Isis Pharmaceuticals (ISIS)

3.9    Silicon Valley Bank Loan; Notes.

(a)

ISIS shall not, without the prior written consent of DRC:



(i)

refinance the Loan, except to a lender dealing at arm's length with ISIS and on financial terms and conditions that (i) include a covenant by ISIS that is the same as the financial covenant set out in section 6.8 of the Loan Agreement; and (ii) are substantially similar to the terms and conditions of the Silicon Valley Bank Agreement; or



(ii)

amend the Silicon Valley Bank Agreement to increase the amount of the Loan or remove or reduce ISIS' positive or negative covenants or financial obligations thereunder; or



(iii)

pre-pay the Loan in part or in full (except in connection with refinancing the Loan in accordance with Subsection 3.9(a)(i) above or as permitted under Subsection 3.9(b) below) (each, a "Repayment"); or



(iv)

pre-pay or repay the Notes in full if such pre-payment or repayment of the Notes would constitute a default or an event of default under the Silicon Valley Bank Agreement or, if applicable, the Liquidity Covenant or the Selected SVB Covenants (as each term is defined below).



(b)

Notwithstanding the foregoing ISIS may make a Repayment, provided following any such Repayment and until the expiration of the Special Events of Default: (x) ISIS shall have and maintain, as of the last day of each [***], Liquidity of at least the greater of (I) Cash Burn for such [***] multiplied by [***] or (II) the then applicable Liquidated Damages Amount multiplied by [***] (determined as if a Special Event of Default has occurred at the time of such Repayment and adjusted to take into account payments of the Purchase Price by DRC and Royalties received by DRC thereafter) (the "Liquidity Covenant"); (y) the covenants of ISIS in favor of Silicon Valley Bank under Sections 7.1 and 7.4 of the Silicon Valley Bank Agreement (the "Selected SVB Covenants") shall be deemed to be incorporated herein by reference and form a part of this Agreement with all references therein to Silicon Valley Bank changed to DRC (and all other applicable changes as the context requires); and (z) the Special Events of Default shall be deemed to include a breach of the Selected SVB Covenants or of the Liquidity Covenant. "Liquidity" is unrestricted cash on hand (and cash equivalents). "Cash Burn" is the change in Liquidity from that as of the prior [***] end to Liquidity calculated at such [***] end, excluding such extraordinary items as ISIS may reasonably request and as DRC may approve in its reasonable discretion.

ARTICLE 4
CLOSING; DELIVERIES ON CLOSING

4.1    Closing.    Subject to satisfaction or waiver of all deliveries set forth below, the closing with respect to the sale, assignment, transfer, set-over and conveyance of the Assigned Rights (the "Closing") shall occur on the Effective Date.

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4.2    Deliveries by ISIS.    ISIS hereby agrees to deliver to DRC on the Effective Date:

(a)

A Certificate of Good Standing from the Delaware Secretary of State dated not earlier than five (5) days prior to the date of this Agreement.



(b)

A certificate signed by an authorized signing authority of ISIS certifying that the execution, delivery and performance by ISIS of this Agreement and the ISIS Closing Documents have been duly and validly authorized by the Board of Directors of ISIS and attaching complete and accurate copies of its Certificate of Incorporation, bylaws and authorizing resolutions relating to this Agreement.



(c)

An opinion of counsel to ISIS, in a form reasonably acceptable to DRC, that: (i) the execution and delivery of this Agreement and the ISIS Closing Documents and the performance of ISIS' obligations under this Agreement and the ISIS Closing Documents have been duly authorized; (ii) ISIS is validly existing as a corporation in good standing under the laws of the State of Delaware and has the power and authority to execute and deliver this Agreement and the ISIS Closing Documents and perform its obligations hereunder and thereunder, that the execution, delivery and performance of ISIS' obligations by ISIS will not contravene its charter documents, any Material Agreement, any orders of any court or tribunal or any applicable law; and (iii) this Agreement and the ISIS Closing Documents are valid and binding on and enforceable against ISIS in accordance with their terms, subject to the usual qualifications and the creation and perfection of DRC's Encumbrance in the Patents, the Licensed Patent Rights and the License Agreement (as it relates to the ISIS Rights but not as it relates to the Assigned Rights).



(d)

The Eyetech Consent, the Security Agreement and [***] (collectively, the "ISIS Closing Documents"), a consent by Silicon Valley Bank, in writing, in form and substance reasonably satisfactory to DRC: (i) consenting to the execution, delivery and performance of this Agreement and the Security Agreement; (ii) releasing the negative pledge covering the Patents and the Licensed Patent Rights; (iii) releasing Silicon Valley Bank's security interest in the Patents, the Licensed Patent Rights and the License Agreement; (iv) waiving the negative covenant in respect of [***] with respect to ISIS' obligations to DRC hereunder; (iv) confirming that the Loan is in good standing and that the execution, delivery and performance by ISIS of this Agreement and the ISIS Closing Documents will not constitute an Event of Default and (v) agreeing to notify DRC of the occurrence of any event of default under the Silicon Valley Bank Agreement in a reasonably timely manner (the "Silicon Valley Bank Consent").



(e)

Such other certificates, documents and financing statements as DRC may reasonably request, including a UCC financing statement satisfactory to DRC (i) to create, evidence and perfect the first ranking Encumbrance in the Patents, the Licensed Patent Rights and the License Agreement (as it relates to the ISIS Rights but not as it relates to the Assigned Rights) created under the Security Agreement and (ii) pursuant to the provisions of Section 7.7 hereof.

4.3    Deliveries by DRC.    DRC hereby agrees to deliver to ISIS on the Effective Date:

(a)

a Good Standing Certificate from the Nevada Secretary of State;



(b)

the Security Agreement, the Eyetech Consent and [***] (collectively, the "DRC Closing Documents");



(c)

a check in the amount of [***] US dollars ($[***]); and



(d)

a certificate signed by an authorized signing authority of DRC certifying that the execution, delivery and performance by DRC of this Agreement and the DRC Closing Documents have

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been duly and validly authorized by the Board of Directors of DRC and attaching complete and accurate copies of its Articles of Incorporation, bylaws and authorizing resolutions relating to this Agreement.

ARTICLE 5.A
SPECIAL EVENTS OF DEFAULT

5.A.1    Special Events of Default.    Following the occurrence of any Special Event of Default, DRC shall have a period of [***] days (such [***] days commencing on the earlier of (i) the date of receipt by DRC of written notification from ISIS of the occurrence of such Special Event of Default and (ii) the date DRC becomes actually aware of the occurrence of a Special Event of Default and has notified ISIS of same in writing) to notify ISIS in writing that either: (a) DRC waives such Special Event of Default, such that the parties' respective rights and obligations hereunder shall continue; or (b) DRC elects to exercise DRC's remedies under Subsection 5.A.2 below (collectively, the "Special Event of Default Remedies").

5.A.2    Special Event of Default Remedies.    If DRC elects to exercise the Special Event of Default Remedies or fails to waive in writing the Special Event of Default before the expiry of the [***] day period in Section 5.A.1, then:

(a)

No [***] or [***]: if neither the [***] nor the [***], ISIS shall be required to pay to DRC, as liquidated damages, an amount equal to: (i) the total of all Purchase Price payments made by DRC to ISIS up to the date of the Special Event of Default (the "Default Date"; such amount being, the "Aggregate Payments"); less (ii) the total of any Royalties received by DRC as of such Default Date (the "Aggregate Receipts"); plus (iii) the amount required in order for DRC to have received an internal rate of return, as of the Default Date, of [***] per cent ([***]%) per annum, compounded quarterly, on the Aggregate Payments less the Aggregate Receipts taking into account the dates on which any such amounts were actually paid or received (collectively, the "Liquidated Damages Amount"). Upon receipt by DRC of the Liquidated Damages Amount: (i) DRC shall re-convey to ISIS all of DRC's right, title and interest in and to the Assigned Rights; (ii) DRC shall direct Eyetech to pay all future Royalties for Net Sales of the Product directly to ISIS; (iii) this Agreement shall terminate; and (iv) DRC shall release its security interest under the Security Agreement. In addition, if the Default Date occurs before DRC pays any component of the Purchase Price, DRC will, subject to DRC's right (notwithstanding any other provision hereof) to retain any or all of such amounts to off-set any Damages, repay to ISIS any Royalty Interest received by DRC under this Agreement. For greater certainty, DRC shall have no obligation to pay any components of the Purchase Price otherwise due and payable on or after the Default Date;



(b)

No [***]: if the [***] but the [***], ISIS shall be required to pay to DRC, as liquidated damages, an amount equal to the Liquidated Damages Amount reduced by the US Percentage. Upon receipt by DRC of such amount: (i) the amount of the Purchase Price outstanding as of the Default Date, if any, shall be reduced by the US Percentage; and (ii) DRC shall re-convey to ISIS all of DRC's right, title and interest in and to the Assigned Rights to the extent that the Assigned Rights relate to Net Sales of the Product in the EU; or



(c)

No [***]: if the [***] but the [***], ISIS shall be required to pay to DRC, as liquidated damages, an amount equal to the Liquidated Damages Amount reduced by the EU Percentage. Upon receipt by DRC of such amount: (i) the amount of the Purchase Price outstanding as of the Default Date, if any, shall be reduced by the EU Percentage; and (ii) DRC shall re-convey to ISIS all of DRC's right, title and interest in and to the Assigned Rights to the extent that the Assigned Rights relate to Net Sales of the Product in the United States.

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(d)

The parties acknowledge and agree that the Special Event of Default Remedies constitute a genuine and reasonable good faith pre-estimate of the damages that will be suffered by DRC upon the occurrence of any Special Event of Default and shall not be characterized as or deemed to be a penalty. Notwithstanding anything to the contrary contained herein, DRC shall not enforce its security interest in the Collateral (as such term is defined in the Security Agreement) if DRC has received payment of the Liquidated Damages Amount, as same may be reduced pursuant to Subsections 5.A.2(b) or (c) hereof, as applicable.

5.A.3    Payment Date and Interest on Overdue Amounts.    All amounts payable by ISIS under Section 5.A.2 shall be due within [***] days following written notice by DRC of its election to exercise the Special Event of Default Remedies or upon the expiry of the [***] day period in Section 5.A.1 if no written notice of waiver is provided by DRC. Overdue amounts shall bear interest at the rate of [***] per annum, compounded quarterly, until paid in full.

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ARTICLE 5
TERM AND TERMINATION

5.1    Term.    Subject to this Article 5 and Article 5.A, the term of this Agreement shall commence as of the Effective Date and shall continue until the date of receipt by DRC of the Royalties for the calendar quarter ending on December 31, 2009; provided that, notwithstanding the term of this Agreement, DRC shall be entitled to receive any payments relating to the Royalty Interest accruing on or prior to the termination or expiry of this Agreement.