note and the Tranche B Warrant, taken together, constitute an “investment unit” for purposes of Section 1273(c)(2) of the Code.  In accordance with Sections 1273(c)(2)(A) and 1273(b)(2) of the Code,

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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the issue price of the investment unit is the purchase price of the Tranche B Note, with [*****] thereof representing the fair market value of the Tranche B Warrant.  Unless otherwise required by Law, the Parties shall not take any position inconsistent with these allocations on any tax return or for any other tax purpose.

 

SECTION 5.07.               Registered Obligation .

 

(a)           Borrower shall establish and maintain at its address referred to in Section 13.04 (A) a record of ownership (the “ Register ”) in which Borrower agrees to register by book entry the interests (including any rights to receive payment hereunder) of each Lender in the Loans, each of their obligations under this Amended Agreement to participate in the Loans, and any assignment of any such interest, obligation or right, and (B) accounts in the Register in accordance with its usual practice in which it shall record (1) the names and addresses of the Lender(s) (and each change thereto pursuant to Section 13.02), (2) the Tranche B Commitment of each Lender, (3) the amount of the Loans and each funding of any participation described in clause (A) above, (4) the amount of any principal or interest due and payable or paid, and (5) any other payment received and its application to the Loans.

 

(b)           Notwithstanding anything to the contrary contained in this Amended Agreement, the Loans (including any Note evidencing such Loan) are registered obligations, the right, title and interest of the Lender and its assignees in and to such Loans shall be transferable only upon notation of such transfer in the Register and no assignment thereof shall be effective until recorded therein.  This Section 5.07 and Section 13.02 shall be construed so that the Loans are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related regulations (and any successor provisions).

 

ARTICLE VI
PAYMENTS; COMPUTATIONS

 

SECTION 6.01.               Making of Payments .

 

(a)           To the extent (i) that Applicable Included Receipts received into the Lockbox Account during any fiscal quarter are less than the total amount of Applicable Included Receipts required for purposes of calculating the interest that Borrower is required to pay to Lender under Section 4.01(a) on any Interest Payment Date or (ii) Borrower exercises its option to pay any Deficiency Amount out of other funds of Borrower and/or any of its Subsidiaries as described in the last sentence of Section 4.01(a), then such deficiency shall be made in Dollars, by deposit in same day funds by 3:00 p.m. New York time on the date the interest payment is due, to the Lockbox Account, for the account of the applicable Lending Office(s), or to any other account designated by the Lenders by Notice to Borrower.

 

(b)           Notwithstanding anything to the contrary contained herein, any payment stated to be due hereunder or under any Note on a given day in a specified month shall be made or shall end (as the case may be), (i) if there is no such given day or corresponding day, on the last Business Day of such month or (ii) if such given day or corresponding day is not a Business Day, on the next succeeding Business Day, unless such next succeeding Business Day falls in a

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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different calendar month, in which case such payment shall be made on the next preceding Business Day.

 

SECTION 6.02.           Setoff or Counterclaim .  Each payment by Borrower under this Amended Agreement or under any Note shall be made without setoff or counterclaim.  Lenders shall have the right to setoff any and all amounts owed by Borrower and/or any of its Subsidiaries under this Amended Agreement as provided in Section 11.03.

 

ARTICLE VII
CLOSING  DOCUMENTATION

 

SECTION 7.01.           Tranche A Loan Closing Documentation .  In order to induce the Lender to make the Tranche A Loan on the Closing Date, the following documentation was provided simultaneous with the execution of the Original Loan Agreement:

 

(a)           Borrower delivered to the Lender the Tranche A Note, dated the Closing Date.

 

(b)           Borrower delivered to the Lender an executed copy of:

 

(i)      a certificate of Borrower, dated the Closing Date, substantially in the form set forth in Exhibit L to the Original Loan Agreement together with the attachments specified therein;

 

(ii)     an opinion of Edwards Angell Palmer & Dodge LLP, counsel to Borrower, dated the Closing Date, substantially in the form of Exhibit M to the Original Loan Agreement and otherwise in form and substance satisfactory to the Lender;

 

(iii)    an opinion of Wolf Greenfield, counsel of Borrower , dated the Closing Date, substantially in the form of Exhibit N to the Original Loan Agreement and otherwise in form and substance satisfactory to the Lender.

 

(iv)    an opinion of Lowrie, Lando & Anasasi, LLP, counsel of Borrower, dated the Closing Date, substantially in the form of Exhibit O to the Original Loan Agreement and in form and substance satisfactory to the Lender.

 

(c)           Borrower delivered to the Lender a certificate, dated the Closing Date, of a senior officer of Borrower (the statements made in which to have been true and correct on and as of the Closing Date):  (i) attaching copies, certified by such officer as true and complete, of Borrower’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 Borrower authorizing and approving the execution, delivery and performance by Borrower of the Original Loan Agreement, the other Original Transaction Documents and the transactions

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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contemplated therein; (iii) setting forth the incumbency of the officer or officers of Borrower who executed and delivered the Original Loan Agreement and the other Original 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 Borrower was in good standing under the laws of such jurisdiction as of the Closing Date.

 

(d)           Borrower executed and delivered to the Lender the Original Loan Documents and such other documents as the Lender reasonably requested, in each case, in form and substance satisfactory to the Lender.

 

(e)           Borrower executed and delivered to the Lender the Tranche A Warrant Agreement.

 

(f)            Borrower executed and delivered to the Lender the other Original Transaction Documents, which were in full force and effect.

 

(g)           The Lender received all fees and expenses due and payable to the Lender on the Closing Date under the Original Loan Agreement and the other Original Transaction Documents.

 

(h)           No event occurred and continued that constituted a Default or an Event of Default under the Original Loan Agreement or a similar event under the other Original Transaction Documents and no such event occurred or would have occurred by reason of the Tranche A Loan.

 

(i)            The representations and warranties made by Borrower in Article VIII of the Original Loan Agreement and in the other Original Transaction Documents were true and correct as of the Closing Date, before and after giving effect to the Tranche A Loan.

 

(j)            Borrower delivered to the Lender true copies of the License Agreements in existence as of the Closing Date, certified by an officer of Borrower, including all amendments, supplements or other modifications thereto which, as of the Closing Date, were in full force and effect.

 

(k)           All filings, recordings and other actions that were necessary or reasonably requested by the Lender in order to establish, protect, preserve and perfect the security interest in the assets of Borrower as provided in the Original Security Agreement as a valid and perfected first priority security interest with respect to such assets were duly effected.

 

(l)            All necessary governmental and third-party approvals, consents and filings, including in connection with the Tranche A Loan, the Original Security Agreement and the Tranche A Warrant Agreement were obtained or made and be in full force and effect.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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(m)          The Lender had conducted a background check of the officers of Borrower and the results were to the satisfaction of the Lender.  The Lender received all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation, the Patriot Act, including, without limitation, the information described in Section 13.19.

 

(n)           The Lender received from Borrower (i) an executed copy of the Release of Security Agreement between Borrower and Paul Royalty Funds Holdings II, (ii) evidence to the satisfaction of the Lender that such release(s) in form and substance satisfactory to the Lender were to be filed with the U.S. Patent and Trademark Office and the U.S. Copyright Office on the Closing Date, (iii) evidence to the satisfaction of the Lender that a UCC-3 termination statement was filed with the office of the Secretary of State of the State of Delaware on the Closing Date, and (iv) evidence to the satisfaction of the Lender of agreements to terminate (A) the lockbox agreement among Paul Royalty Funds Holdings II, Borrower and JP Morgan Chase Bank, and (B) the escrow arrangement with respect to duplicate libraries for the benefit of Paul Royalty Funds Holdings II.

 

SECTION 7.02.           Tranche B Loan Closing Documentation .  In order to induce the Lender to make the Tranche B Loan on the Tranche B Funding Date, the following documentation was provided simultaneous with the execution of this Amended Agreement:

 

(a)           Borrower executed and delivered to the Lender the Tranche B Note.

 

(b)           Borrower delivered to the Lender an executed copy of:

 

(i)      a certificate of Borrower, dated the Tranche B Closing Date, substantially in the form set forth in Exhibit G hereto together with the attachments specified therein;

 

(ii)     an opinion of Edwards Angell Palmer & Dodge LLP, counsel to Borrower, dated the Tranche B Closing Date, substantially in the form of Exhibit H hereto and otherwise in form and substance satisfactory to the Lender;

 

(iii)    an opinion of Wolf Greenfield, counsel of Borrower, dated the Tranche B Closing Date, substantially in the form of Exhibit I hereto and otherwise in form and substance satisfactory to the Lender; and

 

(iv)    an opinion of Lowrie, Lando & Anasasi, LLP, counsel of Borrower, dated the Tranche B Closing Date, substantially in the form of Exhibit J hereto and in form and substance satisfactory to the Lender.

 

(c)           Borrower delivered to the Lender a certificate, dated the Tranche B Closing Date, of a senior officer of Borrower (the statements made in which shall be true and correct on and as of the Tranche B Closing Date):  (i) attaching copies, certified by such officer as true and complete, of Borrower’s certificate of incorporation or other organiza-

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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tional 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 Borrower authorizing and approving the execution, delivery and performance by Borrower of this Amended Agreement, the other Transaction Documents and the transactions contemplated herein and therein; (iii) setting forth the incumbency of the officer or officers of Borrower who have executed and delivered this Amended 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 Borrower is in good standing under the laws of such jurisdiction.

 

(d)           Borrower executed and delivered to the Lender the Security Agreement (including the schedules thereto) and such other documents as the Lender reasonably requested, in each case, in form and substance satisfactory to the Lender.

 

(e)           Borrower executed and delivered to the Lender the Tranche B Warrant Agreement.

 

(f)            Borrower executed and delivered to the Lender the other Transaction Documents, which were in full force and effect.

 

(g)           The Lender received all fees and expenses due and payable to the Lender on or prior to the Tranche B Closing Date under this Amended Agreement and the other Transaction Documents.

 

(h)           All filings, recordings and other actions that are necessary or reasonably requested by the Lender in order to establish, protect, preserve and perfect the security interest in the assets of Borrower as provided in the Security Agreement as a valid and perfected first priority security interest with respect to such assets have been duly effected, including the filing of a UCC-3 financing statement amendment and a Patent Security Agreement (as defined in the Security Agreement) and Copyright Security Agreement (as defined in the Security Agreement) with respect to any registered intellectual property Collateral which Lender has not previously filed a Patent Security Agreement or Copyright Security Agreement, with respect thereto.

 

(i)            Borrower delivered to the Lender true copies of the License Agreements certified by an officer of Borrower, including all amendments, supplements or other modifications thereto, and each License Agreement and amendment, supplement or other modification thereto shall be in full force and effect, provided that Borrower was not required to deliver any License Agreements which were delivered to Lender as of the Closing Date or in any Business Report and that have not been amended, modified, supplemented or terminated since the date they were so delivered.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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(j)            All necessary governmental and third-party approvals, consents and filings, including in connection with the Tranche B Loan, the Security Agreement and the Tranche B Warrant Agreement were obtained or made and be in full force and effect.

 

ARTICLE VIII
REPRESENTATIONS AND WARRANTIES

 

SECTION 8.01.           Representations and Warranties of Borrower .  Borrower hereby represents and warrants to Lender as follows (with such representations and warranties qualified to the extent of the Schedules referred to therein and delivered to the Lender concurrently with the execution and delivery of this Amended Agreement):

 

(a)           Borrower is a corporation 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 the power and authority (including any required license, permit or other approval from any Governmental Authority) to own its assets, to carry on its business as currently conducted and to consummate the transactions contemplated in, and to perform its obligations under, this Amended Agreement and the other Transaction Documents to which it is party or by which it is bound.

 

(b)           Borrower has taken all necessary action to authorize its execution and delivery of this Amended Agreement and the other Transaction Documents to which it is party, the performance of its obligations under this Amended Agreement and the other Transaction Documents to which it is party or by which it is bound and the consummation of the transactions contemplated hereby and thereby.

 

(c)           This Amended Agreement and each other Transaction Document to which Borrower is party has been duly executed and delivered by Borrower, and each constitutes a valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium and similar laws affecting creditors’ rights generally, and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

 

(d)           No authorization or action of any kind by any Governmental Authority is necessary to authorize the transactions contemplated by this Amended Agreement and each other Transaction Document or required for the validity or enforceability against Borrower of this Amended Agreement and each other Transaction Document, except any filings with a Governmental Authority required to perfect the Lender’s security interest under the Security Agreement and any filings with the United States Securities and Exchange Commission (“ SEC ”).

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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(e)           No consent or approval of, or notice to, any Person is required by the terms of any agreement, contract, lease, commitment, license and other arrangement (each a “ Contract ”) for the execution or delivery of, or the performance of the obligations of Borrower under, this Amended Agreement and the other Transaction Documents to which Borrower is party or the consummation of the transactions contemplated hereby or thereby, and such execution, delivery, performance and consummation will not result in any breach or violation of, or constitute a default under Borrower Documents or any material Contract, instrument or Law applicable to Borrower, any of its Subsidiaries or any of its assets.

 

(f)            There are no actions, proceedings or claims pending or, to the actual knowledge of Borrower, threatened the adverse determination of which could reasonably be expected to have a Material Adverse Effect.

 

(g)           No Default or Event of Default has occurred and is continuing, and no such event will occur upon the making of the Loan.

 

(h)           The representations and warranties previously made by Borrower in Article VIII of the Original Loan Agreement and in the other Transaction Documents shall have been true and correct as of the date such representations and warranties were made (in each case, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date).

 

(i)            With respect to each Contract that is material to the conduct of the LFRP, (i) each such Contract is a valid and binding agreement and each such Contract is in full force and effect, and (ii) Borrower and/or any of its Subsidiaries is in compliance with each such Contract and has no actual knowledge of any default under any such Contract which default has not been cured or waived.

 

(j)            All written information heretofore, herein or hereafter supplied to the Lender by or on behalf of Borrower in connection with the Loans and the other transactions contemplated hereby has been, is and will be accurate and complete in all material respects.  All representations and warranties made by Borrower in any of the other Transaction Documents to which it is party are true and correct in all material respects.

 

(k)           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 Borrower and its Subsidiaries as of the dates and for the periods covered thereby and the consolidated statements of cash flows of Borrower and its Subsidiaries for the periods presented therein.  Except as disclosed in Borrower’s SEC filings, there have been no Material Adverse Effects since December 31, 2008.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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(l)            Borrower and its Subsidiaries have no Indebtedness other than (i) identified in the Financial Statements or (ii) incurred by Borrower or its Subsidiaries in the ordinary course of business since December 31, 2008 or (c) otherwise listed and described on Schedule 8.01(l) .

 

(m)          As of February 28, 2009 and after giving effect to the making of the Loans:

 

(i)      The aggregate value of the assets of Borrower, at fair value and present fair salable value, exceeds (i) its Liabilities and (ii) the amount required to pay such Liabilities as they become absolute and matured in the normal course of business;

 

(ii)     Borrower has the ability to pay its debts and Liabilities as they become absolute and matured in the normal course of business; and

 

(iii)    Borrower does not have an unreasonably small amount of capital with which to conduct its business.

 

(n)           Borrower’s Subsidiaries are set forth on Schedule 8.01(n) .

 

(o)           (i)  Borrower and its Subsidiaries are in compliance with all applicable Laws except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  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.

 

(ii)           Borrower 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 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 and permits, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.  Borrower has not received any notice of proceedings relating to, and to the Knowledge of Borrower 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.

 

(iii)          To the actual knowledge of Borrower, 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 Borrower, suffered any material adverse events in any clinical trial.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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(p)           Borrower is not an investment company subject to regulation under the Investment Company Act of 1940.

 

(q)           Borrower has timely filed all tax returns required to be filed by it and has paid all taxes due reported on such returns or pursuant to any assessment received by Borrower, except for failures to file tax returns or pay taxes that, individually, and in the aggregate, are not reasonably expected to result in a Material Adverse Effect.  Any charges, accruals or reserves on the books of Borrower in respect of taxes are adequate except for inadequacies that, individually, and in the aggregate, are not reasonably expected to result in a Material Adverse Effect.  Borrower has had no material liability for any taxes imposed on or with respect to its net income (except for state or local income or franchise taxes).  Borrower has fulfilled all its obligations with respect to withholding taxes except for failures that, individually, and in the aggregate, are not reasonably expected to result in a Material Adverse Effect.  No deduction or withholding for or on account of any tax has been made, or was required under applicable Law to be made, from any payment to Borrower under the License Agreements in effect on the Tranche B Closing Date.

 

(r)            Neither Borrower nor any ERISA Affiliate has ever incurred any unsatisfied liability or expects to incur any liability under Title IV or Section 302 of ERISA or Section 412 of the Code or any similar non-U.S. law or maintains or contributes to, or is or has been required to maintain or contribute to, any employee benefit plan (as defined in Section 3(3) of ERISA) subject to Title IV or Section 302 of ERISA or Section 412 of the Code or any non-U.S. law.  The consummation of the transactions contemplated by this Amended Agreement will not constitute or result in any non-exempt prohibited transaction under Section 406 of ERISA, Section 4975 of the Code or substantially similar provisions under any foreign or U.S. federal, state or local laws, rules or regulations.  Neither Borrower nor any of its Subsidiaries has incurred any material liability with respect to any obligation to provide benefits, including death or medical benefits, with respect to any person beyond their retirement or the termination of service other than coverage mandated by law.

 

(s)           (i)  Except as set forth on Schedule 8.01(s)(i) , all of the LFRP Intellectual Property owned by Borrower is solely (and not jointly) owned by Borrower and is free and clear of any and all Liens, except those Liens created in favor of Lender pursuant to the Transaction Documents. The Included Receipts and all of the rights of Borrower under the In Licenses and License Agreements and all other rights in and to the LFRP are free and clear of any and all Liens, except those Liens created in favor of Lender pursuant to the Transaction Documents.

 

(ii)           Borrower owns, and is the sole holder of, all the Included Receipts.  Borrower 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.  Borrower has not transferred, sold,

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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or otherwise disposed of, or agreed to transfer, sell, or otherwise dispose of any portion of its respective rights to receive payment of Royalties.  Except as set forth on Schedule 8.01(s)(ii) , no Person other than Borrower has any right to receive the payments payable under any License Agreement entered into from and after the Closing Date through Tranche B Closing Date, other than, in respect of the Included Receipts, Lender.

 

(t)            The claims and rights of the Lender created by this Amended Agreement and any other Transaction Document in and to the Collateral is senior to any Indebtedness or other obligation of Borrower, with respect to such Collateral.

 

(u)           Borrower’s principal place of business and chief executive office are set forth on Schedule 8.01(u) .

 

(v)           (i)  Borrower has provided Lender all material information in its possession, or otherwise known to it with respect to the LFRP Patents.

 

(ii)           Schedule 8.01(v)(ii)  sets forth an accurate and complete list of all LFRP Patents (including all LFRP Patents not owned by Borrower).  For each item of the LFRP Patents listed on Schedule 8.01(v)(ii) , Borrower 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.

 

(iii)          The issued LFRP Patents owned by Borrower are valid, enforceable and subsisting.  To the Knowledge of Borrower, each individual associated with the filing and prosecution of the LFRP Patents owned by Borrower, 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.  [*****].

 

(iv)          Schedule 8.01(v)(iv)  sets forth an accurate and complete list of all LFRP Patents owned by Borrower that have issued with at least one claim covering the Company LFRP Methods and Libraries.

 

(v)           Borrower 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.

 

(vi)          There are no unpaid maintenance or renewal fees payable by Borrower to any third party that are currently overdue for any of the LFRP Patents or other LFRP Intellectual Property owned by Borrower.  To the Knowledge of Borrower no material ap-

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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plications for LFRP Patents owned by Borrower in whole or in part have lapsed or been abandoned, cancelled or expired.

 

(vii)      Borrower has not undertaken and, to the Knowledge of Borrower, no licensee has undertaken or omitted to undertake any acts, and no conduct, circumstances or grounds exist that would void, invalidate or eliminate, in whole or in part, the enforceability of any of the LFRP Intellectual Property.  [*****]

 

(viii)      Except as set forth on Schedule 8.01(v)(viii) , Borrower 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.

 

(ix)         Except as set forth on Schedule 8.01(v)(ix) , to the Knowledge of Borrower 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 Knowledge of Borrower, 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 Borrower 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.

 

(x)            To the Knowledge of Borrower, there are no Disputes by any third party against Borrower, any licensor under an In License or any licensee under a License Agreement relating to the LFRP.  Borrower has not received or given, and to the Knowledge of Borrower, no such licensee or licensor has received or given any notice of any such Dispute and, to the Knowledge of Borrower, there exist no circumstances or grounds upon which any such claim could be asserted.  [*****].

 

(xi)           There is no pending or, to the Knowledge of Borrower, threatened action, suit, or proceeding, or any investigation or claim by any Governmental Authority to which Borrower or, to the Knowledge of Borrower, 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 Borrower 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.  [*****].

 

(w)          (i)  Schedule 8.01(w)(i)  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 Knowledge of Borrower):  manufacturing and supply agreements, In Licenses and License Agreements, options (not part of License

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

37

 

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 Lender.  For each agreement specified on Schedule 8.01(w)(i) , Borrower has indicated (A) whether such agreement relates to inbound licenses of LFRP Intellectual Property to Borrower or outbound licenses of LFRP Intellectual Property by Borrower and (B) the specific LFRP Intellectual Property relating to such agreement.  Each agreement specified on Schedule 8.01(w)(i) , whether or not terminated prior to the Tranche B Closing Date, 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 general equitable principles.  Borrower is not in breach of such agreements and, to the Knowledge of Borrower, 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 8.01(w)(i) , including the signing of this Amended Agreement.  None of the Excluded Agreements fall within the scope of an In License or License Agreement as each is defined; provided   that the intellectual property or technology which is the subject of an In License may be assigned in connection with an Excluded Agreement.  None of the Excluded Agreements was used in the calculation of the revenue forecasts provided by Borrower to Lender on February 13, 2009.

 

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

 

(iii)          Except as set forth on Schedule 8.01(w)(iii) , 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.

 

(iv)          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.

 

(v)           Borrower has not received (A) any notice or other written or, to the Knowledge of Borrower, 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 8.01(w)(v) , any notice or other written or, to the Knowledge of Borrower, oral communication requesting any amendment, alteration or modification of such License Agreement or In License or any subli-

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

38

 

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

 

(vi)          To the Knowledge of Borrower, nothing has occurred and no condition exists that would adversely impact the right of Borrower 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 8.01(w)(vi) , Borrower, or, to the Knowledge of Borrower, any Contract Party has not taken any action or omitted to take any action, that would adversely impact the right of Lender to take a security interest in the LFRP Technology, and no scheduled item could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(vii)         [*****].

 

(viii)        Except as set forth on Schedule 8.01(w)(viii) , 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 no scheduled item could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(ix)           The execution, delivery and performance of each License Agreement and In License was and is within the corporate powers or other organizational power of Borrower and, to the Knowledge of Borrower, 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, Borrower and, to the Knowledge of Borrower, 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 Borrower or, to the Knowledge of Borrower, the Contract Party thereto.

 

(x)            The representations and warranties made in each existing Material License and In License by Borrower 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.

 

(xi)           The royalty rates and the duration of such royalty rates in each country under each existing License Agreement are as set forth on Schedule 8.01(w)(xi) .  There are no royalties due to Contract Parties under In Licenses with respect to Royalties under the License Agreements except to [*****].

 

(xii)          [*****].

 

(xiii)         No software is necessary for use in the LFRP other than commercially available software.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

39

 

(xiv)        Schedule C sets forth all the biological material, know-how, data, technical and other information other than the LFRP Libraries described in Schedule D that is provided to Contract Parties under Library License Agreements, other than in oral form.

 

(xv)         The LFRP Libraries described in Schedule D are all the libraries used in the LFRP within the twelve (12) months prior to the Closing Date with the exception of affinity maturation libraries.

 

(x)            Borrower and Borrower’s Subsidiaries have the insurance policies with the coverages and limits set forth on Schedule 8.01(x) , carried with the insurance companies also set forth therein.

 

SECTION 8.02.           Survival of Representations and Warranties .  All representations and warranties of Borrower contained in this Amended Agreement shall survive the execution, delivery and acceptance thereof by the Parties and the closing of the transactions described in this Amended Agreement.

 

ARTICLE IX
AFFIRMATIVE COVENANTS

 

SECTION 9.01.           Maintenance of Existence .  Borrower and/or any of its Subsidiaries party to the Loan Documents shall at all times (a) preserve, renew and maintain in full force and effect its legal existence and good standing as a corporation under the Laws of the jurisdiction of its organization; (b) not change its name or its chief executive office as set forth herein without having given the Lender simultaneous notice thereof; (c) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (d) preserve or renew all LFRP Intellectual Property, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

 

SECTION 9.02.           Use of Proceeds .  Borrower shall use the net proceeds of the Loans received by it (i) for general corporate purposes and/or (ii) to pay all fees and expenses payable by Borrower pursuant to the Transaction Documents.

 

SECTION 9.03.         Financial Statements and Information .

 

(a)           In the event that any such information need not to be filed with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, Borrower shall furnish to the Lender, on or before the forty-fifth day after the close of each quarter of each fiscal year, the unaudited consolidated balance sheet of Borrower as at the close of such quarter and unaudited consolidated statement of operations and comprehensive loss and cash flows of Borrower for such quarter, duly certified by the chief financial officer of Borrower as having been prepared in accordance with GAAP.  Concurrently with the delivery or filing of the documents described in the preceding sentence, Borrower shall furnish to the Lender a certificate of the chief financial officer, chief accounting officer or treasurer of Borrower, which certificate shall include a statement that

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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such officer has no knowledge, except as specifically stated, of any condition, event or act which constitutes a Default or Event of Default.

 

(b)           In the event that any such information need not be filed with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, Borrower shall furnish to the Lender, on or before the sixtieth day after the close of each fiscal year, Borrower’s audited financial statements as at the close of such fiscal year, including the consolidated balance sheet as at the end of such fiscal year and consolidated statement of operations and cash flows of Borrower for such fiscal year, in each case accompanied by the report thereon of independent registered public accountant of nationally recognized standing.  Concurrently with the delivery or filing of the documents described in the preceding sentence, Borrower shall furnish to the Lender a certificate of the chief financial officer, chief accounting officer or treasurer of Borrower, which certificate shall include a statement that such officer has no knowledge, except as specifically stated, of any condition, event or act which constitutes a Default or Event of Default.

 

(c)           Borrower shall, promptly upon receipt thereof, forward or cause to be forwarded to the Lender copies of all notices, reports, updates and other information regarding the License Agreements and Included Receipts received from the Contract Parties which could reasonably be expected to have a Material Adverse Effect.

 

(d)           Borrower shall furnish or cause to be furnished to the Lender from time to time such other information regarding the financial position, assets or business of Borrower or any other Subsidiary or its compliance with any Transaction Document to which it is a party or the LFRP as the Lender may from time to time reasonably request.

 

(e)           Borrower shall, promptly after the end of each fiscal quarter of Borrower (but in no event later than [*****] following the end of such quarter), produce and deliver to the Lender a Quarterly Report and Business Report for such quarter, together with a certificate of a senior officer of Borrower, certifying that to the Knowledge of Borrower that such Quarterly Report and Business Report are true, correct and accurate in all material respects.  Following receipt of any Business Report, the Lenders shall have the right to require a meeting in person or by phone with management of Borrower to discuss matters related to the LFRP.  With each Quarterly Report, Borrower shall provide a copy to the Lenders 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 9.15.

 

SECTION 9.04.           Books and Records .  Borrower shall keep proper books, records and accounts in which entries in conformity with sound business practices and all requirements of Law applicable to it shall be made of all dealings and transactions in relation to its business, assets and activities and as shall permit the preparation of the consolidated financial statements of Borrower in accordance with GAAP.

 

SECTION 9.05.           Inspection Rights; Access .  Borrower shall, on [*****], or, at any time during which a Default or Event of Default shall have occurred and be continuing, permit representatives of the Lender to examine its or its Subsidiaries’ assets, books and records

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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upon reasonable Notice during normal business hours.  Borrower shall allow the Lender reasonable access to its managers and/or officers.  To the extent any License Agreement contains provisions requiring confidential treatment of any information, including financial information, that would prohibit Borrower from providing such information to the Lender, in connection with any audit permitted hereunder, Borrower 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.

 

SECTION 9.06.           Maintenance of Insurance and Properties .  Borrower and its Subsidiaries shall maintain and preserve all of its properties that are used and useful in the conduct of the LFRP in good working order and condition, ordinary wear and tear excepted.  Borrower shall maintain insurance policies with the same or better coverages and limits as those set forth on Schedule 8.01(x)  with the insurance companies set forth therein (the “ Insurance Providers ”) or with insurance companies rated at least as high as the Insurance Providers as of the Closing Date (according to A.M. Best Company, Inc.).  Borrower shall furnish to the Lender from time to time upon written request full information as to the insurance carried.

 

SECTION 9.07.           Governmental Authorizations .  Borrower shall obtain, make and keep in full force and effect all authorizations from and registrations with Governmental Authorities that may be required for the validity or enforceability against Borrower of this Amended Agreement and the other Transaction Documents to which it is a party.

 

SECTION 9.08.         Compliance with Laws and Contracts .

 

(a)           Borrower and any its Subsidiaries shall comply with all applicable Laws and perform its obligations under all Contracts relative to the conduct of its business, including the Transaction Documents to which it is party in all material respects.

 

(b)           Borrower shall at all times comply with the margin requirements set forth in Section 7 of the Exchange Act and any regulations issued pursuant thereto, including, without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.

 

SECTION 9.09.         Plan Assets .  Borrower shall not take any action that causes its assets to be deemed to be Plan Assets at any time.

 

SECTION 9.10.         Notices .

 

(a)           Borrower shall promptly give written Notice to the Lender of each Default or Event of Default and each other event that has or could reasonably be expected to have a Material Adverse Effect; provided that in any situation where Borrower knows a press release or other public disclosure is to be made, Borrower shall use all commercially reasonable efforts to provide such information to the Lender as early as possible but in no event later than simultaneously with such release or other public disclosure.

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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(b)           Borrower shall promptly give written Notice to the Lender upon receiving notice, or otherwise becoming aware, of any default or event of default under the License Agreements.

 

(c)           Borrower shall, promptly after becoming aware thereof, give written Notice to the Lender of any litigation or proceedings to which Borrower or any of its Subsidiaries is a party or which could reasonably be expected to have a Material Adverse Effect.

 

(d)           Borrower shall, promptly after becoming aware thereof, give written Notice to the Lender of any litigation or proceedings challenging the validity of the License Agreements, the LFRP Intellectual Property or any of the transactions contemplated therein.

 

(e)           Borrower shall, promptly after becoming aware thereof, give written Notice to the Lender of any representation or warranty made or deemed made by Borrower in any of the Transaction Documents or in any certificate delivered to the Lender pursuant hereto shall prove to be untrue, inaccurate or incomplete in any material respect on the date as of which made or deemed made.

 

SECTION 9.11.           Payment of Taxes .  Borrower shall pay all material taxes of any kind imposed on or in respect of its income or assets before any penalty or interest accrues on the amount payable and before any Lien on any of its assets exists as a result of nonpayment except as provided in Section 10.03 hereof and except for taxes contested in good faith by appropriate proceedings and for which adequate reserves are maintained in accordance with GAAP.

 

SECTION 9.12.           Waiver of Stay, Extension or Usury Laws .  Borrower will not at any time, to the extent that it may lawfully not do so, insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive Borrower from paying all or any portion of the principal of or premium, if any, or interest on the Loans as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this Amended Agreement; and, to the extent that it may lawfully do so, Borrower hereby expressly waives all benefit or advantage of any such law and expressly agrees that it will not hinder, delay or impede the execution of any power herein granted to the Lender, but will suffer and permit the execution of every such power as though no such law had been enacted.

 

SECTION 9.13.         Additional Covenants of Borrower .

 

SECTION 9.14.         [*****]

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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SECTION 9.15.           Further Assurances .  Borrower shall promptly, at its sole cost and expense, execute and deliver to the Lender such further instruments and documents, and take such further action, as the Lender may, at any time and from time to time, reasonably request in order to carry out the intent and purpose of this Amended Agreement and the other Transaction Documents to which it is a party and to establish and protect the rights, interests and remedies created, or intended to be created, in favor of the Lender hereby and thereby.    [*****]  In the event that any of the Collateral is, directly or indirectly, sold, leased, licensed, transferred or otherwise disposed of to a Subsidiary of Borrower (other than in connection with a Permitted Collateralization), Borrower shall cause such Subsidiary to execute a joinder to the Security Agreement confirming that the Collateral continues to be subject to the Lien granted to the Lender thereunder and such other documentation that the Agent shall reasonably request.

 

ARTICLE X
NEGATIVE COVENANTS

 

SECTION 10.01.       Activities of Borrower .

 

(a)           Neither Borrower nor any of its Subsidiaries shall amend, modify or waive or terminate any provision of, or permit or agree to the amendment, modification, waiver or termination of any provision of, any of the Loan Documents, License Agreements or any material Contract related to the LFRP that could reasonably be expected to have a Material Adverse Effect without the prior written consent of the Agent.

 

(b)           Neither Borrower nor any of its Subsidiaries shall 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 10.02.       Merger; Sale of Assets .

 

(a)           Borrower shall not merge or consolidate with or into (whether or not Borrower is the Surviving Person) any other Person and Borrower will not, and will not cause or permit any Subsidiary to, sell, convey, assign, transfer, lease or otherwise dispose of all or substantially all of Borrower’s and its Subsidiaries assets (determined on a consolidated basis for Borrower and its Subsidiaries) to any Person in a single transaction or series of related transactions, unless (1) either (A) Borrower will be the Surviving Person or (B) the Surviving Person (if other than Borrower) will be an entity organized and validly existing under the laws of Delaware, and will, in any such case, expressly assume the due and punctual payment of the principal of, premium, if any, and interest on the Loans and the performance and observance of every covenant of the Loan Documents to be performed or observed on the part of Borrower and shall use its commercially reasonable efforts to actively market and promote the LFRP and to seek out and exploit opportunities for entering into Future Licenses; and (2) immediately thereafter, on a pro forma basis after giving effect to such transaction (and treating any Indebtedness not previously an obligation of Borrower or any Subsidiary of Borrower in connection with or as a result of

 

 

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

 

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such transaction as having been incurred at the time of such transaction), no Default or Event of Default will have occurred and be continuing.

 

(b)           Neither Borrower nor any of its Subsidiaries shall directly or indirectly sell, lease, license, transfer or otherwise dispose of all or any part of its assets consisting of or used in the LFRP Technology or the LFRP, except (i) licenses of intellectual property rights of Borrower or any of its Subsidiaries in connection with services provided by Borrower or such Subsidiary for fair value in an arm’s-length transaction in the ordinary course of its business; (ii) sales of equ